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Davis v. Echo Valley Condominium Association

(2009) 177 Cal.App.4th 1090

[Discrimination; ADA; Disability Accommodations; Smoking Restrictions] An HOA’s obligation to grant a reasonable accommodation does not mandate a fundamental change in policy that would intrude upon the rights of others.

Phyllis Davis, Plaintiff-Appellant, v. Echo Valley Condominium Association; Casa Bella Property Management, Inc., Defendants-Appellee.

OPINION

[486] Murphy, United States Court of Appeals, Sixth Circuit:

Phyllis Davis suffers from asthma but lives in a condominium complex that allows residents to smoke in their condos. Davis asserts that the smell of smoke regularly emanating from a neighbor’s condo aggravated her asthma. Unsatisfied with her condo association’s efforts to address the situation, she sued the association and its property manager. Davis alleged that these defendants, by refusing to ban smoking, discriminated against her under the Fair Housing Amendments Act, violated various condo bylaws, and allowed a tortious nuisance to persist. The district court rejected Davis’s claims on summary judgment. We affirm.

In the 1970s, a developer built the Echo Valley Condominium complex in Farmington Hills, Michigan. The complex is governed by a master deed, bylaws, and the Michigan Condominium Act, Mich. Comp. Laws § 559.101-.276. The bylaws impose many regulations on condo owners. They contain several specific bans, including, for example, a ban on keeping a dog or cat in a condo. They also contain general rules like the following: “No immoral, improper, unlawful or offensive activity shall be carried on in any apartment or upon the common elements, limited or general, nor shall anything be done which may be or [487] become an annoyance or a nuisance to the co-owners of the Condominium.”

The Echo Valley Condominium Association—an association of co-owners organized as a nonprofit corporation that we will call the “Association”—manages the Echo Valley complex. A board of directors made up of volunteer co-owners oversees this Association. The bylaws give the board “all powers and duties necessary for the administration” of the Echo Valley complex, including maintaining the common elements, collecting the assessments, and enforcing the bylaws. The board also must contract with a professional manager to carry out its duties. At most times relevant here, the Association contracted with Casa Bella Property Management, Inc., to help run the complex.

The minutes from the regular meetings of the Association’s board show that condo living can be trying, and board membership a thankless task. The board fields complaints ranging from the need for repairs (“We have had nine A.C. units break down since we last [met]”), to non-residents sneaking into the pool (“I could not believe the condition of the water after the guests left”), to inflamed passions from the pet ban (“another lady is very upset and is considering taking [a board member] to court if she stays on the board with a pet”).

This case concerns another fact of life in Echo Valley: Condo owners regularly detect odors from each other’s condos. Residents, for example, have complained about the smell of their neighbors’ cooking. Some residents also smoke cigarettes in their condos. Michigan law permits smoking in one’s home, cf. Mich. Comp. Laws § 333.12603(1), and the Association has long read the bylaws to permit residents to smoke in their units. (The bylaws say nothing specific about smoking.) Yet neighbors can sometimes smell this smoke, and in-condo smoking has produced complaints to the Board over the years. Some residents have even moved out because of the Association’s policy allowing smoking.

Davis, a cancer survivor with “a history of asthma and multiple chemical sensitivity disorder,” seeks to change the Association’s smoking policy through this suit. In 2004, she bought a condo on the second floor of a four-unit building in the complex. The condos in her building share a common entryway, basement, and attic. A 2015 letter that Davis addressed to “Dear Neighbor” suggests that smells and sounds carry across her building. As for smells, Davis told her neighbor that she “almost had an asthma attack” because “[t]he smell of whatever you were cooking this morning engulfed my condo.” She asked her neighbor to cook with the windows open and exhaust fan on. As for sounds, Davis added: “Also, please stop slamming your door when you come in as it is very loud.”

Davis’s more recent concern has been cigarette smoke. Moisey and Ella Lamnin owned a condo on the first floor of Davis’s building and began renting it to Wanda Rule in 2012. At some point not apparent in the record, the smell of smoke from the Lamnins’ condo (presumably from Wanda Rule and her husband) started entering Davis’s unit and lingering in the building’s common areas. According to Davis, the smoke “has significant adverse effects on [her] ability to breathe comfortably.”

On March 1, 2016, in her first written complaint in the record, Davis emailed a Casa Bella employee to report that the Lamnins’ tenants “do not work, so they are home all day and night chain smoking,” which affected her “breathing, causing constant coughing, and near asthma attacks.” She asked if the board could “make owners accountable for cigarette and other types of smoke seeping through [488] the cracks of their doors and vents.” The Association’s board, which at that time included Davis, discussed her complaint at a March 2016 meeting. The board ultimately directed the Casa Bella employee to send a letter to the Lamnins. The letter noted that the board had received complaints about the smoke and that, “[w]hile there is no rule or regulation that prohibits smoking inside one’s home, it can be considered a nuisance to those who do not smoke.” The letter requested the Lamnins’ “assistance in keeping the smell contained,” such as by asking their tenants to smoke on their balcony or by further insulating their doors.

Minutes from a board meeting in February 2017 memorialize another complaint. Davis urged the board to send a second letter to the Lamnins about “heavy smoking of cigarettes, weed and etc[.], infiltrating common areas and other units.” This time the board chose a different path. It asked Mark Clor, a heating and cooling contractor, to install a $275 fresh-air system on Davis’s ductwork. This system allowed Davis’s furnace to draw in fresh air from outside rather than stale air from the basement. Other board members who had installed a similar system thought that it eliminated a significant portion of the smoke smell infiltrating their condos.

While Davis told Clor that the system “was helping with the smell of smoke,” it did not fully eliminate the odor. In April 2017, her lawyer sent a letter to the Lamnins stating that the smoke pervading her condo affected her health. The letter suggested that the Rules’ smoking breached various bylaws and created a common-law nuisance. It asked the Lamnins either to ensure that smoke did not escape their condo or to order their tenants to stop smoking. It also copied the Association’s board and made “a formal demand that [it] take further action.”

In their response, the Lamnins declined to force the Rules to cease smoking because the bylaws permitted the practice. Yet the Rules, “in the spirit of being good neighbors,” volunteered to “purchase and use an air purifier/ionizer[] to clean the air in their unit of any residual cigarette smoke.” This solution did not appease Davis either. In “logs” that she kept between May and July 2017, she regularly identified times that she could still smell smoke in her condo or the hallways.

Things came to a head in July 2017. Davis sued the Association, Casa Bella, and the Lamnins (and later amended her complaint to add Wanda Rule). Davis alleged that, by refusing to ban smoking in her building, the Association had discriminated against her because of her disability in violation of the Fair Housing Amendments Act, 42 U.S.C. § 3604(f), and a similar Michigan law. (The parties agree that the state law has the same elements as the federal act, so we do not discuss it separately.) Davis also asserted two other state-law claims: a breach-of-covenant claim for violations of various bylaws, and a nuisance claim. She sought damages and an injunction against smoking in her building.

Davis’s suit was apparently the last straw for the Lamnins. They told Wanda Rule that they would terminate her lease effective December 31, 2017. The Rules moved out, and the Lamnins sold their condo. By March 2018, Davis had settled with the Lamnins and dismissed them from this suit.

Even after the primary source of Davis’s complaints had moved out, she continued to litigate the suit against the Association and Casa Bella. In March 2018, she began keeping “logs” again after smelling cigarette and marijuana smoke from a new source. The next month, her lawyer told defense counsel that another resident “in [489] Ms. Davis'[s] building ha[d] started smoking cigarettes and marijuana,” which was “triggering Ms. Davis'[s] asthma, and making it very difficult for her to breathe.” The lawyer asked the Association to grant Davis “a reasonable accommodation and prohibit smoking within her building.” The Association requested more information about the source, but never received a definitive answer (at least not one in the record). Around this time, as a result of this suit, the Association circulated a bylaws-amendment package to condo owners proposing a smoking ban in the complex. The proposal failed to pass.

Following these developments, each side moved for summary judgment. The district court granted the defendants’ motion. Davis v. Echo Valley Condo. Ass’n, 349 F. Supp. 3d 645, 665 (E.D. Mich. 2018). It recognized that the Fair Housing Amendments Act prohibits discrimination based on disability and defines “discrimination” to include the refusal to grant a reasonable accommodation. Id. at 657. The court held, however, that Davis’s requested smoking ban was not a “reasonable accommodation.” Id. at 659. The ban would fundamentally change the Association’s smoking policy by barring residents “from engaging in a lawful activity on their own property.” Id. The court next rejected Davis’s nuisance claim, analogizing to Michigan cases that refused to hold a landlord liable for a tenant’s nuisance. Id. at 660. And it found that Davis’s four breach-of-covenant claims failed for various reasons. Id. at 661-65.

Davis raises eight issues on appeal. She disputes the district court’s resolution of her disability claim, her breach-of-covenant claims, and her nuisance claim. She also asserts evidentiary and discovery challenges. Reviewing the court’s grant of summary judgment de novo, Westfield Ins. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003), and its procedural rulings for an abuse of discretion, United States v. Kelsor, 665 F.3d 684, 696 (6th Cir. 2011); Vance ex rel. Hammons v. United States, 90 F.3d 1145, 1149 (6th Cir. 1996), we affirm on all fronts.

A.

[i]We begin with the disability claim. The Fair Housing Amendments Act of 1988 amended the Fair Housing Act to bar housing discrimination against the handicapped. Pub. L. No. 100-430, § 6, 102 Stat. 1619, 1620-22 (adding 42 U.S.C. § 3604(f)). Section 3604(f) makes it unlawful “[t]o discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap of” that person. 42 U.S.C. § 3604(f)(2). Section 3604(f) then defines “discrimination” “[f]or purposes of this subsection” to include “a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” Id. § 3604(f)(3)(B). Combining these two paragraphs in § 3604(f), Davis argues that the Association and Casa Bella “discriminate[d] against” her “in [their] provision of services or facilities in connection with” her condo by refusing to provide a “reasonable accommodation[]” (a smoking ban in her building) to their general “polic[y]” allowing smoking. Id. § 3604(f)(2)-(3).

