Category Archives: Case Law

Takiguchi v. Venetian Condominiums Maintenance Corporation

(2023) 90 Cal.App.5th 880

[Failure to Hold Election; Court Ordered Ballot Counting] Corporations Code section 7510 allows for a court to order an HOA to count and tabulates ballots cast in an HOA election.

Weintraub Tobin Chediak Coleman Grodin and Brendan J. Begley for Defendant and Appellant.
Law Offices of Michael G. Kim and Michael Gene Kim for Plaintiff and Respondent.

OPINION

BUCHANAN, J.—

A homeowners association is aptly described as “`a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government.'” (Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 651 [191 Cal.Rptr. 209].) And “[w]ith power, of course, comes the potential for abuse.” (Ibid.) One form of abuse may occur when incumbent board directors try to perpetuate their own power by failing to hold regular homeowner meetings or elections. Corporations Code[1] section 7510, subdivision (c) provides homeowners with a judicial remedy to counteract such conduct in a nonprofit mutual benefit corporation. Specifically, the statute allows a court to summarily order the corporation to hold a regular meeting or election if it has failed to do so within specified timeframes.

We here conclude that the trial court properly exercised this statutory authority by summarily ordering Venetian Condominiums Maintenance Corporation (Venetian) to hold a meeting for the purpose of counting the 166 [884] written ballots cast for its January 20, 2021 annual member meeting and election. Substantial evidence supports the trial court’s finding that there was a quorum present for that meeting. By adjourning the meeting based on the purported absence of a quorum, Venetian failed to conduct the scheduled meeting or cover the noticed agenda items, which included counting the ballots and determining the results. Accordingly, we affirm the trial court’s order.

FACTUAL AND PROCEDURAL BACKGROUND

A. Venetian’s Bylaws and Election Rules

Venetian is a condominium project with 368 condominium units in the University Town Center area of San Diego. It is a nonprofit mutual benefit corporation governed by the Nonprofit Mutual Benefit Corporation Law. (§ 7110 et seq.)

Venetian is run by a board of directors with three directors. Its bylaws require the board to hold regular annual member meetings to elect directors. The members include all unit owners, with each unit having one vote.

Section 3.04 of the bylaws (entitled “Quorum”) imposes a 51 percent quorum requirement for annual member meetings, with the percentage based on the number of units entitled to vote. The bylaws also provide for a reduced one-third quorum requirement if the higher quorum is not met at the initial meeting. Specifically, section 3.04 states in relevant part: “The presence at any meeting, either in person or proxy, of Members entitled to cast at least fifty-one (51%) percent of the total voting power of the Association shall constitute a quorum for any action except as otherwise provided in the Restrictions. If, however, such quorum shall not be present or represented at any meeting, a majority of the Members entitled to vote thereat shall have the power to adjourn the meeting to [a] date not less than five (5) days nor more than thirty (30) days from the meeting date, at which meeting the quorum requirements shall be one-third (1/3) of the total voting power.”

Venetian’s board has also adopted election rules, which require the appointment of an independent, third party inspector of elections to preside over elections, receive ballots, count votes, and determine the results. Voting for directors must be by secret written ballot sealed in two envelopes. The inspector must provide notice of any election, including the date, time, and address where written ballots must be returned by mail or handed to the inspector of elections, and the date, time and location of the meeting at which ballots will be counted. The envelopes may be opened and the ballots counted [885] and tabulated only at a properly noticed board or member meeting. Only the inspector of elections or a designee may open the envelopes and count and tabulate the ballots.

B. Prior History of Director Elections

Ali Ghorbanzadeh owns 18 units at the Venetian. He was elected to Venetian’s board of directors in 2008. In 2009, Ghorbanzadeh appointed his son Sean Gorban[2] to the board. They have controlled the three-member board continuously from 2009 through at least 2021. Guy Takiguchi was elected as the third director in 2015.

From 2009 to 2021, the board repeatedly failed to hold annual elections, either due to the absence of a quorum or for other reasons. Ghorbanzadeh and his son also targeted opposition candidates Takiguchi and Elaine Nishime by fining them and trying to exclude their candidate statements from the ballot packets. Takiguchi successfully challenged these actions in court several times.

C. January 2021 Meeting and Election

There were three directors on the board in 2020: Ghorbanzadeh, his son Sean Gorban, and Takiguchi. Ghorbanzadeh’s seat was up for reelection at the 2020 annual meeting, and there were two other candidates for the seat, including Nishime. The annual meeting was supposed to be conducted in November or December 2020, but was delayed until January 2021.

Lisa Schwartz is the owner of The Ballot Box, Inc. (Ballot Box), which had a contract with Venetian to serve as its inspector of elections. On December 18, 2020, on behalf of the Venetian board, Ballot Box sent out a notice of annual homeowners meeting and director election, along with an agenda and written ballots for the election. The notice was for both an annual meeting to be held on January 20, 2021, and an “adjourned meeting” to be held on January 25, 2021. The notice explained the reason for the adjourned meeting as follows: “As the Association usually does not reach quorum at the first meeting, an adjournment date is also provided on this notice. The quorum for any such adjourned meeting is 25% [sic—should be one-third] of the total voting power. The inspector of election will not be present at the first meeting.”

The notice of annual meeting stated that due to COVID-19 restrictions, “the meeting will only be available virtually although members will be [886] permitted to deliver a ballot or obtain a replacement at the physical location. Members will not be permitted to remain at the physical location. To join the meeting and observe the ballot counting, members must use the virtual platform.” The notice provided members with the necessary information to join the meeting online or by telephone and identified the physical location as the complex’s clubhouse. A cover letter sent by Ballot Box along with the notice advised: “It is important that you participate in this meeting, by returning the enclosed ballot either by mail or in person at the meeting.”

The notice advised that the election would be for one 2-year term on the board. With regard to the quorum requirement, it stated: “Representation may be by attendance in person at the meeting, by the return of a ballot, or by proxy.” The notice provided members with voting instructions and set a deadline of January 15, 2021, for Ballot Box’s receipt of any mailed ballots. It further stated: “The envelopes are received and held by The Ballot Box until they are opened at the meeting…. The SECRET BALLOT envelopes are then opened and the ballots tabulated. The envelopes are only opened IF a quorum is met.”

The written agenda for the membership meeting included seven agenda items as follows: (1) “Call to Order”; (2) “Introductions”; (3) “Balloting” (including “Verification of Quorum” and “Begin Tabulation of Ballots”); (4) “Board Reports”; (5) “Homeowner Open Forum”; (6) “Election Results”; and (7) “Adjournment.”

Before the meeting, Ballot Box received the mailed ballots and maintained a ballot receipt list identifying the unit owners from whom it received them. Schwartz provided a copy of this list to multiple owners and board members both before and after the scheduled January 20, 2021 meeting. By the time of the meeting, Ballot Box had received 166 ballots.

Venetian’s management specifically instructed Ballot Box not to attend the regular annual meeting scheduled for January 20, 2021, and only to attend the adjourned meeting scheduled for January 25, 2021. According to Schwartz, “[t]he adjourned meeting was specifically chosen and noticed for us to attend in lieu of the original meeting, to save the Association money from having us attend 2 meetings.”

The regular meeting was convened virtually on January 20, 2021. There was no inspector of elections present at the clubhouse or remotely. Amber Korody, the community manager for Venetian, presided over the meeting remotely even though she was not the inspector of elections. She informed the participants that Ballot Box would not be attending “to save us money.” Korody did not take roll, did not count the members present online or by [887] telephone, and did not determine the number of units they represented or whether an owner of those units had already submitted a written ballot.

According to Korody, she called Schwartz during the meeting to determine the status of the ballots, and Schwartz informed her that based on the number of ballots received by the voting deadline, she had determined that a quorum was not met. But Schwartz denied making this determination. Schwartz explained: “I was not present at the Venetian’s January 20, 2021 annual meeting and therefore could not and did not rule on anything that occurred at that meeting.”

Korody declared that there was no quorum for the meeting because Ballot Box had only received 166 ballots, and the quorum was 188. However, Korody did not include in her count any members who were present online or by telephone representing units for which no written ballot had been submitted. After Korody declared that there was no quorum, there was a motion to adjourn the meeting and move the ballot count to the “adjourned meeting” previously scheduled for January 25, 2021. Sean Gorban seconded the motion, and the meeting was adjourned without a formal vote. No one prepared minutes for the meeting. Ghorbanzadeh later acknowledged that “people at the meeting were led to believe that there would be a [further] meeting on Monday [January 25].”

Nishime participated in the January 20, 2021 meeting remotely by computer and took multiple screenshots of the participants. With one exception, the screenshots showed only the participants’ screen names, not their faces. However, Nishime was able to identify eight members who were present representing 37 units for which no written ballot had been submitted to Ballot Box. Ballot Box’s ballot receipt list showed that no written ballot had been submitted for these 37 units. If those 37 units had been counted along with the 166 written ballots, there would have been a quorum of 203 present at the meeting—exceeding the 188 minimum.

The eight participating members who represented units for which no ballot had been submitted included Ghorbanzadeh (representing 18 units), his son Sean Gorban (representing one unit), his other son Brian Gorban (representing three units), and an ally of Ghorbanzadeh’s who was also running for the director’s seat, Ben Ariannejad (representing one unit). Takiguchi asserted that Ghorbanzadeh and his allies did not submit their ballots “in a deliberate and tactical effort to not reach quorum so they could remain in power another year or two.” Venetian submitted no evidence refuting this accusation, or disputing that Ghorbanzadeh and his allies participated in the meeting, or explaining why they did not submit a written ballot.

[888] On January 22, 2021, two days after the aborted member meeting, Venetian’s three-member board of directors convened an emergency board meeting. Ghorbanzadeh announced that the annual membership meeting had “failed.” He and his son Sean Gorban voted to cancel the “adjourned meeting” previously scheduled for January 25, 2021, due to the lack of a quorum on January 20, 2021. Takiguchi voted against the motion. Later the same day, at the board’s direction, Korody sent a notice to the members notifying them of the board’s action. The notice stated in relevant part: “On Wednesday January 20, 2021, there was an attempt to hold the Annual Meeting of the members for the purposes of holding the Annual Director Election. Due to a lack of a quorum, the meeting was not held…. [¶] As there was no motion, as required by the governing documents in the Annual Meeting to reconvene, there could be no reduced quorum for any subsequent meetings. Therefore, the Board has cancelled the Special Membership Meeting that was previously scheduled for January 25, 2021.”

Because the January 25 meeting was cancelled, nobody ever counted the 166 written ballots that were mailed to Ballot Box. Many Venetian members were upset by this decision. Fifty-six members representing 15 percent of the voting power signed a petition calling on the board to conduct a meeting to count the ballots. Schwartz also sent an e-mail to Korody and Venetian’s counsel stating her “professional opinion” that “it was bad form/bad faith for the Board” to cancel the January 25 meeting without counting the ballots. She advised that Ballot Box “would be happy to attend a rescheduled meeting to open and count the ballots so the election may be completed for the owners of this community.” On behalf of the board, however, Korody responded to the members’ petition as follows: “Please be advised that the submitted petition is not appropriate in that the members cannot hold a meeting to count ballots that were failed as a result of a failed election.”

D. Trial Court Proceedings

On March 8, 2021, Takiguchi filed a petition against Venetian seeking a court order under section 7510. The petition argued that there was a quorum present at the January 20, 2021 annual meeting—counting both the 166 written ballots received by Ballot Box and the 37 additional units represented by members participating online or by telephone for which no ballot had been submitted. The petition sought a summary order directing Venetian to “notice and hold the annual meeting for the sole purpose of counting the ballots in custody of [Ballot Box] as of January 20, 2021 and tabulating and certifying the results of that vote as the election results for the Venetian in 2021.”

