Palos Verdes Assn v. Rodman

Palos Verdes Home Owners Association v. Rodman

182 Cal.App.3d 324 (1986)

325*325 COUNSEL

Stuart W. Willis for Defendants and Appellants.

Sidney F. Croft for Plaintiff and Respondent.

Summary by Mary M. Howell, Esq.:

Installation of solar system after denial of application by association was a violation of restrictive covenants.  Association’s guidelines for solar installations held to satisfy the requirements of Civil Code §714.

**End Summary**

OPINION

HASTINGS, J.

Defendant/appellant Stacey Rodman (Rodman) resides on the Palos Verdes Peninsula in an area governed by conditions, covenants and restrictions (CC&Rs) recorded by plaintiff/respondent Palos Verdes 326*326 Homes Association (the Association) on July 15, 1923. The CC&Rs include a provision which requires prior approval by the Association of plans and specifications for any works of improvement to be done on any of the “covered” properties.[1]

Defendant/appellant Servamatic Solar Systems (Servamatic) contracted with Rodman to install a passive solar water hearing unit on the roof of the Rodman home. On March 20, 1983, Servamatic sought approval from the Association for this installation; approval was denied. On July 26, 1983, when the Association discovered that Servamatic had installed the system, it sent a letter to Rodman notifying him that his property was in a condition of noncompliance with the CC&Rs and enclosed a copy of its solar unit guidelines.[2] On August 15, 1983, the Association received a letter from Servamatic informing it that Servamatic had agreed to indemnify Rodman against all legal expenses incurred in defending his rights to solarize his home. Servamatic went on to cite portions of Government Code section 65850.5 and Civil Code section 714,[3] claiming these statutes precluded the Association from interfering with installation of solar energy systems.

327*327 On October 5, 1983, the Association filed its complaint for injunctive and declaratory relief against Rodman and Servamatic. Rodman answered; Servamatic answered and cross-complained. Its cross-complaint stated causes of action for interference with business and for injunctive and declaratory relief. All parties sought a judicial determination of their respective rights and obligations under section 714, quoted, ante, in footnote 3. On November 1, 1984, all parties stipulated to a bifurcation of the issues of declaratory relief of the complaint and cross-complaint from the issues of injunction and damages.

The issues of declaratory relief were tried before the court on January 23, 1985. Judgment for the Association was filed on February 14, 1985; it provided “… 1. That defendants are enjoined from maintaining the solar units on the property … [¶] 2. That defendants are ordered to comply with requirements of the Art Jury of the PalosVerdes Homes Association within ninety (90) days of entry of judgment herein. [¶] 3. If defendants do not comply with the requirements of the Art Jury of the PalosVerdes Homes Association within ninety (90) days of entry of judgment herein they are ordered to remove the solar units … [¶] 4. The restrictions of the Palos VerdesHomes Association on solar energy systems installed by defendants are reasonable and met the standards set forth in California Civil Code, Section 714. [¶] 5. Plaintiff,Palos Verdes Homes Association, have and recover its costs in the amount of $92.00 from defendants.”

Rodman and Servamatic (both as appellants) have joined in the appeal from this judgment. They urge us to find that as a matter of law the Association’s solar unit guidelines are in violation of the spirit and intent of section 714. Specifically, appellants argue that these guidelines “effectively prohibit or restrict” installation of solar energy units in that they significantly increase the cost of a system, decrease a system’s efficiency and do not allow for “an alternative system of comparable cost and efficiency,” all in contravention of the policy stated in section 714, “… to promote and encourage the use of solar energy systems and to remove obstacles….” In support, appellants cite the testimony regarding the three types of solar 328*328 systems allowed by the California State Energy Commission: active (or flat plate); passive (Integral Collector System (ICS)); and thermosyphon (a combination of both). Appellants assert that the guidelines allow installation of active systems, but effectively preclude installation of the ICS, the only type appellants install, because it sits 18 inches atop the roof, is painted black, and looks like an up-side-down bathtub; and that the guidelines would require the ICS to be set into the roof (guideline 4), adding between $1,400-$1,800 to the cost of installation.

The Association counters that the pertinent and controlling language of section 714 is that which finds “reasonable restrictions” to include those “… which allow for an alternative system of comparable cost and efficiency.” (1a) The Association argues that the solar unit guidelines do not prohibit all solar units but are formulated to promote the installation of solar units which are comparable in costs and aesthetically acceptable. We concur.

(2) The right to enforce covenants that require approval of construction has long been recognized in California. (Hannula v. Hacienda Homes (1949) 34 Cal.2d 442, 444-445 [211 P.2d 302, 19 A.L.R.2d 1268].) (3) The issue here is whether the Association’s Guidelines are a “reasonable restriction” on the installation of solar units, as required by section 714. This is a question of fact to be determined by the trier of fact. Its conclusion will not be disturbed unless unsupported by substantial evidence. (Bowers v. Bernard (1984) 150 Cal. App.3d 870, 873-874 [197 Cal. Rptr. 925].)

(1b) The evidence presented at the court trial included testimony by William Nelson Rowley, Ph.D., in mechanical engineering. Dr. Rowley, an engineer for 30 years and member of numerous professional organizations, has been designing and selling solar systems since 1974, designing and/or installing more than 250 systems. In October 1983, he was hired as a consultant to the Association to study and determine whether the Association’s solar guidelines complied with section 714. His study included a comparison of the costs of various solar systems, including appellant’s; their positive and/or negative aspects; capacity; weight; insulation; tank temperature design; efficiency; output and warranties. Based on his study comparing 26 systems installed on the Palos Verdes Peninsula with appellant’s ICS, he concluded the solar units permitted by the Association guidelines were comparable to the ICS in performance and costs.

Given this evidence and the fact that appellant’s own witness agreed that the various solar systems discussed by Dr. Rowley were comparable, we cannot say as a matter of law that the trial court erred. The evidence before 329*329 the court, partially summarized above, clearly supports the judgment rendered.

The judgment is affirmed.

Ashby, Acting P.J., and Eagleson, J., concurred.

[1] When an owner seeks to install a solar unit, he or she must comply with the requirements of the solar unit guidelines formulated by the Association’s Art Jury.

[2] These guidelines provide as follows: “1. Solar Units not on the roof should be maintained a minimum of 5′ from property line and concealed from the neighboring view, and a fence or wall of sufficient height to accomplish same may be appropriate. [¶] 2. Solar Units on a roof should be within the wall line of the structure. However, the Art Jury may require more roof area between solar unit and roof edge if the roof overhang is minimal. [¶] 3. All aluminum trim should be bronze anodized or otherwise color treated. [¶] 4. Solar Units should be in or below the plane of roofing material. [¶] 5. Solar Unit should be constructed of rigid materials. (Units may not be of flexible materials). [¶] 6. All plumbing lines should be concealed and the method of installation shown and detailed. [¶] 7. Panel material should be dark in color. [¶] 8. Sample of the proposed solar unit should be submitted with application. [¶] 9. Professionally drawn construction details which apply to specific installations should be provided. They should be drawn to scale and should clearly show all elevations, assembly, the attachment to the roof structure and proposed location on the lot or building. [¶] 10. Calculations should be provided verifying the number and/or area of panels required. [¶] 11. Photographs should be submitted showing the location of the proposed solar units and their visibility from neighboring structures, street or streets. [¶] 12. A cover plate or the glazing should be either transparent or white to reduce the reflectance of light. Cover material, if flammable, should be self extinguishing. [¶] The Art Jury may ask for alternative combinations in smaller groupings when large areas of grouped solar panels are found not to be aesthetically satisfactory.”

[3] Government Code section 65850.5, in pertinent part, provides: “The legislative body of any city or county shall not enact an ordinance which has the effect of prohibiting or of unreasonably restricting the use of solar energy systems other than for the preservation or protection of the public health or safety. This prohibition shall be applicable to charter cities … [¶] This section shall not apply to ordinances which impose reasonable restrictions on solar energy systems. However, it is the policy of the state to promote and encourage the use of solar energy systems and to remove obstacles thereto. Accordingly, reasonable restrictions on a solar energy system are those restrictions which do not significantly increase the cost of the system or significantly decrease its efficiency, or which allow for an alternative system of comparable cost and efficiency….”

Civil Code section 714, in pertinent part, provides: “Any covenant, restriction, or condition contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of, or any interest in, real property which effectively prohibits or restricts the installation or use of a solar energy system is void and unenforceable. [¶] This section shall not apply to provisions which impose reasonable restrictions on solar energy systems. However, it is the policy of the state to promote and encourage the use of solar energy systems and to remove obstacles thereto. Accordingly, reasonable restrictions on a solar energy system are those restrictions which do not significantly increase the cost of the system or significantly decrease its efficiency, or which allow for an alternative system of comparable cost and efficiency….”

All subsequent references are to the Civil Code.

 

Keywords: Solar

Pacifica HOA v. Wesley Palms

Pacifica Homeowners Association v. Wesley Palms

178 Cal.App.3d 1147 (1986)

1150*1150 COUNSEL

A. Lee Estep and Estep, Williams & Gordon for Plaintiff and Appellant.

Kadison, Pfaelzer, Woodard, Quinn & Rossi and Laurence J. Hutt for Defendants and Respondents.

Summary by Mary M. Howell, Esq.:

Association unsuccessfully attempts to enforce a view restriction imposed by a conditional use permit on property adjacent to the association.   Court confirms as well there is no common law right to an unobstructed view.

**End Summary**

OPINION

STANIFORTH, Acting P.J.

Pacifica Homeowners’ Association (Association) appeals the sustaining of a demurrer and the dismissal of its action seeking to enjoin the Wesley Palms Retirement Community and Pacific Homes, Inc. (collectively Wesley Palms) from allowing trees on its property to grow higher than its five-story building.

FACTS

The Association’s members own single-family residences in a development, Pacifica Homes (Pacifica), located uphill from Wesley Palms on Mount Soledad in the City of San Diego (City). These residences have views of the ocean, Mission Bay and the city. Covenants contained in the homeowners’ deeds protect these views from future obstruction.

Wesley Palms was granted a conditional use permit in 1958 to operate a retirement hotel on its 40-acre tract of land. In the findings of fact supporting issuance of the permit, the City, inter alia, stated: “That such use under the circumstances of the particular case will not be detrimental to health, safety or general welfare of persons residing or working in the vicinity, or injurious to property or improvements (existing or future) in the vicinity because a capable architect has designed attractive buildings and cottages which will be surrounded by a beautiful landscaped area. There will be no medical facilities on the property, which will not be a rest home, hospital, or sanitarium. The buildings will be set back from the exterior boundaries of the 40-acre tract and will constitute a harmonious, well-designed unit, 1151*1151 which will be far more attractive than even a high-class subdivision, or an uncoordinated development of individual houses. The installation of sewer and water lines will directly increase property values and health conditions; improve fire protection facilities; and make the immediate development of surrounding areas easier and less expensive.” The City also attached conditions to the issuance of the permit, including: “That a landscaping plan be submitted and approved by the Planning Commission along with the final subdivision map with the entire landscaping plan to be completed within one year after the first building is occupied.

“…. …. …. …. …. …. .

“That construction shall be substantially as shown on the attached plan, except that the proposed 7-story building shall be reduced in height by two floors, with a proportional reduction in total height.”

By 1984, eucalyptus and pine trees on the Wesley Palms property exceeded the height of its five-story building and were obstructing views in Pacifica. Attempts to resolve the problem broke down and the Association filed suit in February 1984, alleging Wesley Palms had interfered with an easement to light, air and an unobstructed view created by the conditional use permit in favor of the Association. The Association sought damages and injunctive relief. In July 1984, the Association amended the complaint. It sought injunctive relief, alleging the Wesley Palms property was burdened with a servitude in favor of the Association to not permit any obstruction exceeding the height of Wesley Palms’ five-story building, had a duty under the conditional use permit to maintain its land so as not to be injurious to the Association’s property and was creating a nuisance by allowing its trees to obstruct the Association’s light and view.

Wesley Palms demurred. On September 7, 1984, the court sustained the demurrer without leave to amend. A judgment of dismissal was entered on October 3, 1984. The Association appeals, contending the conditional use permit was intended to give the Association’s members a right to an unobstructed view and Wesley Palms has violated that condition.

DISCUSSION

(1) “The function of a demurrer is to test the sufficiency of a complaint as a matter of law.” (Banerian v. O’Malley (1974) 42 Cal. App.3d 604, 611 [116 Cal. Rptr. 919].) (2) A demurrer admits the truth of all properly pleaded material allegations without regard to the difficulty of proof. (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 [86 Cal. Rptr. 1152*1152 88, 468 P.2d 216].) (3) “`[T]he allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties.'” (King v. Central Bank (1977) 18 Cal.3d 840, 843 [135 Cal. Rptr. 771, 558 P.2d 857].)

(4) A general demurrer may be sustained without leave to amend where it is probable from the nature of the defects in the previous unsuccessful attempts the plaintiff cannot state a cause of action. On appeal, the question is whether the trial court abused its discretion in denying leave to amend. (Fugitt v. City of Placentia (1977) 70 Cal. App.3d 868, 871 [139 Cal. Rptr. 123].) The burden of showing an abuse of discretion rests on the appellant. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [134 Cal. Rptr. 375, 556 P.2d 737].)

(5a) As a general rule, a landowner has no natural right to air, light or an unobstructed view and the law is reluctant to imply such a right. (Venuto v. Owens-Corning Fiberglas Corp. (1971) 22 Cal. App.3d 116, 127 [99 Cal. Rptr. 350];Taliaferro v. Sayler (1958) 162 Cal. App.2d 685, 691 [328 P.2d 799]; 3 Miller & Starr, Current Law of Cal. Real Estate (1977) § 18:9, p. 262; 1 Ogden’s Revised Cal. Real Property (1974) § 13.13, p. 548; 3 Witkin, Summary of Cal. Law (8th ed. 1973) Real Property, § 360, p. 2056.) (6) Such a right may be created by private parties through the granting of an easement (see, e.g., Petersen v. Friedman (1958) 162 Cal. App.2d 245, 247 [328 P.2d 264]; Civ. Code, § 801, subd. 18) or through the adoption of conditions, covenants and restrictions (as is the case among the Pacificahomeowners) or by the Legislature (see, e.g., Civ. Code, §§ 801, subd. 18, 801.5; Pub. Resources Code, § 25980 et seq. [creating a right to sunlight for solar collectors]). Local governments may also protect views and provide for light and air through the adoption of height limits. (See, e.g., San Diego Mun. Code, § 101.0452 et seq.; Taliaferro v. Sayler, supra, 162 Cal. App.2d 685, 691.)

II

Wesley Palms asserts that even if the permit contained a condition limiting the height of its trees, this condition could not be enforced by the Association.

(7) The law allows a private individual to enjoin a zoning violation as a nuisance when the individual suffers a “special injury to himself in person or property of a character different in kind from that suffered by the general public” (Venuto v. Owens-Corning Fiberglas Corp., supra, 22 Cal. App.3d 116, 124, italics deleted) or an injury “greater than that suffered by the 1153*1153 public generally” (Cal. Zoning Practice (Cont.Ed.Bar 1969) § 11.6, pp. 479-480) or the individual is a “member of the community for whose particular welfare the ordinance was enacted” (McIvor v. Mercer-Fraser Co. (1946) 76 Cal. App.2d 247, 254 [172 P.2d 758]).

Here the Association alleges a specific conditional use permit contains a limitation on tree height and this limitation was imposed particularly for the benefit of the uphill landowners including the Association. Under these circumstances, the Association has met the standing requirements. It has sufficiently alleged it is a “member of the community for whose particular welfare the ordinance was enacted” (McIvor v.Mercer-Fraser Co., supra, 76 Cal. App.2d 247, 254) and it has suffered an injury different from or greater than that suffered by the general public. (Contrast Taliaferrov. Sayler, supra, 162 Cal. App.2d 685, where the plaintiff sought an injunction for a violation of a general height limit.[1])

(8) Wesley Palms also contends the Association’s failure to timely appeal the issuance of the conditional use permit or seek court review of the issuance of the permit bars the present action. This contention has no merit. The Association here is not challenging the validity of the permit or its conditions but seeking to enforce a condition which it alleges was attached to the permit. Any action based on a violation of this alleged condition would have been premature if prosecuted within the time frame (10 to 180 days after issuance) suggested by Wesley Palms.

III

The Association asserts the conditional use permit restricted the height of Wesley Palms’ trees to the height of its five-story building.[2] The Association 1154*1154 concedes the use permit does not expressly limit the height of the trees but argues such a limitation may be implied by reading together the City’s finding Wesley Palms would not be “injurious to property and improvements (existing or future) in the vicinity” with the permit’s conditions that Wesley Palms submit and obtain the planning commission’s approval of a landscaping plan and that Wesley Palms’ seven-story building be reduced by two floors. The Association contends since the City intended Wesley Palms be compatible with the surrounding community and since the City placed a five-story height limit on the building due to community concern, the City also intended to limit the height of the trees to the height of the five-story building.

First, we note the Association’s reliance on the permit’s language Wesley Palmswould not be “injurious to property or improvements (existing or future) in the vicinity” is misplaced. This language is contained in a finding of fact, not a condition. Such a finding — the proposed use “will not adversely affect” the neighborhood — is required for the issuance of every conditional use permit. (San Diego Mun. Code, § 101.0506-C.1.) (9) Moreover, when read in context, the language does not imply a height limitation on trees in favor of the Association.

The planning commission found the Wesley Palms project would not be injurious “because a capable architect has designed attractive buildings and cottages which will be surrounded by a beautiful landscaped area.” Thus, the focus is on the aesthetics of Wesley Palms, not on protecting the Association’s views. The finding continues: “There will be no medical facilities on the property, which will not be a rest home, hospital, or sanitarium. The buildings will be set back from the exterior boundaries of the 40-acre tract and will constitute a harmonious, well-designed unit, which will be far more attractive than even a high-class subdivision, or an uncoordinated development of individual homes. The installation of sewer and water lines will directly increase property values and health conditions; improve fire protection facilities; and make the immediate development of surrounding areas easier and less expensive.” This language is also directed at how Wesley Palms would fit into the community aesthetically and otherwise and how it would provide beneficial improvements. It is not directed at protecting the Association’s views.

(10) The Association also relies on the permit’s requirement Wesley Palms obtain the planning commissioner’s approval of a landscape plan to show the existence of the height limit. Presumably, Wesley Palms complied with this condition by submitting a landscape plan showing the eucalyptus 1155*1155 and pine trees and obtaining the commissioner’s approval of this plan. The Association has made no allegations to the contrary.[3] Thus, it must be inferred the planning commission approved the mature height of the trees since it attached no trimming or other height restrictions and this would naturally be a place for imposing such a restriction.

(11) Finally, the Association points to the permit’s condition reducing the height ofWesley Palms’ seven-story building to five stories as implying a similar reduction in the height of its trees. We disagree.

San Diego’s Municipal Code in its definition of “Height (Building)” refers only to “a building or structure.” (San Diego Mun. Code, § 101.0101.62.) In pertinent part, it provides: “As used herein, building or structure shall include such structural appurtenances as parapets; safety guardrails other than the type specified below; elevator shaft and stairwell enclosures not meeting the specified criteria below; chimneys, vents, stacks, or ducts exceeding twelve square feet in any one plane; other mechanical equipment and related screening; and similar features. Items not included as structural appurtenances nor in any determination of the height of a building or structure are television and radio reception antennae; flagstaffs; chimneys, vents, stacks, or ducts not exceeding twelve square feet in any one plane; open safety guardrails which are no higher than forty-two inches above a roofline, which contain vertical elements no greater than two inches square in cross section and no closer than four inches apart; and elevator shaft or stairwell enclosures above a building roofline and meeting the following criteria: …” (San Diego Mun. Code, § 101.0101.62.) Similarly, in the section, “Height Limitation Zones — Establishment of,” it states in pertinent part: “In a height limitation zone, no building or structure shall be erected, constructed, altered, moved in or enlarged to a greater height than is permitted in said zone.” (San Diego Mun. Code, § 101.0452, italics added.) The section goes on to detail how the height of a building is to be measured and repeats the definition of building height provided in section 101.0101.62.

These sections negate the Association’s contention that included in a height restriction of a building is a corresponding height restriction of trees. This conclusion is strengthened by the fact the City has in other instances specifically imposed height restrictions on trees.

In Municipal Code section 101.0449 (Airport Instrument Approach Zone) the city had provided,[4] in pertinent part: “In an Airport Instrument Approach 1156*1156 Zone, no structure, building, tower, smokestack, overhead transmission lines, trees or any objects of natural growth, shall be erected, constructed, altered, moved in, enlarged or allowed to grow in such a manner as to create an airport hazard which obstructs the aerial approach to an airport or is otherwise hazardous to its use for airplane landing or taking off.

“It is hereby declared that any building, structure, tree or object of natural growthwhich extends through or above a height limitation plane, as hereinafter defined, shall constitute an airport hazard and a public nuisance.” (Italics added.) (See also San Diego Mun. Code, § 101.0450, Airplane Flight Training Zones.)

The City has also adopted sections addressing the height of “major landscaping at maturity” in the context of solar access and has required a “shadow plan” to be submitted in certain instances. (See, e.g., San Diego Mun. Code, §§ 101.1208, 103.0101-C.)

The fact the City has expressly addressed the height of trees in other contexts leads to the conclusion that if the City had intended a height limit on the trees in this instance, it would have so stated. Since it did not and since conditions on a conditional use permit must be expressly attached (see San Diego Mun. Code, § 101.0506-C-4), we conclude no such height limit was intended here.

The Association also contends it has a cause of action against the Wesley Palms because Wesley Palms in accepting the benefits of the permit, accepted a corresponding obligation to conduct its operation in good faith, i.e., to not cause unnecessary or unreasonable interference with the rights of surrounding property owners by allowing its trees to obstruct their views. (5b) However, as we noted before, a property owner has no natural right to an unobstructed view. In the absence of any agreement, statute or governmentally imposed conditions on development creating a right to an unobstructed view, it cannot be said Wesley Palms either acted in bad faith or interfered with any right. It did only what the law allows.

The judgment is affirmed.

Butler, J., and Lewis, J., concurred.

