Quail Lakes Owners Association v. Kozina

204 Cal.App.4th 1132 (2012)

1134*1134 Law Offices of Mayall, Hurley, Knutsen, Smith & Green and Paul A. Kozina for Defendant and Appellant.

Inman Law Group, Bruce Ray Inman; Peters & Freedman and Laurie S. Poole for Plaintiff and Respondent.

Summary by Mary M. Howell, Esq.:

Homeowner opposing petition for Superior Court approval of CC&R amendment does not have standing to raise objections on behalf of other homeowners not before the court.

**End Summary**

OPINION

DUARTE, J.—

Quail Lakes Owners Association (the Association) filed a petition seeking an order modifying its governing laws to reduce a supermajority voting restriction, a special proceeding authorized by Civil Code section 1356 (§ 1356). The trial court conducted a hearing and granted the Association’s amended petition. Objector Vladimir F.Kozina (Kozina) timely filed this appeal.^[1]

On appeal, Kozina contends the manner of notice of the hearing violated due process, and the trial court abused its discretion in granting the amended petition. We disagree and shall affirm.

INTRODUCTION

The organic charters for many older homeowners associations required supermajority votes for amendments, but voter apathy and other reasons often 1135*1135make achieving such a supermajority impractical. (See Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472, 477 [64 Cal.Rptr.2d 81]; 1 Sproul & Rosenberry, Advising Cal. Common Interest Communities (Cont.Ed.Bar 2011) Amending the Governing Documents, § 9.30, p. 660.) Section 1356 creates a court procedure for lowering the supermajority requirement.

(1) Section 1356, “part of the Davis-Stirling Common Interest Development Act (the Act), provides that a homeowners association, or any member, may petition the superior court for a reduction in the percentage of affirmative votes required to amend the [governing documents] if they require approval by `owners having more than 50 percent of the votes in the association . . . .’ [Citation.] [Fn. omitted.] The court may, but need not, grant the petition if it finds all of the following: Notice was properly given; the balloting was properly conducted; reasonable efforts were made to permit eligible members to vote; `[o]wners having more than 50 percent of the votes . . . voted in favor of the amendment’; and `[t]he amendment is reasonable.'” (Peak Investments v. South Peak Homeowners Assn., Inc. (2006) 140 Cal.App.4th 1363, 1366-1367 [44 Cal.Rptr.3d 892].)

PROCEDURAL BACKGROUND

On March 19, 2010, the Association filed its petition, alleging an inability to make prudent changes to its “Covenants, Conditions and Restrictions” (CCR’s), despite majority support among the homeowners, due to a supermajority requirement. The original and proposed CCR’s were attached. The petition alleged that in a 2009 election, of 1,958 “membership votes,” 1,409 votes were cast, of which 1,209 voted in favor of the new CCR’s.

On June 17, 2010, an objection was filed, in part alleging the defeat of the new CCR’s in the prior election was due to a “strong campaign in opposition” based on the unreasonableness of the proposed governance changes. The tenor of the objection was that there was a rift in the community; however, Kozina was the only objector. The objection contended the evidence attached to the unverified petition was not properly authenticated, and contended the manner of notice was insufficient to satisfy due process.^[2]

On June 23, 2010, Thomas G. Murphy, the Association’s manager, filed a declaration responding to the opposition. Murphy’s declaration, with attachments, tended to show that the new CCR’s had been crafted with notice and opportunity for comment, but acknowledged an apparent rift within four 1136*1136 subassociations, one of which, the “Neighborhood” association, declined to participate in crafting the new CCR’s.

On July 1, 2010, the petition was denied without prejudice for lack of evidence. The petition was not verified, and the Association’s counsel did not attach any declarations to it, as is recommended. (1 Sproul & Rosenberry, supra, § 9.34, p. 664.) The trial court explicitly noted these deficiencies, and declined to allow live testimony to cure them. The court set dates for the filing of an amended petition, opposition and reply, as well as a date for hearing on the amended petition. The trial court made clear that it wanted adequate time and attention given to noticing the membership.

The Association filed an amended petition on July 23, 2010. No supporting declarations were attached, but it was verified by the Association president, Penelope A. Calvird, who declared under penalty of perjury: “I have read the foregoing Amended Petition. The matters stated in the foregoing Amended Petition are true and correct of my personal knowledge.”

On August 5, 2010, the trial court reaffirmed by written order the hearing date previously set for September 2, 2010, and ordered notice be given to the homeowners on or before August 13, 2010. The order required any written opposition to the amended petition be filed by August 17, 2010.

On August 16, 2010, Kozina filed opposition to the amended petition. His objections focused on what he characterized as insufficient notice permitted by the trial court’s August 5, 2010, order. Despite multiple references to the “membership,” the opposition was in Kozina’s name only. However, the opposition also included declarations from three homeowners stating they had not received notice in time to review the documents and consult counsel.^[3] The opposition declined to “address procedural and substantive deficiencies” in the amended petition, “reserving expressly the right to submit” additional briefing.^[4]

At the September 2, 2010, hearing on the amended petition, the trial court once again declined the Association’s counsel’s offer to present live testimony. Kozina conceded the Association’s president had verified the amended petition, but argued she had not stated her competence or authenticated the documents attached to the amended petition.