Section 3604(f)’s text requires Davis to prove several things. See Hollis v. Chestnut Bend Homeowners Ass’n, 760 F.3d 531, 541 (6th Cir. 2014). To begin with, § 3604(f)(2) prohibits discrimination only “because of a handicap,” so Davis must show that her asthma falls within the definition of “handicap.” See 42 U.S.C. § 3602(h). [490] But Davis offered little evidence that, apart from the smoke-related aggravation, her asthma was otherwise severe enough to “substantially limit[]” a “major life activit[y].” Id. § 3602(h)(1); cf. Milton v. Tex. Dep’t of Criminal Justice, 707 F.3d 570, 573-74 (5th Cir. 2013); Wofsy v. Palmshores Ret. Cmty., 285 F. App’x 631, 634 (11th Cir. 2008) (per curiam); Sebest v. Campbell City Sch. Dist. Bd. of Educ., 94 F. App’x 320, 325-26 (6th Cir. 2004).

In addition, § 3604(f)(3)(B) requires only those accommodations that are “necessary” to give a person with a handicap an “equal opportunity to use and enjoy a dwelling.” But, as the district court noted, Davis’s total smoking ban likely was not necessary (that is, “‘indispensable,’ ‘essential,’ something that ‘cannot be done without'”) to give her the same opportunity to use and enjoy her condo as compared to a non-disabled person who dislikes the smell of smoke. Cinnamon Hills Youth Crisis Ctr. v. St. George City, 685 F.3d 917, 923 (10th Cir. 2012) (Gorsuch, J.) (citation omitted); Vorchheimer v. Philadelphian Owners Ass’n, 903 F.3d 100, 105-09 (3d Cir. 2018); see Davis, 349 F. Supp. 3d at 658-59. In fact, Davis was apparently able to use her condo for “several years” despite the Rules’ smoking, Howard v. City of Beavercreek, 276 F.3d 802, 806 (6th Cir. 2002), and the law “does not require more or better opportunities” for those with handicaps as compared to those without, Cinnamon Hills, 685 F.3d at 923.

Ultimately, though, we find it easiest to resolve Davis’s claim on another ground: She must show that her request qualifies as a “reasonable accommodation” to the Association’s policy of allowing smoking. Davis cannot meet this element.[ii] Text and precedent both show that the phrase “reasonable accommodation” means a moderate adjustment to a challenged policy, not a fundamental change in the policy. Davis’s smoking ban falls in the latter camp.

[iii]Start, as always, with the text. Southeastern Community College v. Davis, 442 U.S. 397, 405, 99 S. Ct. 2361, 60 L. Ed. 2d 980 (1979). The Fair Housing Amendments Act defines discrimination to include “a refusal to make reasonable accommodations in rules, policies, practices, or services.” 42 U.S.C. § 3604(f)(3)(B). In this context, the word “accommodation” means “adjustment.” 1 Oxford English Dictionary 79 (2d ed. 1989); The American Heritage Dictionary of the English Language 11 (3d ed. 1992). Like the word “modification,” therefore, “accommodation” is not an apt word choice if Congress sought to mandate “fundamental changes” to a housing policy. See MCI Telecomms. Corp. v. Am. Tel. & Telegraph Co., 512 U.S. 218, 225, 114 S. Ct. 2223, 129 L. Ed. 2d 182 (1994). Consider two examples: One would naturally say that a blind tenant requests an accommodation from an apartment’s “no pets” policy if the tenant seeks an exemption for a seeing eye dog. 24 C.F.R. § 100.204(b)(1). But one would not naturally say that a tenant with allergies requests an accommodation from an apartment’s “pet friendly” policy if the tenant seeks a total pet ban. The former tenant seeks a one-off adjustment; the latter seeks a complete change. The word “accommodation” includes the first, but not the second, request.

The adjective “reasonable” further narrows the types of accommodations that the text directs property owners to make. Even if a request would qualify as an “adjustment,” the adjustment still must be “moderate,” “not extravagant or excessive.” 13 Oxford English Dictionarysupra, at 291; American Heritage Dictionarysupra, at 1506. Put another way, the word “reasonable” conveys that the adjustment cannot “impose[] ‘undue financial [489] and administrative burdens.'” Smith & Lee Assocs. v. City of Taylor, 102 F.3d 781, 795 (6th Cir. 1996) (citation omitted). The word also indicates the process that courts should undertake when deciding if a proposed adjustment is unduly burdensome. Dating back to the “‘reasonable’ person of tort fame,” a reasonableness inquiry “has long been associated with the balancing of costs and benefits.” See Int’l Union, United Auto., Aerospace & Agr. Implement Workers of Am. v. OSHA, 938 F.2d 1310, 1319, 291 U.S. App. D.C. 51 (D.C. Cir. 1991) (citing United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947) (Hand, J.)). So an adjustment goes too far if the costs of implementing it exceed any expected benefits it will provide the person requesting it. Smith & Lee Assocs., 102 F.3d at 795.

[iv]The backdrop against which Congress legislated also supports this reading of “reasonable accommodation.” When the Supreme Court has given a phrase a specific meaning, courts assume that Congress intends that meaning to carry over to the “same wording in related statutes.” Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts § 54, at 322 (2012); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 85-86, 126 S. Ct. 1503, 164 L. Ed. 2d 179 (2006). Here, when Congress passed the Fair Housing Amendments Act, the Supreme Court had already coined the phrase “reasonable accommodation” to delimit the requirements of the Rehabilitation Act of 1973. Alexander v. Choate, 469 U.S. 287, 300, 301, & n.20, 105 S. Ct. 712, 83 L. Ed. 2d 661 & n.21 (1985). And Choate contrasted the “reasonable accommodations” that the Rehabilitation Act compels with the “fundamental alteration[s]” that it does not. Id. at 300 n.20 (quoting Davis, 442 U.S. at 410). This preexisting view confirms that the Fair Housing Amendments Act requires only moderate adjustments.

[v]One last textual point. The prepositional phrase “in rules, policies, practices, or services” modifies the noun “accommodation” and provides the benchmark against which to assess whether a request qualifies as a “reasonable accommodation.” See 42 U.S.C. § 3604(f)(3)(B). In other words, the phrase tells courts that they should not ask whether the request is a moderate adjustment or a fundamental change in some abstract sense. Rather, they should ask whether the request is a modest adjustment or fundamental change of the “rule, policy, practice, or service” that the plaintiff challenges.

[vi]Now turn to precedent. Whether under the Rehabilitation Act, the Fair Housing Accommodations Act, or the Americans with Disabilities Act of 1990, caselaw interpreting the phrase “reasonable accommodation” has long distinguished the types of moderate adjustments that are required from the fundamental changes that are not. See, e.g.Davis, 442 U.S. at 409-10; Groner v. Golden Gate Gardens Apts., 250 F.3d 1039, 1046-47 (6th Cir. 2001); McPherson v. Mich. High Sch. Athletic Ass’n, 119 F.3d 453, 461-63 (6th Cir. 1997) (en banc).

Two lines of cases—one focused on the nature of a housing facility’s policy, the other on an accommodation’s effects on third parties—reveal the types of changes that are “fundamental.”

A request works a fundamental change if it turns the challenged policy into something else entirely. In Davis, for example, a nursing-school applicant with a hearing impairment asked a college to adjust its curriculum to accommodate her disability. 442 U.S. at 407-08. But her proposed changes—such as allowing the applicant to skip certain [492] courses—would have transformed the nursing degree that the college offered into an altogether different degree. Id. at 409-10. Similarly, in the employment context, a party may not ask for changes to a job’s duties that would alter the job’s “essential functions.” Jasany v. U.S. Postal Serv., 755 F.2d 1244, 1250 (6th Cir. 1985). So, when a job’s primary task was operating a mail-sorting machine, a post-office employee did not propose a reasonable accommodation by asking not to use the machine. Id.

[vii]Apart from changes to a policy, courts also reject requested changes that interfere with the rights of third parties. As we said in Groner, a third party’s “rights [do] not have to be sacrificed on the altar of reasonable accommodation.” 250 F.3d at 1046 (quoting Temple v. Gunsalus, No. 95-3175, 1996 U.S. App. LEXIS 24994, 1996 WL 536710, at *2 (6th Cir. Sept. 20, 1996) (per curiam)). There, the plaintiff’s mental illness caused him to disturb a neighbor by screaming at all hours of the night. 250 F.3d at 1041. As one of his proposed accommodations, the plaintiff asked his apartment complex to force the neighbor out in violation of its lease. Id. at 1046. We held that landlords need not breach their contracts with neighboring tenants on account of a handicapped person’s needs. Id.see also Temple, 1996 U.S. App. LEXIS 24994, 1996 WL 536710, at *2. The same is generally true in the employment context. An employer need not “bump another employee from a position in order to accommodate a disabled employee.” Lucas v. W.W. Grainger, Inc., 257 F.3d 1249, 1256 (11th Cir. 2001); see also US Airways, Inc. v. Barnett, 535 U.S. 391, 406, 122 S. Ct. 1516, 152 L. Ed. 2d 589 (2002).

Both lines of precedent should foreshadow the outcome here. Davis’s proposed smoking ban amounts to a “fundamental alteration” of the Association’s smoking policy. Howard, 276 F.3d at 806 (citation omitted). No one would describe a change from a smoking-permitted policy to a smoking-prohibited policy as an “accommodation” in the policy. It is more rewrite than adjustment. Cf. Falchenberg v. N.Y. State Dep’t of Educ., 338 F. App’x 11, 13-14 (2d Cir. 2009) (summary order); Sandison v. Mich. High Sch. Athletic Ass’n, 64 F.3d 1026, 1035 (6th Cir. 1995). Not only that, Davis’s proposal would intrude on the rights of third parties. Neighbors who smoke may well have bought their condos because of the Association’s policy permitting smoking. So, unlike the blind applicant asking to keep a seeing eye dog in an apartment building that bans pets, Davis is like the person with allergies seeking to expel all dogs from a building that allows pets. Here, as in Groner, a third party’s “rights [do] not have to be sacrificed on the altar of reasonable accommodation.” 250 F.3d at 1046 (citation omitted).