[1] In Taliaferro, the court held the adjoining landowner had no standing to seek damages for his neighbor’s violation of a general height limit because the height limit granted him no easement for air and light and since he had no easement, he had no damages. But see Hopkins v. MacCulloch (1939) 35 Cal. App.2d 442 [95 P.2d 950], and Smith v. Collison (1931) 119 Cal. App. 180 [6 P.2d 277], where the courts found anyone residing in a residential zone could enjoin and seek damages from the owner of a nonpermitted commercial use. See also California Zoning Practice, supra, section 11.6, page 480, observing: “To show special injury, the above cases seem to require only proof that plaintiff’s property decreased in value because of the violation. Kappadahl v. Alcan Pac. Co. (1963) 222 CA2d 626 …, although dealing with landowners seeking mandamus to compel revocation of a building permit allegedly issued in violation of the zoning ordinance, suggests that when a private person seeks to enforce a zoning ordinance a showing of special injury may no longer be required or that the court will presume the existence of special injury.”

[2] The trees are uphill of the five-story building. The Association apparently wants the trees’ height limited to the height of an imaginary horizontal line drawn from the top of the five-story building to the hillside, a height less than five stories at the hillside.

[3] In its brief on appeal, the Association states the trees were blocking views by 1966.

[4] This section and section 101.0450 were in effect at the time the conditional use permit was issued but were repealed in December 1985.

 

Keywords: Governing Documents, Enforcement, Proper Parties, Views

Pacific Hills HOA v. Prun

Pacific Hills Homeowners Association v. Prun

73 Cal.Rptr.3d 653 (2008)

655*655 Law Offices of Richard A. Tinnelly, Bruce R. Kermott, Aliso Viejo; Blackmar, Principe & Schmelter, Gerry C. Schmelter, San Diego, and Christina B. VonBehren, for Plaintiff and Appellant.

Law Office of Julie M. McCoy and Julie M. McCoy, Newport Beach, for Defendants and Appellants.

Summary by Mary M. Howell, Esq.:

Judicial action to enforce CC&Rs, and architectural guidelines must be brought within 5 years of the date of the violation, per Code of Civil Procedure §336.  Further, owners’ claim that association had waived its right to enforce because it did not enforce against other owners with similar violations was unsuccessful, because the association was not aware of the violations until defendant owner reported them, and thereafter the association enforced to the degree appropriate given the nature of the other violations.

**End Summary**

654*654 OPINION

RYLAARSDAM, Acting P.J.

Defendants Jon L. Prun and Linda L. Prun appeal from a judgment requiring them to reduce the height of or move a gate and a fence in the front of their residence that violates the height and setback requirements in the covenants, conditions, and restrictions and architectural guidelines adopted by plaintiff Pacific Hills Homeowners Association. They contend the action was not subject to a five-year statute of limitations in Code of Civil Procedure section 336, subdivision (b) (all further statutory references are to this code unless otherwise noted) as the court determined but was barred by the four-year statute of limitations in section 337.

They also assert that, in any event, the action was barred by laches and waiver, and the court erroneously excluded certain evidence of other nonconforming use. We disagree with each contention.

Plaintiff filed a cross-appeal claiming that portion of the judgment requiring it to pay for two-thirds of the cost of relocation of defendants’ gate upon satisfaction of certain conditions was erroneous. It did not address the substance of that issue, however, arguing that because defendants had not satisfied the conditions, its own appeal was moot. We decline plaintiffs request to clarify the effect of that part of the judgment.

Thus, we affirm the judgment.

FACTS

Defendants’ home is located in a planned community subject to a Declaration of Covenants, Conditions and Restrictions (CC & R’s) and governed by plaintiff. The656*656 CC 4 R’s allow plaintiff to adopt reasonable rules and incorporate them into the CC & R’s. The CC & R’s require “the prior written approval of the Architectural Committee” (committee) before construction of any improvement, including a “fence or wall” and also mandate submission of plans to the committee and its approval before construction can begin. Plaintiff also adopted Architectural Guidelines (guidelines) that limit fences to 6 feet in height unless they are within 20 feet of the front property line, in which case the maximum height is 3 feet.

In late 2000 defendants decided to erect a mechanical gate, connected to a fence and pilasters, across their driveway. Jon testified they reviewed the copy of the CC & R’s and guidelines they received when they purchased the home and found no mention of setbacks. Jon also testified that after this action was filed he noticed that the copy of the guidelines they received upon purchase of their home contained only odd-numbered pages; they were missing the page containing the setback requirements. (We note that the guidelines and amended guidelines in the record show the setback requirement was on odd-numbered pages.)

After reviewing those documents, Jon then called the property management company and asked about setbacks. Jon testified that Bill Scales, the Architectural Administrator, told him that neither plaintiff nor the City of Mission Viejo had setback requirements. According to Jon, Scales only said that color was critical and the gate should be of high quality. Scales assured him “there won’t be any problem” or “there shouldn’t be any problem” after Jon told him a professional contractor was installing the gate. Jon also testified Scales said he would fax the forms defendants needed for plaintiffs approval and that permission should take only a couple of weeks. Jon testified he understood the approval was “basically a formality.”

Scales testified he did not remember the call and would not have checked a city setback requirement for a homeowner because he had no copy of those codes.

In the meantime defendants started building the gate. When Scales learned of it he sent a letter informing them construction violated the CC & R’s because prior approval was required; he asked for plans to be submitted. In late November Jon completed the forms he had received from Scales and sent them both to him and to the committee; he did not enclose plans.

In January 2001, plaintiff sent a letter to defendants asking for plans. Defendants re-sent their application with a drawing that did not show the specifics of the gate as required by the CC & R’s. Consequently, plaintiff returned it stamped, “Disapproved as submitted” (capitalization omitted) with another request for defendants to “[s]ubmit clear drawings….” Defendants then did so, showing the gate within three feet of the front property line. In mid-February the committee denied approval of defendants’ proposed fence and gate because it did not comply with the setback requirements. But defendants had already completed the gate.

In late July and August 2001 plaintiff sent letters to defendants, first asking them to comply with the CC & R’s and then inviting them to attend a board meeting in October. Thereafter plaintiff sent a letter giving defendants a November deadline for them to move the gate to comply with the setback requirements and advising it would assess a $100 fine if they did not; plaintiff also invited them to a meeting in December to “discuss the situation.”

At some point plaintiff contacted the City of Mission Viejo advising it of the situation. In May 2002, the city sent written 657*657 notice to defendants that their gate violated its setback requirements. Between November 2002 and January 2003, plaintiff sent four more letters assessing fines and inviting defendants to meetings, which they attended.

In March 2003, plaintiffs lawyer sent a letter to defendants, stating it was plaintiffs “last effort to resolve th[e] matter” and insisting that the gate be moved back. It gave defendants 10 days to advise whether or not they intended to comply; if not plaintiff would take legal action. Jon testified he called the lawyer and explained defendants'”side of the … story.” He also testified plaintiffs counsel told him he thought that sounded “logical” and “plausible”; he wanted to research the matter and said if he did not get back to defendants, they should “consider the matter closed.”

Thirteen months later in April 2004 a different lawyer sent a letter to defendants inviting them to submit the matter to alternative dispute resolution and advising that if they did not respond in 30 days, plaintiff “may authorize” filing of a lawsuit. When Jon called that lawyer he was told, “we’re going to make you move the gate.” Nothing happened until almost one year later, in March 2005, when plaintiffs lawyer sent another letter suggesting mediation.

When defendants did not mediate, in April 2005 plaintiff filed this action for breach of the CC & R’s, nuisance, and declaratory and injunctive relief. The injunction sought was based on violation of the setback requirements, not defendants’ failure to obtain prior approval of the project. The case went to trial only on the injunction cause of action.

The court found in favor of plaintiff. It ruled, in part, that the five-year statute of limitations in section 336, subdivision (b) applied and thus the action was filed timely. The court also found defendants had not proven their other affirmative defenses of estoppel, laches, or waiver.

The judgment ordered defendants to lower their fence, gates, and pilasters to a maximum of 3 feet, or, in the alternative, to set them back to at least 20 feet from the front property line. In that case, the height could be up to six feet. If defendants chose the latter alternative and gave plaintiff timely written notice of their decision, plaintiff would be required to pay two-thirds of the cost of the relocation. If defendants did not timely give notice, they had to pay the entire cost of the ordered corrections. If defendants gave such notice and plaintiff did not agree in writing to pay two-thirds of the cost, the injunction would dissolve and defendants would be allowed to keep the gates and fence as built.

DISCUSSION

1. Applicable Statute of Limitations

Plaintiff filed this action more than four years but less than five years after defendants erected the gate. Defendants contend that section 336, subdivision (b), which is a five-year statute of limitations, applies only to recorded documents, in this case, CC & R’s, and not to unrecorded rules and regulations or guidelines of homeowners associations such as are at issue here. We disagree.

Section 336, subdivision (b) provides for a five-year statute of limitations for “[a]n action for violation of a restriction, as defined in Section 784 of the Civil Code.” Civil Code section 784 states, “`Restriction,’ when used in a statute that incorporates this section by reference, means a limitation on, or provision affecting, the use of real property in a deed, declaration, or other instrument, whether in the form of a covenant, equitable servitude, condition 658*658 subsequent, negative easement, or other form of restriction.”

Defendants maintain that, for this definition to apply, a restriction must be recorded. They advance several grounds for this assertion, including the plain language of the statute and its legislative history, the rule that statutes should be harmonized, the absence of the setback restriction from the recorded CC & R’s, and the principle of ejusdem generis. Based on our reading of the plain language of section 336, subdivision (b) and Civil Code section 784, we conclude section 336, subdivision (b) does not govern merely recorded restrictions but applies to unrecorded restrictions as well.

“`When interpreting statutes, “we follow the Legislature’s intent, as exhibited by the plain meaning of the actual words of the law” “`…'” giving them their usual and ordinary meaning and construing them in context. [Citation.] If the plain language of the statute is clear and unambiguous, our inquiry ends, and we need not embark on judicial construction. [Citations.] If the statutory language contains no ambiguity, the Legislature is presumed to have meant what it said, and the plain meaning of the statute governs.’ [Citation.]” (Stephens v. County of Tulare (2006) 38 Cal.4th 793, 801-802, 43 Cal. Rptr.3d 302, 134 P.3d 288.) This is so “`”`whatever may be thought of the wisdom, expediency, or policy of the act.'”‘ [Citations.]” (California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist. (1997) 14 Cal.4th 627, 632, 59 Cal. Rptr.2d 671, 927 P.2d 1175; see also Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733, 3 Cal.Rptr.3d 636, 74 P.3d 737.)

A restriction, as defined in Civil Code section 784, is a limitation on the use of real property, as set out in several specified types of documents, including covenants, equitable servitudes, conditions subsequent, and negative easements, with a catchall description at the end applying to any “other form of restriction.”

Nothing in the language states this last category of restriction must be recorded. The fact that all enumerated documents are generally recorded does not compel such an interpretation. Had that been the intent of the Legislature, it could have easily used the language any “other form of recorded restriction.”

But it did not, and it is not within our province to do so in the guise of interpretation, even if that seems like a more logical or better policy. If such was its intent, the Legislature has the ability and opportunity to amend the language to make this clear.

Because we determine the plain meaning of the statute based on its language, we do not resort to extrinsic aids to construe its meaning. (Beat Bank, SSB v. Arter & Hodden, LLP (2007) 42 Cal.4th 503, 508, 66 Cal.Rptr.3d 52, 167 P.3d 666.) Thus, we need not address defendants’ other arguments as to the meaning of the statutes.

2. Laches

Defendants also assert that plaintiffs claim is barred by laches. “`The defense of laches requires unreasonable delay plus either acquiescence in the act about which plaintiff complains or prejudice to the defendant resulting from the delay.’ [Citation.]” (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68, 99 Cal.Rptr.2d 316, 5 P.3d 874.) Defendants argue plaintiffs more than four-year delay in filing the action was “patently unreasonable” and that the delay shows plaintiff acquiesced in defendants’ placement of the gate. It points to three 1-year periods in which plaintiff did virtually nothing with respect to defendants’ gate.

659*659 There is no question plaintiff delayed in enforcing the setback restriction. Despite the spin it tries to put on the facts, plaintiffs alleged “sheer volume” of attempts and “continued … efforts to bring [defendants] into compliance” do not explain those lengthy gaps in its contacts with defendants or its extended inactivity. We do not condone this course of conduct and in the right fact situation, which we do not define, such delays could support a finding of laches.

But we agree with the trial court that defendants cannot show prejudice. They began building the gate before they submitted an application for approval of their project and before the architectural committee got involved. The evidence showed construction was finished by as early as November 2000 and no later than February 2001. Thus, it would not have mattered whether plaintiff was diligent.

Nor, despite the delays, can defendants show plaintiff acquiesced. Plaintiff made its opposition to the gate known from the moment it was built, and it never changed its position or communicated to defendants it had changed its position. And, importantly, Jon testified that from February 2001 until the complaint was filed, he understood that plaintiff “appeared to want the gate moved.” Thus, the defense of laches must fail.

3. Waiver

Defendants also assert plaintiff waived its right to enforce the guidelines because it did not apply them fairly, reasonably, or uniformly. They contend plaintiff had the burden of proof to show it in fact did enforce the guidelines fairly, and the court erred in not requiring that plaintiff meet that burden but instead put the burden on defendants to prove an affirmative defense. Finally, defendants claim the court erred by excluding defense evidence that showed plaintiff had arbitrarily allowed a nonconforming use by another property owner. None of these arguments persuades.

“When a homeowners’ association seeks to enforce the provisions of its CCRs to compel an act by one of its member owners, it is incumbent upon it to show 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. [Citations.]” (Ironwood Owners Assn. IX v. Solomon (1986) 178 Cal.App.3d 766, 772, 224 Cal.Rptr. 18.) “The criteria for testing the reasonableness of an exercise of such a power by an owners’ association are (1) whether the reason for withholding approval is rationally related to the protection, preservation or proper operation of the property and the purposes of the Association as set forth in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner. [Citations.]” (Laguna Royale Owners Assn. v. Darger (1981) 119 Cal. App.3d 670, 683-684, 174 Cal.Rptr. 136.)

Here there was evidence plaintiff followed its ordinary procedures in attempting to enforce the setback requirement. It sent letters demanding that defendants comply with the guidelines, invited defendants to meet with the board, imposed fines, and finally filed suit.

Defendants complain that their nextdoor neighbors, Anthony and Kathleen Garcia, built in violation of the guidelines but plaintiff did not sue them to compel compliance with the architectural rules. Thus, they conclude, plaintiff lost its right to enforce the restrictions as to defendants. The Garcias obtained plaintiffs approval to build pilasters within the 20-foot setback area. But during construction, 660*660 which occurred six years before defendants’, they apparently built their pilasters six feet high in violation of the guidelines. Plaintiff was unaware that had occurred until defendants pointed it out during the pendency of this dispute.

At that point plaintiffs committee sent letters to the Garcias asking them to modify the pilasters to conform to the guidelines, and the committee and the management company discussed the violation. Plaintiff determined that the Garcias’ pilasters were “not as obtrusive as [defendants’] gate was.” It also concluded, as its expert, an architect and engineer, testified that the Garcias’ pilasters are only a “minor obstruction” and therefore not as dangerous, compared to defendants’ gate, which is a safety hazard.

Although this is not overwhelming evidence, it met plaintiffs burden of proof to show it did address the Garcias’ violation and did not act unreasonably or unfairly in not suing them as it did defendants. Thus, the court did not improperly shift the burden of proof to defendants’ to prove an affirmative defense,

“[E]nforcement of the restriction must be in good faith, not arbitrary or capricious, and by procedures which are fair and uniformly applied. [Citation.] The framework of reference, as the court made clear, is not the reasonableness specific to the objecting homeowner, but reasonableness as to the common interest development as a whole. [Citation.]” (Liebler v. Point Loma Tennis Club (1995) 40 Cal.App.4th 1600, 1610, 47 Cal. Rptr.2d 783.) The evidence shows plaintiff took into account the relative safety of the two different structures, thus evaluating them in light of the entire development, in deciding how to proceed.

Defendants argue they had evidence of another homeowner’s violation of the guidelines that would support their waiver argument but the court erroneously excluded it. But nothing in the record shows defendants made an offer of proof, as was their burden, nor does it give us any information about the particulars of the evidence such that we could determine whether it was error to exclude it. Magic Kitchen LLC v. Good Things Internal, Ltd. (2007) 153 Cal.App.4th 1144, 1164-1165, 63 Cal.Rptr.3d 713.)

4. Plaintiffs Appeal

Plaintiff filed, a cross-appeal, claiming the court abused its discretion in ordering it to pay for two-thirds of the cost of moving defendants’ gate. It maintains there was no evidence the cost of relocating the gate would “cost twice” the amount plaintiffs expert testified to. Plaintiff misstates the court’s decision.

In its tentative ruling the judge did note it was “very likely it will cost appreciably more than [the expert’s] estimate.” But its ruling was not based on evidence of the cost. The tentative stated it was because of “plaintiffs sloppiness in not pursuing this much more promptly….” Injunctions are based on equity (Syngenta Crop Protection, Inc. v. Helliker (2006) 138 Cal.App.4th 1135, 1166-1167, 42 Cal.Rptr.3d 191), and we see no abuse of discretion in the result the court fashioned. (See City of Vernon v. Central Basin Mun. Water Dist. (1999) 69 Cal. App.4th 508, 516, 81 Cal.Rptr.2d 650.)

Plaintiff asserts that its appeal “is apparently moot” because defendants did not timely elect to move the gate back at least 20 feet from the property line, and asks for a “clarification of the effect of the passage of [the] time lines” set out in the judgment. We decline to do so. There is nothing in the record to show what occurred after judgment was entered with respect to the gate. Nor do we give advisory opinions. (Coleman v. Department of Personnel Administration (1991) 52 661*661 Cal.3d 1102, 1126, 278 Cal.Rptr. 346, 805 P.2d 300.)

DISPOSITION

The judgment is affirmed. In the interests of justice, the parties shall bear their respective costs on appeal.

WE CONCUR: O’LEARY and FYBEL, JJ.

 

Keywords: Governing Documents, Statute of Limitations

Mulligan v. Panther Valley POA

Mulligan v. Panther Valley Property Owners Association

766 A.2d 1186 (2001)

1188*1188 Scott William Miller, argued the cause for appellant/cross-respondent (Mulligan & Mulligan, Hackettstown, attorneys; John Musarra, Trenton, on the brief).

Marilyn S. Silvia, Princeton, argued the cause for respondents/cross-appellants (Hill Wallack, attorneys; Gerard H. Hanson, of counsel; Ms. Silvia, on the brief).

Before Judges WEFING, CUFF and LEFELT.

Summary by Mary M. Howell, Esq.:

New Jersey association’s CC&R amendment prohibiting residency by Megan’s law violators was to be judged on the basis of reasonableness, rather than the more deferential standards used in states such as California.  After determining the correct standard, the appellate court remanded to the trial court for a consideration of the reasonableness of the restriction.

**End Summary**

 

1187*1187 The opinion of the court was delivered by WEFING, J.A.D.

Plaintiff owns a home in Panther Valley, a private common-interest residential community in Warren County. Defendant Panther Valley Property Owners Association (Association) is a non-profit corporation that was organized in 1968 for the purpose of governing the community. The Association acts through an elected Board of Trustees; the individual defendants are members of the Association’s Board. Plaintiff, as a result of her home ownership, is a member of the Association.

In October 1998, the Association, through a vote of its membership, adopted six amendments to the community’s Declaration of Covenants and Restrictions (Declarations) and the Association’s bylaws. Plaintiff filed suit challenging five of those amendments. The trial court upheld three of the amendments and struck down two. The parties appeal and cross-appeal from the trial court’s judgment. After a careful review of the entire record in light of the arguments advanced on appeal, we affirm in part and reverse in part.

1189*1189 The first of these amendments declared, in substance and effect, that no individual registered as a Tier 3 offender under N.J.S.A. 2C:7-8(c)(3) (“Megan’s Law”) could reside in Panther Valley. Tier 3 is the highest classification within Megan’s Law. In order for an individual to be classified as a Tier 3 registrant, that individual must be a sex-offender who has been deemed to pose a high risk of re-offending. Factors that inform the decision whether an individual poses a high risk of re-offending include whether the conduct involved repetitive and compulsive behavior, N.J.S.A. 2C:7-8b(3)(a); whether the individual served the maximum term of confinement, N.J.S.A. 2C:7-8b(3)(b); and whether the sexual offense was committed against a child, N.J.S.A. 2C:7-8b(3)(c). Because such an individual poses a substantial risk to the community, the statute directs that notification of the presence of a Tier 3 offender within the community be more widespread than that provided in the instance of a Tier 1 or Tier 2 offender, who have been deemed to pose low and moderate risks of re-offending. The trial court upheld the amendment precluding such Tier 3 registrants from residing within Panther Valley.

The second amendment authorized the Association to file with the Warren County Clerk a “Notice of Continuing Violation” if a member persisted in violating Panther Valley’s Declaration or the Association’s bylaws or rules. The trial court concluded that amendment was invalid because it did not require the Association to give notice to a member before filing such a Notice.

The third amendment provided that an owner could be liable for the Association’s counsel fees and costs if the Association were required to file suit to enforce the Declaration, its bylaws or rules. The trial court struck down that amendment.

The fourth amendment set forth a procedure governing a member’s inspection of the Association’s books and records. The trial court concluded the amendment was facially valid.

The fifth amendment established minimum qualifications for members who wished to be elected to the Association’s Board of Trustees. The trial court again concluded the amendment was facially valid.

I

The threshold issue to be determined is the proper standard governing judicial review of these amendments. It is important to note that plaintiff’s challenge to the validity of these amendments does not revolve around the manner in which they were adopted, e.g., compliance with procedural requirements. Rather, her challenge is directed to the substance of the amendments themselves.

Plaintiff contends in essence that the amendments should be measured under a test of reasonableness. She asserts that each of these amendments fail that test. She maintains that each of these amendments represents a diminution of her ownership rights and, in consequence, is invalid. Defendants, on the other hand, assert that the amendments should be analyzed under what is termed the business judgment rule to determine if they are authorized by statute and the applicable documents governing the parties’ relationship and to see if they violate any constitutional or statutory provision or conflict with public policy; defendants assert the amendments are entitled to a presumption of validity. According to defendants, each of these amendments represents an authorized action by the membership.