1137*1137 On September 30, 2010, the trial court granted the amended petition in a written ruling, and directed counsel to prepare a further order. After considering a proposed order and opposition, the trial court signed a final order granting the amended petition on October 19, 2010. Kozina timely appealed therefrom.

DISCUSSION

I

Due Process Claim

Kozina contends the trial court’s order setting forth the manner of notice of and briefing for the September 2, 2010, hearing violated due process, pointing out the order permitted notice by mail as late as August 13, the opposition was due on August 17, and a weekend intervened. Kozina contends this order unduly compressed the time for homeowners to object.

But Kozina filed a timely objection that was considered by the trial court, although he chose to address only notice. Nowhere in his briefing does Kozina contend that he was unable to articulate all of the arguments he wanted to make, or unable to muster the evidence he wanted the trial court to consider, due to time constraints. He has not shown or even attempted to show that he was prejudiced by the time limits set by the briefing order. We may not reverse a judgment for a procedural error absent a miscarriage of justice. (Cal. Const., art. VI, § 13; Code Civ. Proc., § 475; Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830, 833 [16 Cal.Rptr.2d 38].) Absent an explicit argument that a procedural error caused prejudice, we are under no obligation to address the claim of error. (Paterno v. State of California (1999) 74 Cal.App.4th 68, 105-106 [87 Cal.Rptr.2d 754].) Therefore we reject Kozina’s claim.

Kozina argues other homeowners might have been prejudiced by the briefing order. However, we agree with the Association that Kozina lacks standing to assert the due process rights of other homeowners.

(2) “`[A] plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.'” (Independent Roofing Contractors v. California Apprenticeship Council (2003) 114 Cal.App.4th 1330, 1341 [9 Cal.Rptr.3d 477] [association could not raise purported legal rights of prospective members]; see Johnson v. Department of Social Services (1981) 123 Cal.App.3d 878, 883 [177 Cal.Rptr. 49]; cf. Horn v. County of Ventura (1979) 24 Cal.3d 605, 619-620 [156 1138*1138 Cal.Rptr. 718, 596 P.2d 1134] [although Horn alleged notice to other landowners had not been adequate before he bought his property, he was not seeking to vindicate their rights, but “his own claim to due process”].) The general rule that a party cannot represent the interests of others “is not confined to plaintiffs; it may also arise when one seeks to defeat a claim by asserting the paramount rights of a third person.” (Jasmine Networks, Inc. v. Superior Court(2009) 180 Cal.App.4th 980, 991 [103 Cal.Rptr.3d 426].)^[5]

In his reply brief, Kozina claims he has “associational” standing, and likens this case to that of a derivative action filed on behalf of all shareholders of a corporation. We are not persuaded.

(3) Kozina’s associational standing claim is predicated on the following rule: “`[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.'” (Property Owners of Whispering Palms, Inc. v. Newport Pacific, Inc.(2005) 132 Cal.App.4th 666, 673 [33 Cal.Rptr.3d 845].)

Kozina overlooks the fact that the Association is the de facto representative of the homeowners. Kozina did not and does not purport to represent a subgroup within the Association. Instead, the record shows he is attempting to assert the rights of people who allegedly would have objected to the petition if provided sufficient notice. But any such persons could have achieved standing for themselves by moving to vacate the order granting the petition, and appealing if that motion were denied. (See People ex rel. Reisig v. Broderick Boys (2007) 149 Cal.App.4th 1506, 1516-1517 [59 Cal.Rptr.3d 64].) No one did so.

(4) Kozina analogizes to derivative shareholder suits. “The fundamental purpose of a derivative action is to provide a means by which a stockholder may seek to enforce the rights of a corporation when the corporate board refuses to do so. [Citations.] If successful, a derivative claim will accrue to the direct benefit of the corporation and not to the stockholder who litigated it.” (Grosset v. Wenaas (2008) 42 Cal.4th 1100, 1114 [72 Cal.Rptr.3d 129, 175 P.3d 1184].) But this appeal does not challenge any action or omission by the Association; it challenges the court’s order amending the CCR’s. Any 1139*1139 aggrieved homeowner had a remedy, and because a derivative action does not advance the rights of individual shareholders, Kozina’s analogy is unpersuasive.^[6]

Our conclusion that Kozina cannot raise due process claims on the purported behalf of objecting homeowners answers his related contention that the trial court improperly refused to consider two letters purportedly submitted by homeowners: If other homeowners’ rights were violated, they had a remedy.^[7]

Accordingly, we reject Kozina’s due process claims.

II

The Section 1356 Petition

Kozina asserts the trial court abused its discretion when it granted the Association’s amended petition, arguing the court failed to make proper factual findings and failed to find proper notice had been given to all entities entitled to notice. As we will explain, the findings were sufficient.