B.

We next turn to Davis’s breach-of-covenant claims.[viii] Under Michigan law, the complex’s bylaws are “in the nature of a contract” between the condo owners and the Association. Sawgrass Ridge Condo. Ass’n v. Alarie, No. 335144, 2018 Mich. App. LEXIS 38, 2018 WL 340944, at *2 (Mich. Ct. App. Jan. 9, 2018) (per curiam); Stadler v. Fontainebleau Condos. Ass’n, No. 343303, 2019 Mich. App. LEXIS 788, 2019 WL 1574776, at *2 (Mich. Ct. App. April 11, 2019) (per curiam). Davis seeks to enforce four of the bylaws. The first requires owners to maintain their “apartment[s]” and certain “appurtenant” spaces “in a safe, clean and sanitary condition.” The second tells them: “nor shall anything be done which may be or become an annoyance or a nuisance to the co-owners of the Condominium.” The third says: “No co-owner shall do . . . in his apartment . . . anything that will increase the rate of insurance on the Condominium.” And the last notes that [493] no “unlawful or offensive activity shall be carried on in any apartment.”

For three general reasons, all of Davis’s claims face significant headwinds.[ix] Reason One: These provisions are restrictive covenants on the use of property. See Vill. of Hickory Pointe Homeowners Ass’n v. Smyk, 262 Mich. App. 512, 686 N.W.2d 506, 508 (Mich. Ct. App. 2004). Because of the “bedrock principle in [Michigan] law that a landowner’s bundle of rights includes the broad freedom to make legal use of her property,” Thiel v. Goyings, 939 N.W.2d 152, 504 Mich. 484, 504 Mich. 484, 2019 Mich. LEXIS 1287, 2019 WL 3331810, at *6 (Mich. July 24, 2019), Michigan courts construe restrictive covenants “strictly against those claiming to enforce them, and all doubts [are] resolved in favor of the free use of the property,” Moore v. Kimball, 291 Mich. 455, 289 N.W. 213, 215 (Mich. 1939); Millpointe of Hartland Condo. Ass’n v. Cipolla, No. 289668, 2010 Mich. App. LEXIS 832, 2010 WL 1873085, at *1 (Mich. Ct. App. May 11, 2010) (per curiam). Unless the bylaws plainly cover the challenged in-condo smoking, therefore, Davis must lose.

Reason Two: Nowhere do the Association’s bylaws specifically prohibit (or even regulate) smoking. The record shows instead that the Association has long read the bylaws to permit smoking and that Echo Valley residents have long smoked in their homes. The bylaws do, by comparison, specifically prohibit many activities, ranging from keeping a dog or cat in a condo, to drying one’s clothes in common areas, to shooting a BB gun, to displaying a sign. If these bylaws meant to ban smoking, they would have done so with similarly specific language. They would not have hidden a smoking ban in, for example, a bylaw requiring owners to keep their apartments “in a safe, clean and sanitary condition.” Davis thus cannot rely on any theory of “breach” that compels the Association to impose a categorical ban on smoking.

Reason Three: Davis does not sue the purported violators. The Lamnins sold their condo, their tenants moved out, and Davis does not name any other resident whose smoking affects her condo. Instead, she sues the condo association (the Association) and its former property manager (Casa Bella) for failing to enforce the bylaws. The bylaws do say that the Association’s board “shall be responsible” for the bylaws’ “enforce[ment].” See also Mich. Comp. Laws § 559.207. But this secondary-liability theory means that Davis must show more than that she has a breach-of-covenant claim against the Lamnins. She must show that she has a failure-to-enforce claim against the Association and Casa Bella despite their efforts to accommodate her.

Against this backdrop, Davis’s four breach-of-covenant claims fall short.

  1. Safe and Clean. Davis argues that the Association and Casa Bella failed to enforce the bylaw requiring owners to keep their condos in a “safe” and “clean” “condition.” As generally understood, “safe” means “free from danger,” 14 Oxford English Dictionarysupra, at 355, whereas “clean” means “free from pollution,” The Random House Dictionary of the English Language 383 (2d ed. 1987). But these words must be construed in their context rather than in a vacuum. Thiel, 504 Mich. 484, 504 Mich. 484, 939 N.W.2d 152, 2019 Mich. LEXIS 1287, 2019 WL 3331810, at *6. And, notably, they are part of a bylaws package that allows smoking. Id.So ordinary levels of “smoke” cannot be considered a “danger” or “pollution”; otherwise, this provision would ban a practice that the bylaws permit.

Davis’s claim fails under this reading. We need not decide whether unusual amounts or types of smoking might violate this provision, because her theory of [494] “breach” is far more expansive. Based on a combination of common knowledge and board-member admissions, she argues that any smoke makes condos unsafe and unclean because smoking is harmful to health. This interpretation would incorrectly compel the Association to ban smoking, which we view as inconsistent with the bylaws when read as a whole.

  1. Annoyance or Nuisance. Davis next contends that smoking falls within the bylaw prohibiting activities “which may be or become an annoyance or a nuisance to the co-owners of the Condominium.” The bylaw does not define these terms.[x]A “nuisance” is, however, a well-known common-law concept. See Weimer v. Bunbury, 30 Mich. 201, 211 (1874) (Cooley, J.). Under Michigan law, a private nuisance is an “unreasonable interference with the use or enjoyment of property” that results in “significant harm.” Adams v. Cleveland-Cliffs Iron Co., 237 Mich. App. 51, 602 N.W.2d 215, 222 (Mich. Ct. App. 1999) (emphasis omitted); Adkins v. Thomas Solvent Co., 440 Mich. 293, 487 N.W.2d 715, 720-21 (Mich. 1992). And, in this context, “annoyance” is synonymous with “nuisance.” An “annoyance” is “[a]nything annoying or causing trouble, a nuisance.” 1 Oxford English Dictionarysupra, at 486 (emphasis added); see also Random House Dictionarysupra, at 84 (same); cf. Black’s Law Dictionary 82 (5th ed. 1979) (cross-referencing “Nuisance”).

To be sure, this reading renders these terms largely duplicative. But that is inevitable.[xi] Any reading of “annoyance” (even one that reduces the required interference with property) swallows up the term “nuisance.” And “[s]ometimes drafters do repeat themselves and do include words that add nothing of substance, either out of a flawed sense of style or to engage in the ill-conceived but lamentably common belt-and-suspenders approach.” Scalia & Garner, supra, § 26, at 176-77 (listing “peace and quiet” as an example). We must also consider the restriction’s context. Thiel, 2019 Mich. LEXIS 1287, 2019 WL 3331810, at *8, *10. It regulates neighbors who have opted to live relatively close to each other, making it unlikely that an owner’s slight irritation would trigger a bylaw permitting the owner to bring an “action to recover sums due for damages” against a co-owner. Context compels limiting this bylaw’s coverage to activities that most residents would reasonably find significantly bothersome—in contrast to the activities that can be “generally expected” in a condo complex. Cf. Bedows v. Hoffman, 2016 IL App (4th) 160146-U, 2016 WL 6906744, at *11 (Ill. Ct. App. 2016).

We agree with the district court that Davis did not create a genuine issue of material fact that the Board violated its duty to enforce this nuisance bylaw. Davis, 349 F. Supp. 3d at 662-65. Davis chose to live in a condo complex whose bylaws do not restrict smoking.[xii] As other courts have found, while even a small amount of smoke might be a nuisance in a complex that bans smoking, the same cannot be said for a complex that allows it. See Schuman v. Greenbelt Homes, Inc., 212 Md. App. 451, 69 A.3d 512, 520 (Md. Ct. Spec. App. 2013). Indeed, other courts reviewing these claims “have almost uniformly found no right to relief” on nuisance theories. Nuncio v. Rock Knoll Townhome Vill., Inc., 2016 OK CIV APP 83, 389 P.3d 370, 374-75 (Okla. Civ. App. 2016); see Ewen v. Maccherone, 32 Misc. 3d 12, 927 N.Y.S.2d 274, 276-77 (N.Y. App. Div. 2011) (per curiam); Boffoli v. Orton, No. 63457-7-I, 2010 Wash. App. LEXIS 807, 2010 WL 1533397, at *3 (Wash. Ct. App. Apr. 19, 2010); DeNardo v. Corneloup, 163 P.3d 956, 961 (Alaska 2007). These cases identify a (clear) default rule around which parties may bargain by, for example, adopting restrictive covenants imposing a specific ban (or limit) on smoking in their communities. Cf. R.H. Coase, [495] The Problem of Social Cost, 3 J.L. & Econ. 1 (1960).

In addition, while smoking affects Davis more than other residents given her unique sensitivities, that fact undercuts her breach-of-covenant claim. As another court has noted, “nuisance is not subjective.” Schuman, 69 A.3d at 525. This bylaw ties the standard of liability to an ordinary resident, not a resident with unique needs.

Lastly, the Association and Casa Bella did not simply ignore Davis’s concerns. They sought to facilitate a compromise. The Association’s board initially authorized a letter asking the Lamnins to assist in keeping the smoke smell contained to their condo. At the Association’s expense, the board then contracted for a $275 fresh-air system for Davis’s condo, a system that Davis said helped to reduce the smell of smoke. The Rules also agreed to use an air purifier in their unit. And the board ultimately put the issue to the condo owners by holding a vote on whether to ban smoking. After the Rules left, moreover, Davis never identified for the board any other specific resident that allegedly violated a bylaw. These efforts undermine any claim that the board failed to enforce the bylaw. Cf. America v. Sunspray Condo. Ass’n, 2013 ME 19, 61 A.3d 1249, 1255-56 (Me. 2013).