There is no reported case in New Jersey which clearly resolves the question of what standard a reviewing court should employ in such a context, where the membership has voted to amend the community’s Declaration and the Association bylaws. Other reported cases in New Jersey which have considered such amendments have, generally, arisen following action by the community’s board of trustees. See, e.g.,Thanasoulis v. Winston Towers 200 Ass’n, 110 N.J. 650, 542 A.2d 900 (1988), in1190*1190 which the Court struck down two amendments to the association’s rules and regulations adopted by the board. In Siller v. Hartz Mountain Assocs., 93 N.J. 370, 382, 461 A.2d 568 (1983), in the context of a suit by individual unit owners to prevent settlement between the condominium developer and the condominium association of claims related to alleged defects in construction, the Court spoke of the association’s board occupying a position analogous to a corporation’s board of directors. Perhaps the clearest explication of the business judgment rule is contained in Papalexiou v. Tower West Condominium, in which individual unit owners challenged the authority of the board to levy a special emergency assessment upon the membership. In upholding the assessment, the court said:

The refusal to enforce arbitrary and capricious rules promulgated by governing boards of condominiums is simply an application of the “business judgment” rule. This rule requires the presence of fraud or lack of good faith in the conduct of a corporation’s internal affairs before the decisions of a board of directors can be questioned. If the corporate directors’ conduct is authorized, a showing must be made of fraud, self-dealing or unconscionable conduct to justify judicial review…. Although directors of a corporation have a fiduciary relationship to the shareholders, they are not expected to be incapable of error. All that is required is that persons in such positions act reasonably and in good faith in carrying out their duties. Courts will not second-guess the actions of directors unless it appears that they are the result of fraud, dishonesty or incompetence.

[Papalexiou v. Tower West Condo., 167 N.J.Super. 516, 527, 401 A.2d 280 (Ch.Div.1979) (citations omitted).]

In Chin v. Coventry Square Condominium Ass’n, 270 N.J.Super. 323, 637 A.2d 197 (App.Div.1994), we considered amendments to the association’s bylaws. It is not possible to tell from the opinion whether the challenged amendments were passed by the association’s board or the membership as a whole. In our decision, however, we noted the existence of these two tests and concluded that the challenged amendments could not withstand scrutiny even under the business judgment rule.270 N.J.Super. at 329, 637 A.2d 197.

We pause first to note the unique nature of Panther Valley. It is a gated residential community located within the Township of Allamuchy; it is comprised of more than 2,000 homes, including single-family homes, townhouses and condominium units.State v. Panther Valley Prop. Owners Ass’n, 307 N.J.Super. 319, 322, 704 A.2d 1010 (App.Div.1998) (holding that the Association, having asked the Warren County Prosecutor to assume jurisdiction to enforce the provisions of Title 39 over its private roads, lacked the authority to impose independent fines upon its members who committed traffic violations within its borders). The development itself, in light of the mix of ownership types, is not a condominium development but is more properly referred to as a “common interest development.” Id. at 327, 704 A.2d 1010. The Association as a whole is thus not subject to the terms and provisions of the Condominium Act, N.J.S.A. 46:8B-1 to -38, Id. at 328, 704 A.2d 1010, for only “[a] small minority of the units are governed by the Condominium Act.” Id. at 327, 704A.2d 1010. In certain contexts, however, the condominium statute may be considered “instructive” and looked to for guidance. Id. at 332, 704 A.2d 1010.

Although Justice Schreiber noted in Siller that there is some authority for the proposition that condominium ownership existed as long ago as ancient Rome, Siller, supra, 93 N.J. at 375, n. 4, 461 A.2d 568, such common interest developments are generally considered a relatively recent phenomenon. Carl B. Kress, Beyond Nahrstedt: Reviewing Restrictions Governing Life in a Property Owner Association,42 UCLA L.Rev. 837, 842 (1995), (hereinafter Kress). Common interest developments are the fastest growing form of housing in the United States. Armand Arabian, Condos, Cats, and CC & RS: 1191*1191 Invasion of the Castle Common, 23Pepp. L.Rev. 1, (1995), (hereinafter Arabian). New Jersey is among the states in which residential community associations are most common. David J. Kennedy,Residential Associations as State Actors: Regulating the Impact of Gated Communities on Nonmembers, 105 Yale L.J. 761, 793, n. 24 (1995), (hereinafter Kennedy). The law governing the relationships among an association, its board and its members has been described as being “in its infancy, or at best early adolescence….” Stewart E. Sterk, Minority Protection in Residential Private Governments, 77 B.U. L.Rev. 273, 307 (1997). One indication that the courts are, indeed, grappling with new concepts is the split that exists in the different approaches of different jurisdictions.

California, for instance, has adopted the “reasonableness” test, Nahrstedt v. Lakeside Village Condominium Ass’n, 8 Cal.4th 361, 33 Cal.Rptr.2d 63, 878 P.2d 1275 (1994), while New York has adopted the “business judgment” rule. Levandusky v. One Fifth Avenue Apartment Corp., 75 N.Y.2d 530, 554 N.Y.S.2d 807, 553 N.E.2d 1317 (1990). Some courts and commentators recognize a distinction between considering original recorded restrictions, i.e., those extant at the time of purchase, and later-adopted ones. Ridgely Condo. Ass’n v. Smyrnioudis, 105 Md. App. 404, 660 A.2d 942, 948 (1995), aff’d 343 Md. 357, 681 A.2d 494 (1996); Sterk, supra, 77B.U. L.Rev. at 338-39. Other cases turn upon whether the restriction at issue was improperly incorporated in the association’s bylaws, rather than the community’s underlying declaration. Shorewood West Condo. Ass’n v. Sadri, 140 Wash.2d 47, 992 P.2d 1008 (2000) (leasing restriction contained in amendment to bylaws rather than the condominium declaration unenforceable).

The majority of jurisdictions appear to employ the reasonableness standard. Arabian, supra, 23 Pepp. L.Rev. at 11. We are satisfied that, in the context of this case, the appropriate test to measure the validity of these amendments is that of reasonableness. We reach that conclusion for several reasons. First, we recognize that we are dealing with amendments to the documents governing life at Panther Valley, as opposed to original provisions. None of the terms to which plaintiff objects were contained within the Declaration and bylaws to which she gave her assent by her decision in 1976 to purchase a home at Panther Valley. As amendments, we do not consider them entitled to the “very strong presumption of validity” that some courts have attached to restrictions imposed by a common interest community from the outset of its development. Ridgely, supra, 660 A.2d at 947, quoting Hidden Harbour Estates, Inc. v. Basso, 393 So.2d 637, 639 (Fla.App. 4 Dist. Ct.1981).

Additionally, we note that under Section 4 of Article XI of the Declaration, the Declaration can be amended at any time by a simple majority vote of the Association’s members. By contrast, many common interest communities permit amendments to the declaration only by a substantial majority of the owners, thus affording greater protection to the affected parties. Kress, supra, 42 UCLA L.Rev. at 841. This, for example, is the approach of the Uniform Common Interest Ownership Act, a statute that has been passed in a number of states, although not yet in New Jersey.

Finally, these amendments were passed by the membership as a whole, rather than the Association’s board of trustees. Thus, the analytical framework which provides the justification for the business judgment rule, see Papalexiou, supra, is absent.

Because these amendments all reflect changes adopted substantially after plaintiff took up residence at Panther Valley, and because the governing documents require no more than a simple majority vote, we are unwilling to afford them the presumption of validity for which defendants contend. We are satisfied that plaintiff is entitled in the context of this case to have these amendments judged on their reasonableness.

1192*1192 II

We turn then to the amendments at issue. We have concluded that the second amendment, which authorizes the filing of a Notice of Continuing Violation, does not pass the test of reasonableness but that the third, fourth and fifth amendments do pass that test. As to the first amendment, however, which precludes residency at Panther Valley by a Tier 3 offender, we decline to pass upon the issue for we are satisfied that the parties did not create a sufficient record in this matter, which was handled as a summary proceeding, to permit a reviewing court to reach a decision that can take into account and reflect the various competing policy considerations.

Plaintiff asserts three reasons why this first amendment is invalid. She contends that it is an unlawful infringement on her right to alienate her property, that it compels her to violate the law by obligating her to seek out and identify such Tier 3 registrants and that it is contrary to public policy. The first two are wholly insubstantial in our view and if plaintiff’s argument were confined to them, we would reject her position out of hand.

Defendants have supplied as part of the record in this case statistics that were compiled by the Office of the Attorney General in connection with its overall responsibility for monitoring Megan’s Law matters. According to those figures, there were, as of July 30, 1999, only 80 Tier 3 registrants within the entire State of New Jersey. New Jersey has, as of the 2000 census, a population in excess of 8,400,000; that there may be 80 individuals out of a total of 8.4 million to whom plaintiff may not sell her home cannot, in our judgment, seriously be considered an unlawful restriction upon her right to sell or lease her home.

In addition, the restriction, if indeed it can be considered one, does not fall unfairly upon plaintiff; it affects all members of the Association equally. Thus, plaintiff, if she sought to sell or lease her home, would not be relegated to a smaller potential market than another Panther Valley resident. (“Courts appear[ ] far more likely to reject changes that involved potential special privileges for individuals than they [are] to reject changes applicable to the entire population of unit owners.” Patrick A. Randolph, Jr., Changing the Rules: Should Courts Limit the Power of Common Interest Communities to Alter Unit Owners’ Privileges in the Face of Vested Expectations?, 38 Santa Clara L.Rev. 1081, 1082 (1998).) And it cannot escape remarking that the record is entirely barren of any indication that plaintiff has any present plans to sell or lease her home to anyone. To the extent plaintiff is seeking to vindicate the rights of a Tier 3 registrant to reside in Panther Valley, she is not the proper party. “Ordinarily, a litigant may not claim standing to assert the rights of the third party.” State, Dep’t of Envtl. Prot. & Energy v. Dopp, 268 N.J.Super. 165, 173, 632 A.2d 1270 (App. Div.1993), quoting Jersey Shore Med. Ctr. v. Estate of Baum,84 N.J. 137, 144, 417 A.2d 1003 (1980).

Her second asserted reason flies in the face of the plain language of the amendment. It imposes no such obligation upon her.

The third, however, gives us pause, at least in one regard. Although not contained within the record before us, we are aware that other similar common interest communities within the State have passed similar restrictions upon residency by Tier 3 registrants. 156 N.J.L.J. 361 (May 3, 1999). We do not know from the record how many common interest communities exist within the State and we do not know from the record how many of those communities have seen fit to adopt comparable restrictions and whether they have determined to include a broader group than Tier 3 registrants. We are thus unable to determine whether the result of such provisions is to make a large segment of the housing market unavailable to one category of individual and indeed perhaps to approach “the ogre of vigilantism and 1193*1193harassment,” the potential dangers of which the Supreme Court recognized even while upholding the constitutionality of Megan’s Law. Doe v. Poritz, 142 N.J. 1, 110, 662 A.2d 367 (1995).

The record is deficient in another regard as well for it is entirely unclear if the Association performs quasi-municipal functions, such that its actions perhaps should be viewed as analogous to governmental actions in some regards. As to this issue, see, e.g., Kennedy, supra, 105 Yale L.J. 761; John B. Owens, Westec Story: Gated Communities and the Fourth Amendment, 34 Am.Crim. L.Rev. 1127 (1997). We do know, from State v. Panther Valley, supra, that the Association has turned over to the township the responsibility for traffic enforcement, for instance, and is precluded from acting independently in that sphere. The record does not disclose whether certain services are provided by the township and others by the Association. It may be somewhat instructive in this regard that we have concluded in another matter involving Panther Valley that the Association’s newsletter, “The Panther,” could not be compelled to publish an ad submitted by the plaintiff that was apparently critical of the local first-aid squad. William G. Mulligan Found. for the Control of First Aid Squadders & Roving Paramedics v. Brooks, 312 N.J.Super. 353, 711 A.2d 961 (App.Div. 1998).

We recognize, of course, that Tier 3 registrants (and indeed convicted criminals) are not a protected group within the terms of New Jersey’s Law Against Discrimination.N.J.S.A. 10:5-3. Nor have we been pointed to any authority deeming them handicapped. In this regard, however see Arnold Murray Constr., L.L.C. v. Hicks,621 N.W.2d 171 (S.D.2001), in which the court upheld the eviction of a handicapped tenant who posed a direct threat to the health and safety of other tenants without the necessity of attempting to provide reasonable accommodations under the federal Fair Housing Act. It does not necessarily follow, however, that large segments of the State could entirely close their doors to such individuals, confining them to a narrow corridor and thus perhaps exposing those within that remaining corridor to a greater risk of harm than they might otherwise have had to confront.

Common interest communities fill a particular need in the housing market but they also pose unique problems for those who remain outside their gates, whether voluntarily or by economic necessity. The understandable desire of individuals to protect themselves and their families from some of the ravages of modern society and thus reside within such communities should not become a vehicle to ensure that those problems remain the burden of those least able to afford a viable solution.

We hasten to add that we recognize that not all gated communities are refuges for the wealthy. They are a spreading phenomenon that can be found among all economic strata. Owens, supra, 34 Am.Crim. L.Rev. at 1136-37. Their growth has been fueled by the public’s fear of crime and need for safety. Ibid.; Kennedy, supra,105 Yale L.J. at 766.

The Supreme Court has long cautioned against the dangers inherent in courts, presented with a meager record, ruling upon questions having a broad social and legal impact. Jackson v. Muhlenberg Hosp., 53 N.J. 138, 249 A.2d 65 (1969). Although the Supreme Court concluded in Doe v. Poritz, supra, that it had no basis to overturn the legislative judgment “that public safety was more important than the potential for [an] unfair … impact….” 142 N.J. at 110, 662 A.2d 367, it did so on the basis of a fully-formed record. We decline to write a solution for a problem that has not been fully stated.

Because we have concluded, for the reasons we have set forth, that the record was insufficient to permit determination of the issue, we reverse that portion of the trial court’s judgment upholding the validity of the first amendment to the Association’s Declaration.

We have considered whether the paucity of the record is a matter that could 1194*1194 be cured upon remand. We have, however, determined that a remand is not appropriate. We see no reason to depart from the general practice that a plaintiff who failed initially to present sufficient evidence to the trial court is, ordinarily, not entitled to a remand to cure that deficiency.

III

A

We turn now to plaintiff’s remaining challenges to the trial court’s judgment. The membership voted to amend the Association’s bylaws on the subject of a member’s inspection of the Association’s books and records. Prior to amendment, Article XIV of the bylaws provided that “all books, records, papers and files of the Association shall be open, upon request” for inspection by a member. It also authorized inspection by an attorney or certified public accountant representing a member and, in appropriate instances, the township. Its only limitation was a reference to “reasonable business hours.”

The amended article restricted such inspection to a review of the books for the current fiscal year and the two preceding fiscal years. It required a request for inspection to be in writing and to be served not less than ten business days before the requested date for inspection. It limited any one inspection to no more than two hours in length and provided that if all the records could not be reviewed in that time, an additional date would be provided within five business days. It authorized the Board to draft reasonable rules and regulations governing such inspections and further authorized the Board to withhold from inspection any documents that in “its reasonable business judgment” would

1. Constitute an unwarranted invasion of privacy.

2. Constitute privileged information under the attorney-client privilege.

3. Involve pending or anticipated litigation or contract negotiations.

4. Involve the employment, promotion, discipline, or dismissal of a specific committee member or employee.

Plaintiff argues that the ten-day notice requirement is illegal and that the amendment as a whole is too broad. She asserts that it restricts rights she previously possessed and will hamper members’ attempts to assure themselves that the Association is being properly governed.

Her challenge to the legality of the ten-day notice requirement rests upon N.J.S.A.15A:5-24c, a section of our Nonprofit Corporation Act which provides for inspection of a corporation’s books and records “upon at least 5 days’ written demand.” Based upon that language, plaintiff asserts that the Association may not require ten days written notice. Plaintiff’s argument disregards the statutory language, however; it refers to “at least” five days, it does not say “no more than five days.”

In support of her contention that the amendment invalidly deprives her of rights she had previously possessed, she relies upon Ridgely Condominium Ass’n v. Smyrnioudis, supra. That case, however, dealt with an amendment that purported to restrict certain unit owners’ use of their premises. This amendment places no restriction on plaintiff’s use of her home or the common elements of the community.

As to her final argument of overbreadth, we agree with the trial court that it is better dealt with on a case-by-case basis. The members of the Association’s board occupy a fiduciary position vis-a-vis the Association and the membership. Any response to a request for inspection of books and records must be made in good faith and cannot be structured with an eye to self-protection. Plaintiff has not hesitated in the past to seek judicial relief from Association actions she has considered improper. See, e.g., Mulligan Found. v. Brooks, supra; State v. Panther Valley Prop. Owners Ass’n, supra. We have no doubt that she will remain vigilant 1195*1195 against the possibility of improper self-dealing or negligent governance. We thus affirm that portion of the trial court’s judgment that upheld the fourth amendment.

B

Article VII of the Association’s bylaws deals with the election of trustees. Prior to amendment, Section 2 of that article merely referred to appointment of a three-member nominating committee three months prior to the annual meeting. It specified that one member of the nominating committee, who would serve as its chairman, had to be a member of the current board and the two remaining, members of the Association. It directed the committee to solicit suggestions for possible candidates.

The amended Section 2 retained the compositional structure and time frame but added the following language:

Unless waived by resolution of the Board the minimum qualifications to be a candidate for a trustee position will be (a) the absence of any prior dismissal for cause from the Board of Trustees or a Committee, or (b) the absence of any conviction of a crime constituting a felony or a crime of moral turpitude. The Board of Trustees may, by resolution, adopt additional qualifications for candidates, provided, however, that the resolution must be approved by the affirmative vote of two-thirds of the fully constituted Board. If any Owner who meets the qualifications otherwise set forth in this paragraph obtains the signatures of other Owners representing 10 percent or more of the Lots endorsing the Owner’s candidacy, and provides same to the Board at least 30 days prior to the date of the annual meeting, the Owner will not be required to satisfy the additional qualifications set forth in a resolution of the Board adopted under this section, and the name of such candidate will be set forth on the ballot for the trustee election.

Plaintiff urges that the amended section vests too much discretion in the Board, again creating the potential for favoritism and improper actions. We reiterate our earlier statements about the fiduciary responsibilities of the members of the Board and note that section 23 of the Nonprofit Corporation Act provides a forum for relief, if necessary, by providing for judicial review of elections to the boards of nonprofit corporations.

There is no indication in the record that the ten percent threshold for getting on the ballot by way of petition is unduly burdensome. Indeed, the amended provision could be considered more favorable to dissident members because the earlier provision entirely failed to provide a mechanism for nomination by petition. We thus affirm that portion of the judgment that upheld the fifth amendment.

IV

A

The Association has cross-appealed from the portions of the trial court’s judgment that struck down two amendments. The members voted to supplement Article X of the Declaration by adding the following language:

In the event the Association files a lawsuit, counterclaim or third-party claim… against any owner to enforce any term or provision of … [the Association’s Declaration, bylaws or rules] and [it] prevails in its claims, [it] shall be entitled to collect reasonable costs and attorneys’ fees from the Owner…. Should [it] seek to collect its reasonable costs and fees, it will cause the costs and fees to be set forth in the judgment or order … adjudicating the claim. Collection… may be enforced … as if the attorneys’ fees and costs were an Assessment owed by the particular Owner, except as otherwise determined by a court having jurisdiction over the claim.

An earlier amendment had also sought to afford the Association a right to seek counsel fees but had been struck down by the same trial court in an earlier lawsuit1196*1196 between the same parties. The trial court concluded the instant amendment was also invalid; the trial court struck down the amendment because it was not authorized by statute and plaintiff had not assented to it.

The statutory prong of the trial court’s reasoning is based upon the fact that PantherValley is not a condominium community and thus does not fall within the fee-shifting provision of the Condominium Act, N.J.S.A. 46:8B-15(e). We do not consider that dispositive, however. As we noted earlier, while the condominium statute is not conclusive, it may provide guidance. State v. Panther Valley Prop. Owners Ass’n, supra, 307 N.J.Super. at 332, 704 A.2d 1010.

One of the core foundations of a common interest community is a sharing of expenses for maintenance among the residents. If the community, however, is compelled to shoulder higher legal expenses because of the intransigence of a small number, we cannot consider it unfair or unreasonable for the Association to seek to lessen the burden upon its other members by seeking to have the uncooperative member contribute to the attorneys’ fees required to vindicate the Association’s rights.

Nor is it dispositive that plaintiff did not agree with the amendment and thus there was no contract between the parties. The Declaration provided from the outset that it could be amended; the Association could not be deprived of the ability to add provisions to the Declaration that its experience proved warranted. Plaintiff has maintained throughout this litigation that the amendments at issue should be measured under the reasonableness standard; we are unable to consider this amendment unreasonable. We thus reverse that portion of the trial court’s judgment that struck down the third amendment.

B

The membership also voted to amend Section 8 of Article XV of the bylaws. Article XV deals generally with enforcement of the community’s covenants, bylaws, rules and regulations. Section 8 authorizes the Association to file with the Warren County Clerk a Notice of Violation if the Covenant’s Committee has determined “that a continuing violation exists with respect to any Owner….” The trial court concluded this amendment was invalid because a Notice of Violation could be filed without notice to the affected owner.

Defendants argue that the trial court improperly read Section 8 in isolation. They urge that when it is viewed in the overall context of Article XV, there is ample provision for notice to an affected owner.

We do not agree. We conclude that there is a qualitative difference between the private enforcement techniques encompassed within the balance of Article XV and the attempt to create a publicly-recorded lien upon an owner’s property. We concur with the trial court that an affected owner is entitled to receive notice before any Notice of Violation is submitted for recording with the County Clerk.

We have noted at several points that the governance of Panther Valley is not subject to the Condominium Act. We are unable, however, to perceive any reason in logic or policy that would obviate the necessity for notice before establishing a lien upon an owner’s property. We concur in the analysis expressed in Loigman v. Kings Landing Condominium Ass’n, 324 N.J.Super. 97, 734 A.2d 367 (Ch.1999), that requiring notice can only further the presumed purpose of the association, to be paid. We thus affirm that portion of the trial court’s judgment that struck down the second amendment.

V

The remaining issue on appeal is the trial court’s denial of plaintiff’s request for counsel fees. She argued to the trial court and repeats to us that she was entitled to counsel fees because she prevailed in her challenge to at least a limited degree.1197*1197 She premised her claim upon the frivolous claims statute, N.J.S.A. 2A:15-59.1. We are satisfied that none of defendants’ actions can be considered to have met the statutory threshold requirements. We thus affirm the denial of counsel fees and costs.

In summary, on both plaintiff’s appeal and defendant’s cross-appeal, we reverse in part and affirm in part.

 

Keywords: Governing Documents, Enforcement

Morgan v. Veach

Morgan v. Veach

59 Cal.App.2d 682 (1943)

John L. Wheeler for Appellants.