In support of the petition, Takiguchi submitted declarations from himself, Nishime, and Schwartz, copies of Nishime’s screenshots, the 56 member [889] petitions, Ballot Box’s ballot receipt list, Venetian’s bylaws, election rules, and homeowner directory, the December 18, 2020 notice of annual meeting and election, and e-mails written by various participants.

Venetian filed a five-page opposition to the petition, but submitted no defense evidence and made no objections to Takiguchi’s evidence.[3] Venetian’s initial opposition acknowledged that under its bylaws and applicable statutes, the annual meeting required “a quorum of the members present in person, by proxy, or by submitting a secret written ballot by mail.” Venetian nevertheless argued that there was no quorum for the January 20, 2021 meeting because only “160 ballots were received by the voting deadline on January 15, 2021, and 185 [sic—should be 188] ballots were needed to reach a quorum.” Venetian’s opposition did not mention or dispute Takiguchi’s evidence that there were 37 additional units represented by members who were participating in the virtual meeting for which no ballot had been submitted.

At an initial hearing in April 2021, the trial court requested supplemental briefing on several issues. Represented by new counsel, Venetian changed its position and filed a supplemental brief arguing that only the 166 ballots received before the January 20, 2021 meeting counted towards the quorum; that Venetian did not fail to hold an annual meeting because the 166 ballots did not satisfy the quorum requirement; and that the requirements for reconvening the annual meeting with a lower quorum were not met. Venetian’s supplemental opposition again did not dispute Takiguchi’s evidence that there were 37 units represented at the January 20, 2021 meeting for which no written ballot had been submitted.

At another hearing in June 2021, the court instructed Venetian to provide the available meeting minutes. Venetian later submitted Korody’s declaration with attached exhibits, which did not include any minutes of the January 20, 2021 meeting. Korody’s declaration purported to describe aspects of the meeting, but again did not dispute Takiguchi’s evidence regarding the 37 nonvoting units represented at the meeting.

After taking the matter under submission, the trial court granted Takiguchi’s petition. The court reasoned: “A virtual Annual Meeting was scheduled for January 20, 2021. The Venetian’s quorum requirements are 51% and 33%. (Venetian Bylaws 3.04….) There are 368 members of the Association and thus, a quorum is 185 [sic—should be 188] members. The quorum requirement may be met by the members present in person, by proxy or by [890] submitting a secret written ballot. (Corp. Code, § 7512; Bylaws § 3.04 and CC § 5115(d); see also Respondent’s Opposition, p. 3:12-14.) Here, 160 ballots were received by the voting deadline … with another five or six ballots received thereafter constituting a total of 166 ballots. Petitioner has submitted evidence that 37 units were present at the virtual meeting. (Nishime Dec. ¶23.) Respondent provides no contrary evidence. Further, Respondent confirms that no contemporaneous record was made of the meeting by any of Respondent’s agents. Thus, based upon the evidence submitted, the quorum requirements were met.”

Accordingly, the trial court ordered Venetian “to hold the annual meeting for the purpose of counting the ballots in custody of the Ballot Box as of January 20, 2021.”

DISCUSSION

I

We first consider whether Venetian’s appeal is moot. The January 20, 2021 annual member meeting was for the purpose of electing a director for a two-year term to the seat held by Ghorbanzadeh. Because more than two years have now passed, we asked the parties to brief the mootness issue. In response, the parties notified us that there was another annual membership meeting scheduled in November 2022 for the purpose of conducting an election for the same director’s seat, but the election was unsuccessful because there was no quorum for the meeting. There has been no successful election for this seat since the disputed meeting of January 20, 2021. Because section 4.02 of the Venetian bylaws provides that “all incumbent Directors shall hold their office until their successors are elected,” Ghorbanzadeh continues to hold the seat that was the subject of the January 20, 2021 election, even though he has not been reelected.

Both parties take the position that we should not dismiss the appeal as moot. We agree that the appeal is not moot. Even though the original two-year term would have expired by now, the winner of the January 20, 2021 election would still remain in the seat under Venetian’s bylaws because a successor has not yet been elected. Thus, if the ballots from the January 20, 2021 meeting are counted as directed by the trial court, and Ghorbanzadeh is determined not to have been the winner, the winner will be entitled to take his place on the board until a successor is elected. In these circumstances, Venetian’s appeal is not moot because we would still be able to grant it effective relief if we were to reverse the trial court’s order directing that the ballots be counted. (See Lockaway Storage v. County of Alameda (2013) 216 [891] Cal.App.4th 161, 175 [156 Cal.Rptr.3d 607] [appeal is moot if superseding events make it impossible to grant appellant any effective relief].)

II

We next consider whether there is sufficient evidence to support the trial court’s finding that there was a quorum for the January 20, 2021 meeting. On appeal, Venetian has once again abandoned its argument that only the written ballots received by Ballot Box count towards the quorum. More specifically, Venetian does not contest the trial court’s conclusion that nonvoting units represented by members who personally attended the meeting online or by telephone count towards the quorum, as well as units for which a written ballot had been submitted.[4] For the first time in its opening brief, however, Venetian now asserts that the evidence does not support the trial court’s finding that there were 37 units represented at the virtual meeting for which no written ballot had been submitted. Although Venetian did not make this argument in either of its written oppositions to Takiguchi’s petition, we will decide this issue on the merits because a sufficiency of evidence claim may be raised for the first time on appeal.[5] (Tahoe National Bank v. Phillips (1971) 4 Cal.3d 11, 23, fn. 17 [92 Cal.Rptr. 704, 480 P.2d 320].) We review the trial court’s factual finding of a quorum for substantial evidence, viewing the entire record in the light most favorable to the finding. (See Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053 [68 Cal.Rptr.2d 758, 946 P.2d 427].)

Substantial evidence supports the trial court’s finding that there was a quorum present for the January 20, 2021 meeting. Nishime participated in the meeting online and took multiple screenshots of the participants. She had lived at Venetian for several years, she knew who the owners were and how many units they owned, and she had the Venetian homeowner directory with her during the meeting. Based on her observations and screenshots, she was able to identify the participants by their screen names and compile a list of them. Moreover, the inspector of elections (Ballot Box) had disseminated its ballot receipt list, which identified the units for which a written ballot had [892] already been submitted. Thus, Nishime was able to identify eight members who were present online or by telephone representing 37 units for which no written ballot had been submitted to Ballot Box. Counting those 37 units along with the 166 units for which written ballots had been submitted, there is substantial evidence to support the trial court’s finding of a quorum in excess of the 188 minimum.

Venetian argues that Nishime had no personal knowledge of the screen names used by those who participated in the meeting remotely. For example, Venetian claims that the screen name “Dr. ali” used by one of the participants could refer to another owner with the first name Ali, rather than Ali Ghorbanzadeh. Absent any contrary evidence, however, there was ample evidence for the trial court to infer that this was Ghorbanzadeh’s screen name. Ghorbanzadeh was both an incumbent director and a candidate for reelection with an obvious interest in the meeting. Ghorbanzadeh later wrote an e-mail purporting to describe what happened in the meeting. Moreover, according to one of Nishime’s screenshots, the person with the “Dr. ali” screen name also spoke at the meeting and the trial court could reasonably infer that Nishime would have recognized his voice from her attendance at past board meetings. Finally, it would have been a simple matter for Venetian to submit a declaration refuting the evidence that Ghorbanzadeh participated in the meeting using the screen name “Dr. ali.” But Ghorbanzadeh submitted no declaration, and Korody’s declaration submitted on Venetian’s behalf is conspicuously silent on the issue, even though she presided over the meeting. The trial court could reasonably infer from Venetian’s failure to present any contrary evidence that Ghorbanzadeh did in fact participate in the meeting using this screen name. (Evid. Code, §§ 412, 413; Westinghouse Credit Corp. v. Wolfer (1970) 10 Cal.App.3d 63, 69 [88 Cal.Rptr. 654] [adverse inference against party whose declaration did not address material issues].)

As for the other meeting participants Nishime identified as representing nonvoting units, at least four of them used real first and last names of known unit owners as their screen names in the meeting. These included Sean Gorban (one unit), Mike Fani (one unit), Margarita Abagyan (eight units), and Bahram (“Ben”) Ariannejad (one unit)—whose face was also shown in the screenshots. Absent any evidence that these people were imposters, the trial court could reasonably conclude that they were who they purported to be. Together with Ghorbanzadeh and his 18 units, these individuals accounted for a total of 29 nonvoting units, which was more than enough for a quorum when added to the 166 ballots received.

Finally, we reject Venetian’s argument that there were no “adequate safeguards” in place to verify that each person participating remotely was a member. It was Venetian’s responsibility to have proper procedures in place [893] to determine who was participating in the meeting and whether there was a quorum. Venetian deliberately chose not to have the inspector of elections attend the January 20, 2021 meeting. Venetian also chose not to take roll, keep minutes or other records, or determine how many units represented at the meeting had not submitted a written ballot. In these circumstances, Venetian cannot fault Takiguchi for presenting the best evidence available to prove the existence of a quorum. Taken together, Takiguchi’s evidence and the reasonable inferences from Venetian’s failure to refute it constitute substantial evidence to support the trial court’s finding of a quorum.

III

Venetian contends that the trial court exceeded its statutory authority by directing that ballots cast for the January 20, 2021 annual meeting be counted. According to Venetian, even assuming that there was a quorum for the meeting, section 7510, subdivision (c) is only “future-looking” and does not give a court authority “to count ballots from a prior meeting.” Venetian argues that an order directing that completed ballots be counted may be issued only “via a regular civil action that affords discovery and other due process, not in the summary proceedings that section 7510 and 7511 contemplate.”[6] This is an issue of statutory interpretation, which we review de novo. (Lopez v. Ledesma (2022) 12 Cal.5th 848, 857 [290 Cal.Rptr.3d 532, 505 P.3d 212].)

Section 7510 governs meetings of nonprofit mutual benefit corporations, including their place and time, frequency, and remote participation. Subdivision (b) provides: “A regular meeting of members shall be held on a date and time, and with the frequency stated in or fixed in accordance with the bylaws, but in any event in each year in which directors are to be elected at that meeting for the purpose of conducting such election, and to transact any other proper business which may be brought before the meeting.”

Section 7510, subdivision (c) provides for a summary judicial remedy if the corporation fails to hold a regular meeting or written ballot within specified timeframes. It states: “If a corporation with members is required by subdivision (b) to hold a regular meeting and fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then [894] the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member or the Attorney General, after notice to the corporation giving it an opportunity to be heard.” (§ 7510, subd. (c).)

By its terms, this summary remedy is available in two different circumstances: (1) if the corporation is required by subdivision (b) to hold a regular meeting and “fails to hold the regular meeting” within the specified time-frames, or (2) “if the corporation fails to hold a written ballot” within 60 days of the designated date. (§ 7510, subd. (c).) If either of these conditions is present, the court “may summarily order the meeting to be held or the ballot to be conducted….” (Ibid.)

We begin by considering whether the statutory phrase “fails to hold a written ballot” includes failing to count ballots cast by members in an election, and whether the court’s statutory authority to order “the ballot to be conducted” includes ordering that completed ballots be counted. (§ 7510, subd. (c).) On this issue, the literal meaning of the statutory language is arguably susceptible to differing interpretations. On the one hand, to “hold” or “conduct” a ballot could conceivably be construed narrowly to mean only allowing members to cast votes in an election—but not counting the completed ballots. On the other hand, the statutory language could reasonably be interpreted more broadly to include counting the ballots as an inherent part of conducting any election. (See, e.g., Elec. Code, § 15702 [defining word “vote” as used in the California Constitution to include “all action necessary to make a vote effective,” including “having the ballot counted properly and included in the appropriate total of votes cast”].)