In response, Davis argues that a relaxed standard of annoyance applies because the bylaw covers activities that “may be or become” an annoyance. “As used here,” we read “the auxiliary verb ‘may’ [to] signal[] a hazard that is yet to come”; it does not lower the level of hazard that must be shown. Russell v. Citigroup, Inc., 748 F.3d 677, 680 (6th Cir. 2014) (citing a definition of “may” in Oxford English Dictionary (3d ed. 2012)). Indeed, when asked at oral argument why this lower level of annoyance would not ban a resident from cooking if a neighbor found the smell annoying (as Davis has found it previously), her counsel responded that “cooking is necessary.” We see no textual basis for that distinction; instead, we think the standard of annoyance must be set at a sufficiently high level to permit activities that are “generally expected” in a condo complex. Bedows, 2016 IL App (4th) 160146-U, 2016 WL 6906744, at *11. And in the Echo Valley complex, those expected activities include both cooking and smoking in one’s condo.

Davis also points to evidence suggesting that the amount of smoke infiltrating her condo and her hallways is “strong,” at times even leaving the smell on clothes and towels. Like the district court, though, we do not think this evidence suffices to take this case outside the default rule that smoking cannot be considered a nuisance in a condo complex that allows it. Indeed, Davis presented no evidence that her neighbors had “unique” “smoking habits.” Davis, 349 F. Supp. 3d at 664.

  1. Rate of Insurance. Davis next invokes the bylaw that bars condo owners from doing anything “that will increase the rate of insurance on the Condominium.” She alleges that smoking increases that rate because it is a “fire hazard.” Like her first theory, this claim fails because it ignores the overall context of permissible smoking at Echo Valley. We can no more read this provision to ban smoking than we can read it to ban other fire hazards like cooking. Even if we accepted the theory, Davis’s sole evidence in support—a board member’s personal opinion that smoking raises insurance rates—does not suffice to withstand summary judgment. Davis does not explain why this board member may competently opine on actuarial science.
  2. Unlawful or Offensive Activity. Davis last contends that the Association failed to enforce the bylaw provision prohibiting “unlawful or offensive activities.” Her argument turns on the fact that marijuana is [496] unlawful, and on board-member opinions that marijuana and cigarette smoke are offensive. This claim fails for a procedural reason: Davis did not allege it in her complaint, and she did not properly move to amend her complaint to include it. Davis, 349 F. Supp. 3d at 661.

[xiii]Parties who seek to raise new claims at the summary-judgment stage must first move to amend their pleadings under Federal Rule of Civil Procedure 15(a) before asserting the claims in summary-judgment briefing. See Rafferty v. Trumbull County, 758 F. App’x 425, 429 (6th Cir. 2018); Carter v. Ford Motor Co., 561 F.3d 562, 567-69 (6th Cir. 2009); Tucker v. Union of Needletrades, Indus., & Textile Emps., 407 F.3d 784, 788 (6th Cir. 2005). By that point, “a plaintiff has conducted discovery and has had the opportunity to amend the complaint and raise additional theories.” West v. Wayne County, 672 F. App’x 535, 541 (6th Cir. 2016). But if the plaintiff raises the new claims for the first time in the summary-judgment briefing, it generally “subjects a defendant to ‘unfair surprise,’ because the defendant has no opportunity to investigate the claim during discovery.” M.D. ex rel. Deweese v. Bowling Green Indep. Sch. Dist., 709 F. App’x 775, 778 (6th Cir. 2017) (citation omitted).

Davis’s failure to follow this rule dooms her claim. Davis’s unlawful-or-offensive claim relies on a different substance, different smokers, a different time period, and a different bylaw. Her complaint did not mention marijuana or this specific bylaw. Nor did it challenge smoking other than from the Lamnins’ condo. The complaint instead alleged that other condos in Davis’s building had “been designated non-smoking by their respective owners.” It was not until April 2018—after Davis had filed her amended complaint and after the Lamnins had terminated Rule’s lease—that Davis’s lawyer informed the Association that someone else “in Ms. Davis’ building has started smoking cigarettes and marijuana.” In short, Davis never notified the Association and Casa Bella in the correct way that she sought to bring this new claim into the case.

Davis responds by framing her “claim” at a high level of generality, suggesting that her “breach of covenant” claim encompasses any violation of any bylaw by any source. This expansive theory does not suffice at the motion-to-dismiss stage, cf. Northampton Rest. Grp. v. FirstMerit Bank, N.A., 492 F. App’x 518, 521-22 (6th Cir. 2012), let alone at the summary-judgment stage, Tucker, 407 F.3d at 788. Davis also argues that, unlike in the cases we cite, she raised her new claim in her own summary-judgment motion, not just in her opposition to the other side’s motion. She does not explain why that distinction matters. In both contexts, a defendant has “no opportunity to investigate the claim during discovery.” Deweese, 709 F. App’x at 778. Davis finally suggests that the district court should have granted her leave to amend. But she “buried” her request for leave in a perfunctory footnote in a summary-judgment brief that did not cite Rule 15 or the relevant caselaw. See Pulte Homes, Inc. v. Laborers’ Int’l Union of N. Am., 648 F.3d 295, 305 (6th Cir. 2011). The district court did not abuse its discretion by finding this approach inadequate. See id.

Up next is Davis’s tort claim for nuisance.[xiv] In Michigan, as noted, a nuisance is an “unreasonable interference with the use or enjoyment of . . . property.” Adams, 602 N.W.2d at 222. To be liable, a party must have “possession and control over the property” causing the nuisance. Sholberg v. Truman, 496 Mich. 1, [497] 852 N.W.2d 89, 93 (Mich. 2014) (quoting Merritt v. Nickelson, 407 Mich. 544, 287 N.W.2d 178, 181 (Mich. 1980)). A landlord, for example, generally does not face liability for a tenant’s actions that create a nuisance because the landlord does not possess or control the tenant’s property. See Samuelson v. Cleveland Iron Mining Co., 49 Mich. 164, 13 N.W. 499, 502 (Mich. 1882) (Cooley, J.). This principle bars Davis’s nuisance claim against the Association and Casa Bella because they did not possess or control the condo units in Davis’s building. As the district court noted, “a condominium association is even farther removed” from the conduct of its condo owners than is a landlord from the conduct of its tenants. Davis, 349 F. Supp. 3d at 660.

Davis responds that this principle applies only in “the absence of a contract duty on the part of the” defendant and that the Association undertook the contractual duty to enforce the bylaws. See Sholberg, 852 N.W.2d at 93-97. But we have already found that her breach-of-covenant claims fail. Because Davis did not establish a contract breach, she could not show that Echo Valley or Casa Bella had any contractual ability to prevent the challenged conduct.

D.

We end with two procedural claims. Davis argues that the district court should have excluded a “sham affidavit” from Mark Clor—the heating-and-cooling contractor who noted that Davis’s unit does not share a ventilation system with other units—because Clor did not meet expert-witness requirements. See Fed. R. Evid. 702. But the district court did not abuse its discretion in concluding that Clor testified as a lay witness, not an expert, based on his personal observations of the basement’s open ductwork. Kelsor, 665 F.3d at 696. And his testimony fell comfortably within the rules for lay opinions because it was “rationally based on [his] perception,” “helpful,” and “not based on scientific, technical, or other specialized knowledge.” Fed. R. Evid. 701; United States v. Manzano,     F. App’x    , 793 Fed. Appx. 360, 2019 U.S. App. LEXIS 32357, 2019 WL 5561389, at *3 (6th Cir. Oct. 29, 2019). Contrary to Davis’s claim that Clor’s opinion would require the “supernatural” ability to see through walls, “[i]t took no special knowledge for Clor to describe what was there in the basement to be seen.” Davis, 349 F. Supp. 3d at 654. And Davis’s remaining arguments—that Clor’s testimony was contradicted by other evidence or based on limited knowledge—go to weight, not admissibility.

Davis also says that the district court did not give her an adequate opportunity to prove her claims because it dismissed two of her discovery motions as moot when it ruled for the Association and Casa Bella.[xv] Davis is correct in one respect: “The general rule is that summary judgment is improper if the non-movant is not afforded a sufficient opportunity for discovery.” Vance, 90 F.3d at 1148. But she is wrong in another: She did not lack a sufficient opportunity for discovery. The parties engaged in extensive discovery, and her single paragraph on this issue fails to tell us what information she needed or why it was relevant. Her conclusory claim falls well short of establishing an abuse of discretion.

We affirm.


[i] Protected Classes, Disability Discrimination: The Fair Housing Amendments Act of 1988 amended the Fair Housing Act to bar housing discrimination against the handicapped. 42 U.S.C.S. § 3604(f) makes it unlawful to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap of that person. 42 U.S.C.S. § 3604(f)(2). Section 3604(f) then defines discrimination for purposes of this subsection to include a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling. § 3604(f)(3)(B).

[ii] Protected Classes, Disability Discrimination: “Reasonable accommodation,” in the context of the Fair Housing Amendments Act, means a moderate adjustment to a challenged policy, not a fundamental change in the policy.

[iii] Protected Classes, Disability Discrimination: The Fair Housing Amendments Act defines discrimination to include a refusal to make reasonable accommodations in rules, policies, practices, or services. 42 U.S.C.S. § 3604(f)(3)(B). In this context, the word “accommodation” means adjustment. Like the word “modification,” therefore, “accommodation” is not an apt word choice if Congress sought to mandate fundamental changes to a housing policy. The adjective “reasonable” further narrows the types of accommodations that the text directs property owners to make. Even if a request would qualify as an adjustment, the adjustment still must be moderate, not extravagant or excessive. Put another way, the word “reasonable” conveys that the adjustment cannot impose undue financial and administrative burdens. The word also indicates the process that courts should undertake when deciding if a proposed adjustment is unduly burdensome. Dating back to the “reasonable” person of tort fame, a reasonableness inquiry has long been associated with the balancing of costs and benefits. So an adjustment goes too far if the costs of implementing it exceed any expected benefits it will provide the person requesting it.