Max E. Gilmore and Albert E. Marks for Respondents.

WOOD (Parker), J.

Summary by Mary M. Howell, Esq.:

Owner seeking to enforce setback restrictions against a neighbor is not barred by laches because once the owner was able to discern from his lot that a setback violation was occurring, he put his neighbor on notice of the problem.   Judgment in the alternative (cure the setback violation or pay damages) was not inappropriate.

**End Summary**

 

In this action to enjoin the violation of building setback restrictions, plaintiffs obtained judgment requiring defendants to move the building erected by them in violation of the restrictions or to pay $1,000 damages. 685*685

The tract of land involved herein, consisting of 12 lots, included 10 hillside lots, the fronts of which adjoined a semicircular street that extended up-grade in a northerly direction. Beginning at the southerly end of the tract and extending northerly, the lots fronting on that street were numbered from 1 to 10 inclusive. Generally stated, the lots faced as follows: lots 1, 2, 3, and 4, south; lots 5 and 6, southeast; and lots 7, 8, 9, and 10, east.

The lots owned by plaintiffs and the approximate values thereof were as follows: Raymond R. Morgan, lot 1 and house, $20,000; Karl and Edith Schneider, lot 2 and house, $23,000; Pauli Hoffman, lot 4 and house, value not stated; Virginia W.Morgan, lot 8 and house, $25,000; and Jean and Paul Carson, lot 9, vacant, $4,000. Defendants, husband and wife, owned lot 10, at the northerly end of the street.

All the parties held their lots under a deed which provided, pursuant to a general plan of improvement of said lots and tract, that the residences on the various lots “shall be placed not less than” the following mentioned distances from the front property lines of the lots: 45 feet on lots 1, 2, 3, and 4; 40 feet on lot 5; 35 feet on lot 6; 30 feet on lot 7; 25 feet on lot 8; and 20 feet on lots 9 and 10. The deed provided further that “no building … shall be erected or maintained within 5 feet of the sidelines of any of said lots nor any fence, wall or hedge nearer to the front line thereof than the setback hereinabove established or elsewhere thereon at a greater height than 5 feet”; and that said conditions “shall … terminate … after January 1, 1960. … Provided also that a breach of any of the foregoing conditions shall cause the lot … to revert to said grantor, or its successors … and as to the owner … of any other lot … the foregoing conditions shall operate as covenants running with the land, and a breach of any such covenants … may be enjoined, abated or remedied by said grantor … or by any such owner. …”

Defendants admitted in their answer that their residence did not comply with the restrictions, but denied that it was constructed in violation of them. They alleged further: (1) that plaintiffs’ claims for injunctive relief were barred by laches on the part of plaintiffs, in that, when the action was commenced the house was substantially completed; (2) that plaintiff Pauli Hoffman constructed a house and a wall on lot 4 which did not conform with the restrictions, and therefore 686*686 the claims of plaintiffs for injunctive relief were barred; and (3) that plaintiff Virginia W. Morgan maintained for many years a hedge on lot 8 between the southeasterly corner of the residence on lot 8 and the curb, which did not conform with the restrictions, and therefore the claims of plaintiffs for injunctive relief were barred.

On July 22, 1941, defendants received a deed to lot 10 which recited that the lot was subject to restrictions of record. On August 1st, defendants received a policy of title insurance which stated the number of the book and page of the official records wherein the restrictions appeared. Stakes and lines placed on lot 10 by defendants on July 15th to indicate the foundation lines remained in position until August 10th, when excavation was commenced. Construction of the cement foundation, started September 3rd, was finished September 13th. Erection of the rough framework of the building, commenced September 15th, was completed September 27th.

Defendant Russel A. Veach and plaintiff Raymond R. Morgan will be referred to hereinafter as the defendant and Morgan, respectively.

About September 21st, when some of the rough framework of the walls had been erected, a brother of plaintiff Morgan, who lived across the street from lot 10, told defendant that the house was too close to the front property line. On September 21st, plaintiff Morgan, who owned lot 1 and lived on lot 8 owned by his wife Virginia W.Morgan, noticed for the first time that defendant was building in violation of the restrictions; and on September 22nd (according to his testimony), or on September 29th (according to defendant’s testimony), he said to defendant by telephone that the house was too close to the line and defendant was violating the restrictions. Defendant replied that his builder had told him he could build anywhere on the lot and he (defendant) thought he would go ahead as planned. About September 29th, defendant went to Morgan’s office and told him: that he had found the restrictions as to the setback; that he did not know what he could do about it, since it would cost him more to relocate the house than he had expended at that time; and that he was going ahead with the building anyway. Morgan replied that if he did go ahead, he (Morgan) would have to do something about it and try to stop him legally. About October 1st,Morgan’s attorney sent a letter to defendant, which 687*687 reached him October 15th or 16th, stating that unless defendant complied with the restrictions, relief would be sought from the courts. Thereafter and during October, the rough plumbing, the fireplace, cabinets, paper and netting on the outside for stucco, and plaster board on the inside, were installed. This action was commenced on October 31, 1941. On November 1st, a temporary restraining order was served on defendants. At that time the house was ready for the outside stucco and the inside plaster. Within a week after the temporary restraining order was dissolved, defendant resumed work on the house, and, according to his statement, he proceeded to complete it “in a hurry” because materials were hard to get. The house was completed on December 24th. The cost of the house, not including the lot, was about $10,000.

The front property lines of the lots are 8 feet from the street curb, and there is no sidewalk. The garage on defendants’ lot is “a part of the main residence,” as required by the restrictions, and adjoins the house at the front on the south side. Defendants’ house, instead of being at least 20 feet from the front property line, is the following distances from the front property line: the northerly corner of the house, 8.2 feet; the northeast corner of the garage, 13.65 feet; and the southeast corner of the garage, 21.7 feet. Defendants’ house, instead of being 5 feet from the lot sidelines, is the following distances from the sidelines of lot 10: the north side, 3.8 feet; and the south side, 3.5 feet.

The trial court found that defendants’ residence did not comply with said restrictions, particularly in that said building was placed less than 20 feet from the front property line of lot 10; that about September 21, 1941, plaintiffs caused defendants to be notified of the fact that defendants were constructing a building which did not conform with the setback restrictions; that notwithstanding said fact and notice defendants continued with and completed the construction of said building in violation of said restrictions and covenants; that said violations by defendants caused damage to plaintiffs, and the beauty and symmetry of the plan of improvement of the tract was diminished; that there was no laches on the part of plaintiffs; that it was not true that the building constructed on lot by plaintiff Hoffman, and the building constructed on lot 8 by plaintiff Virginia W. Morgan, did not conform with said restrictions. 688*688

[1] The first contention of defendants is that the trial court abused its discretion in granting the injunction. They assert “that while the defendants’ residence building was constructed in violation of the restrictions in that the residence was set too close to the front property line, such construction was the result of inadvertence and mistake upon the part of defendants.” They state that the inadvertence and mistake occurred by reason of the following: that the real estate agent who sold the lot told them the curb was the front line of the lot, and they could build anywhere on the lot, except within 5 feet of the south line; that the deed received by defendants did not specifically set forth any restrictions; that the lot was on a steep hillside and there was no sidewalk or trees in the space of 8 feet between the curb and the front property line, dedicated to the city, to indicate the front line was not the curb; that the garage on the lot north of lot 10 (which was not in the tract involved) was closer to the curb than defendants’ house; and that lot 9, to the south of defendants’ lot was vacant, and the street between the Morgan house on lot 8, and defendants’ lot 10 curved appreciably into the hill.

The matters just referred to, standing alone, might indicate inadvertence and mistake, but there were other circumstances to be considered by the trial court. It is difficult to understand why defendant relied upon the agent for information regarding the restrictions when authoritative information was available, as indicated by references to the restrictions in the deed and policy of title insurance received by defendants before the building was commenced. Although he might have acted inadvertently prior to the time he was notified by Morgan’s brother and by Morgan that he was building too close to the line, thereafter he proceeded with knowledge that the restrictions required a setback of not less than 20 feet and with knowledge that his building was considerably less than 20 feet from the line. At the time he was so notified, the expense of changing the location of the house would have been between $1,500 and $2,000. Defendant did not heed the notices, declared his intention on two occasions to proceed without complying with the setback restrictions, and proceeded “in a hurry” to complete the house irrespective of said oral notices and a written demand by Morgan’s attorney that he comply with the restrictions, and irrespective of pending litigation to prohibit him. Although defendant stated that he relied upon 689*689 the agent for information as to the restrictions and the agent told him the building should not be within 5 feet of the south line, it is to be noted that defendant violated even that restriction and built the house 3 1/2 feet from the south line. There was evidence that defendant intended in the first instance to build farther back on the lot but he changed his mind in order to have more space in the back yard. The construction in violation of the restrictions, at least after the foundation was in, was not the result of inadvertence or mistake.

[2] Defendants assert further, as a part of their argument that the court abused its discretion in granting the injunction, that, although the plaintiffs Morgan were in a position at all times to observe the proposed location of the house, a period of more than two months elapsed before defendant was advised the restrictions were being violated, that plaintiffs permitted defendant to continue the construction until the latter part of October, when the house was substantially completed, without bringing to his attention their determination to require compliance with the restrictions; and that while such failure of plaintiffs to act might not have constituted laches the elements of estoppel were present and the issuance of an injunction worked an inequitable burden on defendants. By reason of the hillside character of defendants’ lot, the terraces thereon, and the curve of the street, it was difficult for persons who were not on defendants’ lot and were not builders to determine, before the walls were started, whether the restrictions were being violated.

Plaintiffs were not required, at the risk of waiving a violation of restrictions by defendants, to scrutinize the activities of defendant to ascertain whether he was violating the restrictions. At a time, however, when Morgan could first determine with reasonable certainty, without being upon the lot, that the restrictions were being violated, that is when the walls were started, he notified defendant immediately that he objected to the violation. In response to defendant’s statement that he would go ahead as planned, plaintiff Morgan stated he would try to stop him legally. The position of Morgan that he would insist upon compliance with the restrictions was placed before defendant definitely and promptly when he ascertained the facts. The claim of laches or estoppel cannot be sustained.

[3] An appropriate statement relative to defendants’ assertion that an injunction would work an inequitable burden is in 28 Am.Jur., section 56, page 253 as follows: “In view of 690*690 the drastic character of mandatory injunctions, the rule under consideration as to balancing the relative conveniences of the parties applies with special force to a prayer for such mandatory relief. Where, therefore, by innocent mistake or oversight, buildings erected … slightly encroach … and the damage to the owner of the buildings by their removal would be greatly disproportionate to the injury … the court may decline to order their removal … But relief by way of a mandatory injunction will not be denied on the ground that the loss caused by it will be disproportionate to the good accomplished, where it appears that the defendant acted with a full knowledge of the complainant’s rights and with an understanding of the consequences which might ensue. …”

In a note in 57 A.L.R., first column, page 343, it was said: “Wilfulness on the part of the defendant in proceeding with the violation of the restriction after warning by the complainant, especially after suit is brought, is a ground for equitable relief by mandatory injunction greatly stressed by the courts. Thus, one who deliberately violates building restrictions placed upon his lot for the benefit of a district in a city cannot avoid a mandatory injunction so to build as to comply with the restrictions, on the theory that the loss caused by it will be disproportionate to the good accomplished.” The case of Stewart v. Finkelstone, (1910) 206 Mass. 28 [92 N.E. 37, 40, 138 Am.St.Rep. 370, 28 L.R.A.N.S. 634] cited in support of that statement, stated at page 38: “It is strongly urged that a mandatory injunction ought not to issue, for the reason that it would … impose on the defendant a loss disproportionate to the good it can accomplish. … This remedy … in cases proper for its exercise … ought not to be with-held merely for the reason that it will cause pecuniary loss. It has been found that the defendant with full knowledge of the restrictions ‘deliberately attempted’ to override them, and thus to deprive the district of the character given it by the restrictions. He took his chances as to the effect of his conduct with eyes open to the results which might ensue. It has been the practice of courts to issue mandatory injunctions upon similar facts.”

[4] Defendants assert also, under their point concerning abuse of discretion in granting the injunction, that plaintiffs did not prove any damages. In Walker v. Haslett, (1919) 44 Cal.App. 394 [186 P. 622], it was said at page 398: “When clearly expressed, covenants of this description will be strictly 691*691 enforced, and a court of equity will decree an injunction, and this without any showing of actual damage or substantial injury. … He [owner] has the right to define the injury for himself, and also for his grantees of the remaining lots. … He, or any subsequent owner … may enforce the covenant when it is broken, and is not to be defeated by the opinion of any number of persons that the breach occasions no substantial injury.” It was said in Joyce v. Krupp, (1927) 83 Cal.App. 391 [257 P. 124], at the bottom of page 398: “Where equitable relief is sought, proof of actual or substantial injury is not essential, the establishment of a violation of a uniform building restriction being all that is necessary to entitle a complaining owner to relief. …” “The propriety of affording equitable relief by injunction rests in the sound discretion of the trial court to be exercised according to the circumstances and exigencies of each particular case.” (Diederichsen v. Sutch, (1941) 47 Cal.App.2d 646, 649 [118 P.2d 863].) The court did not abuse its discretion.

[5] The second contention of defendants is that equitable relief should not be granted to one who has violated restrictions. They assert that plaintiff Virginia W. Morgan violated restrictions as to lot 8 in that she maintained a hedge about 7 feet in height on the south side of her house. A witness called by defendants testified to that effect.Morgan testified that there was a line of shrubs, but not a solid line, between the curb and the southeast corner of the house; that the shrubs were not on the Morgan property; that they were not a hedge; that he planted them on the adjoining lot 7, with the permission of the owner; and that he could remove them in 10 minutes. The court found that it was not true that the building on lot 8 did not conform with the restrictions. No finding was made concerning the hedge or shrubbery, but the finding that the building was not in violation of the restrictions should be regarded, in view of the judgment, as a general finding sufficient to include the item of landscaping. They also assert that plaintiff Hoffman violated the restrictions as to lot 4, in that a wall which extended across the premises was 40 feet from the curb instead of being not less than 45 feet from the property line, as required by the restrictions. Morgan testified that the part of the premises referred to as a wall was landscape gardening to hold up flower beds. Defendants also contended that a corner of the Hoffman garage 692*692 was 2 feet closer to the property line than was permitted by the restrictions. The garage adjoined the residence building, as required by the restrictions, and was a part of it. The court found that it was not true that the building on lot 4 did not conform with the restrictions. No special finding was made concerning the wall or the garage. There was no allegation in the answer referring specially to the garage. The general finding concerning the building included the garage and was sufficient, in view of the judgment, to include also a determination that the portion of the premises referred to as a wall or a part of a flower bed was not a violation.

[6] Furthermore, it was not alleged that any of the plaintiffs other than the owners of lots 10 and 4 violated the restrictions. Defendants did contend, however, that a hedge on lot 2 which the owner, Mrs. Schneider, said was 1 foot high, was a violation. Even assuming that some of the plaintiffs had violated the restrictions, the other plaintiffs would not by reason thereof be prevented from obtaining injunctive relief, if they were otherwise entitled to it and had no knowledge that the restrictions had been violated by any person other than defendants. (Alderson v. Cutting, (1912) 163 Cal. 503, 506 [126 P. 157, Ann.Cas. 1914A 1].)

[7] The third contention of defendants is that damages cannot be awarded as an alternative when only injunctive relief was sought in the complaint. Their argument is that plaintiffs sought only injunctive relief in the complaint and did not establish any facts upon which the court could award damages. The complaint was labeled “Complaint for Injunction,” did not include a prayer for damages, but did allege that said violations by defendants caused great damage to plaintiffs, and included a prayer for general relief. “The subject matter of an action and the issues involved are determinable from the facts pleaded, rather than from the title or prayer for relief.” (Standard Brands of California v. Bryce, (1934) 1 Cal.2d 718, 721 [37 P.2d 446].) The case was tried upon the theory that the amount of damages was involved. Plaintiffs and defendants called witnesses who testified concerning damages. The trial judge stated just before the case was submitted that he did not know how much he would allow as damages or whether he would make an alternative judgment. At the time the judge made that statement defendants did not indicate in any way that they considered the amount of damages was not involved. The amount of damages693*693 was an issue in the trial. At the beginning of the trial the parties requested the trial judge to view the property involved, and the judge stated he would do so after testimony had been received. At the close of the trial the judge stated that plaintiffs were entitled to a remedy, that he had not looked at the premises and had not indicated “how much he would allow”–whether a stated amount or “an alternative judgment to move the house back” or allow damages, and he would look at the property before he made up his mind. The record does not show that the judge did not view the property, and it will be assumed that he did view it. In the case of Rose v. State of California, (1942) 19 Cal.2d 713 [123 P.2d 505], which was a condemnation case in which the judge determined the amount of damages, it was stated at page 733: “That the trial judge is not bound by the opinion of the witnesses on market value is well settled. … Furthermore, in the instant case the trial judge visited the premises, and the information so obtained ‘is independent evidence that can be taken into consideration in determining the issue of the case.'”

[8] Defendants also argue that the court in awarding $1,000 damages found that plaintiffs’ injury was compensable, and therefore they had an adequate remedy at law and injunctive relief should have been denied. It can be argued with equal force that the fact that injunctive relief was granted was a finding that the injury was not compensable. An alternative judgment was rendered in the case of Carey v. Bowie, (1933) 130 Cal.App. 400 [19 P.2d 1032], which required defendants to remove a part of their dwelling, in order to comply with building restrictions, to a point not less than 4 feet from the property line, or to pay $1,000 damages. On appeal by defendants the judgment was affirmed. The alternative form of the judgment, however, was not discussed in the opinion. The attorney for defendants herein correctly states that it does not appear from the opinion therein that alternative relief was not prayed for. The transcript in the cited case is not available, but the respondent’s brief therein stated, “Plaintiff prayed for a mandatory injunction compelling the removal of the offending addition, for damages in the sum of One Thousand Dollars ($1,000), and for general relief.” It therefore appears that alternative relief was not prayed for in the complaint in the cited case in which an alternative judgment was rendered. It is true that was not a 694*694 case wherein injunctive relief only was sought, but it is also true that alternative relief was not sought therein. The awarding of damages in the present case, however, did not indicate that the injunction should not have been granted. The circumstances in the case at bar were such that the court was required to grant the mandatory injunction. The defendant deliberately proceeded, after notices and protests, to construct his building in violation of the restrictions with full knowledge that he was violating them and in total disregard of the notices and protests of the owners of other lots. The encroachment by defendants within the restricted distance from the property line was not slight, but was great. At one place defendants’ building extended about 12 feet into the restricted area. The evidence shows that the expense of moving the house after the foundation was in would have been between $1,500 and $2,000. Of course, after the house was completed, the expense of moving it would be considerably more. The mandatory injunction having been required by the evidence, and having been granted, the alternative part of the judgment whereby defendants were granted the privilege of paying $1,000 damages in lieu of complying with the restrictions, was therefore a ruling very much in favor of defendants. The position of defendants is, therefore, that they are objecting to a part of the judgment which, under the circumstances, is favorable to them. The plaintiffs have not appealed from that portion of the judgment. It is not necessary, however, to decide herein either of the questions as to the propriety of an alternative judgment for damages or as to the sufficiency of the evidence to support the award of damages. The judgment of injunction was supported by the findings and the evidence, and it was not necessary, as above shown, that any specific amount of damage be proved as a basis for the injunction. The alternative part of the judgment which permits the defendants to evade the injunction by paying $1,000 was not based upon a finding of damages in that amount, for there was no such finding. The absence of such a finding is a sufficient answer to defendants’ contention that the award of damages shows a case where plaintiffs can be adequately compensated in damages and hence no injunction should be granted. [9] The alternative, allowing payment of $1,000, apparently was an act of grace toward the defendants, and was based upon nothing appearing in the findings. If it was an error, it was in favor of defendants. The evidence clearly 695*695 shows, and defendants concede, that it would cost them much more than $1,000 to comply with the injunction. The alternative allowing the payment of damages being in defendants’ favor, they cannot complain of it on this appeal. (2 Cal.Jur. 841; Irvine v. MacGregor, (1928) 203 Cal. 583, 586 [265 P. 218].)

[10] Defendants also contend that they have been deprived of a jury trial upon the issue of damages because the complaint did not include an issue as to damages, and there was no issue upon which they could base a request for a jury. As above stated, the case was tried upon the theory that the issue of damages was involved. Also as above shown, if injunctive relief was the only issue (as defendants contend), proof of actual or substantial injury was not essential. (Joyce v. Krupp, supra.) Defendants did not suggest at any time when the matter of damages was being presented by plaintiffs and themselves that defendants desired a jury trial. Furthermore, when the judge stated at the close of the case that he might allow damages, no indication was made by defendants that they desired a trial by jury if damages were to be allowed. Under such circumstances defendants’ contention that they were deprived of a jury trial cannot be sustained.

The judgment is affirmed.

Shinn, Acting P. J., and Shaw, J. pro tem., concurred.

 

Keywords: Governing Documents, Statute of Limitations

Martin v. Bridgeport Community Association

Martin v. Bridgeport Community Association

173 Cal.App.4th 1024 (2009)

1027*1027 Law Offices of David L. Hoffman and David L. Hoffman for Plaintiffs and Appellants.

Kulik, Gottesman, Mouton & Siegel, Leonard Siegel, Francesca Dioguardi and Thomas Ware for Defendant and Respondent.

Summary by Mary M. Howell, Esq.:

Tenant of owner lacks standing to sue association regarding association’s alleged breach of agreement relating to lot line adjustment, despite owner’s alleged assignment of causes of action to tenant and tenant’s assertion that it was an intended third-party beneficiary of the agreement.

**End Summary**

OPINION

JACKSON, J.—

INTRODUCTION

Plaintiffs James A. Martin and his wife, RaeAnn, appeal from a judgment against them, including the award of attorney’s fees and costs, entered after the trial court sustained a demurrer in favor of defendant Bridgeport Community Association. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND[1]

Richard and Rachel Peterson (the Petersons) purchased a home constructed by Richmond American Homes (Richmond) in a planned development community named Bridgeport in Santa Clarita at 23944 Windward Lane, Lot 33 (the Property). The Bridgeport Community Association, Inc. (BCA), was the homeowners association responsible for managing the common areas and enforcing the master declaration of covenants, conditions, and restrictions for Bridgeport (the CC&R’s) and rules and regulations (the R&R’s) for the community.