When the language of a statute is ambiguous and reasonably susceptible to more than one meaning, we look to a variety of extrinsic aids to resolve the ambiguity, including the ostensible objects to be achieved, the evils to be remedied, legislative history, public policy, and the statutory scheme of which the statute is a part. (DiCampli-Mintz v. County of Santa Clara (2012) 55 Cal.4th 983, 992 [150 Cal.Rptr.3d 111, 289 P.3d 884].) Our ultimate objective is to construe the statute in a way that most closely comports with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute and avoiding an interpretation that would lead to absurd consequences. (People v. Rubalcava (2000) 23 Cal.4th 322, 328 [96 Cal.Rptr.2d 735, 1 P.3d 52].)

Although the legislative history is silent on the issue,[7] one evident purpose of section 7510, subdivision (c) is to provide a quick judicial fix [895] when an existing board is unfairly retaining its own power by prolonging its existence without holding regular member meetings or elections. The statute seeks to prevent this by providing a summary remedy for members to compel the corporation to hold regular meetings and elections when it fails to do so.

This purpose is best served by interpreting the statute to permit a court to order completed ballots to be counted. Counting the ballots is a necessary part of conducting any bona fide election. An essential purpose of the required member meetings and ballots is to elect directors—and directors cannot be elected unless the ballots are counted. (See §§ 7510, subd. (b) [referring to regular member meetings “in which directors are to be elected”], 7513, subd. (e) [“Directors may be elected by written ballot under this section….”].) Thus, an essential purpose of the law—to provide a quick and efficient mechanism for members to prevent directors from perpetuating their own power—favors construing the trial court’s statutory authority to order a “ballot to be conducted” to include counting the completed ballots. (§ 7510, subd. (c).)

Venetian’s contrary interpretation would provide a virtual roadmap for easy evasion of the statute. For example, a board of directors could retain its own power and circumvent the statutory remedy simply by holding an election and allowing members to vote, but then locking the ballots away in a file cabinet without counting them. “We will not adopt `[a] narrow or restricted meaning’ of statutory language `if it would result in an evasion of the evident purpose of [a statute], when a permissible, but broader, meaning would prevent the evasion and carry out that purpose.'” (Copley Press, Inc. v. Superior Court (2006) 39 Cal.4th 1272, 1291-1292 [48 Cal.Rptr.3d 183, 141 P.3d 288] (Copley Press).)

A remedial statute should be liberally construed to effectuate its object and purpose, and to suppress the mischief at which it is directed. (Leader v. Cords (2010) 182 Cal.App.4th 1588, 1598 [107 Cal.Rptr.3d 505].) A remedial statute is one which provides a means for the enforcement of a right or the redress of a wrong. (Id. at p. 1597.) Section 7510, subdivision (c) is a remedial statute because it provides a judicial remedy for members of a mutual benefit corporation to redress the corporation’s failure or refusal to conduct required meetings or elections. As a remedial statute, it must be liberally construed to effectuate its basic purpose and prevent evasion.

We therefore conclude that the trial court’s statutory authority to order “the ballot to be conducted” includes counting the completed ballots. [896] (§ 7510, subd. (c).) “[F]rom the perspective of both statutory language and practical consequences, [Venetian]’s narrow interpretation is not the more reasonable one, and would not produce reasonable results that most closely comport with the Legislature’s apparent intent.” (Copley Press, supra, 39 Cal.4th at p. 1296.)

For similar reasons, we also conclude that the trial court’s order is authorized by the language of the statute permitting it to “summarily order the meeting to be held” if the corporation “fails to hold the regular meeting” within 60 days after the date designated. (§ 7510, subd. (c).) Venetian noticed an annual member meeting for January 20 and January 25, 2021. The notice of meeting was accompanied by a meeting agenda, and the agenda items included tabulating the ballots and determining election results. But the January 20, 2021 meeting was adjourned without covering any of these substantive agenda items, and the January 25, 2021 meeting was cancelled and never rescheduled. As a result, Ghorbanzadeh remained in office even though Venetian did not actually conduct a meeting to count the completed ballots for his expired term.

Construing the statutory language liberally to achieve its objectives, we conclude that Venetian “fail[ed] to hold the regular meeting” that was scheduled for the purpose of counting the ballots and determining the election results. (§ 7510, subd. (c).) Adjourning a meeting immediately after calling it to order—without covering any of the substantive agenda items—is the functional equivalent of not holding the meeting at all. For this reason, the trial court had authority to “summarily order the meeting to be held” for the purpose of completing the previously noticed agenda items, including counting the ballots and determining the results.[8] (§ 7510, subd. (c).)

IV

Finally, Venetian argues that the trial court’s order “disenfranchises” members who might have cast a ballot at the January 20, 2021 meeting if it [897] had not been adjourned prematurely. This argument is forfeited because Venetian did not make it in either of its briefs opposing Takiguchi’s petition below. (Sea & Sage Audubon Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 417 [194 Cal.Rptr. 357, 668 P.2d 664].) Even if it were not forfeited, however, there is no evidence to support it. Under Venetian’s instructions for the election, written ballots could be returned only by mail to Ballot Box or in person at the clubhouse at the time of the meeting. Venetian submitted no evidence that any member was present at the clubhouse to deliver a written ballot and prevented from doing so at the time of the meeting. On the contrary, Ghorbanzadeh himself stated that Takiguchi “was the only one at the Clubhouse” and “[t]he rest of the interested members had joined in.” Takiguchi had already submitted a written ballot by mail. Thus, the record does not support Venetian’s argument that anyone would be disenfranchised by the trial court’s order directing that the submitted ballots be counted.

DISPOSITION

The trial court’s order is affirmed. Takiguchi shall recover his costs on appeal.

Dato, J., concurred.

 

O’ROURKE, Acting P. J., Dissenting.—

I respectfully dissent. The trial court in this case issued an order under Corporations Code section 7510 (section 7510) that defendant and appellant Venetian Condominiums Maintenance Corporation (Venetian) hold an annual meeting for the purpose of counting ballots collected by an election inspector for its January 2021 annual membership meeting. In its ruling, the court found a quorum was reached by the members present at a previously noticed annual meeting that was adjourned for a claimed lack of quorum. If the court ordered Venetian to hold a new annual meeting because it never conducted its annual meeting in 2021, the order is erroneous because under section 7510, Venetian’s quorum requirement is irrelevant. At a meeting ordered under that statute, any voting members who appear constitute a quorum and those members are entitled to elect directors at that meeting. If the court’s order is that Venetian must reconvene the annual meeting that took place in January 2021 so as to count the ballots collected at that time, the court acted without authority under section 7510 because the summary remedy under that statute comes into play only when a meeting has not taken place at all. When a meeting has occurred and a faulty election has been conducted, the preconditions to section 7510 are absent. In any case, the court erred. The majority—stretching the statute beyond its bounds to give homeowners a truncated remedy for perceived abuses of power by homeowners associations—have compounded the court’s error. Plaintiff and respondent Guy Takiguchi’s remedy was not via summary [898] relief under section 7510, but to seek a mandatory injunction under Code of Civil Procedure section 526 in a lawsuit contesting the election’s validity, affording the parties the protections and process associated with such a proceeding.

The majority recognizes that section 7510, subdivision (c) sets forth a summary judicial remedy. Section 7510, subdivision (c) provides: “If a corporation with members is required by subdivision (b) to hold a regular meeting and fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member or the Attorney General, after notice to the corporation giving it an opportunity to be heard.” (§ 7510, subd. (c).)

The statute allows a court to grant relief in two circumstances: when a corporation required by subdivision (b) to hold a regular meeting “fails to hold the regular meeting” within specified timeframes, “or if the corporation fails to hold a written ballot” within a specified period of time. (§ 7510, subd. (c); see People v. Perez (2021) 67 Cal.App.5th 1008, 1015 [282 Cal.Rptr.3d 796] [use of word “if” signifies a statutory condition]; Mel v. Franchise Tax Board (1981) 119 Cal.App.3d 898, 908, fn. 10 [174 Cal.Rptr. 269]Hassan v. Mercy American River Hospital (2003) 31 Cal.4th 709, 715 [3 Cal.Rptr.3d 623, 74 P.3d 726] [courts must give ordinary and usual meaning to words used in statutes].)[1] Because section 7510 sets out a summary proceeding for limited injunctive relief, its provisions must be strictly construed. (Accord, Dr. Leevil, LLC v. Westlake Health Care Center (2018) 6 Cal.5th 474, 480 [241 Cal.Rptr.3d 12, 431 P.3d 151] [holding with respect to unlawful detainer statutes]; see also Bawa v. Terhune (2019) 33 Cal.App.5th Supp. 1, 5 [244 Cal.Rptr.3d 854] [same].) “`The statutory requirements in such proceedings “`must be followed strictly'”‘” and “`relief not statutorily authorized may not be given….'” (Dr. Leevil, at p. 480; see Bawa, at [899] p. 5.) Thus, it is only when either condition is met does the court have authority to “summarily order the meeting to be held or the ballot to be conducted” upon a proper application and notice to the corporation. When, as in this case, the meaning is clear, “`there is no need for construction and courts should not indulge in it.'” (Mutual Life Ins. Co. v. City of Los Angeles (1990) 50 Cal.3d 402, 413 [267 Cal.Rptr. 589, 787 P.2d 996], italics omitted.)

No reading of the court’s order saves it under a proper interpretation of section 7510. As stated, the court ordered Venetian “to hold the annual meeting for the purpose of counting the ballots in custody of [Venetian’s election inspector] as of January 20, 2021.” If the court ordered Venetian to conduct a new annual meeting, the order cannot stand properly viewing subdivision (c) of section 7510 in context with subdivision (d) of the statute. (See Orange County Water Dist. v. Alcoa Global Fasteners, Inc. (2017) 12 Cal.App.5th 252, 300 [219 Cal.Rptr.3d 474] [statutory language must be examined in the context of the statutory framework as a whole in order to determine its scope and purpose and to harmonize the various parts of the enactment].)

Section 7510, subdivision (d) comes into play when the court orders a meeting or a written ballot take place “pursuant to subdivision (c)….” Subdivision (d) provides: “The votes represented, either in person (or, if proxies are allowed, by proxy), at a meeting called or by written ballot ordered pursuant to subdivision (c), and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.” (§ 7510, subd. (d), italics added.)

When ordering a new annual meeting to be held under subdivision (c), the quorum is specified in subdivision (d). It is not for the trial court to determine whether a quorum is met under association rules, as the court did here. The statute specifies that for any court-ordered meeting or ballot, a quorum is reached by the votes represented and entitled to be cast notwithstanding the corporation’s bylaws, articles, or other parts of the Corporations Code pertaining to nonprofit mutual benefit corporations. To interpret section 7510 as permitting a trial court in a section 7510, subdivision (c) summary proceeding to judicially determine whether a quorum was reached under an association’s bylaws or rules renders subdivision (d) “`meaningless or inoperative'” (Hassan v. Mercy American River Hospital, supra, 31 Cal.4th at pp. 715-716; see also Citizens for a Responsible Caltrans Decision v. Department of Transportation (2020) 46 Cal.App.5th 1103, 1119 [260 Cal.Rptr.3d 306]) contrary to settled principles of statutory construction.

[900] The “without limitation” language in the remainder of section 7510, subdivision (d) does not authorize the relief given by the lower court, as Takiguchi maintains. In Johnson v. Tago, Inc. (1986) 188 Cal.App.3d 507 [233 Cal.Rptr. 503], the Court of Appeal addressed nearly identical language in section 600 of the General Corporation Law relating to shareholder meetings.[2] The court agreed that the sentence at issue “is `concerned with the mechanical aspects of holding the annual shareholders meeting.'” (Johnson v. Tago, Inc., at p. 515.) “The judicial power to `issue such orders as may be appropriate’ is reasonably construed as referring to caretaking details and procedure involved in such a meeting. It cannot be construed as a license for courts to trespass upon substantive matters confided to the directors and shareholders of a corporation.” (Ibid.)