[iv] Legislation, Interpretation: When the Supreme Court has given a phrase a specific meaning, courts assume that Congress intends that meaning to carry over to the same wording in related statutes.

[v] Protected Classes, Disability Discrimination: The prepositional phrase “in rules, policies, practices, or services” modifies the noun “accommodation” and provides the benchmark against which to assess whether a request qualifies as a “reasonable accommodation.” 42 U.S.C.S. § 3604(f)(3)(B). In other words, the phrase tells courts that they should not ask whether the request is a moderate adjustment or a fundamental change in some abstract sense. Rather, they should ask whether the request is a modest adjustment or fundamental change of the rule, policy, practice, or service that the plaintiff challenges.

[vi] Americans with Disabilities Act, Accommodations: Whether under the Rehabilitation Act, the Fair Housing Accommodations Act, or the Americans with Disabilities Act of 1990, caselaw interpreting the phrase “reasonable accommodation” has long distinguished the types of moderate adjustments that are required from the fundamental changes that are not. A request works a fundamental change if it turns the challenged policy into something else entirely.

[vii] Protected Classes, Disability Discrimination: For purposes of the Fair Housing Amendment Act, third party’s rights do not have to be sacrificed on the altar of “reasonable accommodation.”

[viii] Common Interest Communities, Condominiums: Under Michigan law, condominium bylaws are in the nature of a contract between the condo owners and the Association.

[ix] Restrictive Covenants, Enforcement of Restrictive Covenants: Because of the bedrock principle in Michigan law that a landowner’s bundle of rights includes the broad freedom to make legal use of her property, Michigan courts construe restrictive covenants strictly against those claiming to enforce them, and all doubts are resolved in favor of the free use of the property.

[x] Nuisance, Elements: A “nuisance” is a well-known common-law concept. Under Michigan law, a private nuisance is an unreasonable interference with the use or enjoyment of property that results in significant harm. And, in this context, annoyance is synonymous with nuisance. An annoyance is anything annoying or causing trouble, a nuisance.

[xi] Nuisance, Elements: Any reading of annoyance (even one that reduces the required interference with property) swallows up the term nuisance. And sometimes drafters do repeat themselves and do include words that add nothing of substance, either out of a flawed sense of style or to engage in the ill-conceived but lamentably common belt-and-suspenders approach.

[xii] Types of Nuisance, Private Nuisances: While even a small amount of smoke might be a nuisance in a complex that bans smoking, the same cannot be said for a complex that allows it. Indeed, other courts reviewing these claims have almost uniformly found no right to relief on nuisance theories.

[xiii] Amendment of Pleadings, Leave of Court: Parties who seek to raise new claims at the summary-judgment stage must first move to amend their pleadings under Fed. R. Civ. P. 15(a) before asserting the claims in summary-judgment briefing. By that point, a plaintiff has conducted discovery and has had the opportunity to amend the complaint and raise additional theories. But if the plaintiff raises the new claims for the first time in the summary-judgment briefing, it generally subjects a defendant to unfair surprise, because the defendant has no opportunity to investigate the claim during discovery.

[xiv] Common Interest Communities, Condominiums: In Michigan, a nuisance is an unreasonable interference with the use or enjoyment of property. To be liable, a party must have possession and control over the property causing the nuisance. A landlord, for example, generally does not face liability for a tenant’s actions that create a nuisance because the landlord does not possess or control the tenant’s property. A condominium association is even farther removed from the conduct of its condo owners than is a landlord from the conduct of its tenants.

[xv] Entitlement as Matter of Law, Appropriateness: The general rule is that summary judgment is improper if the non-movant is not afforded a sufficient opportunity for discovery.

Related Links

Disabled Residents and the Law
“The Legal Obligations of an Association in Accommodating Disabled Residents”
Educational article published by HOA attorneys of Tinnelly Law Group

AB 3182 (Ting) Common interest developments: governing documents: rental or leasing of separate interests.

Would make void and unenforceable any governing document that purports to prohibit the rental or leasing of any of the separate interests in a common interest development.

Current Status: Chaptered

FindHOALaw Quick Summary:

Existing law provides that an owner of a separate interest in a common interest development shall not be subject to a provision in a governing document or an amendment to a governing document that prohibits the rental or leasing of any separate interest in that common interest development to renter, lessee, or tenant unless that governing document, or amendment thereto, was effective before the date the owner acquired title to the owner’s separate interest. Existing law makes these provisions applicable only to a provision in a governing document or a provision in an amendment to a governing document that became effective on or after January 1, 2012.

This bill would amend Civil Code Section 4740 to instead make void and unenforceable any governing document that purports to prohibit the rental or leasing of any of the separate interests in a common interest development. The bill would also provide that an owner of a separate interest in a common interest development is not subject to a provision in a governing document or an amendment to a governing document that effectively prohibits or unreasonably restricts the rental or leasing of any of the separate interests in that common interest development to a renter, lessee, or tenant.

View more info on AB 3182
from the California Legislature's website

Related Links

AB 828 (Ting) Temporary moratorium on foreclosures and unlawful detainer actions: coronavirus (COVID-19).

Would prohibit a person from taking any action to foreclose on a residential real property or proceeding with an unlawful detainer action while a state or locally declared state of emergency related to the COVID-19 virus is in effect and until 15 days after the state of emergency has ended.

Current Status: Dead

FindHOALaw Quick Summary:

Existing law confers a power of sale upon a mortgagee, trustee, or any other person to be exercised after a breach of the obligation for which the mortgage or transfer is a security. Existing law requires a trustee, mortgagee, or beneficiary to first file a notice of default, and establishes other requirements and procedures for completion of a foreclosure sale.
This bill would prohibit a person from taking any action to foreclose on a residential real property while a state or locally declared state of emergency related to the COVID-19 virus is in effect and until 15 days after the state of emergency has ended, including, but not limited to, causing or conducting the sale of the real property or causing recordation of a notice of default.
This bill would prohibit a county recorder from recording any instrument, paper, or notice that constitutes a notice of default, a notice of sale, or a trustee’s deed upon sale during the above-specified declared state of emergency relating to the COVID-19 virus. The bill would also prohibit a court from accepting a complaint in an action to foreclose.
Existing law establishes a procedure, known as an unlawful detainer action, that a landlord must follow in order to evict a tenant. Existing law provides that a tenant is subject to such an action if the tenant continues to possess the property without permission of the landlord in specified circumstances, including when the tenant has violated the lease by defaulting on rent or failing to perform a duty under the lease.
This bill would prohibit a state court, county sheriff, or party to a residential unlawful detainer case from accepting for filing, or taking any further action including executing a writ of possession or otherwise proceeding with an unlawful detainer action during the timeframe in which a state of emergency related to the COVID-19 virus is in effect and 15 days thereafter, except as specified.

The bill would make these provisions effective in a jurisdiction in which a state or locally declared state of emergency is in effect until 15 days after the state of emergency ends and would repeal these provisions on January 1, 2022.

This bill would declare that it is to take effect immediately as an urgency statute.

**AB 828 was amended on July 28, 2020 to extend the moratorium from 15 days to 91 days after the state of emergency has ended, would stay any current foreclosure actions, and would extend the right of redemption period until 90 days after the state of emergency has ended.

(c) This section shall be operative only while there is a state or locally declared state of emergency related to the COVID-19 virus in the jurisdiction in which the residential real property is located, located and for 90 days thereafter, and shall become inoperative 15 91 days after the state or locally declared state of emergency ends.
(d) Any action taken in violation of this section is void.

730.7 (a) Notwithstanding the provisions of this chapter or any other law, no court shall accept for filing a complaint in an action to foreclose any residential real property in a jurisdiction subject to a state or locally declared state of emergency on account of the COVID-19 virus until 15 days after the state or locally declared state of emergency ends. any other law, any action for foreclosure on a mortgage or deed of trust of residential real property brought under this chapter is stayed and the court may take no action and issue no decisions or judgments unless the court finds that the action is required to further the public health and safety.

(b) The period for electing or exercising any rights under this chapter, including exercising any right of redemption from a foreclosure sale or petitioning the court in relation to such a right, is extended until 90 days after the state or local declared state emergency related to the COVID-19 virus in the jurisdiction where the residential real property is located ends.

 

View more info on AB 828
from the California Legislature's website

Related Links

A Member in Our Community Tested Positive for COVID-19 – What Do We Do? - Published on HOA Lawyer Blog (March 2020) HOA Assessment Collection During the PandemicPublished on HOA Lawyer Blog (March 2020) Managing the Coronavirus – A Discussion of Preliminary Board ConcernsPublished on HOA Lawyer Blog (March 2020)

AB-3219 (Frazier) Construction defects: actions.

Would require that the inspection for construction defects be conducted by a person who is a licensed contractor.

Current Status: Dead

FindHOALaw Quick Summary:

Existing law specifies the requirements for actions for construction defects and includes a nonadversarial procedure for the parties to resolve the dispute. Existing law requires a builder who, as part of this nonadversarial procedure, elects to inspect a claim of unmet building standards to meet certain requirements for the inspection.
This bill would add Civil Code 916.5 to require that the inspection for purposes of the nonadversarial procedure be conducted by a person who is licensed as a contractor with a license that applies to the field and scope in which the person is conducting the inspection and issuing inspection findings or a report.
View more info on AB 3219
from the California Legislature's website

Related Links

SB 326 Signed! Balconies, Branches, and Builder Defect Actions - Published on HOA Lawyer Blog (October 2019) Arbitrator Not Found to Exceed its PowersPublished on HOA Lawyer Blog (November 2018) Turning up the Heat on Residential Design ProfessionalsPublished on HOA Lawyer Blog (February 2013)

AB-2503 (Rubio) Senior citizen housing developments.

Would require the governing documents of a senior citizen housing development to permit a qualifying resident to share their dwelling unit with a qualified roommate.