Pursuant to an arrangement with the Petersons, James Martin and his wife, RaeAnn (the Martins), agreed that the Martins would live at the Property and 1028*1028 pay all the costs involved with the Property, including the mortgage payments. RaeAnn Martinis the Petersons’ daughter. They also agreed that the Martins would deal directly with BCA on any issues regarding the Property. The Petersons executed a power of attorney to that effect which was accepted by BCA. The Petersons agreed to assign all their rights, title, and interest in their causes of action stated in the FAC to the Martins.

During construction of the home on the Property, the Petersons and the Martins observed that the size of Lot 33 where the construction was occurring was smaller than represented in the purchase transaction. Richmond agreed to move the northern property line 10 feet to include approximately 5,593 square feet within the Lot 33 lot lines (Adjustment Area). This required two separate lot line adjustments (Lot Line Adjustment No. 1 and Lot Line Adjustment No. 2). Before either adjustment could be completed, Richmond transferred the Adjustment Area to BCA as part of the common area.

As the result of negotiations with BCA by the Martins on behalf of the Petersons, BCA agreed to deed the Adjustment Area to the Petersons under certain terms and conditions (BCA Lot Line Agreement), as shown by a May 8, 2004 letter from Nancy O’Neil on behalf of the BCA board of directors and an August 10, 2004 letter from the attorney for BCA.[2] Both letters were addressed to the Martins. The Martins accepted the terms of the agreement proposed by BCA on behalf of themselves and the Petersons. Both letters represented that the BCA board had agreed to completing the Lot Line Adjustment No. 2 and the transfer of land, subject to the conditions that the homeowners would pay BCA’s attorney’s fees to prepare and execute the necessary documents and the homeowners would pay for the relocation of the common area sprinklers from the Adjustment Area.

After receiving notice of BCA’s agreement, the Martins invested money for fencing, landscaping and the import of dirt on the Adjustment Area. The Martins also represented that the Petersons were not able to landscape and hardscape their front yard because they did not yet have ownership of the Adjustment Area and thus lost use of the yard for more than four years.

After lengthy delays, the City of Santa Clarita (City) approved Lot Line Adjustment No. 1. When BCA did not thereafter cooperate in order to begin 1029*1029 the required City-approval process for Lot Line Adjustment No. 2, the Martins sought specific performance of the BCA Lot Line Agreement by filing the instant lawsuit on October 20, 2006. The original complaint named the Petersons and the Martins as plaintiffs and BCA as defendant. BCA filed a demurrer to the complaint, in part on the ground that the Martins lacked standing.

Then the Martins filed the FAC, the operative complaint in this action. The FAC named only the Martins as plaintiffs. The first cause of action was for damages for breach of, and the second cause of action was for specific performance of, the BCA Lot Line Agreement. As a part of the allegations, the Martins requested that the court order BCA “to transfer title and cooperate in the approval and transfer of title to the property regarding Lot Line Adjustment No. 2 to Plaintiffs [the Martins].”

The third cause of action was for breach of the R&R’s of, and the fourth cause of action was for breach of the CC&R’s of, the Bridgeport Community. The fifth cause of action was for violation of Civil Code section 1363 et seq.[3]

The sixth cause of action was for intentional infliction of emotional distress. In part, the Martins alleged BCA took certain actions “in order to punish, and retaliate against, the Plaintiffs [the Martins] for enforcing their rights with respect to the Property.”

The seventh cause of action was for negligence arising from the duty of BCA to the Martins, “as residents and members of the BCA,” to use reasonable care in maintaining the common areas. The eighth cause of action was for negligence per se for violation of sections 1363 and 1364.

At the hearing on July 16, 2007, the trial court ruled that the demurrer to the FAC was sustained with leave to amend as to the first through the fifth, and the seventh and eighth causes of action, on the ground that the Martins lacked standing. With regard to the scope of the leave to amend, the trial court stated: “I am going to allow [plaintiffs’ counsel] leave to amend to bring in the Petersons, and I will give [counsel] one last shot at seeing if there’s any other claims the Martins have that can be pled.” As to the sixth cause of action, the trial court sustained the demurrer without leave to amend, on the ground that the facts did not support a finding of sufficiently outrageous conduct as is necessary for recovery based upon intentional infliction of emotional distress.[4]

1030*1030 The second amended complaint (SAC) was filed on August 6, 2007. The Petersons were the only named plaintiffs. They alleged only four causes of action: first cause for breach of the R&R’s, second cause for breach of the CC&R’s, third cause for violation of sections 1363 and 1364, and fourth cause for negligence per se based on the violation of the same statutes.

BCA filed a demurrer to the SAC. After hearing on December 10, 2007, the trial court sustained the demurrer with leave to amend as to the first, second and third causes of action on the ground of failure to allege sufficient facts to support the causes of action. The court sustained the demurrer to the SAC without leave to amend as to the fourth cause of action.

The Petersons filed the third amended complaint on January 4, 2008. Only the Petersons were named as plaintiffs.

Also on January 4, 2008, BCA filed a request that the court enter judgment against the Martins in favor of BCA. The request represented that on July 16, 2007, the trial court granted BCA’s demurrer to the FAC “without leave to amend,” except leave to amend to substitute the Petersons, as the real parties in interest, for the Martins as plaintiffs, and the Petersons filed the SAC.

BCA also filed a motion for an award of attorney’s fees pursuant to sections 1354, subdivision (c), and 1717, subdivision (a). The trial court granted BCA’s motion for award of attorney’s fees in the amount of $29,371.39 for defense against the Martins. The trial court entered judgment in favor of BCA against the Martins and included the award of attorney’s fees and costs to BCA.[5]

DISCUSSION

The Martins contend that the trial court erred in sustaining BCA’s demurrer on the ground that they lacked standing to assert the first through fifth, seventh and eighth causes of action. They claim they had standing as to all the causes of action, in that the Petersons assigned “all of their rights, title, and interest in their causes of action stated in the First Amended Complaint. . . to the Martins.” As to individual causes of action, the Martins also 1031*1031 present other grounds upon which they contend they have standing. The Martins further claim that the trial court erred in including in the judgment an award of attorney’s fees and costs pursuant to section 1354. We disagree and affirm the judgment.

I. Standard of Review

When a demurrer is sustained by the trial court, we review the complaint de novo to determine whether, as a matter of law, the complaint states facts sufficient to constitute a cause of action. (Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126 [119 Cal.Rptr.2d 709, 45 P.3d 1171].) Reading the complaint as a whole and giving it a reasonable interpretation, we treat all material facts properly pleaded as true. (Ibid.) The plaintiff has the burden of showing that the facts pleaded are sufficient to establish every element of the cause of action and overcoming all of the legal grounds on which the trial court sustained the demurrer, and if the defendant negates any essential element, we will affirm the order sustaining the demurrer as to the cause of action. (Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 879-880 [6 Cal.Rptr.2d 151].) We will affirm if there is any ground on which the demurrer can properly be sustained, whether or not the trial court relied on proper grounds or the defendant asserted a proper ground in the trial court proceedings. (Id. at p. 880, fn. 10.)

A trial court has discretion to sustain a demurrer with or without leave to amend. (Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.) If we determine that the plaintiff has met its burden to demonstrate that a reasonable possibility exists that the defect can be cured by amendment of the pleading, then the trial court has abused its discretion in denying leave to amend and we reverse the denial. (Ibid.) Otherwise, we affirm the judgment on the basis that the trial court has not abused its discretion. (Ibid.)

(1) Standing is the threshold element required to state a cause of action and, thus, lack of standing may be raised by demurrer. (Buckland v. Threshold Enterprises, Ltd. (2007) 155 Cal.App.4th 798, 813 [66 Cal.Rptr.3d 543]; Blumhorst v. Jewish Family Services of Los Angeles (2005) 126 Cal.App.4th 993, 1000 [24 Cal.Rptr.3d 474].) To have standing to sue, a person, or those whom he properly represents, must “`have a real interest in the ultimate adjudication because [he] has [either] suffered [or] is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.’ [Citation.]” (Schmier v. Supreme Court (2000) 78 Cal.App.4th 703, 707 [93 Cal.Rptr.2d 580].) Code of Civil Procedure section 367 establishes the rule that “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” (2) A real party in interest is one who has “an actual 1032*1032 and substantial interest in the subject matter of the action and who would be benefited or injured by the judgment in the action.” (Friendly Village Community Assn., Inc. v. Silva & Hill Constr. Co. (1973) 31 Cal.App.3d 220, 225 [107 Cal.Rptr. 123].) Upon review of action on a demurrer, we review the determination of standing de novo.

II. Standing

The Martins’ causes of action relate to BCA’s actions with regard to, or duties with respect to, the Property, that is, Lot 33 owned by the Petersons, as part of a planned development subject to the Davis-Stirling Act. The causes of action other than the first and second seek either the enforcement of governing documents of the development, including its CC&R’s and R&R’s, or redress for violations of the Davis-Stirling Act. The Martins did not claim to have, and the record does not show that the Martins ever had, any ownership interest in the Property. As we explain below, ownership in the Property is a prerequisite to standing to assert each of the causes of action as each seeks redress for violations of rights of the owners of the Property, for which the causes of action are not assignable to the Martins.

(3) The Martins contend they have standing on the basis that the Petersons assigned to them all the Petersons’ interests in the causes of action pursuant to section 954,[6] which permits an owner of a chose in action to assign it to another person where it arises “out of the violation of a right of property, or out of an obligation.” Such types of choses in action include, for example, breach of contract or damage to personal or real property. (Curtis v. Kellogg & Andelson (1999) 73 Cal.App.4th 492, 504 [86 Cal.Rptr.2d 536]; 1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 720, p. 805.) Exceptions to the general rule of assignability under section 954 are choses in action for wrongs done to the person, the reputation or the feelings of the injured party, and to contracts of a purely personal nature, like promises of marriage. (Fireman’s Fund Ins. Co. v. McDonald, Hecht & Solberg(1994) 30 Cal.App.4th 1373, 1381 [36 Cal.Rptr.2d 424].)

Assignability under section 954 is limited to “[a] thing in action,” a term defined in section 953 as “a right to recover money or other personal property by a judicial proceeding.” By definition, “[t]he words `personal property’ include money, goods, chattels, things in action, and evidences of debt,” and do not include “lands, tenements, and hereditaments,” which instead are “real property.” (§ 14.)

1033*1033 A. First and Second Causes of Action

The first cause of action for breach of the BCA Lot Line Agreement and the second cause of action for specific performance of the BCA Lot Line Agreement involve a right to recover an ownership interest in real property and not “a right to recover money or other personal property.” (§ 953.) Thus, contrary to the Martins’ contentions, the first and second causes of action were not choses of action assignable under section 954. They could be brought only by the real parties in interest, the Petersons. (Code Civ. Proc., § 367.)

The Martins also claim they had standing as parties to, or third party beneficiaries of, the BCA Lot Line Agreement.[7] They rely on the facts that they negotiated the agreement and lived on the property which was affected, and “accepted the terms of the agreement . . . on behalf of themselves and the Petersons.” Also, they claim that the letters from the BCA board of directors’ representative and BCA’s attorney show they were parties, in that the letters were addressed to them and phrased as if they were parties.

In the FAC, however, the Martins admitted that the Petersons were the owners of the Property and the parties to be bound by the BCA Lot Line Agreement, and that the Martins’ related actions were “on behalf of the Petersons.” In the first cause of action, the Martins state that BCA “agreed in writing to accept the offer made by the [Martins] on behalf of the Petersons at a board meeting[] . . ., to have [BCA] deed the property contained in Lot Line Adjustment #1 and Lot Line Adjustment #2, to the Petersons (collectively, the `BCA Lot Line Agreement’) under certain terms and conditions.. . . The Martins accepted the terms of the agreement . . . on behalf of themselves and the Petersons.” As a result of BCA’s actions, “the Petersons were not able to landscape and hardscape their front yard . . . and side yard because they do not yet have their ownership of” the Adjustment Area. “As a result they have lost usage of their usable yard for more than four years . . . .”

As the quoted material from the FAC shows, the Martins also admitted that specific performance would require BCA to deed the Adjustment Area to the Petersons, not to the Martins. Thus, they had no standing to assert a cause of action, as they did, seeking specific performance of the Agreement “to transfer title and cooperate in the approval and transfer of title to the property . . . to Plaintiffs [i.e., the Martins].”

1034*1034 (4) The same facts that show that the Martins were not parties to the BCA Lot Line Agreement also show that the Martins were not intended to be third party beneficiaries of the BCA Lot Line Agreement. In order to qualify as third party beneficiaries, the Martins were required to plead and prove that the BCA Lot Line Agreement was made for their benefit. (Schonfeld v. City of Vallejo (1975) 50 Cal.App.3d 401, 420 [123 Cal.Rptr. 669].) “`The test in deciding whether a contract inures to the benefit of a third person is whether an intent to so benefit the third person appears from the terms of the agreement. . . .’ [Citation.]” (Ibid.) The fact that a third party is incidentally named in the contract, or that the contract, if carried out according to its terms, would inure to his benefit, is not sufficient to entitle him to enforce it. (Jones v. Aetna Casualty & Surety Co. (1994) 26 Cal.App.4th 1717, 1724-1725 [33 Cal.Rptr.2d 291].) Reading the agreement as a whole in light of the circumstances under which it was made, the terms of the agreement must clearly manifest an intent to make the obligation inure to the benefit of the third party. (Id. at p. 1725; Schonfeld, supra, at p. 421.)

The Martins did not attach a signed written BCA Lot Line Agreement to the FAC. Neither did they quote the terms of the BCA Lot Line Agreement in the body of the FAC. Even if we assume that the facts pleaded were sufficient to allege an enforceable contract, as we previously discussed, the facts pleaded by the Martins were that the BCA Lot Line Agreement was made in order to require the BCA to deed the Adjustment Area to the Petersons, and the Martins’ role was to negotiate the BCA Lot Line Agreement on behalf of the Petersons. Given their role, there is no significance to the fact that the letters from BCA’s board and attorney were addressed to the Martins. (See Jones v. Aetna Casualty & Surety Co., supra, 26 Cal.App.4th at pp. 1724-1725.) The letter from BCA’s board stated that the board approved the request for the “corner of your lot to be deeded over to you [i.e., the Petersons]” on the condition that the “homeowners” would bear the financial responsibility for costs of legal fees and moving the common area sprinklers from the lot to the common area. The references to “your lot,” “deeded over to you,” and the “homeowners” could only be intended to be to the Petersons, in that the Martins owned no lot and were not homeowners in the Bridgeport Community. Assuming that the letter correctly reflects the content of the BCA Lot Line Agreement, there is nothing in its terms that clearly manifests an intent by BCA or the Petersons to make the obligation inure to the benefit of the Martins. We conclude that the facts pleaded do not support a determination that the Martins are third party beneficiaries of the BCA Lot Line Agreement. (Id. at p. 1725; Schonfeld v. City of Vallejo, supra, 50 Cal.App.3d at p. 421.)

(5) The Martins further contend that “[w]hether or not the property of [Lot Line Adjustment] #2 could be deeded to the Martins, they were entitled to at least receive an assignment of the damages.” As the Martins assert, a 1035*1035 claim for damages to real property may be assigned without transferring title or possession of the damaged property. (Stapp v. Madera Canal & Irr. Co. (1917) 34 Cal.App. 41, 46 [166 P. 823].) In their prayer for relief, the Martins included a general request for damages as to all causes of action, but in the first and second cause of action, however, the Martins did not allege that the Petersons suffered monetary damages.[8]

B. Third Through Fifth, Seventh and Eighth Causes of Action

The third through fifth, seventh and eighth causes of action are premised on duties BCA owed to the Petersons under the Bridgeport governing documents or the Davis-Stirling Act pertaining to rights and restrictions incident to ownership of real property. These are mutual among all of the lot owners in Bridgeport. (Werner v. Graham (1919) 181 Cal. 174, 183-184 [183 P. 945].) What is at issue is the right of enforcement of the governing documents and the Davis-Stirling Act.

The Martins contend that, under the CC&R’s and sections 1351, 1354 and 1363 et seq., they are “bound parties” and, as such, have standing to enforce the CC&R’s and R&R’s.[9] They argue that, under the CC&R’s definitions, “bound parties” include “all occupants, guests and invitees of any Unit,” and therefore, the CC&R’s allow enforcement by them in their capacity as occupants. (See CC&R’s, art. III, § 3.1(e).) They assert that their standing to enforce the CC&R’s is also shown by the fact that the CC&R’s require the owner of a unit to provide his or her lessee with copies of the governing documents. (See CC&R’s, art. III, § 3.1(c).) In support of their contention, they cite legal authority only for the proposition that CC&R’s are interpreted like a contract. (Cebular v. Cooper Arms Homeowners Assn. (2006) 142 Cal.App.4th 106, 119 [47 Cal.Rptr.3d 666].)

We agree that the Martins are “bound parties” as defined in the CC&R’s. They are subject to compliance with the restrictions in the governing documents. That status is different from being an owner of a separate interest who, by virtue of his ownership, is also a BCA member. Section 1354 provides that CC&R’s “in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all 1036*1036 owners of separate interests in the development. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both.” (Id., subd. (a).) Subdivision (b) of section 1354 provides that “[a] governing document other than the declaration may be enforced by the association against an owner of a separate interest or by an owner of a separate interest against the association.” Section 1351, subdivision (l)(3) provides that “[i]n a planned development, `separate interest’ means a separately owned lot . . . .”

(6) In the instant case, as owners of Lot 33, the Petersons qualify as “an owner of a separate interest” entitled to enforce the CC&R’s, the R&R’s and other governing documents of Bridgeport. (§§ 1351, subd. (l)(3), 1354, subds. (a), (b).) The Martins do not qualify. What is bound by an equitable servitude enforceable under CC&R’s is a parcel, a lot, in a subdivided tract, not an individual who has no ownership interest in the lot. (See § 1354, subd. (a).) “`[W]hen the owner of a subdivided tract conveys the various parcels in the tract by deeds containing appropriate language imposing restrictions on each parcel as part of a general plan of restrictions common to all the parcels and designed for their mutual benefit, mutual equitable servitudes are thereby created in favor of each parcel as against all the others.’ [Citation.]” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 379-380 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) Accordingly, the right of enforcement is inextricable from ownership of real property—a parcel, a lot—in a planned development such asBridgeport and, thus, cannot be assigned absent a transfer of ownership of the parcel to which it applies.

(7) The Petersons’ Property and their membership in BCA, and consequently the rights of enforcement and duties they are owed, are indivisible interests under applicable law and Bridgeport governing documents. Section 1358, subdivision (c), provides that, in a planned development, any transfer of a separate interest includes the undivided interest in the common areas and any transfer of the separate interest owner’s lot also includes membership in the association. Under the CC&R’s, an owner is not allowed to subdivide a unit or change its boundary lines. (CC&R’s, art. III, § 3.1(d).) The CC&R’s state that “[e]very Owner shall be a Member of [BCA]. There shall be only one membership per Unit,” regardless of the number of co-owners of the unit. (CC&R’s, art. VI, § 6.2; see also Corp. Code, § 7312.)

(8) The fifth and eighth causes of action are for relief based upon the violation of provisions of the Davis-Stirling Act, sections 1363 and 1364. Section 1363 provides that a common interest development such as Bridgeport must be managed by an association such as BCA and sets forth duties and powers of the association. As previously explained, membership in the association is limited to owners of separate interests. Section 1364 1037*1037 apportions responsibilities for maintenance of the common interest development between the association and owners of separate interests. As we previously concluded, the Petersons’ rights, including membership in BCA, and the duties of BCA to the Petersons as owners of a separate interest, Lot 33, are not assignable, whether set forth in the Bridgeport governing documents or in the Davis-Stirling Act.

The Martins cite no provision in the Davis-Stirling Act that authorizes an owner or a member to assign any right or obligation to any third party. The Martins mistakenly argue that section 1351 does not specifically define the term “owner,” which is used in section 1363 et seq., and, therefore, they have standing to seek redress for violations of sections 1363 and 1364. The references in section 1364, subdivisions (a) through (c), however, are to an owner of a “separate interest,” which is defined as noted in section 1351. Section 1364 clearly differentiates between an owner and residents such as the Martins. Section 1364, subdivision (e), states: “For purposes of this section, `occupant’ means an owner, resident, guest, invitee, tenant, lessee, sublessee, or other person in possession on the separate interest.” Section 1364 primarily deals with the association’s rights and responsibilities, including notifying “occupants,” with respect to the presence of wood-destroying pests or organisms. (§ 1364, subds. (b), (d).)

In the seventh cause of action for negligence, the Martins claimed that BCA had a duty to them, “as residents and members,” which BCA breached by improper use and maintenance of the watering system, which caused water damage to the Property. As previously discussed, they are not and do not qualify as members of the BCA. By law under the Davis-Stirling Act and equitable servitude principles applicable to the CC&R’s, only owners are members of the BCA.

Citing Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490 [229 Cal.Rptr. 456, 723 P.2d 573], the Martins contend that BCA had a common law duty “to exercise due care for the residents’ safety in those areas under [the association’s] control,” similar to a duty a landlord owes to his tenants. (Id. at p. 499.) The duty they pleaded as being breached, however, was BCA’s duty to maintain the common grounds. That duty arises out of the Davis-Stirling Act and the CC&R’s, not out of common law principles of negligence. Thus, as we previously concluded, it is a duty owed only to members of BCA, i.e., the owners.

The Martins argue that they suffered damages to their vehicle, personal injury, loss of work, clean up due to the excess water, interference with their peaceful enjoyment of the Property and loss of use and enjoyment of the Property, and, therefore, have standing to bring negligence claims against 1038*1038 BCA on the basis of nuisance and trespass under section 3479, the statutory definition of nuisance, and related law.[10]These were not the elements the Martins pleaded as negligence, however. The damage they asserted was to the Property owned by the Petersons due to breach of a duty BCA owed to the Petersons.

Not being owners and, therefore, having no authority to enforce the CC&R’s as equitable servitudes arising under the CC&R’s, the Martins are not the real parties in interest for the seventh cause of action and do not have standing to maintain the cause of action. (§ 1354, subd. (a); Code Civ. Proc., § 367.)

(9) In summary, the causes of action are not assignable and the Petersons, as owners of the Property, are the real parties in interest. The Martins failed to establish standing under any of the other arguments they advanced. Given that the causes of action are incidents of the Petersons’ ownership of the Property, and the Martins have no ownership in the Property, we conclude that none of the causes of action can be reasonably amended to give the Martins standing. Accordingly, the court’s action in sustaining the demurrer was proper.