If the court’s order was that Venetian must count ballots collected at the duly noticed and conducted January 2021 annual meeting (a quorum having been met), it is still not authorized by section 7510. When a meeting has taken place or a written ballot held, the preconditions to section 7510 summary relief have not occurred.

The majority characterizes section 7510 as remedial (Maj. opn., ante, at pp. 895-896) so as to engage in broad judicial construction and conclude the statutory authority of a court to order “the ballot to be conducted” includes counting previously collected ballots. (Maj. opn., ante, at pp. 895-896.) Section 7510 is no more remedial than any injunction. The relevant question is whether the statute gives the court authority to proceed as it did, and even with a remedial statute, “liberal construction can only go so far.” (Soria v. Soria (2010) 185 Cal.App.4th 780, 789 [111 Cal.Rptr.3d 91], distinguishing Leader v. Cords (2010) 182 Cal.App.4th 1588 [107 Cal.Rptr.3d 505].) “The rule that a remedial statute is construed broadly does not permit a court to ignore the statute’s plain language….” (Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 842 [189 Cal.Rptr.3d 824, 352 P.3d 391]; see Quarry v. Doe I (2012) 53 Cal.4th 945, 988 [139 Cal.Rptr.3d 3, 272 P.3d 977] [citing cases for proposition that “rule of liberal construction of remedial statutes `does not mean that a court may read into the statute that which the Legislature has excluded, or read out that which it has included'”]; Meyer v. Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 645 [88 Cal.Rptr.3d 859, 200 P.3d 295] [“A mandate to construe a [901] statute liberally in light of its underlying remedial purpose does not mean that courts can impose on the statute a construction not reasonably supported by the statutory language”].) Courts do not have the authority to rewrite legislation “to `”conform to [a party’s] view of what [the law] should be.”‘ [Citations.]… “`[U]nder the guise of construction, a court should not rewrite the law, add to it what has been omitted, omit from it what has been inserted, give it an effect beyond that gathered from the plain and direct import of the terms used, or read into it an exception, qualification, or modification that will nullify a clear provision or materially affect its operation so as to make it conform to a presumed intention not expressed or otherwise apparent in the law.'”‘” (Soto v. Motel 6 Operating, L.P. (2016) 4 Cal.App.5th 385, 393 [208 Cal.Rptr.3d 618].)

Under its plain terms, section 7510, subdivision (c) authorizes the court only to summarily order a “ballot to be conducted” when one has not taken place previously. That the Legislature did not intend in section 7510 to permit a court to summarily order the counting of collected ballots for a previously held meeting is evidenced by other provisions of the chapter in which it refers to ballots being “counted.” Section 7513, which addresses actions of a nonprofit mutual benefit corporation without a meeting, states in part: “Ballots shall be solicited in a manner consistent with the requirements of subdivision (b) of Section 7511 and Section 7514. All such solicitations shall indicate the number of responses needed to meet the quorum requirement and, with respect to ballots other than for the election of directors, shall state the percentage of approvals necessary to pass the measure submitted. The solicitation must specify the time by which the ballot must be received in order to be counted.” (§ 7513, subd. (c), italics added.) The Legislature knows how to reference “count[ing]” ballots, but deliberately did not use that term in section 7510, which only permits the court to summarily order a ballot be “conducted” when one has not taken place at all. (See Merriam-Webster Unabridged Dict. Online (2023) [as of Apr. 21, 2023] [defining “conduct” as the “act, manner, or process of carrying out (as a task) ….”].) “`When the Legislature “has employed a term or phrase in one place and excluded it in another, it should not be implied where excluded.”‘” (People v. Buycks (2018) 5 Cal.5th 857, 880 [236 Cal.Rptr.3d 84, 422 P.3d 531]; see also Hicks v. E.T. Legg & Associates (2001) 89 Cal.App.4th 496, 507.) [108 Cal.Rptr.2d 10].)

[902] In short, the trial court’s power under section 7510 does not encompass declaring quorums or ordering ballots collected in previously held meetings to be counted. The statute does not permit the remedy imposed by the court. Because the trial court lacked authority to grant relief under section 7510, I would reverse the order.

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

[2] Sean Gorban and his brother Brian Gorban are also referred to in the record by the last name Gorban-Zadeh.

[3] Venetian later filed evidentiary objections to some supplemental evidence submitted by Takiguchi, but the trial court overruled all evidentiary objections and Venetian has not renewed those particular objections on appeal. Venetian submitted no evidentiary objections to any of the evidence submitted with Takiguchi’s original moving papers.

[4] Because the issue has not been raised on appeal, we express no view as to whether this is a correct interpretation of Venetian’s bylaws and applicable provisions of the Corporations Code. We note, however, that Venetian’s notice of annual meeting similarly stated that for the purpose of the quorum requirement, “[r]epresentation may be by attendance in person at the meeting, by the return of a ballot, or by proxy.”

[5] Although the sufficiency of evidence issue is preserved for appeal, the evidentiary objections to Takiguchi’s evidence asserted for the first time in Venetian’s opening brief are not. These include Venetian’s multiple objections based on lack of personal knowledge and hearsay. Venetian forfeited these objections by failing to assert them in the trial court. (Evid. Code, § 353, subd. (a); Gormley v. Gonzalez (2022) 84 Cal.App.5th 72, 82 [300 Cal.Rptr.3d 156].)

[6] Although Venetian did not make this argument in the trial court, we exercise our discretion to consider it on appeal because it presents a pure question of law based on undisputed facts. (Howitson v. Evans Hotels, LLC (2022) 81 Cal.App.5th 475, 489 [297 Cal.Rptr.3d 181].)

[7] The Legislature enacted section 7510 in 1978 as part of Assembly Bill No. 2180, a lengthy bill that added the Nonprofit Corporation Law (§ 5000 et seq.), the Nonprofit Mutual Benefit Corporation Law (§ 7110 et seq.), and the Nonprofit Religious Corporation Law (§ 9110 et seq.). (Stats. 1978, ch. 567, § 6, p. 1821.) We have examined the available legislative history and found nothing that sheds light on the question before us.

[8] In fact, the legislative scheme suggests to us that the Legislature intended the statute to apply when a regular meeting is not conducted because of the absence of a quorum. The statute specifically provides that when the corporation fails to hold a regular meeting and the court summarily orders the meeting to be held under section 7510, subdivision (c), the corporation’s usual quorum requirements will not apply. Section 7510, subdivision (d), provides in relevant part: “The votes represented, either in person (or, if proxies are allowed, by proxy), at a meeting called or by written ballot ordered pursuant to subdivision (c), and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or in this part to the contrary.” (Italics added.) We see no reason why the Legislature would have decided to override the corporation’s usual quorum requirement unless it contemplated that regular meetings and elections might not be conducted because of the absence of such a quorum. We need not decide this issue, however, because we conclude that there was substantial evidence to support the trial court’s finding of a quorum.

[1] Venetian’s meeting was conducted in part via electronic video screen communication. Subdivision (f) of section 7510 permits meetings to be held in such a manner under specified conditions, including that the “corporation implements reasonable measures … to provide members and proxyholders, if proxies are allowed, a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with those proceedings….” Effective January 1, 2022, the Legislature amended subdivision (f) of the statute to, among other things, add another prerequisite for conducting a membership meeting by electronic transmission, namely that the corporation implement reasonable measures “to verify that each person participating remotely is a member or proxyholder, if proxies are allowed.” (§ 7510, subd. (f), as amended by Stats. 2022, ch. 617, § 61.) Any order that Venetian hold a regular membership meeting would require it to engage in such reasonable verification methods.

[2] Section 600 of the General Corporation Law vests courts with the authority to summarily order members to hold a meeting. It “grants the trial court power to order an annual meeting if one has not been scheduled in the ordinary course of events.” (Johnson v. Tago, Inc., supra, 188 Cal.App.3d at p. 515, italics added; see also Legis. Com. com., Deering’s Ann. Corp. Code, § 600 (2009 ed.) p. 13 [“subdivision (c) [of section 600] authorizes the superior court upon application of a shareholder to summarily order the meeting to be held” so as “[t]o provide prompt relief in the event an annual meeting is not held”].)

LNSU #1, LLC v. Alta Del Mar Coastal Community Association

(2023) Nos. D080208, D081204

[Board meetings; E-mail Exchanges] E-mail discussions between HOA Board Members are not “meetings” within the definition of the Open Meeting Act.

James E. Friedhofer; Knottnerus & Associates, Wilfred Knottnerus and Mark B. Simpkins for Plaintiffs and Appellants.

Gordon & Rees, Craig J. Mariam, John B. Fraher, and Scott W. McCaskill for Defendant and Respondent.

OPINION

IRION, J.

Appellants LNSU #1 and LNSU #2, two homeowners in a common interest development managed by the Alta Del Mar Coastal Collection Community Association (the Association), appeal the judgment entered against them in their action against the Association for violations of the Common Interest Development Open Meeting Act (OMA; Civ. Code, § 4900 et seq.; subsequent undesignated section references are to this code). After a bench trial, the court rejected appellants’ claims that the Association violated the OMA when its board of directors took action in an executive session that it should have taken in a meeting open to all members, the board failed to prepare minutes concerning a second executive session, and certain directors discussed items of Association business via e-mails without giving all Association members notice and opportunity to participate in the discussions and without preparing related minutes. We affirm the judgment.

Appellants also appeal postjudgment orders denying their motion to strike or tax costs and granting the Association’s motion for attorney fees. The trial court awarded costs under a provision of the OMA authorizing such an award to a prevailing homeowners association in an action the court finds “to be frivolous, unreasonable, or without foundation” (§ 4955, subd. (b)). The court awarded attorney fees under a provision of the Davis-Stirling Common Interest Development Act (Davis-Stirling Act; § 4000 et seq.) applicable to an action to enforce the governing documents of a homeowners association (§ 5975, subd. (c)). We conclude the Association is not entitled to attorney fees or costs, and reverse the challenged orders.

I.

BACKGROUND

A. Parties

The Association is the governing body of a common interest development in San Diego County that includes 10 homes. At most times pertinent to this appeal, the Association had a board of five directors, including Martin Mueller, Richard Pyke, Ponani Sukumar, Anthony Valeri, and Douglas Woelkers.

Appellants LNSU #1 and LNSU #2 are limited liability companies each of which owns a home in the Association. Sukumar is a manager of both entities. Sukumar sometimes sent Douglas Grimes as a proxy to attend Association board meetings. Grimes at some point became a manager of LNSU #2 and was elected to the Association’s board in June 2017.

B. E-mails Among Directors

From August 2016 through March 2017, Mueller, Pyke, Valeri, and Woelkers exchanged multiple e-mails concerning Association business. Several examples are summarized below.