Current Status: Dead

FindHOALaw Quick Summary:

Civil Code Section 51.3 permits specified age restrictions in connection with housing and defines “senior citizen housing development” as a residential development for senior citizens that has at least 35 dwelling units. It also defines “qualifying resident” or “senior citizen” to mean a person 62 years of age or older, or 55 years of age or older in a senior citizen housing development. It further defines “qualified permanent resident” to mean certain other residents who meet specified requirements, including, among others, being a cohabitant, spouse, support person, or a disabled person who is a child or grandchild of the senior citizen.
Civil Code Section 51.3(d) requires the covenants, conditions, and restrictions or other documents or written policy of a senior citizen housing development to permit temporary residency, as a guest of a senior citizen, by a person of less than 55 years of age for not less than 60 days in any year.
This bill would amend Civil Code Section 51.3 to additionally require the covenants, conditions, and restrictions or other documents or written policy of a senior citizen housing development to permit a qualifying resident, as defined, to share their dwelling unit with a qualified roommate pursuant to a lease or other written agreement with the qualified roommate.
Existing law permits a qualified permanent resident in a senior citizen housing development to be entitled to continue their occupancy, residency, or use of a dwelling unit upon the death, dissolution of marriage, hospitalization, or other prolonged absence of the qualifying resident.
This bill would also amend Civil Code Section 51.3 to authorize a qualified roommate to be entitled to continue their occupancy, residency, or use of a dwelling unit in these circumstances if that qualified roommate is 55 years of age or older.
Existing law excepts Riverside County from these provisions.
View more info on AB 2503
from the California Legislature's website

Related Links

   

Highland Greens Homeowners Ass’n v. De Guillen (In re De Guillen)

(2019) 604 B.R. 826

[Assessment Liens; Continuing Lien; Foreclosure] The BAP held that the Davis-Stirling Act does not allow for continuing assessment liens and imposes an affirmative duty on Associations to provide additional pre-lien notices to delinquent homeowners before recording any subsequent assessment lien.

In re: Maria A. Basave De Guillen, Debtor. Highland Greens Homeowners Association of Buena Park, Appellant, v. Maria A. Basave De Guillen, Appellee.

OPINION

[829] LAFFERTY, Bankruptcy Judge:

INTRODUCTION

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

We AFFIRM.

FACTUAL BACKGROUND

Pre-petition, Debtor fell behind on the homeowners association (“HOA”) dues on her condominium in Buena Park, California (the “Property”). As a consequence, Highland Greens recorded a Notice of Delinquent Assessment Lien (the “Notice”) against the Property on December 1, 2008.[i] Highland Greens recorded an amendment to the Notice in April 2011 (the “2011 Amendment”). Both the Notice and the 2011 Amendment purported to include, in the amount subject to the lien, unpaid assessments and charges accruing after the date of the notice.

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

Debtor filed a chapter 13[ii] case on February 28, 2018.[iii] On Schedule D, she listed two debts to Highland Greens secured by the Property, one for $8,000, described as “interest on claim,” and another for $40,000, described as “assessments and attorney’s fees.” Her proposed plan provided for payment of both claims in full, with interest at ten percent on the $40,000 claim.

Highland Greens then filed a proof of claim for $64,137.20, purportedly secured by the Property, with interest at twelve [830] percent. The itemization attached to the proof of claim indicated that it consisted of: (1) the April 2012 money judgment of $21,398.02; (2) $8,572.63 in interest on the judgment; (3) post-judgment assessments through February 1, 2018 of $14,060; (4) late charges of $690; (5) post-judgment interest of $7,207.44; (6) post-judgment attorney’s fees and costs of $13,729.11; less (7) a payment credit of $1,520. The attachment to the proof of claim explained that the post-judgment assessments were secured by the Property pursuant to the Declaration of Covenants, Conditions and Restrictions (“CC&Rs”) recorded in 1964 against the Property. Highland Greens also asserted that it was entitled to twelve percent interest on any delinquent amounts pursuant to California Civil Code § 5650(b)(3).

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

Debtor filed an objection to Highland Greens’ claim. She argued: (1) the claim should be disallowed in its entirety for lack of supporting documentation; (2) most of the claim should be reclassified as unsecured because Highland Greens did not comply with the procedures set forth in the Davis-Stirling Common Interest Development Act (“Davis-Stirling Act” or the “Act”), specifically, California Civil Code §§ 5660 and 5675, and there was no basis to find an equitable lien; (3) only the portion of the debt representing the amount owing under the judgment may be classified as secured; (4) the attorney’s fee portion of the claim should be disallowed as unreasonable and unsupported; and (5) the claim should not include future assessments because Debtor was current postpetition on those obligations.

Highland Greens filed an opposition in which it asserted: (1) the Notice recorded in 2008 complied with all procedural requirements and in any event had been adjudicated valid by the state court in the foreclosure lawsuit; (2) Debtor was barred by issue preclusion from challenging the validity of the lien; (3) Highland Greens was entitled under California Civil Code § 5650(b)(3) to twelve percent interest on the post-judgment assessments and related fees and costs; (4) Highland Greens was entitled to submit cost bills for its judgment enforcement activities, which increased the judgment amount; and (5) the assessment lien was a “continuing lien”; thus, assessments that became delinquent after the recordation of the lien were appropriately included in the amount secured by the lien, citing Bear Creek Master Ass’n v. Edwards, 130 Cal. App. 4th 1470, 1489, 31 Cal. Rptr. 3d 337 (2005).

Debtor filed a reply in which she argued that the Davis-Stirling Act prohibited Highland Greens from asserting a continuing lien. She contended that Bear Creek was not binding on the bankruptcy court and that federal courts in California had held to the contrary, citing In re Warren, No. 15-CV-03655-YGR, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844 (N.D. Cal. Apr. 13, 2016), and In re Guajardo, No. 15-31452 DM, 2016 Bankr. LEXIS 769, 2016 WL 943613 (Bankr. N.D. Cal. Mar. 11, 2016).

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

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

JURISDICTION

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

ISSUE

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

STANDARD OF REVIEW

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

DISCUSSION

This appeal requires us to determine whether, under California law, Highland Greens’ assessment lien was a continuing lien on the Property such that it secured amounts that became delinquent after Highland Greens recorded its Notice. This is a question of first impression for this Panel, and it presents some challenges. First, the statute in question does not expressly address the issue of an HOA’s right to a continuing lien. Second, the statute references the governing documents (the CC&Rs), which may or may not create a contractual basis for a continuing lien. Third, California Courts of Appeal have differed significantly in their assessment of the policy to be enhanced by the Davis-Stirling Act, i.e., is the purpose of the Act to facilitate the expeditious collection of HOA assessments or to safeguard the notice rights of homeowners?

[832] These variables and complexities notwithstanding, we do not write on a blank judicial slate: as discussed below, two federal courts have opined that the Davis-Stirling Act does not provide for the continuing lien that Highland Greens seeks. Highland Greens relies principally on Bear Creek, an older California Court of Appeal decision to the contrary. But that decision, as discussed below, did not address the matter of continuing liens as the primary issue on appeal nor did it consider the Act’s notice provisions. The court of appeal instead focused on what it plausibly believed to be the policy underlying the Act—to facilitate HOAs’ collection of delinquent assessments. But its view is not supported by the legislative history or other California cases. The decision’s rationale was, at least indirectly, called into question by a more recent California Court of Appeal decision, Diamond v. Superior Court, 217 Cal. App. 4th 1172, 159 Cal. Rptr. 3d 110, as modified on denial of reh’g (July 12, 2013), confirming that the most fundamental and important purpose of the statute is to protect homeowners (not associations), and that the statutory requirements for precision in the notice of lien provided to homeowners must override any goals of expedition or convenience to associations.

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

A. The Davis-Stirling Act

We begin, as we must, with the language of the relevant statutes. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989); Lee v. Hanley, 61 Cal. 4th 1225, 1232-33, 191 Cal. Rptr. 3d 536, 354 P.3d 334 (2015). The Davis-Stirling Act, enacted in 1985, authorizes condominium homeowners associations to levy assessments. Subject to certain limitations, a homeowners association “shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this act.” Cal. Civ. Code § 5600.[vi] The Act also sets forth procedures for collecting delinquent assessments:

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

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

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

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

(a) The amount of the assessment, plus any costs of collection, late charges, and [833] interest assessed in accordance with subdivision (b) of Section 5650, shall be a lien on the owner’s separate interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment, which shall state the amount of the assessment and other sums imposed in accordance with subdivision (b) of Section 5650, a legal description of the owner’s separate interest in the common interest development against which the assessment and other sums are levied, and the name of the record owner of the separate interest in the common interest development against which the lien is imposed.

Cal. Civ. Code § 5675. This section further requires that the notice of delinquent assessment must be signed by a designated person and include an itemized statement of charges; it also requires a copy of the notice to be mailed by certified mail to the record owner(s). Cal. Civ. Code § 5675(b)-(e). These notice requirements are to be strictly construed. Diamond, 217 Cal. App. 4th at 1189.

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

B. California Federal Cases Interpreting the Davis-Stirling Act

The Davis-Stirling Act itself does not provide for a continuing lien, and case law is scant regarding whether the Act may be fairly interpreted as so providing. Two federal courts in the Northern District of California have held that adding future assessments to a recorded lien securing delinquent assessments without recording a new lien is impermissible under the Davis-Stirling Act. In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844; In re Guajardo, 2016 Bankr. LEXIS 769, 2016 WL 943613.

In Guajardo, the bankruptcy court was tasked with determining the priorities between an HOA’s assessment lien and a federal tax lien for purposes of distributing the proceeds of a sale of property of the estate. The notice of delinquent assessment at issue in that case provided, “Additional monies shall accrue under this claim at the rate of the claimant’s regular monthly or special assessments, plus permissible late charges, costs of collection and interest, accruing subsequent to the date of this notice.” 2016 Bankr. LEXIS 769, 2016 WL 943613, at *1. The court held that this language was ineffective under both California contract law and the Davis-Stirling Act, for two reasons.