The Martins were given leave to amend the complaint to state some other cause of action for which the Martins may have had standing and to substitute the Petersons as real parties in interest for the causes of action at issue in this appeal. The SAC was filed, but the Martins did not take the opportunity to state any such causes of action. Thus they forfeited the right to do so and remain a part of the action. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091 [32 Cal.Rptr.3d 483, 116 P.3d 1162].) Accordingly, the trial court properly entered judgment against the Martins in favor of BCA.

III. Attorney’s Fees and Costs

(10) The Martins contend that the trial court erred in awarding attorney’s fees and costs to BCA. Section 1354, subdivision (c), states: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” The Martins contend that, nevertheless, if the trial court’s finding that they did not have standing was based on the fact that they had no ownership in the Property and the CC&R’s as well as the R&R’s are enforceable only by the Property’s owners under section 1354, 1039*1039 then there was no basis for the fees and costs award. The mandatory attorney’s fees and costs award under section 1354, subdivision (c), applies when a plaintiff brings an action to enforce such governing documents, but is unsuccessful because he or she does not have standing to do so. (Farber v. Bay View Terrace Homeowners Assn. (2006) 141 Cal.App.4th 1007, 1014 [46 Cal.Rptr.3d 425].) Accordingly, we conclude that the trial court properly awarded attorney’s fees and costs to BCA for defense against the complaints in which the Martins were named plaintiffs. (Ibid.)

DISPOSITION

The judgment, including the award of attorney’s fees, is affirmed. BCA is to recover its costs on appeal.

Perluss, P. J., and Woods, J., concurred.

[1] In reviewing the propriety of sustaining a demurrer, we “`treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.'” (Blank v. Kirwan(1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58].) Accordingly, the statement of facts is based on the factual allegations in the first amended complaint (FAC), which was the subject of the demurrer at issue here.

[2] The letter from the BCA board’s representative stated: “The Board considered your request for the additional parcel of land that includes the triangle-shaped piece of land on the northwest corner of your lot to be deeded over to you. The Board granted your request with the following conditions: [¶] 1. The homeowners will be financially responsible for the legal fees of [BCA’s] attorney to prepare and execute the necessary documents. [¶] 2. The homeowners will be financially responsible for the cost of moving the common area sprinklers to the common area by [BCA’s] landscape maintenance company.”

[3] Section 1363 et seq. is a part of the Davis-Stirling Common Interest Development Act (Davis-Stirling Act) codified in the Civil Code beginning at section 1350. Further statutory references are to the Civil Code, unless otherwise identified.

[4] The Martins do not challenge the trial court’s ruling as to the sixth cause of action.

[5] We deny the Martins’ request for judicial notice of “the fact that [BCA] filed an action on November 27, 2007, after the demurrer on the FAC was decided by the Trial Court finding that the Martins lacked standing. [Citation.] [¶] The new action is against the Martins as well as the Petersons to enforce the Governing Documents (Los Angeles [County] Superior Court Case No. PC 041756, BridgeportCommunity Association, Inc. v. James A. Martin et al.).” A copy of the then current civil case summary for the lawsuit was attached as an exhibit to the request. Our review is limited to the trial court’s judgment against the Martins in the instant action. We will not consider evidence offered on appeal which was not before the trial court in connection with the judgment. (In re Zeth S. (2003) 31 Cal.4th 396, 405 [2 Cal.Rptr.3d 683, 73 P.3d 541].)

[6] Section 954 states: “A thing in action, arising out of the violation of a right of property, or out of an obligation, may be transferred by the owner.”

[7] We render no opinion as to the existence or terms and conditions of the alleged BCA Lot Line Agreement. For the purposes of reviewing the trial court’s action on the demurrer only, for which we are required to assume the material facts pleaded to be true, we assume the BCA Lot Line Agreement existed.

[8] In the first cause of action, the Martins allege that the Petersons lost the use of part of their yard due to BCA’s breach, but they do not allege that the Petersons incurred monetary damages.

[9] With no legal authority cited, the Martins mistakenly assert that, given that the FAC states that BCA engaged in improper enforcement against the Martins, “this must be accepted as true.” We must accept as true only the material facts alleged in the FAC for the purpose of reviewing the trial court’s demurrer ruling. (Zelig v. County of Los Angeles, supra, 27 Cal.4th at p. 1126.) “Improper enforcement” is an alleged conclusion of law, however, and we are not required to accept such conclusions as true. (Ibid.)

[10] The Martins also cite White v. Cox (1971) 17 Cal.App.3d 824 [95 Cal.Rptr. 259] as authority for the proposition that negligently maintaining a sprinkler system in a common area may serve as the basis of a claim for negligence. The plaintiff in that case, however, was a member of the common interest association and, thus, the case does not support the Martins’ claim as to standing. (Id. at p. 831.)

 

Keywords: Governing Documents, Proper Parties

Market Lofts v. 9th Street Lofts

Market Lofts Community Association v. 9th Street Market Lofts

222 Cal.App.4th 924 (2014)

926*926 Freeman, Freeman & Smiley, Todd M. Lander and Tracy R. Daub for Plaintiff and Appellant.

Law Offices of Stephen D. Marks, Stephen D. Marks; Katten Muchin Rosenman, Gregory S. Korman, Andrew J. Demko and Johanna R. Bloomfield for Defendants and Respondents.

Summary by Mary M. Howell, Esq.:

Association has standing as the representative of its members to sue the developer for declaratory relief and damages pertaining to allegedly unfair parking license agreements created by developer prior to creation of the association, and regulating the use of parking within the community.

**End Summary**

927*927 OPINION

ASHMANN-GERST, J. —

A homeowners association appeals from the judgment of dismissal following the sustaining of a demurrer without leave to amend its second amended complaint (SAC). The trial court sustained the demurrer on the ground that the association lacked standing both on its own behalf and as a representative of the homeowners to assert claims against the developers relating to contractual parking rights. We reverse the judgment of dismissal.

FACTUAL AND PROCEDURAL BACKGROUND

The Parties

Appellant is Market Lofts Community Association (HOA), which is the homeowners association for the condominium owners at a mixed-use upscale development called Market Lofts, located at the corner of 9th and Flower Streets in downtown Los Angeles, adjacent to the Staples Center. Retail spaces are located on the streetlevel and 267 residential condominium units are located above. Respondents are essentially two sets of developers — the developer of Market Lofts (referred to as 9th Street) and the developer of an adjacent parking structure that contains 319 parking spaces for the Market Lofts condominium owners (referred to as CIM).[1]

Allegations of the SAC

The SAC alleges the following: On May 11, 2006, the Developers entered into a “PARKING LICENSE AGREEMENT” (License Agreement). At this time, construction of Market Lofts had not been completed and the HOA had not been formed. Pursuant to section D of the License Agreement, which is attached to the SAC, CIM agreed to grant to 9th Street “for the benefit of the residential homeowner’s association (the `HOA‘) to be formed in connection with the sale of residential condominium units in the Market Lofts Project and the owners and occupants of the residential units … a license to use the Market Lofts Parking Spaces, which shall be appurtenant to the Market Lofts Property.” (Italics & underscoring added.)

Section 2.1 of the License Agreement specifies that the license granted is “perpetual” for the exclusive use of the 319 parking spaces, and that the 928*928 license “shall be at no cost” to 9th Street, except for the obligation to pay its proportionate share of “CAM Charges” (common area maintenance) to CIM. Section 2.5 provides that the license is “irrevocable.” Section 13 states that “Upon the First Closing [(defined as the close of escrow for the first residential unit sold)], [9th Street] shall assign or sub-license its rights and obligations under this Agreement to the HOA…. [T]he terms and conditions of this Agreement shall be covenants that run with the land….”

The HOA was formally incorporated on January 10, 2007, and the first sale of a Market Lofts condominium occurred later that year.

On January 24, 2007, the HOA and 9th Street entered into a “Parking Sub-License Agreement” (Sub-License), which is also attached to the SAC. At that time, respondents Lee, Adler and Magdych comprised a “controlling majority” of the HOA’s board of directors and “each was simultaneously serving as an agent, employee, partner and/or member of the 9th Street and/or CIM defendants.” According to the SAC, rather than sublicensing its rights under the License Agreement to the HOA, 9th Street and the other respondents engaged in self-dealing by using the Sub-License “to strip the Association of many of the rights afforded it under the License Agreement and concurrently impose on it financial and other obligations in direct contravention of the terms of [the License Agreement].”

For example, while 9th Street granted to the HOA a sublicense for the exclusive use of the 319 parking spaces pursuant to section 2.1 of the Sub-License, section 3.1 provides that the HOA will pay 9th Street a monthly fee of $75 for each parking space, to be increased annually by 5 percent, and to be adjusted every 10 years to the prevailing market rate for similar parking. Section 4 provides that the term of the Sub-License is the earlier of the date of termination of the covenants, conditions, restrictions and reservation of easements for the Market Lofts project (CC&R’s) or 49 years from the date of the Sub-License with the HOA being permitted to renew the Sub-License no more than five successive 10-year periods. Section 17.6 provides a late fee of 18 percent for any late payment. The SAC details numerous other provisions in the Sub-License that differ from the License Agreement and that “limit the rights of the Association and its members in various respects, all of which contravene the License Agreement.”

The CC&R’s were signed by respondent Lee as both developer and declarant, and were recorded in the Los Angeles County Recorder’s Office on May 23, 2007. According to the SAC, the CC&R’s “are notable not for the information provided in their 80 pages, but rather for what they fail to disclose,” namely, that “the License Agreement plainly extended a perpetual and irrevocable license to the Association and the homeowners.” The SAC 929*929 alleges that at paragraph 3 of the CC&R’s, which is attached to the original and first amended complaints but not to the SAC, “the Sub-License is identified as the governing document by which `Declarant has granted a sublicense to the Association for the benefit of the Owners and other “Permitted Users” to use the parking spaces.'” The CC&R’s were distributed to prospective purchasers in advance of their acquisition of the residential units. The Sub-License and License Agreement were buried in a “massive package” of documents submitted to prospective purchasers of the Market Lofts units, and there was no identification or specific disclosure of the existence of the two agreements or “the critical distinctions in their terms.”

It was not until January 2011 that “the developer dominated Association Board gave way to one controlled by homeowners with no ties to the Defendants,” and “only then, was the [HOA] able to investigate these circumstances comprehensively and initiate ameliorative steps necessary to restore the rights intended by and set forth in the License Agreement.”

The HOA and its members have been damaged in excess of $1 million in paid parking fees. The SAC further alleges that in the event a homeowner refuses to pay the monthly parking fee, the HOA is obligated to do so.

Causes of Action

The HOA first sued the Developers on November 1, 2011. On August 22, 2012, the HOA filed the SAC, which contains two causes of action for declaratory relief, plus causes of action for breach of fiduciary duty, breach of the License Agreement, concealment, unfair business practices, and rescission of the Sub-License. The SAC alleges in both declaratory relief causes of action that the HOA and the Developers dispute their rights under the License Agreement and the Sub-License, and that the HOA seeks a declaration that the Sub-License is void and of no force and effect to the extent that it conflicts with the License Agreement. The HOA brings all other causes of action on its own behalf and as a representative of the condominium owners.

The Demurrer Pleadings and Ruling

The Developers filed a consolidated demurrer to each cause of action in the SAC. The HOA opposed the demurrer, which the trial court sustained without leave to amend on the sole ground that the HOA lacked standing to sue. The trial court concluded that “because the individual homeowners here paid the alleged illegal parking fees and Plaintiff only collected them, Plaintiff has not shown that it suffered an injury such that it has standing.” The HOA then filed this appeal.

930*930 DISCUSSION

I. Standard of Review

We review de novo a trial court’s sustaining of a demurrer without leave to amend, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300 [58 Cal.Rptr.2d 855, 926 P.2d 1042]; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 [271 Cal.Rptr. 146, 793 P.2d 479].) We assume the truth of properly pleaded allegations in the complaint and give the complaint a reasonable interpretation, reading it as a whole and with all its parts in their context. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558 [71 Cal.Rptr.2d 731, 950 P.2d 1086]; People ex rel. Lungren v. Superior Court, supra, at p. 300.) We may disregard allegations which are contrary to law or to judicially noticed facts. (Wolfe v. State Farm Fire & Casualty Ins. Co. (1996) 46 Cal.App.4th 554, 559-560 [53 Cal.Rptr.2d 878].) “On appeal, we do not review the validity of the trial court’s reasoning but only the propriety of the ruling itself.” (Rodas v. Spiegel(2001) 87 Cal.App.4th 513, 517 [104 Cal.Rptr.2d 439].) Thus, the judgment of dismissal will be affirmed if it is proper on any of the grounds raised in the demurrer, even if the trial court did not rely on those grounds. (Jackson v. Doe (2011) 192 Cal.App.4th 742, 750-751 [121 Cal.Rptr.3d 685].) We apply the abuse of discretion standard in reviewing a trial court’s denial of leave to amend. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58]; Hernandez v. City of Pomona(1996) 49 Cal.App.4th 1492, 1497-1498 [57 Cal.Rptr.2d 406].)

II. The Trial Court Erred in Sustaining the Demurrer on the Lack of Standing

A. Declaratory Relief Causes of Action

The first and second causes of action in the SAC seek declaratory relief with respect to the License Agreement and the Sub-License. We agree with the HOA that it has standing to bring these two causes of action on its own behalf.

Code of Civil Procedure section 1060 provides in part that “[a]ny person interested under a written instrument … or under a contract … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.”

931*931 (1) As the court explained in Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606 [98 Cal.Rptr.2d 277]: “All that Code of Civil Procedure section 1060 requires is that there be [an] `actual controversy relating to the legal rights and duties of the respective parties.’ … A cardinal rule of pleading is that only the ultimate facts need be alleged. [Citation.] In a declaratory relief action, the ultimate facts are those facts establishing the existence of an actual controversy. (Code Civ. Proc., § 1060.) … However, to be entitled to declaratory relief, a party need not establish that it is also entitled to a favorable judgment…. `A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. [Citations.] If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to [a] favorable declaration. [Citations.]'” (See Alameda County Land Use Assn. v. City of Hayward (1995) 38 Cal.App.4th 1716, 1722 [45 Cal.Rptr.2d 752] [If the pleaded “facts reveal an actual controversy exists between the parties, the complaint is legally sufficient for declaratory relief”].)

The HOA is an interested party because it is a directly named beneficiary of the License Agreement and is a direct contracting party to the Sub-License. Thus, if the HOA has alleged an actual controversy, it is entitled to seek a declaration of the rights imposed and duties afforded under the License Agreement and the Sub-License. Contrary to the Developers’ assertion, the SAC alleges an actual controversy. The SAC details the material differences in the two agreements, and alleges: “At present, the Association is not enjoying the full benefits of the License Agreement and cannot confer on its member owners the perpetual parking rights prescribed by that agreement.” The SAC also alleges: “There is currently a dispute regarding the efficacy of the License Agreement and the Sub-License, and of the Association’s and its members’ rights under these agreements. The Association alleges that it is entitled to the rights set forth in the License Agreement, and that to the extent the Sub-License conflicts with those rights, it is ineffective. The Association is informed and believes, and on that basis alleges, that the Defendants, and each of them, contest the Association’s claims and allege otherwise.” The HOA seeks numerous declarations regarding the two agreements, including a declaration that the Sub-License is of no force and effect to the extent it conflicts with the License Agreement.

(2) The trial court adopted the Developers’ argument that the HOA lacks standing to bring the declaratory relief claims because the HOA is actually seeking a declaration of its members’ rights, rather than its own, since the members pay the parking fees. But this argument overlooks that the HOA is a 932*932 direct beneficiary of the License Agreement and is a contracting party to the Sub-License. If the Developers’ argument were correct, then the HOA would be powerless to seek a determination of its own rights under either contract. The law allows any party with an interest in a contract to pursue a declaration of rights as to that instrument when an actual controversy exists. (Code Civ. Proc., § 1060.)

The Developers’ additional argument that there is no actual controversy is also without merit. The Developers essentially ignore the License Agreement and focus on the Sub-License, asserting that the HOA understands its obligations under the Sub-License, i.e., to collect parking charges from its members and disburse them to9th Street. But this argument takes an overly simplistic view of the SAC. The HOA is not asking the trial court to merely interpret the terms of the Sub-License. Rather, the HOA is asking the trial court to resolve the interplay between the two agreements. In other words, the HOA contends that the License Agreement must govern the parking arrangements and that the Sub-License is invalid, while the Developers dispute this contention.

(3) In our opinion, the SAC alleges an actionable dispute between the HOA and the Developers, and the HOA has standing to seek a resolution of this dispute. The trial court therefore erred in sustaining the demurrer to the two declaratory relief causes of action.

B. Remaining Causes of Action

The HOA contends that it has standing to bring the remaining causes of action for breach of fiduciary duty, breach of the License Agreement, concealment, unfair business practices, and rescission of the Sub-License either by itself or as a representative of the homeowners. We agree.

(4) With respect to the contract causes of action, it goes without saying that a party to a contract or one for whom the contract was intended to benefit may bring actions related to such contracts. Thus, the HOA is the real party in interest entitled to bring contract claims relating to the License Agreement and the Sub-License. The Developers’ reliance on the argument that the HOA is not the real party in interest because it is seeking to enforce rights that belong to its members, not itself, is of no import. The SAC alleges that the HOA is directly obligated to pay the parking fees and that “in the event a homeowner refused to pay the monthly fee, the Association is obligated to do so.” For purposes of the demurrer, we must accept this allegation as true.

(5) With respect to the other causes of action, the HOA has standing to sue as a representative of the individual homeowners. Code of Civil Procedure section 382 provides in part that “when the question is one of a common 933*933 or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” While this statute is sometimes referred to as the “class action statute,” it also sanctions representative, nonclass actions. “`It may also be true that while all class suits are representative in nature, all representative suits are not necessarily class actions.‘” (Raven’s Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 794 [171 Cal.Rptr. 334] (Raven’s Cove).) Thus, California courts have routinely allowed homeowners associations to sue solely as the representatives of their members. (See, e.g., id. at p. 795; Property Owners of Whispering Palms, Inc. v. Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 672-673 [33 Cal.Rptr.3d 845] [“`[e]ven in the absence of injury to itself, an association may have standing solely as the representative of its members'”]; Salton City etc. Owners Assn. v. M. Penn Phillips Co. (1977) 75 Cal.App.3d 184, 189 [141 Cal.Rptr. 895].)

The two requirements that must be satisfied for a representative action are an ascertainable class and a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented. (Raven’s Cove, supra, 114 Cal.App.3d at p. 795, citing Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704 [63 Cal.Rptr. 724, 433 P.2d 732].) Here, there is plainly an ascertainable class — the homeowners. There is also a well-defined community of interest concerning the relevant questions of law and fact. Each homeowner is subject to the same parking charges and any invalidity of the Sub-License would affect the homeowners in the same manner. The homeowners are also the victims of the Developers’ alleged self-dealing. Additionally, questions of necessity, convenience and justice likewise support the HOA’s standing, because otherwise 267 homeowners would individually have to prosecute their claims. (See Tenants Assn. of Park Santa Anita v. Southers(1990) 222 Cal.App.3d 1293, 1304 [272 Cal.Rptr. 361] [“we conclude that considerations of necessity, convenience and justice provide justification for the use of the representative procedural device”].)

The Developers argue that the HOA cannot be allowed to proceed as a representative of the homeowners because the Developers would be deprived of defenses they would have against individual homeowners, such as the statute of limitations, notice, reliance, causation, waiver and estoppel. But these factual defenses pertain to the merits of the causes of action, an issue we are not concerned with at this initial pleading stage. Moreover, the Developers have not demonstrated why they would be precluded from pursuing these defenses or conducting discovery in this regard.

Additionally, even if individualized assessments are made, that does not destroy the commonality requirement. In Raven’s Cove, supra, 114 934*934 Cal.App.3d 783, the homeowners association sued to redress defects in common area landscaping and for damage to the exterior walls of individual units. Despite the fact that the damage to each unit would necessarily be individualized, the reviewing court found a sufficient commonality of interest because each owner had a similar beneficial interest in the outcome of the case. (Id. at p. 795.) The same is true here, where each homeowner would receive restoration of the parking rights provided in the License Agreement, if the HOA prevails.

(6) To the extent the Developers also argue that the HOA lacks standing to sue because it is not claiming damage to a common area under Civil Code former section 1368.3, such argument is without merit. This statute dealt with the standing of a homeowners association to sue “in its own name as the real party in interest” in specific matters, including damage to the common area and enforcement of the governing documents. (Civ. Code, former § 1368.3.) This statute had nothing to do with a homeowners association’s standing to sue in a representative capacity.

III. The Developers’ Argument Regarding the CC&R’s

The Developers spend much of their brief arguing that, apart from the issue of standing, the causes of action in the SAC are barred because the Sub-License is part of the governing CC&R’s, a recorded document which is presumptively enforceable, and which was provided to each prospective homeowner. Because a judgment of dismissal can be upheld on any ground raised in the demurrer, even when the trial court did not rely on that ground, we address the merits.

(7) Under the Davis-Stirling Common Interest Development Act (Civ. Code, former § 1350 et seq.) (Davis-Stirling Act), “covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development.” (Civ. Code, former § 1354, subd. (a).) “This statutory presumption of reasonableness requires that recorded covenants and restrictions be enforced `”unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.”‘ [Citation.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 239 [145 Cal.Rptr.3d 514, 282 P.3d 1217]; see Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th, 361, 382 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) The Developers argue that the HOA failed to meet its “burden” of showing that the Sub-License parking fee, of which each homeowner had constructive, if not actual, notice was unreasonable.

935*935 The Developers’ argument shows that they are trying to impose their own vision of what this case is about. This lawsuit is not a formal challenge to the CC&R’s or an attempt to formally amend the CC&R’s, for which the Davis-Stirling Act provides the procedural amendment requirements. (Civ. Code, former §§ 1354, 1355.) As the HOA noted in its opposition to the demurrer, “[t]his litigation is centered around the efficacy of the License Agreement and Defendants’ actions to unwind the Association’s rights related to that contract.”