(5) The trial court’s ruling on a section 1356 petition is reviewed for an abuse of discretion. (Mission Shores Assn. v. Pheil (2008) 166 Cal.App.4th 789, 795 [83 Cal.Rptr.3d 108]; Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 570 [71 Cal.Rptr.3d 299].) Section 1356, subdivision (c) provides the trial court may grant the petition “if it finds” that six requirements have been met.^[8]

1140*1140 Kozina complains that the trial court’s initial ruling did not explicitly recite those six requirements, particularly as to whether adequate notice had been provided to lienholders and the local government, and contends that the trial court had to specify the evidence supporting each finding.

The initial ruling directed counsel to prepare a final order, from which the appeal was taken, and it is that final order we review, not the initial ruling. Contrary to Kozina’s evident view, the initial ruling was not a statement of decision, it was a statement of the trial court’s reasoning that cannot be used to impeach the final order. (See Tyler v. Children’s Home Society (1994) 29 Cal.App.4th 511, 551-552 [35 Cal.Rptr.2d 291]; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 350, pp. 402-404.) The final ruling finds all six requirements have been met, including that “the Association has given not less than 15 days written notice of the Court hearing to all Association members and to all others entitled to such notice.” That order is sufficient.

Kozina analogizes to Evidence Code section 352, and contends that the trial court must “provide affirmative evidence that it gave each element the consideration necessary to reach a reasoned judgment . . . .” Kozina adds that a trial court must “make an affirmative record of its exercise of discretion to facilitate meaningful review.” (Ramona Manor Convalescent Hospital v. Care Enterprises (1986) 177 Cal.App.3d 1120, 1137 [225 Cal.Rptr. 120].)

(6) However, in making an Evidence Code section 352 ruling, the trial court need neither recite each factor it considered, nor detail the evidence supporting each factor. Instead, the record need only reflect that the court weighed the relevant factors. (See People v. Clair (1992) 2 Cal.4th 629, 660-661 [7 Cal.Rptr.2d 564, 828 P.2d 705] [“`Certainly, the trial judge need not expressly weigh prejudice against probative value—or even expressly state that he has done so.'”]; People v. Gunder(2007) 151 Cal.App.4th 412, 426 [59 Cal.Rptr.3d 817].)

(7) Here, the requirements for granting a section 1356 petition were detailed in the Association’s moving papers, and the trial court’s final order also referenced section 1356 and deemed all necessary requirements met. Thus, the record adequately shows the trial court was aware of the requirements of exercising its discretion under section 1356. Nothing in section 1356 required the court to recite the evidence pertaining to each subfinding. We decline to add such a requirement to the statute. (See Trackman v. Kenney (2010) 187 Cal.App.4th 175, 184 [114 Cal.Rptr.3d 619].)

Accordingly, we reject Kozina’s contention that the trial court abused its discretion in granting the amended petition.

1141*1141 DISPOSITION

The judgment is affirmed. Kozina shall pay the Association’s costs of this appeal. (Cal. Rules of Court, rule 8.278(a)(2).)

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

[1] Kozina, an attorney, is represented by Paul A. Kozina, another attorney in his firm, but sometimes acted in propria persona in the trial court.

[2] Although the objection referenced a declaration by Kozina that purportedly attached documentary exhibits, no such declaration is in the record on appeal.

[3] Even counting these three homeowners as objectors, only four of the 1,958 homeowners contained in the membership vote number objected to the amended petition or to the procedures for considering the amended petition.

[4] No additional prehearing briefing by Kozina appears in the record.

[5] Of course, either Kozina or his counsel could have represented any other homeowner in their capacity as attorneys. But the record does not indicate either did so.

[6] Kozina also contends “the right to sue is greatly relaxed where the question is of public interest.” In support, he relies on Residents of Beverly Glen, Inc. v. City of Los Angeles (1973) 34 Cal.App.3d 117 [109 Cal.Rptr. 724] (Beverly Glen), a case holding a homeowners association was sufficiently aggrieved by a land-use decision to have standing to challenge it. (Beverly Glen, supra, 34 Cal.App.3d at pp. 121-127.) The case does not support the view that changes to an association’s internal governance structure are of such public interest that ordinary standing rules should be disregarded.

[7] We previously denied Kozina’s motion to augment the record on appeal to include those letters. We express no view on Kozina’s contention that the trial court should have treated those letters as valid objections to the petition.

[8] Section 1356, subdivision (c) provides in relevant part: “The court may, but shall not be required to, grant the petition if it finds all of the following: [¶] (1) The petitioner has given not less than 15 days written notice of the court hearing [to all homeowners and to lienholders and local governments entitled to notice]. [¶] (2) Balloting on the proposed amendment was conducted in accordance with all applicable provisions of the governing documents. [¶] (3) A reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment. [¶] (4) Owners having more than 50 percent of the votes . . . voted in favor of the amendment. . . . [¶] (5) The amendment is reasonable. [¶] (6) Granting the petition is not improper for any reason stated in subdivision (e).”

Keywords: Governing Documents, Amendments

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

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