First, the CC&Rs at issue in that case provided that each “lienable default shall constitute a separate basis for a lien.” 2016 Bankr. LEXIS 769, [WL] at *3. The court found that the language of the notice that provided for the lien to include subsequent assessments and related charges was inconsistent with this provision. 2016 Bankr. LEXIS 769, [WL] at *3.[vii]

Second, and importantly, the court interpreted the language of California Civil Code § 5675 as limiting an assessment lien to the amount stated in the notice of delinquent assessment. Specifically, the statute [834] provides that the amount of the assessment (plus costs, late charges, and interest) shall be a lien on the owner’s separate interest. The statute further requires that the notice state the amount of the delinquent assessment and other sums. As such, the court found that adding future assessments to an existing lien would be “inconsistent with the portions of the Davis-Stirling Act requiring the unpaid amounts to be specifically set forth in the notice and in an attached accounting.” 2016 Bankr. LEXIS 769, [WL] at *3.

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

In Warren, the district court affirmed the bankruptcy court’s order sustaining a debtor’s objection to the secured claim of an HOA on grounds that the HOA’s lien was limited to the amounts stated in its notice of lien assessment. 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844 at *1. As in Guajardo, the lien notice in that case contained language that purported to constitute a prospective charge for future assessments and related costs. And like the bankruptcy court in Guajardo, the district court held that this language was impermissible under the Davis-Stirling Act. The court noted that the procedural notice requirements of the Davis-Stirling Act are to be strictly construed, citing Diamond, 217 Cal. App. 4th at 1191, and found that “[t]he Davis-Stirling Act limits the lien to the amount specified in the notice . . . .” 2016 U.S. Dist. LEXIS 49917, [WL] at *3-*4. The court went on: “Claimant should have filed additional liens to secure its interest in future unpaid assessments. To hold otherwise would offend the comprehensive notice scheme and homeowners’ rights to contest delinquent assessments as established in the Davis-Stirling Act.” 2016 U.S. Dist. LEXIS 49917, [WL] at *4.

C. California State Cases Interpreting the Davis-Stirling Act

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

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

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

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

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

Were the relevant provisions to be construed as [the owner] suggests, the described statutory purpose of providing for a quick and efficient means of enforcing the CC & R’s would be seriously undermined; each month, or at such other intervals as the assessments are charged under a given set of CC&R’s, the association would be required to record successive liens. A successive recordation requirement would impose a heavy—and needless—burden upon homeowners’ associations, fraught with risk to the association, and undue windfall to the delinquent homeowner, should any installment be overlooked. We are unwilling to construe Civil Code section 1367 to require such an oppressive burden. Both delinquent homeowners and the public at large are placed on notice, with the recordation of the initial assessment lien, that subsequent regularly and specially levied assessments, if they continue unpaid, will accrue in due course. The purpose of the lien notice and recordation will have been served, and the [836] association’s remedy justly preserved, by the initial recordation of lien.

Id. at 1489.

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

The court of appeal noted that its conclusion was supported by California Supreme Court precedent, including Li v. Yellow Cab Co., 13 Cal. 3d 804, 815, 119 Cal. Rptr. 858, 532 P.2d 1226 (1975) (“If a provision of the [Civil] [C]ode is plain and unambiguous, it is the duty of the court to enforce it as it is written.”); Chase v. Putnam, 117 Cal. 364, 367-368, 49 P. 204 (1897) (“a lien which is the creature of statute can be enforced only in the manner prescribed by the statute.”). Diamond, 217 Cal. App. 4th at 1192-93.

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

Highland Greens argues that we must follow Bear Creek because there are no other California state court decisions on point. It points out that in the absence of a state supreme court decision on the issue, a federal court is obligated to follow a decision of an intermediate court of appeal unless there is convincing evidence that the highest court of the state would decide differently. Sec. Pac. Nat’l Bank v. Kirkland (In re Kirkland), 915 F.2d 1236, 1238-39 (9th Cir. 1990) (citing American Triticale, Inc. v. Nytco Services, Inc., 664 F.2d 1136, 1143 (9th Cir. 1981); Stoner v. New York Life Ins. Co., 311 U.S. 464, 467, 61 S. Ct. 336, 85 L. Ed. 284 (1940)).

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

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

Here, however, the CC&Rs do not provide for a continuing lien; as such, Bear Creek is factually distinguishable in a critical respect, and we may ignore it. Further and importantly, relevant [837] to our anticipation of the California Supreme Court’s eventual view, the Bear Creek court of appeal did not take into account the Act’s notice provisions as they pertained to the issue of a continuing lien and failed to consider that, although one purpose of the Act may be to facilitate an HOA’s collection of delinquent assessments, see Bear Creek, 130 Cal. App. 4th at at 1489,[ix] the cases citing directly to legislative history emphasize that the purpose of the Davis-Stirling Act is to protect homeowners. See Diamond, 217 Cal. App. 4th at 1190 (“This bill goes to the heart of home owner rights, touching upon the key issue of when, if ever, a homeowners’ association should have the right to force the sale of a member’s home when the home owner falls behind on paying overdue assessments or dues.”) (quoting Assem. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) as amended Apr. 5, 2005, pp. 1-2); Huntington Continental Townhouse Ass’n, Inc. v. Miner, 230 Cal. App. 4th 590, 603-04, 179 Cal. Rptr. 3d 47 (2014) (same).

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

The Davis-Stirling Act reflects the legislature’s intent to impose and rigorously enforce its procedural requirements to protect the interest of the homeowner. See Diamond v. Superior Court, 217 Cal. App. 4th 1172, 1191, 159 Cal. Rptr. 3d 110 (2013) (the procedural notice requirements prescribed in the Davis-Stirling Act must be “strictly construed” such that “substantial compliance is insufficient”). Accordingly, the Court finds that the language of the 2008 Lien purporting to secure future assessments is not permissible under the Davis-Stirling Act.

In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844, at *4.

Applying these principles to the matter before us, we conclude that here, the Notice and 2011 Amendment, which purported to secure future assessments, were (1) inconsistent with the applicable CC&Rs; and (2) impermissible under the Davis-Stirling Act, which limits the lien to the amount specified in the notice, see Cal. Civ. Code § 5675(a); in turn, the notice must include an itemized statement showing the delinquent assessments (and related fees and costs) owing at the time of the notice. See Cal. Civ. Code § 5660(b)See also In re Guajardo, 2016 Bankr. LEXIS 769, 2016 WL 943613, at *2-*3.

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

In the absence of evidence of contrary legislative intent, courts are to follow [838] the principle of statutory construction, expressio unius est exclusio alterius, or “the expression of one thing in a statute ordinarily implies the exclusion of other things.” In re J.W., 29 Cal. 4th 200, 209, 126 Cal. Rptr. 2d 897, 57 P.3d 363 (2002). See also People v. Guzman, 35 Cal. 4th 577, 587, 25 Cal. Rptr. 3d 761, 107 P.3d 860 (2005) (“[I]nsert[ing] additional language into a statute violate[s] the cardinal rule of statutory construction that courts must not add provisions to statutes.”)(second and third alterations in original)(quoting Sec. Pac. Nat’l Bank v. Wozab, 51 Cal. 3d 991, 998, 275 Cal. Rptr. 201, 800 P.2d 557 (1990)); Cal. Civ. Proc. Code § 1858 (“In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.”).

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

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

Second, Highland Greens cites California Civil Code § 5720(b)(2), which permits an HOA to record a lien for less than $1,800 but requires the HOA to wait to foreclose until the amount of delinquent assessments exceeds that amount (or the assessments secured by the lien become more than twelve months delinquent).[xi] Highland Greens argues that, because this provision apparently allows for the addition of subsequent delinquent assessments to the lien amount, any lien may include such assessments without requiring a new [839] notice. But the fact that this provision applies only to liens securing amounts less than $1,800 supports the conclusion that it excludes liens securing higher amounts. In other words, the provision may fairly be interpreted as an exception to the general rule prohibiting addition of delinquencies without specific notice. Additionally, this provision, as written, promotes the purpose of protecting “owners’ equity in their homes when they fail to pay relatively small assessments to their common interest development associations.” Diamond, 217 Cal. App. 4th at 1190 (quoting Sen. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) Mar. 29, 2005, p. 1.). As stated by the district court in Warren:

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

In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844, at *4 (footnote omitted).

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

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

This argument is certainly consistent with the court of appeal’s comments in Bear Creek, 130 Cal. App. 4th at 1489. But it ignores the fact that the Davis-Stirling Act “reflects the legislature’s intent to impose and rigorously enforce its procedural requirements to protect the interest of the homeowner.” In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844, at *4 (citing Diamond, 217 Cal. App. 4th at 1191). While we acknowledge that requiring HOAs to file “successive liens” imposes a burden, that is an issue for the legislature to address.

CONCLUSION

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


i Under California law, the recordation of such a notice, if it complies with certain statutory requirements, creates a lien against the owner’s interest in the subject property. Cal. Civ. Code § 5675.

[ii] Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

[iii] Debtor had filed a previous chapter 13 petition in July 2017. That case was dismissed pre-confirmation on February 16, 2018.

[iv] Under California law, the assessment lien merged into the judgment. Diamond Heights Village Ass’n, Inc. v. Financial Freedom Senior Funding Corp., 196 Cal. App. 4th 290, 301-02, 126 Cal. Rptr. 3d 673 (2011).

[v] Highland Greens filed its notice of appeal on September 4, 2018. It filed an amended notice of appeal six days later. Two appeal numbers were assigned due to administrative error. The appeals were thus consolidated, with all papers to be filed under BAP No. CC-18-1248.

[vi] The Davis-Stirling Act was renumbered in 2014. It is currently codified at sections 4000-6150 of the California Civil Code; it was formerly found at sections 1350-1378.

[vii] The CC&Rs, Notice, and 2011 Amendment contain language that is substantially similar to the documents at issue in Guajardo.

[viii] That section was recodified at California Civil Code § 5600(a) and contains substantively identical language.