(8) The HOA acknowledges that the Sub-License is identified in the CC&R’s, and that the homeowners had at least constructive notice of the existence of the Sub-License. What the HOA complains about is that neither the rights embodied in the License Agreement and how those rights differed from what the Sub-License provided nor the Developers’ alleged self-dealing in systematically unraveling the rights in the License Agreement by way of the Sub-License were disclosed to either the original HOA or to subsequent homeowners. As the HOA noted below, the Developers have conflated two separate and unrelated concepts: Notice and invalidity of the Sub-License. The HOA therefore alleges causes of action for breach of the License Agreement and breach of fiduciary duties. In Raven’s Cove, supra,114 Cal.App.3d 783, the appellate court stated that a “developer and his agents and employees who also serve as directors of an association [in its initial period], like the instant one, may not make decisions for the Association that benefit their own interests at the expense of the association and its members…,” and may therefore be sued for breach of fiduciary duty. (Id. at p. 799.)

Even assuming the Davis-Stirling Act applies here, it does not provide a basis for sustaining the demurrer without leave to amend. We are not prepared to say that the alleged self-dealing by fiduciaries of the HOA that violates the fundamental public policy of the need for trust and accountability with respect to certain special relationships is reasonable as a matter of law. (See Raven’s Cove, supra, 114 Cal.App.3d at pp. 800-801 [“the initial directors and officers of the Association had a fiduciary relationship to the homeowner members analogous to that of a corporate promoter to the shareholders. These duties take on a greater magnitude in view of the mandatory association membership required of the homeowner. We conclude that since the Association’s original directors (comprised of the owners of the Developer and the Developer’s employees) admittedly failed to exercise their supervisory and managerial responsibilities … and acted with a conflict of interest, they abdicated their obligation as initial directors of the Association …”].)

936*936 DISPOSITION

The judgment of dismissal following the sustaining of the demurrer to the SAC is reversed. The HOA is entitled to recover its costs on appeal.

Boren, P. J., and Ferns, J.,[*] concurred.

[1] Respondents shall be referred to collectively as “the Developers.” 9th Street consists of respondents 9th Street Market Lofts, LLC; 645 9th Street, LLC; and the Lee Group, Inc. CIM consists of CIM/830 S. Flower, LLC; CIM Market at 9th & Flower, LLC; CIM/8th & Hope, LLC; and CIM Group, L.P. Respondents also include Jeffrey Lee (Lee); Michael Adler (Adler); and David Magdych (Magdych).

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

 

Keywords: Parking

Mansouri v. Superior Court

Mansouri v. Superior Court

181 Cal.App.4th 633 (2010)

636*636 Manatt, Phelps & Phillips, Andrew A. Bassak and Benjamin G. Shatz for Petitioner.

No appearance for Respondent.

Sproul Trost, Thomas G. Trost, Gregory L. Maxim and Jason M. Sherman for Real Party in Interest.

Summary by Mary M. Howell, Esq.:

Pursuant to Code of Civil Procedure §1281.2, association seeking to enforce a mandatory arbitration clause in the CC&Rs was required to plead a demand for arbitration preceded the petition to compel arbitration.

**End Summary**

OPINION

CANTIL-SAKAUYE, J.—

A dispute arose between petitioner Zari Mansouri and her homeowners association, the Fleur du Lac Estates Association (Association), after Mansouri remodeled her condominium’s patio. The Association obtained a court order compelling arbitration of the dispute under an arbitration provision contained in the Second Restated Declaration of Covenants, Conditions and Restrictions for the Association (CC&R’s). The trial court awarded attorney fees to the Association for its expense in bringing the petition to compel arbitration. We granted an alternative writ in this mandamus proceeding to consider (1) whether the arbitration provision in the CC&R’s is unenforceable and unconscionable; (2) if the arbitration provision is valid, whether this dispute falls outside of the scope of the arbitration provision; and (3) whether the Association complied with the applicable statutory requirements for a petition to compel arbitration. We conclude the 637*637 arbitration provision is enforceable, is not unconscionable, and is applicable. However, in the published portion of this opinion, we conclude a party seeking to compel arbitration under Code of Civil Procedure section 1281.2 (section 1281.2) must establish it demanded arbitration under the parties’ arbitration agreement and that the other party refused to arbitrate under the agreement before it is entitled to an order granting a petition to compel such arbitration. As the Association here failed to show it requested Mansouri to arbitrate under the arbitration provision of the CC&R’s and that Mansouri refused to arbitrate under such provision, its petition to compel such arbitration should have been denied. We will issue a writ of mandate requiring the trial court to vacate its order compelling arbitration and awarding attorney fees and to enter a new order denying the Association’s petition.

BACKGROUND[*]

DISCUSSION

I., II.[*]

III.

THE ASSOCIATION FAILED TO COMPLY WITH THE APPLICABLE STATUTORY REQUIREMENTS FOR A PETITION TO COMPEL ARBITRATION

Prior to filing the petition to compel arbitration, the Association wrote Mansouri requesting that she agree to submit the dispute to binding arbitration before a single arbitrator, unilaterally preselected by the Association. The letter indicated that ifMansouri did not agree, the Association would file “a court action for injunctive and declaratory relief and attorneys fees to enforce [her] compliance.” (Italics added.) The letter made no reference to the arbitration provision of the CC&R’s (section 16.10), did not offer the three person form of arbitration set forth in section 16.10, and did not inform Mansouri that a petition to compel arbitration would be filed if she refused.

Mansouri claims the trial court erred in granting the Association’s motion to compel arbitration because the Association failed to properly satisfy its 638*638 obligation under Civil Code section 1369.520 (section 1369.520), subdivision (a), to endeavor to submit the dispute to alternative dispute resolution before it filed its petition to compel arbitration. Mansouri contends section 1369.520 requires the Association to offer her the kind of arbitration (three person) specified under the arbitration provision of the CC&R’s as a prerequisite to filing the petition to compel arbitration. The Association claims substantial evidence supports the trial court’s finding that it did “in good faith endeavor[] to submit this dispute to alternative dispute resolution before the filing of this court action[]” as required by section 1369.520.

Section 1369.520, subdivision (a), reads: “An association or an owner or a member of a common interest development may not file an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution pursuant to this article.” Subdivision (b) of section 1369.520, however, limits the application of the section “to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits stated in Sections 116.220 and 116.221 of the Code of Civil Procedure.”

Section 1369.520, subdivision (a) does not apply to this case; the Association did not file “an enforcement action” as defined by section 1369.520. (§ 1369.520, subd. (b).) Although the Association threatened to file a court action for injunctive and declaratory relief in its letter to Mansouri offering arbitration, it subsequently took the position that the dispute fell within the binding arbitration provisions of the CC&R’s, section 16.10, and filed the petition to compel arbitration that is the subject of this writ. The applicable statutory provision for the Association’s petition to compel arbitration is not Civil Code section 1369.520, but Code of Civil Procedure section 1281.2.

Subject to exceptions not applicable here, section 1281.2 provides that: “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy,the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….” (Italics added.)

We requested and received supplemental briefs from the parties addressing whether a demand for arbitration under the parties’ agreement to arbitrate and a party’s refusal to arbitrate under the agreement are preconditions of a petition to compel arbitration under section 1281.2.

639*639 The Association filed a supplemental brief that fails to address whether section 1281.2 requires a demand and refusal under the agreement before a petition to compel arbitration under the agreement is appropriate. Instead, the Association argues the CC&R’s do not contain such a prerequisite; Mansouri forfeited her right to assert the claim that the Association failed to satisfy section 1281.2 when she failed to raise the issue before the trial court; and that Mansouri’s conduct waived and/or excused the Association of any requirement that it demand arbitration under the terms of section 16.10 prior to filing its petition to compel arbitration.

(1) Before we consider whether section 1281.2 contains a statutory prerequisite of a prior demand and refusal to arbitrate under the agreement,[6] we consider whether Mansouri’s failure to argue section 1281.2 to the trial court forfeits the issue here. In support of its argument for such result, the Association cites case law expressing the well-settled rule that “`[a] party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant. [Citation.]'” (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 874 [242 Cal.Rptr. 184], quotingErnst v. Searle (1933) 218 Cal. 233, 240-241 [22 P.2d 715]; see Bogacki v. Board of Supervisors (1971) 5 Cal.3d 771, 780 [97 Cal.Rptr. 657, 489 P.2d 537]; Bank of America v. Cory (1985) 164 Cal.App.3d 66, 78, fn. 4 [210 Cal.Rptr. 351]; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 407, pp. 466-468.)

However, this rule is discretionary with the reviewing court and subject to several exceptions. (Watson v. Department of Transportation (1998) 68 Cal.App.4th 885, 890 [80 Cal.Rptr.2d 594].) First, “[t]he general rule confining the parties upon appeal to the theory advanced below is based on the rationale that the opposing party should not be required to defend for the first time on appeal against a new theory that `contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial.’ [Citation.]” (Ward v. Taggart(1959) 51 Cal.2d 736, 742 [336 P.2d 534].) Consequently, “an appellate court may allow an appellant to assert a new theory of the case on appeal where the facts were clearly put at issue at trial and are undisputed on appeal.” (Richmond v. Dart Industries, Inc., supra, 196 Cal.App.3d at p. 879.) Second, a “`court may refuse to follow the doctrine where the error is too fundamental to be ignored, e.g., in cases of illegality, unclean hands, complete failure to state a cause of action, or variance so fundamental as to constitute “departure” or failure of proof. 640*640 [Citations.]'” (Watson v. Department of Transportation, supra, at p. 890, italics added.) Both of these exceptions appear applicable here.

In the trial court, Mansouri opposed the petition to compel arbitration on the ground, inter alia, that the Association did not in good faith endeavor to submit this dispute to alternative dispute resolution under section 1369.520. In making this argument, Mansouri specifically contended the Association’s offer of binding arbitration by a single arbitrator contradicted her right under the CC&R’s to a panel of three arbitrators. This argument placed at issue the facts surrounding the Association’s request for arbitration and its subsequent communications and negotiations withMansouri regarding possible arbitration. The Association was on notice from that point that Mansouri claimed the Association improperly offered her arbitration only by a preselected single arbitrator. In its reply to Mansouri’s opposition, however, the Association never asserted it had in fact offered arbitration with a panel of three arbitrators under the terms of section 16.10. The Association never submitted the supplemental evidence, which it now claims it has, that would show Mansouri and/or her counsel believed the Association’s letter demanding arbitration before a preselected single arbitrator “represented the Association’s intent to submit the dispute to a three-arbitrator panel for resolution” or that it otherwise “informed Mansouri of its willingness to arbitrate either through a three-person panel or through a single arbitrator.” Given the plain relevance of such evidence to Mansouri’s claim, we discount the Association’s belated effort here to suggest in a footnote in its supplemental brief that the factual situation surrounding its request for arbitration is disputed and that it somehow had no opportunity to fully present its evidence to the trial court. On this record, the facts were clearly put at issue at trial and are undisputed here.

In any event, if proof of a demand and refusal to arbitrate under the agreement is a necessary prerequisite to a petition to compel arbitration under section 1281.2, the failure to prove such demand and refusal is a failure to state a cause of action—a fundamental error that permits us to review the issue despite a party’s failure to raise the theory in the trial court. (Watson v. Department of Transportation, supra, 68 Cal.App.4th at p. 890.)

We turn to the merits of the issue and conclude section 1281.2 does require a party seeking to compel arbitration to plead and prove a prior demand for arbitration under the parties’ arbitration agreement and a refusal to arbitrate under the agreement.

(2) We reach this conclusion by construing section 1281.2 under established principles of statutory interpretation. “When construing statutes, our 641*641 goal is `”to ascertain the intent of the enacting legislative body so that we may adopt the construction that best effectuates the purpose of the law.”‘ [Citation.] We first examine the words of the statute, `giving them their ordinary and usual meaning and viewing them in their statutory context, because the statutory language is usually the most reliable indicator of legislative intent.’ [Citation.] If the statutory language is ambiguous and susceptible of differing constructions, we may reasonably infer that the legislators intended an interpretation producing practical and workable results rather than one resulting in mischief or absurdity. [Citation.] It is a fundamental tenet of statutory construction that we must give the statute a reasonable construction conforming to legislative intent. [Citation.]” (City of Santa Monica v. Gonzalez (2008) 43 Cal.4th 905, 919 [76 Cal.Rptr.3d 483, 182 P.3d 1027].)

(3) Section 1281.2 expressly requires a petition to compel arbitration to allege “the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy.” The necessary implication of this language is that a request or demand for arbitration under the written agreement to arbitrate has been made and refused. Such demand and refusal is what requires and justifies the intervention of the court to order arbitration under the agreement. It makes no sense for this language to be read to allow a petitioner to compel arbitration[7] on allegations and proof of a written agreement to arbitrate the controversy, but with allegations and proof that arbitration under some other statutory scheme or contract was offered and refused. The Legislature plainly intended section 1281.2 to provide a procedural device for enforcing the parties’ written arbitration agreement if one or more of the parties would not agree to such arbitration. (4) The only reasonable construction of the statutory language that conforms to such intent, is to require for a petition to compel arbitration the pleading and proof of (1) the parties’ written agreement to arbitrate a controversy (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413 [58 Cal.Rptr.2d 875, 926 P.2d 1061]); (2) a request or demand by one party to the other party or parties for arbitration of such controversy pursuant to and under the terms of their written arbitration agreement; and (3) the refusal of the other party or parties to arbitrate such controversy pursuant to and under the terms of their written arbitration agreement.

(5) Our interpretation of the language of section 1281.2 is supported by consideration of the nature of the relief being granted. Our Supreme Court 642*642 has made it clear that a petition to compel arbitration under section 1281.2 “`”is in essence a suit in equity to compel specific performance of a contract.”‘” (Wagner Construction Co. v. Pacific Mechanical Corp. (2007) 41 Cal.4th 19, 29 [58 Cal.Rptr.3d 434, 157 P.3d 1029]; Rosenthal v. Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 411.) The elements of a cause of action for specific performance of a contract include not only the contract (Roth v. Malson (1998) 67 Cal.App.4th 552, 557 [79 Cal.Rptr.2d 226]), but defendant’s breach of the contract. (5 Witkin, Cal. Procedure,supra, Pleading, § 785, pp. 203-204.) Where no time is specified for performance, there is no breach of a contractual promise to perform an act in the future by a party who has the ability to perform where there has been no demand for performance and refusal to perform. (Leonard v. Rose (1967) 65 Cal.2d 589, 592-593 [55 Cal.Rptr. 916, 422 P.2d 604] [rule is subject to exceptions not at issue here].) So too, there is no breach of an agreement to arbitrate unless there has been a demand to arbitrate and a refusal to arbitrate under the agreement. Without a breach, there is no cause of action for specific performance of the arbitration agreement and therefore, no basis for a petition to compel under section 1281.2.

The Association nevertheless asks us to find “that Mansouri’s conduct in these proceedings operates as a waiver to this requirement and/or excuses [the] Association from complying with any such preconditions.” According to the Association, Mansouri unmistakably demonstrated her unwillingness to submit the dispute to any form of binding arbitration in her responses to the Association’s requests to arbitrate. We have reviewed the referenced letter and e-mail exchanges between the parties regarding arbitration and mediation. In our opinion, Mansouri’s expressed desire in those communications for the matter to be litigated in court and not submitted to binding arbitration must be understood in context as a preference for a judicial forum over the single preselected arbitrator offered by the Association. We do not view it as evidence of Mansouri’s “unequivocal intent … to reject any form of binding arbitration.” We are not convinced by these communications that Mansouri would have rejected arbitration under section 16.10 of the CC&R’s if arbitration pursuant to the terms of such provision had been offered prior to the filing of the petition to compel arbitration. The Association’s failure to offer and request arbitration pursuant to section 16.10 is not waived or excused.

(6) As the Association failed to show it requested that Mansouri arbitrate pursuant to and under the terms of section 16.10 of the CC&R’s and that Mansouri refused to arbitrate under such provision, its petition to compel such arbitration should have been denied.

643*643 DISPOSITION

Let a peremptory writ of mandate issue, directing the trial court to vacate its order granting the Association’s petition to compel arbitration and awarding attorney fees and to enter a new and different order denying the petition. Petitioner is awarded costs in this writ proceeding. (Cal. Rules of Court, rule 8.493(a)(1)(A).)

Blease, Acting P. J., and Raye, J., concurred.

[*] Pursuant to California Rules of Court, rule 8.1110, this opinion is certified for publication with the exception of the Background and parts I and II of the Discussion.

[*] See footnote, ante, page 633.

[6] If the statute contains such a requirement, it is irrelevant that the CC&R’s do not.

[7] Section 1281.2 provides “the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines” one of the statutory exceptions applies. (Italics added.)

 

Keywords: Arbitration

Major v. Miraverde HOA

Major v. Miraverde Homeowners Association

7 Cal.App.4th 618 (1992)

620*620 COUNSEL

Ayscough & Marar and Sidney Lanier for Plaintiffs and Appellants.

Kaiser, DeBiaso, Palmer & Lopez and Eric C. Demler for Defendants and Respondents.

Summary by Mary M. Howell, Esq.:

Association’s rule which discriminated in the use of recreational facilities between residents and non-residents was inconsistent with bylaw provision requiring equal access to such facilities for all owners, and was therefore ultra vires.

**End Summary**

 

621*621 OPINION

JOHNSON, J.

Plaintiffs sought a preliminary injunction restraining a condominium homeowners association from enforcing certain rules plaintiffs contended unreasonably interfered with their right to use the recreational facilities of the condominium project. The trial court denied an injunction. We reverse the denial of injunctive relief as to the Rasmussens. The appeal of Ms. Major is dismissed as moot.

STATEMENT OF FACTS AND PROCEEDINGS BELOW

John and Donna Rasmussen, husband and wife, own a condominium unit in the Miraverde condominium project. The project is managed by the Miraverde Homeowners Association, Inc. (Association).

The Rasmussens purchased the condominium pursuant to a “Declaration of Covenants, Conditions and Restrictions” (CC&R’s) whose provisions are discussed below. The unit was originally occupied by the Rasmussens and their sons, Keith and Kyle. Ms. Rasmussen’s mother, Ethel Major, subsequently moved into the unit. A few years later, the Rasmussens moved into a new residence and Ms. Major remained in the Miraverde condominium.

The dispute in this case centers on the right of the Rasmussens to continue using the recreational facilities of Miraverde, principally the tennis court, even though they are no longer residents of the condominium. Miraverde has only one tennis court. After moving from Miraverde, Ms. Rasmussen and Keith continued to use the court occasionally, while Kyle played regularly. Ms. Major is 82 years old and senile. She does not play tennis.

In July 1989, the Association made new rules regarding the use of the tennis court and other common facilities by the Miraverde residents and others. Rule 1.7 states “non-resident” homeowners are not entitled to use any Miraverde facilities except as guests of an authorized resident. Rule 6.4.2 provides only “registered residents” over 18 years of age may reserve the tennis court and rule 6.4.5 requires a “registered resident” to be present whenever a guest plays tennis.

The day after it adopted these rules, the Association informed the Rasmussens they were nonresident homeowners and only entitled to use the tennis court as guests of an authorized resident. As a result, Ethel Major, whom the Association considered the authorized resident, would have to personally sign up the Rasmussens and be present during their use of the tennis court. There was evidence Ms. Major, because of her physical disabilities, could 622*622 not go to the guard building to sign up the Rasmussens to play tennis or be present while they played. The Rasmussens failed to follow the new rules and were denied use of the tennis court. The Association also imposed fines on the Rasmussens for using the tennis court in violation of the new rules.

The Rasmussens and Ms. Major filed a complaint against the Association and its directors alleging, inter alia, violation of the Unruh Civil Rights Act, slander of title, and breach of fiduciary duty and seeking injunctive and declaratory relief. The Rasmussens and Ms. Major requested a temporary restraining order and preliminary injunction against enforcement of the rules restricting use of the recreational facilities by nonresident homeowners. The trial court issued a temporary restraining order against the assessment of fines against the Rasmussens and set a hearing on the motion for a preliminary injunction.

At the hearing on the preliminary injunction, the parties introduced the following evidence. The Rasmussens purchased their condominium in 1975. The Miraverde condominium project contains one tennis court, two swimming pools, one basketball court, one paddle tennis court, barbecue facilities, recreation room, and some green belt parking all of which the CC&R’s refer to as common areas. The board of directors approved the disputed rules effective July 1989. The Association fined the Rasmussens for using the tennis court in violation of the disputed rules. The CC&R’s, articles of incorporation, and bylaws were also admitted into evidence.

At the conclusion of the hearing, the trial court made the following findings: that the term “resident” means someone who primarily resides at Miraverde whether they are an owner or a nonowner or a lessee; the Rasmussens are nonresidents; the rules relating to the use of the tennis court and other facilities by “nonresidents” are reasonable. The trial court denied the motion for preliminary injunction and vacated the temporary restraining order.

The Rasmussens and Ms. Major appealed the denial of the preliminary injunction.

DISCUSSION

I. The Appeal of Ethel Major Is Moot.

The complaint of Ethel Major alleges, in relevant part, the rules adopted by the Association with respect to guests’ use of the tennis facilities discriminate against her in the use and enjoyment of her property on the basis of her 623*623 age and physical disabilities in violation of the Unruh Civil Rights Act. (Civ. Code, § 51 et seq.) The complaint seeks a preliminary and permanent injunction against further enforcement of those rules. (Civ. Code, §§ 52 subd. (c)(3), 52.1, subd. (b).) As noted, the trial court denied a preliminary injunction and Ms. Major appealed.

(1a) While this appeal was pending, two events rendered the appeal moot: Ms.Major suffered a stroke and moved out of Miraverde and the trial court sustained a demurrer to her Unruh Civil Rights Act cause of action without leave to amend.

Because Ms. Major is no longer a resident of Miraverde there is no longer any discriminatory action on the part of defendants to be enjoined. (Cf. Old National Financial Services, Inc. v. Seibert (1987) 194 Cal. App.3d 460, 467 [239 Cal. Rptr. 728].) We recognize Ms. Major might recover from her stroke and might move back into Miraverde thus raising the possibility the alleged discrimination might be repeated. However, we need not consider these possibilities because the appeal is moot for a second reason.

As previously noted, while this appeal was pending the trial court sustained a demurrer to Ms. Major’s Unruh Civil Rights Act cause of action. Because the Unruh Civil Rights Act claim was her only basis for a preliminary injunction, Ms. Major’sappeal from denial of an injunction is now moot.

(2) A preliminary injunction is an interim remedy designed to maintain the status quo pending a decision on the merits. (Gray v. Bybee (1943) 60 Cal. App.2d 564, 571 [141 P.2d 32].) It is not, in itself, a cause of action. Thus, a cause of action must exist before injunctive relief may be granted. (Shell Oil Co. v. Richter (1942) 52 Cal. App.2d 164, 168 [125 P.2d 930].) Accordingly, where the complaint fails to state a cause of action an order granting a preliminary injunction must be reversed. (Watsonv. Santa Carmenita etc. Co. (1943) 58 Cal. App.2d 709, 719 [137 P.2d 757].)