  • On August 23, 2016, Valeri sent Mueller, Pyke, and Woelkers e-mails proposing items for the agenda for a board meeting on August 25, describing appellants’ plans to construct 10,000 square feet of underground living space on their lots, and suggesting imposition of a fine if the plans were not submitted to the board. Mueller responded with a question about another lot approximately 30 minutes later.
  • On August 26, 2016, Pyke responded to Valeri’s August 23 e-mails by asking, “Any reaction to our HOA meeting yesterday?” In a separate e-mail, Woelkers responded that he “sense[d] we are heading towards an acrimonious relationship with [Sukumar]” and would need to take “some kind of punitive action just to uphold the precedent of the rules of the [Association].”
  • On October 11, 2016, Mueller sent Pyke, Valeri, and Woelkers an e-mail about the landscaping plans for appellants’ lots to state his position appellants should not be granted an extension of time to submit their plans and agreed to a board meeting to address the issues.
  • On October 11, 2016, Valeri sent Mueller, Pyke, and Woelkers an e-mail concerning a hearing and potential imposition of a fine on another homeowner for violating the Association’s landscaping guidelines. Woelkers responded the following day to urge consistency in application of the rules regarding hearings and fines to all homeowners.
  • On January 30, 2017, Valeri sent Pyke, Mueller, and Woelkers an e-mail stating he had removed an item from the agenda for the February 1 board meeting and how he would “like to get [Grimes] out of everyone’s hair.” Mueller responded the following day that he could not attend the meeting.
  • On February 5, 2017, Valeri forwarded Mueller, Pyke, and Woelkers an e-mail he had received from Grimes accusing him (Valeri) of violating the Association’s governing documents and complaining of delays in approval of appellants’ landscaping plans. The following day, Pyke responded,” Blah blah blah!”; and Mueller responded, “We need to get rid of Douglas Grimes. He is not part of our community.”
  • On March 3, 2017, Valeri sent Mueller, Pyke, and Woelkers an e-mail about whether to have a hearing on appellants’ landscaping plans and whether to levy a fine. Valeri stated he would be having a call with an attorney on” how to handle this situation over the longer term.” Ten minutes later, Pyke responded, “I think maybe we let the fines slide since [appellants have] submitted plans.”

C. E-mails from Sukumar and Grimes

During the same period that Mueller, Pyke, Valeri, and Woelkers were exchanging e-mails with one another, Sukumar and Grimes sent the directors many e-mails about Association business. Some examples follow.

  • On September 26, 2016, Grimes sent all directors and two other individuals an e-mail to offer a meeting to discuss appellants’ landscaping plans without other members of the Association present.
  • On October 18, 2016, Grimes sent all directors an e-mail asking them to vote that the requirement of notice to neighbors of appellants’ landscaping plans had been satisfied.
  • On November 16 and 17, 2016, Grimes and Sukumar exchanged e-mails about the draft of an e-mail concerning board approval of appellants’ landscaping plans, which Grimes later sent to the directors.
  • On February 5, 2017, Grimes sent all directors an e-mail accusing Valeri, in his capacity as president of the Association, of having acted “contrary to the spirit and letter of the [Association’s] governing documents” and “interfered with Sukumar’s efforts to landscape [appellants’ lots] in complete accordance with the Design Guidelines.”
  • On February 19, 2017, Sukumar sent all other directors and Grimes an e-mail stating that, subject to two conditions, he approved Woelkers’s application to the board to replace a brow ditch with a buried pipe.
  • On February 24, 2017, Sukumar sent all other directors, Grimes, and two other individuals an e-mail complaining of delays in approval of appellants’ landscaping plans and requesting a board hearing be postponed and held at a neutral location.
  • On March 5, 2017, Sukumar sent all other directors, Grimes, and another individual an e-mail responding to modifications requested by Woelkers to the landscaping plans appellants had submitted.
  • On March 10, 2017, Sukumar sent all other directors, Grimes, and two other individuals an e-mail concerning the scheduling of a board meeting to discuss appellants’ landscaping plans.
  • On March 29, 2017, Sukumar sent all other directors and his attorney an e-mail complaining of the board’s failures to produce documents he had requested and requesting items be put on the agenda for an upcoming board meeting.

D. April 3, 2017 Board Meeting

The board met in executive session on April 3, 2017. Sukumar and all other directors except Mueller attended. They discussed appellants’ landscaping plans and voted 3-0 (Sukumar recused himself) to adopt the recommendations of the design review consultant to reject portions of the plans concerning driveway gates and walls. The directors voted 3-1 (Sukumar was in the minority) to retain legal counsel.

E. Prior Litigation

On July 17, 2017, appellants filed a complaint against the Association and its inspector of elections, Therese McLaughlin, to challenge the election of three directors held on June 22, 2017. Appellants alleged that although Grimes had received the third highest number of votes and was eligible to serve on the board because he was a manager of LNSU #2, McLaughlin erroneously determined Grimes was ineligible. While the action was pending, two of the three newly elected directors resigned, and McLaughlin reversed her position and decided Grimes had been validly elected to the board. Sukumar, who was still a director, and Grimes held a board meeting on October 17, 2017, from which Valeri, who was also still a director, was absent. At that meeting, Sukumar and Grimes appointed Girish Prasad, a manager of appellants, to the board. The newly constituted board later voted to oust Valeri as president of the Association, to install Grimes as president and chief financial officer, to install Sukumar as vice-president and secretary, and to look for replacement legal counsel. The trial court enjoined Prasad from serving on the board and stayed the board’s actions concerning appointment of officers and retention of new counsel. On appellants’ appeal, this court affirmed those orders. (LNSU #1 v. McLaughlin (Dec. 20, 2018, D073366) [nonpub. opn.].)

F. August 28, 2017 Board Meeting

On August 28, 2017, while the prior action was pending, the board met in executive session to discuss the litigation. No minutes were prepared for the meeting.

G. Current Litigation

  1. Pleadings

Appellants commenced the present action against the Association on June 28, 2018, by filing a complaint alleging violations of the OMA. Specifically, appellants alleged the Association violated the OMA by conducting board meetings and taking action on Association business via e-mails without providing all homeowners notices and agendas in advance of the meetings, without allowing all homeowners to participate, and without making minutes available to homeowners. (See §§ 4910, subd. (a), 4920, subds. (a), (d), 4925, 4930, subd. (a), 4950, subd. (a).) Appellants further alleged the board held executive sessions on matters that should have been the subject of meetings open to all members, and did not note the general nature of the matters discussed in the executive sessions in the minutes of the next board meeting that was open to all homeowners. (See § 4935, subds. (a), (e).) Appellants sought a declaration that the Association had violated the OMA, an injunction requiring compliance, civil penalties, costs, and attorney fees. (See § 4955.)

The Association answered the complaint with a general denial and many affirmative defenses. As its 17th affirmative defense, the Association alleged “all the claims against [it] are barred, in whole or in part, by the doctrine of unclean hands.”

  1. Pretrial Proceedings

In discovery, the Association provided a response to appellants’ request for admissions that Valeri verified. The Association admitted directors had exchanged e-mails on matters of Association business and the exchanges violated several provisions of the OMA. In response to a request asking the Association to admit it had no facts to support its affirmative defense of unclean hands, the Association responded with certain objections and then stated: “Admit that [the Association] does not contend that the allegations regarding the [OMA] violations identified in [appellants’] Supplemental Response to Special Interrogatories, Set One as [the Association] understands them are barred by the doctrine of unclean hands. Otherwise denied. Discovery and investigation are ongoing.”

The Association filed a motion for summary judgment or, in the alternative, summary adjudication on the grounds there was no actual controversy that would warrant declaratory relief, because the Association did not contest that at most 10 OMA violations had occurred; there was no need for injunctive relief, because the latest violation alleged by appellants had occurred more than two years earlier and there was no evidence of continuing violations; and the court could determine the number of violations and set the amount of civil penalties, if any. The court ruled appellants had not met their burden to establish the threat of future harm, summarily adjudicated the cause of action for injunctive relief against them, and otherwise denied the motion.

  1. Trial

The case proceeded to a bench trial on appellants’ claims for declaratory relief and civil penalties. In a joint trial readiness report, the parties identified as the legal issues in dispute: (1) whether the e-mails identified by appellants constituted OMA violations; (2) the number of OMA violations each e-mail constituted; (3) whether the two executive sessions identified by appellants violated the OMA; (4) the number of OMA violations that each executive session constituted; and (5) the number and amount of statutory penalties, if any, to which appellants were entitled.

In their trial brief, appellants argued the e-mails the directors had exchanged concerning appellants’ landscaping plans and other Association business violated the OMA because no notices or agendas for the meetings were given to all members of the Association, not all members were allowed to attend and to speak at the meetings, and no minutes were prepared for the meetings. They argued the April 3, 2017 executive session of the board violated the OMA because the board took action on landscaping plans it should have considered in a meeting open to all members, and the August 28, 2017 executive session violated the OMA because the board prepared no minutes describing what was discussed in the session. Appellants also argued the Association’s defense of unclean hands was groundless because they were given no notice of what the allegedly unclean acts were or who allegedly committed them. Appellants asked the trial court to assess 638 civil penalties of $500 each and to award them costs and attorney fees.

In its trial brief, the Association conceded the e-mails were sent but contended the directors did not know at the time they sent them that they could be violating the OMA, and argued that because appellants’ managers (Sukumar and Grimes) had sent similar e-mails during the same period, appellants were “inequitably seek[ing] relief against the Association for the exact same conduct they engaged in.” The Association stated the April 3, 2017 board meeting “arguably” violated the OMA, because the board discussed appellants’ landscaping plans in an executive session rather than in a meeting open to all members, but pointed out Sukumar and Grimes attended the meeting and were allowed to participate. The Association conceded the failure to prepare minutes for the August 28, 2017 executive session violated the OMA, but argued appellants should not be rewarded because it was their unlawful attempt to take over the board (which was the subject of the prior action) that prevented the preparation of minutes. The Association urged the trial court to deny appellants’ claims for relief.

On the first day of trial, the court granted the Association’s unopposed request to take judicial notice of the record in the prior action arising out of the June 22, 2017 election of directors to the Association’s board. The court then heard opening statements from counsel and testimony from Woelkers. Valeri, Grimes, and Sukumar testified the following day. In overruling an objection to a question asking Sukumar whether certain e-mails violated the OMA, the court stated “it’s going to be up to the [c]ourt what constitutes a meeting” under the statute. The court admitted the e-mails described in parts I.B. and I.C., ante, and other documents. The trial court denied appellants’ motion to strike all evidence regarding the Association’s affirmative defense of unclean hands. After the close of evidence, the court asked counsel, “Is there any law on whether an e-mail constitutes a meeting?” Counsel agreed it was a novel issue on which the court would be making new law.

On the third and final day of trial, the court heard closing arguments from counsel. During appellants’ argument, the court asked counsel whether certain e-mail exchanges were board meetings within the meaning of the OMA. Appellants’ counsel answered the exchanges were meetings if the directors discussed “specifics” or offered an “opinion” about a proposed board action, but not if they discussed putting a matter on the agenda or scheduling a meeting. In its closing argument, the Association argued the exchanges were not board meetings within the meaning of the OMA, because the directors were not in the same place at the same time when they exchanged the e-mails and took no action on Association business in them.

After hearing closing arguments, the trial court ordered the parties to submit proposed statements of decision for its review. In their statement, appellants proposed that the court conclude the e-mail exchanges among directors constituted meetings under the OMA and cited statutory and case law purportedly supporting that conclusion. The Association proposed in its statement that the trial court reach the opposite conclusion and cited statutes, cases, and legislative history purportedly supporting that conclusion.

  1. Trial Court’s Decision and Judgment

After issuing a tentative decision in favor of the Association and considering appellants’ objections thereto, the trial court issued a final statement of decision that largely adopted the Association’s proposed statement. The court ruled the April 3, 2017 executive session of the board substantially complied with the OMA because appellants’ representatives (Sukumar and Grimes) participated in the session. The court ruled appellants’ unclean hands in unlawfully attempting to take over the board caused the failure of the preparation of minutes generally noting what had been discussed at the executive session held on August 28, 2017, and barred appellants from obtaining relief for that failure. The court ruled the e-mail exchanges among directors of which appellants complained were not board meetings under the OMA, and appellants’ unclean hands in sending similar e-mails to directors barred them from obtaining any relief based on the exchanges. The trial court entered a judgment that appellants take nothing from the Association.

  1. Postjudgment Motions

a. Appellants’ Motion to Strike or Tax Costs

The Association filed a memorandum of costs totaling $8,874.61 for filing and motion fees; deposition costs; service of process fees; court reporter fees; models, enlargements, and photocopies of exhibits; electronic filing or service fees; and other costs. Attached to the memorandum were invoices and receipts for the various claimed costs.