[ix] In concluding that the purpose of the Act was to facilitate collection of delinquent assessments, the court of appeal in Bear Creek relied on quoted language from Park Place Estates Homeowners Ass’n v. Naber, 29 Cal. App. 4th 427, 432, 35 Cal. Rptr. 2d 51 (1994) (“Because homeowners associations would cease to exist without regular payment of assessment fees, the Legislature has created procedures for associations to quickly and efficiently seek relief against a non-paying owner.”). But the court of appeal in Park Place Estates did not support its conclusion by any citation to legislative history.

[x] California Civil Code § 5650 merely lists the types of costs that may be added to the amount of delinquent assessments. California Civil Code § 5675 provides that the assessed costs and interest will be part of the lien.

[xi] hat statute provides, in relevant part: An association that seeks to collect delinquent regular or special assessments of an amount less than one thousand eight hundred dollars ($1,800), not including any accelerated assessments, late charges, fees and costs of collection, attorney’s fees, or interest, may not collect that debt through judicial or nonjudicial foreclosure, but may attempt to collect or secure that debt in any of the following ways:… (2) By recording a lien on the owner’s separate interest upon which the association may not foreclose until the amount of the delinquent assessments secured by the lien, exclusive of any accelerated assessments, late charges, fees and costs of collection, attorney’s fees, or interest, equals or exceeds one thousand eight hundred dollars ($1,800) or the assessments secured by the lien are more than 12 months delinquent… Cal. Civ. Code § 5720(b)(2).

Civil Code Section 841. Party Walls.

(a) Adjoining landowners shall share equally in the responsibility for maintaining the boundaries and monuments between them.

(b)

(1) Adjoining landowners are presumed to share an equal benefit from any fence dividing their properties and, unless otherwise agreed to by the parties in a written agreement, shall be presumed to be equally responsible for the reasonable costs of construction, maintenance, or necessary replacement of the fence.

(2) Where a landowner intends to incur costs for a fence described in paragraph (1), the landowner shall give 30 days’ prior written notice to each affected adjoining landowner. The notice shall include notification of the presumption of equal responsibility for the reasonable costs of construction, maintenance, or necessary replacement of the fence. The notice shall include a description of the nature of the problem facing the shared fence, the proposed solution for addressing the problem, the estimated construction or maintenance costs involved to address the problem, the proposed cost sharing approach, and the proposed timeline for getting the problem addressed.

(3) The presumption in paragraph (1) may be overcome by a preponderance of the evidence demonstrating that imposing equal responsibility for the reasonable costs of construction, maintenance, or necessary replacement of the fence would be unjust. In determining whether equal responsibility for the reasonable costs would be unjust, the court shall consider all of the following:

(A) Whether the financial burden to one landowner is substantially disproportionate to the benefit conferred upon that landowner by the fence in question.

(B) Whether the cost of the fence would exceed the difference in the value of the real property before and after its installation.

(C) Whether the financial burden to one landowner would impose an undue financial hardship given that party’s financial circumstances as demonstrated by reasonable proof.

(D) The reasonableness of a particular construction or maintenance project, including all of the following:

(i) The extent to which the costs of the project appear to be unnecessary or excessive.

(ii) The extent to which the costs of the project appear to be the result of the landowner’s personal aesthetic, architectural, or other preferences.

(E) Any other equitable factors appropriate under the circumstances.

(4) Where a party rebuts the presumption in paragraph (1) by a preponderance of the evidence, the court shall, in its discretion, consistent with the party’s circumstances, order either a contribution of less than an equal share for the costs of construction, maintenance, or necessary replacement of the fence, or order no contribution.

(c) For the purposes of this section, the following terms have the following meanings:

(1) “Landowner” means a private person or entity that lawfully holds any possessory interest in real property, and does not include a city, county, city and county, district, public corporation, or other political subdivision, public body, or public agency.

(2) “Adjoining” means contiguous to or in contact with.

(Repealed and added by Stats. 2013, Ch. 86, Sec. 3. (AB 1404) Effective January 1, 2014.)

SB-981 (Archuleta) Common interest developments: document delivery.

Would require an association to provide individual delivery by email. Would also require an association of at least 50 units to maintain a website to provide general information to the membership.

Current Status: Dead

FindHOALaw Quick Summary:

Existing law requires the owner of a separate interest in a common interest development to provide an annual written notice to the association managing the common interest development with specified information. Existing law requires the association to solicit this annual notice from each owner and enter the data into its books and records.
Most likely a spot bill, this bill would make nonsubstantive changes to Civil Code Section 4041.
**This bill was amended on April 8, 2020 to require, on and after January 1, 2022, an association to deliver documents by email and to require an association with 50 or more units at least 50 separate interests to maintain an internet website to provide general information to members.
Section 4040 is added to the Civil Code, to read:
4040.

 (a) Subject to subdivisions (b) and (d), if a provision of this act requires an association to deliver a document by “individual delivery” or “individual notice,” the association shall deliver that document by email.

(b) If a provision of this act requires an association to deliver a document by “individual delivery” or “individual notice,” an association shall, instead of complying with paragraph (1) of subdivision (a), deliver the document by first-class mail, registered or certified mail, express mail, or overnight delivery by an express service carrier if either of the following is true:
(1) The member has not provided a valid email address to the association.
(2) The member has revoked the member’s consent to receiving documents by email.
(d) If two-thirds of the members approve, an association shall deliver a document subject to this section by any means described in subdivision (a) or (b), at its discretion.
(e) This section shall become operative on January 1, 2022.
Section 4801 is added to the Civil Code, to read:
4801.

 (a) (1) Subject to subdivision (b), an association shall maintain an internet website to provide general information to its membership if the common interest development it manages consists of 50 or more separate interests.

(2) The internet website required by this subdivision shall be maintained by a person designated by the association, including, but not limited to, any of the following:

(A) A volunteer member of the association.
(B) A real estate licensee, as defined in Section 10014 of the Business and Professions Code.
(C) A person contracted by the association to provide association management services, as defined in Section 11500 of the Business and Professions Code.
(b) An association may choose not to comply with subdivision (a) if that noncompliance is approved by two-thirds of the members.
View more info on SB 981
from the California Legislature's website

SB-969 (Wieckowski) Common interest developments.

Would provide clean up language to 2019’s SB 323 (Wieckowski).

Current Status: Dead

FindHOALaw Quick Summary:

Existing law provides for nomination by acclamation in an election of members of the board of directors of the association if certain conditions are satisfied, including that the association permits all candidates to run if nominated. However, an association is authorized to disqualify a person from nomination under certain circumstances, including if the person has been a member of the association for less than one year.
This bill would amend Civil Code Section 5100 to include among the permissible reasons for disqualifying a person from nomination if the person has served the maximum number of terms or sequential terms allowed by the association.
Existing law requires an association to adopt operating rules for appointing one or 3 independent third parties as inspectors of elections and that allow the inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes, provided that the persons are independent third parties. Existing law specifies criteria for who an independent third party may be, including a volunteer poll worker with the county registrar of voters, among others.
This bill would amend Civil Code Section 5105 to require the additional persons to be appointed and overseen by the inspectors of election to also satisfy the criteria of who may be an independent third party.
View more info on SB 969
from the California Legislature's website

Related Links

SB 323 Signed!  The New State of HOA Election Laws - Published on HOA Lawyer Blog (October 2019) Equal Access to HOA Media Outlets During Election Campaigns - Published on HOA Lawyer Blog (July 2013) Recovering Attorneys' Fees in HOA Election Disputes - Published on HOA Lawyer Blog (September 2012) Challenges to HOA Elections:  Facts and Consequences - Published on HOA Lawyer Blog (April 2012)

SB-908 (Wieckowski) Debt collectors: licensing and regulation: Debt Collection Licensing Act.

Would require debt collection firms to obtain a license and comply with reporting, examination, and other oversight by a state commissioner.

Current Status: Chaptered

FindHOALaw Quick Summary:

Existing law, the Rosenthal Fair Debt Collection Practices Act, prohibits debt collectors from engaging in unfair or deceptive acts or practices in the collection of consumer debts and defines “consumer debt” and “consumer credit” for purposes of that act.
This bill would include sending digital or written communications that do not clearly display the license number of the debt collector as a prohibited debt collection practice.
Existing law establishes the Department of Business Oversight as headed by the Commissioner of Business Oversight, who, among other things, generally provides for the licensure and regulation of persons who are engaged in various consumer financial businesses.
This bill would enact the Debt Collection Licensing Act which would provide for the licensure, regulation, and oversight of debt collectors by the commissioner, define terms for its purposes, and make other conforming changes. The bill would prohibit a person from engaging in the business of collecting on a consumer debt in this state without a license and comply with reporting, examination, and other oversight by the commissioner. The bill would require a person applying for a license to, among other things, pay an application fee, sign the application under penalty of perjury, and submit to a criminal background check by the Department of Justice. By expanding the scope of the crime of perjury this bill would impose a state-mandated local program.
This bill would require each licensee to, among other things, file reports with the commissioner under oath, maintain a surety bond, pay to the commissioner its pro rata share of all costs and expenses reasonably incurred in the administration of these provisions, as estimated by the commissioner. The bill would authorize the commissioner to enforce these provisions by, among other things, promulgating regulations, performing investigations, suspending a license, and enforcing the provisions, as specified. The bill would prohibit the public disclosure of specific information provided by a licensee to the commissioner.
View more info on SB 908
from the California Legislature's website

Related Links

U.S. Supreme Court Holds Debt Collection Firms that Soley Practice Non-Judicial Foreclosure Exempt from FDCPA - Published on HOA Lawyer Blog (June 2019) 'No Cost' Collections Can Prove Very Costly - Published on HOA Lawyer Blog (February 2017) Do 'No Cost' HOA Collection Companies 'Wield Unchecked Power'? - Published on HOA Lawyer Blog (March 2014) Assessment Collections Fees in "No-Cost" Collections Contracts - Published on HOA Lawyer Blog (October 2012)