(3) An appeal from an order denying a preliminary injunction does not deprive the trial court of jurisdiction to proceed to try the case on the merits. (Gray v. Bybee, supra,60 Cal. App.2d at p. 571.) If the court can try the case on the merits then a fortiori it can determine the case has no merit by sustaining a demurrer without leave to amend. In the present case, the trial court having sustained a demurrer without leave to amend to the only cause of action which might have supported a preliminary injunction in favor of Ms. Major, her appeal from the denial of a preliminary injunction is moot.

In order to avoid this result the plaintiff may request a stay of trial court proceedings while the appeal from denial of the preliminary injunction is 624*624 pending. (4) Furthermore, although an order sustaining a demurrer is not appealable (Cohen v.Equitable Life Assurance Society (1987) 196 Cal. App.3d 669, 671 [242 Cal. Rptr. 84]), it is reviewable by petition for writ of mandate (Coulter v. Superior Court (1978) 21 Cal.3d 144, 148 [145 Cal. Rptr. 534, 577 P.2d 669]). We see no reason why such review could not also encompass the denial of preliminary relief. (1b) In the present case, plaintiffs, including Ms. Major, requested a stay of proceedings and writ review of the order sustaining the demurrer to the Unruh Civil Rights Act cause of action. Both requests were denied.

II. The Trial Court Erred in Denying the Plaintiffs a Preliminary Injunction Against an Ultra Vires Rule Which Prevented the Homeowners’ Use and Enjoyment of the Common Areas of Their Condominium.

(5) It is within the trial court’s sound discretion to grant or deny a preliminary injunction (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69 [196 Cal. Rptr. 715, 672 P.2d 121].) However, a trial court abuses that discretion by denying a preliminary injunction where the plaintiffs establish a “reasonable probability” of success on the merits and that they will suffer more harm from its denial than the defendant will from its grant. (Friends of Westwood, Inc. v. City of Los Angeles(1987) 191 Cal. App.3d 259, 264 [235 Cal. Rptr. 788].)

Civil Code section 1353 requires the owner of a project, prior to the conveyance of any condominium, to record a declaration of restrictions relating to such project. Under Civil Code section 1354, those restrictions, where reasonable, are enforceable equitable servitudes and inure to and bind all condominium owners in the project. (See Ritchey v. Villa Nueva Condominium Assn. (1978) 81 Cal. App.3d 688, 693-694 [146 Cal. Rptr. 695, 100 A.L.R.3d 231].) The Association and the Rasmussens do not dispute the validity of the Miraverde condominium’s CC&R’s. The CC&R’s provide in relevant part:

“Article IV, Section 1.

“Every person or entity who is a record owner of a condominium in the project… shall be a member of the Association…. Ownership of such condominium shall be the sole qualification for membership.

“Article IV, Section 2.

“The membership held by any owner of any Condominium shall not be transferred, pledged or alienated in any way, except upon the sale or 625*625 encumbrance of such Condominium, and then only to the purchaser or mortgagee of such Condominium. Any attempt to make a prohibited transfer is void.

“Article VI, Section 2.

“Every member shall have a right and easement of enjoyment in and to the common area within the properties, and such easement shall be appurtenant to and shall pass with the title to every assessed Condominium, subject to the following provisions: … (b) The right of the Association to establish uniform rules and regulations pertaining to the use of the common area and recreational facilities.

“Article VI, Section 3.

“Any member may delegate, …, his right of enjoyment to the common area and facilities to the members of his family, his tenants, or contract purchasers who reside on the property.”

As record owners of a Miraverde condominium, the Rasmussens are members of the Association. This membership is not transferable unless the Rasmussens were to sell the condominium. There is no evidence in the record the Rasmussens ever delegated their right to use the common areas to Ms. Major or anyone else.

(6a) The principal issue in this case is whether the Association is authorized to discriminate between members who reside at Miraverde and nonresident members, such as the Rasmussens, in the use and enjoyment of common areas including recreational facilities. The CC&R’s grant every member of the Association a right and easement of enjoyment in and to the common areas within the property. (Art. VI, § 2.) These rights are subject only to the right of the Association to establish uniform rules and regulations pertaining to a member’s use of the common areas and recreational facilities (Ibid.) The Rasmussens assert the Association acted without authority in restricting the use of common areas, including recreational facilities, by members who are not residents of Miraverde. We agree.

The Association’s bylaws, article IV, section 1, grant the Association’s board of directors the power to manage and maintain the common areas and to make such rules and regulations therefore not inconsistent with law, the Association’s articles of incorporation and its bylaws. The Association’s articles of incorporation, article IV, section 2(a), require the Association to perform the duties and obligations as set forth in the CC&R’s. The CC&R’s 626*626 state that “every member shall have a right and easement of enjoyment in and to the common area.” The legal effect of the CC&R’s is to grant “every member” the right to use the common areas subject to uniform rules and regulations.[1] By classifying members into two categories, residents and nonresidents, the Association created rules that are not uniform as to all members. Under the Association’s rules, a resident member of the Association is entitled to use the common areas subject only to reasonable restrictions on time and manner. A nonresident member is not entitled to use the common areas unless he or she is an authorized guest of a registered resident. Hence, the Rasmussens are not entitled to use the common areas, including recreational facilities, unless Ethel Major, the authorized registered resident, reserves the recreational facility and is personally present during its use. The evidence was undisputed Ethel Major’s physical handicap prevented her from reasonably complying with this rule. Thus, the Rasmussens were denied the use and enjoyment of the recreational facilities on an equal footing with resident members of Miraverde, and the trial court so found. The Association’s rule became a de facto termination of the Rasmussens’ use of the common areas. The effect of the Association’s rule was to terminate a right originally granted by the CC&R’s to all members whether resident or not.

Furthermore, the Association’s rules exclude the Rasmussens from the common areas while simultaneously charging them a fee for the common areas’ use and improvements. (Art. VII, § 1.) If the Rasmussens were to fail to pay their annual or special assessments, the Association would have the right to charge interest, bring an action at law, or foreclose the lien upon the condominium. (Art. VIII, § 1.) In return for the annual or special assessment fees, the Rasmussens, as nonresident members, would receive nothing. To de facto terminate the Rasmussens’ right would impose a substantial obligation upon the Rasmussens while imposing no obligation at all on the Association. Such an illusory agreement would be not enforceable. (See Farnsworth, Contracts (2d. ed. 1990) § 2.13, p. 106 et seq.)

The Association relies on Sunrise Country Club Assn. v. Proud (1987) 190 Cal. App.3d 377, 381-382 [235 Cal. Rptr. 404] for the proposition ownership of a condominium has no necessary relationship to its use. We do not find this case persuasive in the matter at hand. In Sunrise Country Club Assn., the court refused to uphold the prohibition on sale of a condominium designated for “adults only” to persons having children. The court recognized an owner 627*627 with children could comply with the “adults only” restriction because the owner may own the condominium for investment purposes or for use by less than all family members (190 Cal. App.3d at p. 383.) It was in that context the court remarked ownership of a condominium has no necessary relationship to its use. (Ibid.) This case is distinguishable from the Rasmussens’ case. Whether, in general, there is no necessary connection between ownership and use, there is a specific connection between ownership and use in our case. The terms of the CC&R’s link ownership with the use of the common areas. The Rasmussens’ right to use the common areas comes from being owners of a Miraverde condominium.

(7) When disputes arise between the homeowners and the homeowners association, the courts will look to the governing instruments for guidance in determining whether the association has acted within its authority. (Thomas & Grogan, Cal. Condominium and Planned Development Practice (Cont. Ed.Bar 1984) State Regulation of Common Interest Subdivision Sales, p. 236.) Actions taken in excess of the association’s power are unenforceable and courts have granted injunctive relief against associations which have exceeded the scope of their authority.

For example, in Spitser v. Kentwood Home Guardians (1972) 24 Cal. App.3d 215, 218 [100 Cal. Rptr. 798], the association assessed the homeowners’ fees to correct a nuisance emanating from the local airport. The CC&R’s expressly prohibited the use of homeowners’ lots in a manner which constituted a nuisance to the neighborhood and allowed the use of assessment funds to enforce this restriction. In upholding the lower court’s injunctive relief against the association’s assessment of the homeowners, the court held the association was not authorized or required to protect Kentwood from nuisances emanating from outside the area. In Ticor Title Ins. Co. v. Rancho Santa Fe Assn. (1986) 177 Cal. App.3d 726 [223 Cal. Rptr. 175], the appellant challenged the association’s action changing setback restrictions set forth in the CC&R’s. The association was authorized to adopt rules and regulations for the general welfare of the community. However, the CC&R’s specifically set forth setback restrictions for the community and provided any change required approval by two-thirds of the owners. The association proceeded to change the setback requirements on its own. The court held the association’s actions were invalid because it was not authorized to enact setback regulations different from those contained in the CC&R’s.

Florida courts have adopted a similar approach to challenges directed at rules adopted by the homeowners association:

“When a court is called upon to assess the validity of a rule enacted by a board of directors, it first determines whether the board acted within its 628*628 scope of authority and, second, whether the rule reflects reasoned or arbitrary and capricious decision making.” (Beachwood Villas Condominium v. Poor (Fla. Dist. Ct. App. 1984) 448 So.2d 1143, 1144; see also Note, Judicial Review of Condominium Rulemaking(1981) 94 Harv. L.Rev. 647, 652-653.)

(6b) In view of the foregoing authorities, we conclude an association may not exceed the authority granted to it by the CC&R’s. Where the association exceeds its scope of authority, any rule or decision resulting from such an ultra vires act is invalid whether or not it is a “reasonable” response to a particular circumstance. Where a circumstance arises which is not adequately covered by the CC&R’s, the remedy is to amend the CC&R’s. The courts have held homeowners are subject to any reasonable amendment of the CC&R’s properly adopted (See, e.g., Ritchey v. Villa Nueva Condominium Assn., supra, 81 Cal. App.3d at p. 697.)

For the reasons set forth above, we conclude it is reasonably probable the Rasmussens will prevail on the merits in establishing the Association exceeded its authority by excluding nonresident members from the common areas.

We further find the Rasmussens would suffer a greater harm from denial of the injunction than the Association would from its grant. Civil Code section 783 recognizes that ownership of a condominium constitutes a statutory estate in real property. (See Laguna Royale Owners Assn. v. Darger (1981) 119 Cal. App.3d 670, 673, fn. 1 [174 Cal. Rptr. 136].) The Rasmussens’ purchase of the condominium vested in them the right to the physical unit as well as a right to use the common area. To exclude the Rasmussens from the common area would prevent them from enjoying a significant part of their estate.

The Association asserts the restrictions regarding the use of the common areas are necessary in order to prevent overcrowding. In view of the condominium’s CC&R’s, the owners of the condominiums were well aware of the limited facilities available at the Miraverde condominium project. The owners of the condominiums should not expect anything more than they bargained for. Furthermore, the Association should be able to cure any inconvenience or overcrowding with proper rules and regulations, consistent with the CC&R’s, governing the reasonable time and manner of use of the recreational facilities.[2]

629*629 DISPOSITION

The order denying the preliminary injunction is reversed as to the Rasmussens, and the matter is remanded to the trial court for further proceedings not inconsistent with the views expressed herein. The appeal of Ethel Major is dismissed as moot. Each party is to bear its own costs on appeal.

Lillie, P.J., concurred.

WOODS (Fred), J.

I concur in the judgment only since the Majority opinion, in my view, reaches the correct result but unnecessarily adverts to and inadequately treats the issue of delegation. By its brevity the approach of the Majority may create confusion for trial courts and litigants in future cases involving related issues.

Respondents’ petition for review by the Supreme Court was denied September 2, 1992. Panelli, J., was of the opinion that the petition should be granted.

[1] The CC&R’s grant any member the right to delegate his right of enjoyment to the common areas to the members of his family, tenants, or contract purchasers who reside on the property (art. of incorp., art. VI, § 3.) Here we do not address the issue whether the member’s right and easement to the common areas is extinguished upon delegation to a third party.

[2] Our decision, of course, is based on the record before us. We note, for example, the Rasmussens were not seeking to both use the tennis court themselves and have a tenant or other delegatee use the court. Consequently the Rasmussens’ unit was placing no greater burden on the Association’s facilities than it did when the Rasmussens occupied that unit and no greater burden than if they still did. As mentioned earlier (see fn. 1, ante), we need not reach the question whether, under the CC&R’s, a delegation to a tenant or contract owner of the owner’s right to enjoy common facilities would have the effect of terminating (or suspending) the owner’s personal rights to use those facilities. We leave this question to the trial court for resolution in the first instance should new facts be developed on remand.

 

Keywords: Governing Documents, Enforcement

Lake Arrowhead Timeshares v. Lake Arrowhead Owners

Lake Arrowhead Chalets Timeshare Owners v. Lake Arrowhead Chalets Owners

51 Cal.App.4th 1403 (1996)

1405*1405 COUNSEL

Fiore, Walker, Racobs & Powers, Peter E. Racobs and Margaret G. Wangler for Plaintiffs and Appellants.

Feldsott, Lee & Feinberg, Martin L. Lee and Stanley Feldsott for Defendants and Appellants.

[Opinion certified for partial publication.[*]]

Summary by Mary M. Howell, Esq.:

Amendment of bylaws to deprive one group of owners of the right to an assured seat on the board of directors was an amendment which required the consent of the class comprised of such owners pursuant to Corporations Code §7150, and failure to obtain that consent resulted in the invalidation of the amendment.

**End Summary**

OPINION

McKINSTER, J. —

FACTUAL AND PROCEDURAL BACKGROUND

The Lake Arrowhead Chalets is a 62-unit residential condominium project. It is governed by the Lake Arrowhead Chalets Owners Association (Condominium Association). Of the 62 units, 24 are operated as time-share facilities. The time-share units are governed by the Lake Arrowhead Chalets Timeshare Owners Association (Timeshare Association).

A meeting of the members of the Condominium Association was held on February 1, 1992, to elect new members of the association’s board of directors and to vote on a proposed third amendment to the association’s bylaws. Mr. Dave Burdick, a member of the boards of directors of both the Condominium Association and the Timeshare Association, appeared at the meeting, purporting to be empowered to vote on behalf of the owners of the 24 time-share units. Burdick cast the votes of those 24 units against the proposed bylaws amendment, but the Condominium Association refused to recognize either his authority or the validity of his vote. Accordingly, the third amendment was declared to have been adopted by a vote of 36 to 0.

In March of 1992, the Timeshare Association and Bruce Rummer, an individual member of the Condominium Association, sued the Condominium Association and two of its officers and directors, Linda Hanneman and James Genn. As ultimately amended, that action sought (1) a declaration that the third amendment to the Condominium Association’s bylaws was invalid, (2) a declaration that a prior second amendment to the bylaws was rescinded, (3) damages against Hanneman and Genn for alleged violations of fiduciary duty, and (4) a variety of injunctive relief. The Condominium Association cross-complained against the Timeshare Association in June of 1992, seeking a declaration that various provisions of the declaration of covenants, 1406*1406 conditions and restrictions under which the Timeshare Association operated were invalid.

In May of 1994, the plaintiffs represented that they had reached a settlement of their dispute with the Condominium Association and applied for a determination that the settlement was in good faith. (Code Civ. Proc., § 877.6, subd. (a)(2).) The Condominium Association contested the settlement. (Ibid.) The trial court denied the application in August of 1994.

Meanwhile, in June of 1994, the plaintiffs moved for an order (1) disqualifying defense counsel, Feldsott, Lee & Feinberg, from continuing to represent either the Condominium Association or the individual defendants, and (2) restraining the Condominium Association from continuing to pay the costs of defense of the individual defendants. Both aspects of the motion were denied.

The declaratory relief claim concerning the validity of the third amendment to the Condominium Association bylaws was bifurcated from all other issues. Trial on that issue began on August 18, 1994. At the conclusion of the plaintiffs’ case-in-chief, the defendants successfully moved for judgment. (Code Civ. Proc., § 631.8.) In particular, the court determined that the third amendment was valid.

The Condominium Association then dismissed its cross-complaint. Shortly thereafter, the plaintiffs dismissed the remaining causes of action of their complaint. All claims having been resolved either through trial or dismissal, a judgment was entered in favor of the defendants.

Relying on Civil Code section 1354, subdivision (f), the defendants then moved for an award of over $200,000 in attorney’s fees. Their motion was denied.

The plaintiffs appeal from the judgment against them. The defendants cross-appeal from the denial of their motion for attorney’s fees.

CONTENTIONS

The plaintiffs contend that the judgment should be reversed because the trial court erred in refusing to approve the settlement with the Condominium Association, refusing to disqualify defense counsel, and finding that the third amendment was valid. On the cross-appeal, the defendants contend that the trial court erred by denying their motion for attorney’s fees. In addition, arguing that the plaintiffs’ appeal is frivolous, the defendants have moved 1407*1407 for an award of attorney’s fees on appeal, pursuant to Code of Civil Procedure section 907 and California Rules of Court, rule 26.

DISCUSSION

A., B.[*]

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C. The Third Amendment to the Bylaws Is Invalid.

(1) The plaintiffs’ principal argument is that the trial court erred on the merits of the only issue tried, i.e., the validity of the third amendment to the Condominium Association’s bylaws. In particular, they contend that the amendment is invalid for three reasons: (a) the notice of the meeting at which it was adopted was inadequate; (b) there were insufficient favorable votes to adopt the amendment; and (c) the amendment was not approved by the owners of the time-share units, as required by Corporation Code section 7150, subdivision (b). Finding the last issue to be dispositive, we address it first.

Since the initial adoption of the bylaws of the Condominium Association, they have been amended three times. The first amendment increased the number of directors from five to seven. The second amendment provides that four of the seven directors shall be owners of whole condominium units, while the remaining three directors shall be owners of fractional interests in time-share units. The third amendment, which is the subject of this action, provides that “only timeshare owners/representatives may vote for the three (3) seats on the Board of Directors occupied by the timeshare owners. Only the condominium owners may vote for candidates for the remaining four (4) seats on the Board of Directors.”

Subdivision (b) of Corporations Code section 7150 establishes certain restrictions on the powers of a mutual benefit corporation’s members to amend its bylaws.[3] In particular, it provides that some amendments, although approved by the members generally, are not effective unless they are also approved by the members of a class. (Ibid.) Among the proposed amendments requiring class approval are those which would “[a]uthorize a new 1408*1408 class of memberships” (id., subd. (b)(6)) or “[m]aterially and adversely affect the rights, privileges, preferences, restrictions or conditions of that class as to voting … in a manner different than such action affects another class” (id., subd. (b)(1)).

The plaintiffs contend that the third amendment creates a new and disadvantaged class of members, and is therefore ineffective because it was not approved by the members of that new class. They are correct.

“`Class’ refers to those memberships which … have the same rights with respect to voting….” (Corp. Code, § 5041.) By specifying that the time-share owners could only vote for the directors who would constitute a minority of the board, while the whole-unit owners would select the board’s majority, the third amendment created two classes of members. We cannot accept the trial court’s finding to the contrary.

Not only did the third amendment divide the members into two classes, but it materially and adversely affected the voting rights of the minority time-share class. Prior to the amendment, the time-share members of the association, though owners of a minority of the units, had the chance to elect a majority of the board of directors.[4] After the division of the membership into two classes, only the whole-unit owners had that opportunity. Thereafter, the time-share owners could never elect a majority of the board, regardless of how much greater their degree of organization and voter turn-out compared to the owners of the whole units.

The defendants deny that the change in voting rights was adverse to the time-share owners, arguing that in fact the change benefited the time-share owners by guaranteeing that they would always have some representation on the board. They concede, however, that another effect of the amendment would be to prevent the continuation of the practice by which a passive majority (of whole-unit) owners, through their lack of participation, allowed an active minority (the time-share owners) to control the board. Thus, we 1409*1409 cannot say as a matter of law that the effect of the amendment were entirely beneficial to the time-share owners.[5] Because the amendment confers potential disadvantages as well as potential advantages, the weighing process is reserved for the members of the affected class. (Corp. Code, § 7150, subd. (b).)

Since the owners of the time-share units did not approve the third amendment, it was not validly adopted, and thus is not effective, even though it was approved by a majority of the members. Therefore, we need not decide whether the Condominium Association failed to give adequate notice at the meeting at which the amendment was purportedly approved, or whether there would have been sufficient favorable votes cast by the members to adopt the amendment in the absence of the need for separate votes by class. The judgment declaring that the amendment was validly adopted and effective must be reversed.

D. The Issue Raised in the Defendants’ Cross-appeal Is Moot.[*]

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DISPOSITION

The judgment is reversed. Having decided the invalidity of the adoption of the third amendment to the Condominium Association’s bylaws as a matter of law, we direct the trial court to enter a declaratory judgment in favor of the plaintiffs.

Hollenhorst Acting P.J., and Ward J., concurred.

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

[3] The statutory restrictions on the power of a corporation’s board to amend bylaws (Corp. Code, § 7150, subd. (a)), to which the defendants refer, are irrelevant. A board may not amend the bylaws if the bylaws withhold that power. (Corp. Code, § 7150, subd. (c).) Here, the bylaws specify that the power to amend is solely in the hands of the members.

[4] Since the term of office of directors is only one year, all seven seats are open at the annual election. The election is held at the annual meeting. A quorum for the meeting is 51 percent of the units. Thus, under the pre-amendment bylaws, an election could be decided on just 32 votes. If all 24 time-share unit owners participated in the election and voted cumulatively for 4 candidates, each candidate would receive 42 votes (24 x 7 ÷ 4). If the eight whole-unit owners who attended also voted cumulatively for four candidates, each would receive only fourteen votes. Under the old system, therefore, the time-share units could (and apparently, frequently did) elect a majority of the board because they participated in the election in greater numbers and voted as a block. Under the third amendment, however, the whole-unit members would be ensured of a majority of the board, regardless of how few of them bothered to turn out and vote.

[5] Indeed, if the amendment were entirely beneficial to the time-share owners and adverse to the whole-unit owners, one would be hard pressed to explain why the time-share owners have spent so much time and attorney’s fees to prevent the amendment from going into effect, or why the whole-unit owners have worked so long and hard to enforce it. The Condominium Association’s actions speak louder than its words.

 

Keywords: Governing Documents, Amendment, Voting, Elections