Appellants filed a motion to strike or tax costs. They argued the Association could not recover any costs, because the provision governing costs in actions under the OMA allows a homeowners association to recover costs against a homeowner only if the court finds the action “to be frivolous, unreasonable, or without foundation” (§ 4955, subd. (b)), and their action did not fit that description. Appellants also argued the court reporter fees ($1,960.00) were not recoverable, because the parties had agreed to share those costs; and the “[o]ther” costs ($735.18) were insufficiently documented.

In opposition to appellants’ motion, the Association argued that as the prevailing party it was entitled to recover costs. The Association claimed it was entitled to costs as “the prevailing party” “[i]n an action to enforce [its] governing documents” (§ 5975, subd. (c)), because appellants alleged in their complaint that they had made requests under the Association’s governing documents, those requests underlay their claims for relief, and they recovered nothing in the action. The Association also claimed it was entitled to costs because appellants’ action was “unreasonable” and “without foundation” (§ 4955, subd. (b)) in light of their unclean hands in sending e-mails of the type they alleged violated the OMA and their steadfast resistance to the Association’s efforts to end the litigation, as evidenced by their rejection of a settlement offer,[1] opposition to the motion for summary judgment in which the Association conceded 10 OMA violations, and changing position on how many OMA violations occurred. Based on appellants’ failure to accept the settlement offer, the Association argued it was entitled to recover its postoffer costs. (See Code Civ. Proc., § 998, subd. (c)(1).) The Association finally contended the court reporter fees it had claimed were allowable as costs, and the “other” costs it had claimed were for fees for virtual hearings held during the COVID-19 pandemic.

In reply, appellants argued the statute governing costs was section 4955, subdivision (b), not section 5975, subdivision (c), because their action was to enforce the OMA, not the Association’s governing documents. Appellants further argued the Association could recover no costs, because the action was not frivolous. They also argued the unavailability of costs under section 4955, subdivision (b) rendered the cost-shifting provisions of Code of Civil Procedure section 998 inapplicable.

b. Association’s Motion for Attorney Fees

The Association moved for an award of $409,282.50 in attorney fees. It sought fees under the same statutes and for the same reasons as it sought costs.

Appellants opposed the motion. They argued the controlling statute was section 4955, subdivision (b), which they claimed under no circumstances authorizes an award of attorney fees to a prevailing homeowners association in a homeowner’s action for violation of the OMA. Appellants also argued the amount of fees the Association had requested was unreasonable.

In reply, the Association repeated and expanded on points it had made in its initial motion papers, and argued the fees it had requested were reasonably incurred.

c. Trial Court’s Orders

The trial court denied appellants’ motion to strike or tax costs. It ruled that section 4955, subdivision (b) authorized the Association’s recovery of costs, because appellants'”pursuit of litigation was unreasonable at multiple stages. . . . Among other reasons, [appellants] pursued the litigation despite unclean hands and rejected a reasonable settlement offer.” The court awarded all claimed costs.

The trial court granted the Association’s motion for attorney fees in part. It ruled fees were recoverable under section 5975, subdivision (c), because the Association had prevailed in an action in which “the complaint asserted requests under [the Association’s] governing documents” and “sought to enforce [the] governing documents.” The court further ruled that “although not necessary for an award of fees under . . . section 5975(c), the court has already found that [appellants’] litigation was unreasonable. [Citation.] Accordingly, [the Association] is entitled to its reasonable fees from the date of its [Code of Civil Procedure s]ection 998 offer.” After consulting with the parties and considering the record, the trial court awarded the Association $348,306 in attorney fees.

The trial court amended the judgment to add the awards of attorney fees and costs.

II.

DISCUSSION

A. Appeal of Judgment

Appellants attack the judgment on several grounds. They contend the trial court erred by interpreting “board meeting” as used in the OMA not to include the e-mail exchanges among directors, and the Association’s failure to assert that interpretation before trial precluded its assertion after trial under principles of waiver or judicial estoppel. Appellants argue that undisputed facts showed the Association violated the OMA by considering their landscaping plans at the April 3, 2017 executive session, rather than at a meeting open to all homeowners, and by failing to note what was discussed at the August 28, 2017 executive session in the minutes of the next board meeting open to all homeowners. Appellants contend the defense of unclean hands does not bar their claims for OMA violations based on the directors’ e-mail exchanges. They ask us to reverse the judgment and to remand the matter for a new trial.

  1. Appealability and Standard of Review

The trial court’s judgment finally disposed of the parties’ dispute and is appealable. (Code Civ. Proc., § 904.1, subd. (a)(1); UAP-Columbus JV 326132 v. Nesbitt (1991) 234 Cal.App.3d 1028, 1034-1035.) On appeal from a judgment based on a statement of decision after a bench trial, we review questions of law de novo and the trial court’s findings of fact for substantial evidence. (Gajanan Inc. v. City and County of San Francisco (2022) 77 Cal.App.5th 780, 791-792; Aljabban v. Fontana Indoor Swap Meet, Inc. (2020) 54 Cal.App.5th 482, 496.)

  1. OMA Violations Based on Board’s Executive Sessions

We first address appellants’ claims of error regarding the two executive sessions of the Association’s board. The OMA limits the matters a homeowners association board may consider in an executive session to “litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member’s request, regarding the member’s payment of [past-due] assessments.” (§ 4935, subd. (a).) “Any matter discussed in executive session shall be generally noted in the minutes of the immediately following meeting that is open to the entire membership.” (Id., subd. (e).) Appellants contend undisputed facts showed the Association violated these statutes by discussing their landscaping plans at the April 3, 2017 executive session and by failing to prepare the required minutes concerning the topics discussed at the August 28, 2017 executive session. We conclude appellants forfeited these claims of error.

In their opening brief, appellants expend little effort on discussing the April 3, 2017 executive session. The pertinent portion of the statement of facts describes matters the board discussed and voted on, and states Sukumar and Grimes attended but Grimes was not allowed to speak. As purported record support, appellants cite a trial exhibit (“TE 21, pp. 1-23”) that is not included in their appendices. In the corresponding portion of the legal argument, appellants say the trial court “appeared to conclude” the Association violated the OMA by discussing appellants’ landscaping plans in an executive session rather than in a meeting open to all members, and then go on to argue “the [c]ourt was prohibited from excusing the violation under the facts of the case” as “a mere `technical error’ or [`]immaterial omission'” because other homeowners were excluded and Grimes was not allowed to speak. This portion of the brief contains no citation to the record or legal authority and no reference to the substantial compliance doctrine on which the trial court relied in its statement of decision to conclude there was no OMA violation.

Such a factually and legally unsupported claim of error does not satisfy appellants’ burden on appeal. We presume the trial court’s judgment is correct, and to overcome that presumption appellants must affirmatively establish prejudicial error by providing an adequate record, citing to the record, and presenting a persuasive argument with citations to supportive legal authorities. (Cal. Rules of Court, rule 8.204(a)(1)(B), (C); Jameson v. Desta (2018) 5 Cal.5th 594, 609; Lee v. Kim (2019) 41 Cal.App.5th 705, 721 (Lee); Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246.) It is not our role as an appellate court independently to review the record for error and to construct arguments for appellants that would require reversal of the judgment. (United Grand Corp. v. Malibu Hillbillies, LLC (2019) 36 Cal.App.5th 142, 153; Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852 (Benach).) Rather, where, as here, the appellants’ opening brief makes contentions unsupported by proper record citations or cogent legal arguments, we may treat the contentions as forfeited. (E.g., County of Sacramento v. Singh (2021) 65 Cal.App.5th 858, 861; Lee, at p. 721.) Although in their reply brief appellants discussed the substantial compliance doctrine on which the trial court based its ruling and cited one case concerning the doctrine, that discussion comes too late. An appellant may not put off to its reply brief the presentation of a legal argument supporting a claim of error asserted in its opening brief, for to do so would unfairly deprive the respondent of the ability to rebut the argument. (Bitner v. Department of Corrections & Rehabilitation (2023) 87 Cal.App.5th 1048, 1065, fn. 3 (Bitner); Hernandez v. First Student, Inc. (2019) 37 Cal.App.5th 270, 277-278.) We thus conclude appellants forfeited their claim of error concerning the April 3, 2017 executive session. (Bitner, at pp. 1065-1066; Benach, at p. 852 & fn. 10.)

We reach the same conclusion on appellants’ claim of error regarding the August 28, 2017 executive session. In their opening brief, appellants barely discuss that session in the statement of facts or the legal argument. Appellants quote the meeting agenda and as purported support cite a trial exhibit (“TE 102”) that is not in their appendices. In the legal argument, appellants contend a new trial should be granted because undisputed evidence established the board’s secretary was tasked with preparing the minutes, and no evidence showed any of their managers ever lawfully held that position. Appellants do not reference the trial court’s ruling that the required minutes for the August 28, 2017 executive session were not prepared because of their unlawful attempt to take over the board and that their resultant unclean hands barred their claim that the Association’s failure to prepare the minutes violated the OMA. Appellants cite the statute they alleged was violated, but no other legal authority. They do not explain why, as a factual or legal matter, the conduct on which the trial court relied does not bar their claim. Appellants expand on their argument in their reply brief, but still cite no legal authority to support their contentions. This claim of error has thus been forfeited. (Bitner, supra, 87 Cal.App.5th at pp. 1065-1066 & fn. 3; Lee, supra, 41 Cal.App.5th at p. 721; Benach, supra, 149 Cal.App.4th at p. 852 & fn. 10.)

  1. OMA Violations Based on Directors’ E-mail Exchanges

We next consider appellants’ claim that the trial court erred by concluding the directors’ e-mail exchanges did not constitute board meetings within the meaning of the OMA. Appellants contend a series of e-mails among directors on a matter of Association business, such as those of which they complain, fits within the definition of “board meeting” in section 4090, subdivision (a), and the Association should be barred from asserting a contrary position because it did not do so until after the close of evidence at trial. We are not persuaded.

a. Waiver or Estoppel

We first address appellants’ contention that the Association’s litigation conduct bars it from arguing the directors’ e-mail exchanges were not board meetings within the meaning of the OMA. Appellants correctly point out that in a verified response to their request for admissions, the Association admitted the e-mails violated several provisions of the OMA, and in its summary judgment motion, the Association did not contest some of the e-mails constituted board meetings that violated the OMA. (See pt. I.G.2., ante.) Appellants also correctly point out that not until closing arguments did the Association contend the e-mails did not meet the statutory definition of a board meeting. (See pt. I.G.3., ante.) A “litigant cannot be permitted to blow hot and cold in this manner” if “[s]uch a strategy subjects the opposing party to unwarranted surprise” (A & M Records, Inc. v. Heilman (1977) 75 Cal.App.3d 554, 566) or “would prejudice his or her opponent” (Garcia v. Roberts (2009) 173 Cal.App.4th 900, 913).

Here, however, the Association’s change of position did not unfairly surprise or prejudice appellants. They could not rely on any admissions the Association had made in the summary judgment motion, because such admissions were only for the purpose of the motion and did not estop the Association, as the unsuccessful moving party on the claims for declaratory relief and civil penalties, from taking a contrary position at trial. (Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 747-749; see Filtzer v. Ernst (2022) 79 Cal.App.5th 579, 587 [judicial estoppel requires party to be estopped to have successfully asserted position it later abandoned].) Nor could appellants rely on the Association’s response to their request for admissions. During trial, the court considered whether to allow appellants to put on evidence of OMA violations not identified in discovery and the Association to put on evidence of unclean hands not disclosed in discovery. Appellants suggested the court either “allow everybody to put in whatever they want at this time, regardless of what the responses were before,” or “exclude both.” The court ruled the parties would not be bound by their discovery responses and “allow[ed] all that evidence to come in.” Having invited and benefited from that ruling, appellants may not now seek to hold the Association to its discovery responses. (See § 3521 [“He who takes the benefit must bear the burden.”]; Mesecher v. County of San Diego (1992) 9 Cal.App.4th 1677, 1685 [party forfeits right to attack on appeal procedure it agreed to at trial].)

Moreover, the record shows appellants were aware before and during trial that the key legal issue to be decided by the court was whether the e-mail exchanges of which they complained constituted board meetings under the OMA. In their joint trial readiness report, the parties identified as the first legal issue in dispute, “Whether the Emails identified by plaintiffs constitute OMA violations.” During trial, the court told the parties “it’s going to be up to the [c]ourt what constitutes a meeting” under the statute. The parties presented their competing views on the issue orally during closing arguments and in writing in their proposed statements of decision. The court was not bound by the Association’s earlier concessions that the e-mails constituted meetings under the OMA. “No litigant, of course, can effectively `abandon’ the correct reading of a statute; [the court] must independently determine the best interpretation . . . regardless of what the parties argue.” (Spanish Speaking Citizens’ Foundation, Inc. v. Low (2000) 85 Cal.App.4th 1179, 1230; see Evid. Code, § 310, subd. (a) [court must decide all questions of law, including construction of statute]; County of Madera v. Superior Court (1974) 39 Cal.App.3d 665, 668 [“proper interpretation of statutory language is a question of law for the court”].)

Because the issue of whether the directors’ e-mail exchanges constituted board meetings under the OMA was a legal one for the court to decide, appellants’ complaint that the Association’s change of position at the end of trial prejudicially prevented them from obtaining and presenting pertinent evidence lacks merit. Specifically, appellants claim that “[h]ad [the Association’s] switch of argument taken place earlier, [they] could have cross-examined both Valeri and Woelkers on the involved directors’ understandings and motivations at the time.” Such matters, however, are irrelevant to the question of statutory interpretation the trial court had to decide. (See Evid. Code, § 310, subd. (a) [construction of statute is question of law for court]; City of Rocklin v. Legacy Family Adventures-Rocklin, LLC (2022) 86 Cal.App.5th 713, 728 [“It is the role of the judge to decide purely legal issues.”]; Maia v. Security Lumber & Concrete Co. (1958) 160 Cal.App.2d 16, 21 [witness’s understanding of statute is inadmissible because “[c]ourts are bound by the statute, not by individual opinions of its interpretation”].) Appellants also claim the issue of whether an e-mail exchange constitutes a board meeting under the OMA may depend on factors that are in part factual (e.g., whether the e-mails functioned as in-person meetings, or whether directors had continuous access to e-mails and the ability to reply in a reasonable time), and they could have explored such factors more fully in discovery and at trial had they known earlier the Association was contesting the issue. Such exploration was unnecessary, because the trial court admitted into evidence all the e-mail exchanges appellants claimed violated the OMA and therefore had the information it needed to decide whether they constituted board meetings within the meaning of the OMA. (See, e.g., Estate of Madison (1945) 26 Cal.2d 453, 456 [“The construction of a statute and its applicability to a given situation are matters of law to be determined by the court.”]; accord, In re Marriage of Martin (2019) 32 Cal.App.5th 1195, 1199.)

b. Whether E-mail Exchanges Were Board Meetings

We now turn to the dispositive question of statutory interpretation: Were the directors’ e-mail exchanges that appellants claim violated the OMA “board meetings” under the statute? We review the trial court’s interpretation of the statute de novo. (Segal v. ASICS America Corp. (2022) 12 Cal.5th 651, 658; Royals v. Lu (2022) 81 Cal.App.5th 328, 344.) We begin by examining the language of the statute, giving that language its usual and ordinary meaning and adopting a construction that is consistent with the apparent legislative intent. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1232-1233; Yu v. Superior Court (2020) 56 Cal.App.5th 636, 644.)

The OMA is part of the Davis-Stirling Act, which defines “board meeting” as “either of the following:

“(a) A congregation, at the same time and place, of a sufficient number of directors to establish a quorum of the board, to hear, discuss, or deliberate upon any item of business that is within the authority of the board.

“(b) A teleconference, where a sufficient number of directors to establish a quorum of the board, in different locations, are connected by electronic means, through audio or video, or both. A teleconference meeting shall be conducted in a manner that protects the rights of members of the association and otherwise complies with the requirements of this act. Except for a meeting that will be held solely in executive session or conducted under Section 5450 [which pertains to meetings during a state of disaster or emergency], the notice of the teleconference meeting shall identify at least one physical location so that members of the association may attend, and at least one director or a person designated by the board shall be present at that location. Participation by directors in a teleconference meeting constitutes presence at that meeting as long as all directors participating are able to hear one another, as well as members of the association speaking on matters before the board.” (§ 4090.)

The Davis-Stirling Act defines “board” as “the board of directors of the association” (§ 4085) and “item of business” as “any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a quorum of the board” (§ 4155).

Appellants rely solely on subdivision (a) of section 4090 for their claim that the directors’ e-mail exchanges constituted board meetings that violated the OMA. They contend “[t]he usual and ordinary meaning of the phrase `congregation, at the same time and place’ encompasses a `virtual’ assembly by means of email,” because, they say, e-mail allows all directors to communicate with one another simultaneously on items of board business in the same place, namely, cyberspace. We reject this construction of the statutory language as inconsistent with its usual and ordinary meaning.

To determine the usual and ordinary meanings of words used in a statute, courts consider the dictionary definitions of those words. (Wasatch Property Management v. Degrate (2005) 35 Cal.4th 1111, 1121-1122; Turo Inc. v. Superior Court (2022) 80 Cal.App.5th 517, 521.) We have consulted three dictionaries available at the time the Legislature enacted the OMA to determine the meaning of the phrase “congregation, at the same time and place.” (§ 4090, subd. (a), as enacted by Stats. 2012, ch. 180, § 2.) Two define “congregation” as “an assembly of persons: gathering.” (Webster’s 3d New Internat. Dict. (2002), p. 478; Merriam-Webster’s Collegiate Dict. (11th ed. 2003) p. 262.) An “assembly” is defined as “a company of persons collected together in one place usu. for some common purpose (as deliberation and legislation, worship, or entertainment)” (Webster’s, p. 131), and a “gathering” as “a coming together of people in a group (as for social, religious, or political purposes)” (id., p. 940). A third dictionary defines “congregation” similarly as “a gathered or assembled body; assemblage” (Random House Unabridged Dict. (2d ed. 1987) p. 430), and “assemblage” as “a group of persons . . . gathered” (id., p. 125). That dictionary defines “place” as “a space, area, or spot, set apart or used for a particular purpose: a place of worship; a place of entertainment.” (Id., p. 1478.) The other two define “place” as “a building or locality used for a special purpose,” and offer as examples “<~ of amusement>,” “<~ of worship>,” “,” and “.” (Webster’s, p. 1727; Merriam-Webster’s, p. 946.)

From these definitions and examples, we conclude a “board meeting,” as defined by section 4090, subdivision (a), means a gathering of a quorum of the directors of a board of a homeowners association at the same time and in the same physical location for the purpose of transacting any matter of association business that is within the board’s purview. By using the word “congregation,” the Legislature intended the directors come together for a common purpose. By specifying the congregation be “at the same time and place,” the Legislature intended the directors simultaneously come together in one location so that they can “hear, discuss, or deliberate upon any item of business that is within the authority of the board.” (Ibid.) Although the definitions of “congregation” in the dictionaries cited in the preceding paragraph say nothing explicit about physical location, the examples in those dictionaries ordinarily involve gatherings of persons in one location for a particular purpose—for deliberation and legislation (e.g., the U.S. Capitol), for religious worship (e.g., a church or temple), or for social engagement or entertainment (e.g., a night club or theater). Every example of a “place” in those dictionaries is a physical location—a building, a place of worship (e.g., a church or temple), a place of amusement or entertainment (e.g., a theater or stadium), a place of education (e.g., an elementary school or college), or a fine eating place (a café or restaurant). We think it is clear from the words chosen that in enacting section 4090, subdivision (a) the Legislature had in mind the traditional board meeting of a homeowners association, i.e., one where the directors gather in the same room with homeowners to talk about and to act on matters of association business. Hence, by sending e-mails to one another through cyberspace, often hours or days apart and from different homes and offices, the Association’s directors did not simultaneously gather in one location to transact board business, and therefore they did not conduct a “board meeting” within the meaning of section 4090, subdivision (a).[2]

In urging us to construe section 4090, subdivision (a) to include e-mail exchanges among the directors of a board of a homeowners association on matters of association business, appellants argue that “[l]egally, a `[b]oard [m]eeting’ under [the] OMA is capable of being conducted via electronic transmissions.” We agree a board meeting conducted by electronic means is permitted by the OMA, but not by virtue of section 4090, subdivision (a). Subdivision (b) of section 4090 defines “board meeting” as “[a] teleconference, where a sufficient number of directors to establish a quorum of the board, in different locations, are connected by electronic means, through audio or video, or both.” In this type of meeting, “[p]articipation by directors . . . constitutes presence at that meeting as long as all directors participating are able to hear one another, as well as members of the association speaking on matters before the board.” (Ibid.) The e-mail exchanges at issue in this case do not qualify as such a board meeting, however, because they did not allow the participating directors “to hear one another.” (Ibid.) In any event, appellants have expressly disavowed reliance on section 4090, subdivision (b).

Appellants also rely on section 4910, subdivision (b) as support for their contention that a series of e-mails among directors can satisfy the “same time and place” requirement of section 4090, subdivision (a). Section 4910, subdivision (b) prohibits the board from conducting a board meeting “via a series of electronic transmissions, including, but not limited to, electronic mail,” except “as a method of conducting an emergency board meeting” to which all directors consent in writing. An emergency board meeting may be called “if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice” four days before the meeting. (§ 4923; see § 4920, subds. (a), (b)(1).) Appellants argue an emergency board meeting by e-mail would not be possible unless that type of meeting were a subset of the type defined by section 4090, subdivision (a). We are not persuaded.

Section 4910, subdivision (a) states, “The board shall not take action on any item of business outside of a board meeting.” As noted above, the statute goes on to prohibit the board from conducting a meeting by a series of e-mails unless there is an emergency and all directors give written consent. (§ 4910, subd. (b).) Considering these subdivisions together, as we must (Smith v. LoanMe, Inc. (2021) 11 Cal.5th 183, 190), we read them as authorizing the board, in an emergency as defined by section 4923, to dispense with notice to homeowners and to conduct a meeting and take action on a matter of association business via a series of e-mails or other electronic transmissions, provided all directors give written consent to that procedure. There would have been no need to add these specific provisions if, as appellants argue, an exchange of e-mails among directors on a matter of association business already qualified as a board meeting under section 4090, subdivision (a). We must avoid an interpretation that would make a statutory provision redundant and interpret the provision in a way that gives it independent meaning and enables it to perform a useful function. (Plantier v. Ramona Municipal Water Dist. (2019) 7 Cal.5th 372, 385-386; Garcia v. McCutchen (1997) 16 Cal.4th 469, 476.) We therefore read section 4910, subdivision (b) as specifying a third method, in addition to and different from those defined by section 4090, by which the board may conduct a meeting and take action on a matter of homeowners association business, and which may be used only in an emergency as defined by section 4923. It is not a subset of the type of board meeting defined by section 4090, subdivision (a), by which the board may take action on association business matters in nonemergency situations.

Appellants contend “Corporations Code section 7211 . . . also supports the interpretation that the Legislature in general believes a board meeting is capable of being conducted by email.”[3] To confirm that belief, however, we need not look beyond the OMA. By expressly authorizing the board of a homeowners association to hold a meeting and take action by a series of e-mails when there is an emergency and all directors consent in writing to proceed that way (§ 4910, subd. (b)(2)), the Legislature obviously believed a board meeting was capable of being conducted via e-mail. The enactment of a separate provision to authorize that type of board meeting shows, contrary to appellants’ position, that the Legislature did not believe that type of meeting fell within the scope of section 4090, subdivision (a).

Apparently anticipating we might reject their arguments based on the text of the OMA, appellants advise against “exclusive and myopic reliance on statutory language,” and urge consideration of “the overriding purpose of [the] OMA.” That purpose, they say without any analysis or citation of authority, is to permit “all [homeowners association] members [to] have access to the [b]oard’s discussions and action on official [association] business.” Appellants argue their interpretation of section 4090, subdivision (a) as including the directors’ e-mail exchanges at issue in this case furthers that purpose, but an interpretation that excludes them frustrates that purpose by allowing a board to make all decisions on association business via private e-mail exchanges and later hold a meeting as “mere theatre” to confirm the decisions. We disagree.

To discern the purpose of the OMA, we look to its words as the most reliable indicator of legislative intent and consider them in the context of the statute as a whole. (Hoffmann v. Young (2022) 13 Cal.5th 1257, 1266; Union of Medical Marijuana Patients, Inc. v. City of San Diego (2019) 7 Cal.5th 1171, 1184; Olmstead v. Arthur J. Gallagher & Co. (2004) 32 Cal.4th 804, 811.) The first substantive provision of the OMA states, “The board shall not take action on any item of business outside of a board meeting.” (§ 4910, subd. (a).) With exceptions for emergency board meetings (§ 4923) and executive sessions (§ 4935), subsequent OMA provisions provide for input of homeowners in board actions by requiring homeowners be given at least four days’ notice of a board meeting (§ 4920, subd. (a)), the notice contain the meeting agenda (§ 4920, subd. (d)), homeowners be allowed to attend and speak at the meeting, (§ 4925), the board not discuss or take action on any item of business not on the agenda (§ 4930, subd. (a)), and minutes of the meeting be made available to homeowners within 30 days (§ 4950, subd. (a)). In short, the OMA “mandate[s] open governance meetings, with notice, agenda and minutes requirements, and strictly limit[s] closed executive sessions.” (Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 475 (Damon).) These various requirements make clear the purpose of the OMA is to ensure members of a homeowners association are informed about and have input into the actions to be taken by the association’s board of directors on matters affecting the community in which they live. (See Golden Eagle Land Investment, L.P. v. Rancho Santa Fe Assn. (2018) 19 Cal.App.5th 399, 416, 417 (Golden Eagle) [board’s “possess[ion of] broad powers to affect large numbers of individuals through [its] decisions and actions” requires “[h]olding open meetings and taking account of various opinions among community members” before acting on items of association business].)

Our interpretation of section 4090, subdivision (a) as not including the e-mail exchanges of which appellants complain does not frustrate the purpose of the OMA. Section 4090, subdivision (a) defines one method by which the board of directors of a homeowners association may act consistently with the purpose of the OMA, namely, by holding an in-person meeting where homeowners have an opportunity to voice their opinions on items of association business, and then voting on what actions to take on the items. By discussing items of Association business in e-mails (e.g., whether to approve appellants’ landscaping plans and whether to fine another homeowner), the directors did nothing contrary to the purpose of the OMA, because they took no action on those items in the e-mails. Although the OMA prohibits the board from acting on items of Association business outside a board meeting (§ 4910, subd. (a)), it does not prohibit the board from discussing the items outside a meeting. Had the Legislature intended to prohibit such discussions, it knew how to do so. In the Ralph M. Brown Act (Gov. Code, § 54950 et seq.), an open meeting law that governs public agencies and the provisions of which “parallel” those of the OMA (Damon, supra, 85 Cal.App.4th at p. 475), the Legislature provided: “A majority of the members of a legislative body shall not, outside a meeting authorized by this chapter, use a series of communications of any kind, directly or through intermediaries, to discuss, deliberate, or take action on any item of business that is within the subject matter jurisdiction of the legislative body” (Gov. Code, § 54952.2, subd. (b)(1)). Interpreting section 4090, subdivision (a) to include the e-mail exchanges at issue in this case, as appellants would have us do, would effectively add to the OMA a similar provision prohibiting directors from discussing items of association business except at a board meeting. We refuse to adopt an interpretation of a statute that would require insertion of language the Legislature knew how to include but did not include. (Code Civ. Proc., § 1858; Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 545; Yao v. Superior Court (2002) 104 Cal.App.4th 327, 332-333.)

In sum, we conclude “board meeting,” as defined by section 4090, subdivision (a), is an in-person gathering of a quorum of the directors of a homeowners association at the same time and in the same physical location for the purpose of talking about and taking action on items of association business. E-mail exchanges among directors on those items that occur before a board meeting and in which no action is taken on the items, such as those at issue in this case, do not constitute board meetings within the meaning of that provision. The trial court therefore correctly rejected appellants’ claims that the e-mail exchanges were board meetings that violated the OMA.

  1. Unclean Hands Defense

Appellants’ last challenge to the judgment is to the trial court’s ruling that their “unclean hands” in sending the directors e-mails on matters of Association business barred them from pursuing claims that the Association violated the OMA when the directors exchanged similar e-mails among themselves. Appellants contend the doctrine of unclean hands is not available as a defense to a claim for violation of the OMA; the doctrine does not apply to the undisputed facts of this case; and principles of waiver, abandonment, or estoppel preclude the Association from asserting the defense. Because we have rejected appellants’ contention that the e-mail exchanges on which they based their claims constituted board meetings to which the notice, agenda, homeowner participation, and minutes requirements of the OMA apply, their claims the Association violated the OMA by not complying with those requirements fail as a matter of law. We therefore need not, and do not, decide whether the trial court correctly applied the unclean hands doctrine to bar the claims.

B. Appeal of Postjudgment Orders

Appellants also attack the trial court’s postjudgment orders denying their motion to strike or tax costs and granting the Association’s motion for attorney fees. They contend the trial court erred by awarding attorney fees under section 5975, subdivision (c), because that section applies to actions to enforce the governing documents of a homeowners association, not to an action like theirs that seeks relief for violations of the OMA. Rather, appellants argue, the statute that applies to their action is section 4955, subdivision (b), which never allows a homeowners association to recover attorney fees from a homeowner. Appellants further contend attorney fees were not recoverable under Code of Civil Procedure section 998, because that statute does not provide an independent basis to award fees, and the settlement offer the Association made under the statute was invalid for requiring a general release. As to costs, appellants contend the trial court relied on the correct statute (i.e., § 4955, subd. (b)), but erred by finding their action was “unreasonable” and therefore justified an award to the Association. They also contend the court abused its discretion by awarding the court reporter fees and “other” costs sought by the Association. Appellants ask us to reverse the challenged orders.

  1. Appealability and Standard of Review

“A postjudgment order which awards or denies costs or attorney’s fees is separately appealable.” (Silver v. Pacific American Fish Co., Inc. (2010) 190 Cal.App.4th 688, 693; see Code Civ. Proc., § 904.1, subd. (a)(2) [postjudgment order is appealable]; DeZerega v. Meggs (2000) 83 Cal.App.4th 28, 43 [postjudgment order awarding attorney fees is appealable]; Jimenez v. City of Oxnard (1982) 134 Cal.App.3d 856, 858, fn. 3 [postjudgment order denying motion to tax costs is appealable].) We review the trial court’s determination on whether the statutory criteria for an award of costs or attorney fees have been met de novo, and its determination on the amount of costs or fees for abuse of discretion. (Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751; McGuigan v. City of San Diego (2010) 183 Cal.App.4th 610, 622-623.) Whether an action is “frivolous,” “unreasonable,” or “without foundation” under a statute authorizing an award of costs or attorney fees in such an action presents a question of law we review de novo where, as here, the pertinent facts are not in dispute. (Rudisill v. California Coastal Com. (2019) 35 Cal.App.5th 1062, 1070; Smith v. Selma Community Hospital (2010) 188 Cal.App.4th 1, 31-33 (Smith).)

  1. Attorney Fees

We first consider the court’s award of attorney fees to the Association. Each party to an action must pay its own attorney fees unless a statute or contract requires the opposing party to pay them. (Code Civ. Proc., § 1021; Tract 19051 Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1142; Srouy v. San Diego Unified School Dist. (2022) 75 Cal.App.5th 548, 558-559.) No contractual attorney fee provision is at issue here. The Association therefore may recover its attorney fees from appellants only if a statute authorizes recovery. The Association contends that because appellants’ action was, at least in part, an action to enforce the governing documents of the Association and it prevailed in the action, the trial court properly awarded fees under section 5975, subdivision (c). Appellants counter that they sued not to enforce the Association’s governing documents but to enforce the OMA, which does not authorize an award of attorney fees to the Association. As we shall explain, appellants are correct.

The governing documents of a homeowners association are enforceable in a civil action by a homeowner or by the association. (§ 5975, subds. (a), (b).) The Davis-Stirling Act defines “governing documents” as “the declaration and any other documents, such as bylaws, operating rules, articles of incorporation, or articles of association, which govern the operation of the common interest development or association.” (§ 4150.) The “declaration” is the document that “contain[s] [the] legal description of the common interest development”; states whether “the common interest development is a community apartment project, condominium project, planned development, stock cooperative, or combination thereof”; and “set[s] forth the name of the association and the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes.” (§§ 4135, 4250, subd. (a).) “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (§ 5975, subd. (c).) An award of attorney fees to the prevailing party is mandatory in such an enforcement action. (Champir, LLC v. Fairbanks Ranch Assn. (2021) 66 Cal.App.5th 583, 590; Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 Cal.App.5th 252, 263; Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1039.)

To determine whether appellants sought by their action to enforce the Association’s governing documents, and therefore were liable for attorney fees because they failed to do so, we examine the allegations of their complaint. (See Gause v. Pacific Gas & Electric Co. (1923) 60 Cal.App. 360, 367 [“the nature of the action must be determined from the allegations of the complaint”]; Vera v. REL-BC, LLC (2021) 66 Cal.App.5th 57, 65-66 [reviewing allegations of complaint to determine nature of action for limitations purposes].) The only express reference to the governing documents in the complaint is in a paragraph describing the Association as “a nonprofit mutual benefit association existing by and under the laws of the State of California, and . . . governed by the Davis-Stirling Act, the California Corporations Code, and the Association’s governing documents, including, without limitation, its Covenants, Conditions and Restrictions (`CC&R’s’), its Articles, its By-Laws, and its Community Election Rules as published in the [Association’s] Community Handbook. The foregoing are collectively referred to herein as the `Governing Laws and Rules.'” Later in the complaint appellants alluded to the governing documents by alleging they had repeatedly requested minutes of all board meetings from the Association “in accordance with the Governing Laws and Rules.” The complaint nowhere mentions section 5975; the charging allegations neither cite nor quote any provision of any governing document; the prayer for relief does not ask the court to enforce any provision of the governing documents; and no governing document or part thereof is attached to the complaint. We would expect to find such content in the complaint had appellants sought enforcement of the Association’s governing documents under section 5975. Its absence shows this case is not that type of enforcement action.

The content of the complaint instead shows appellants sued the Association for allegedly violating the OMA. The complaint is labeled one for “VIOLATIONS OF COMMON INTEREST DEVELOPMENT OPEN MEETING ACT [Civil Code §§ 4900, et seq.].” Its first paragraph states that appellants “seek[ ] declaratory and equitable relief, and statutory penalties against [the Association] for violations of the [OMA].” The charging allegations of the complaint quote many provisions of the OMA, and then go on to state facts showing how the Association violated those provisions. In particular, the paragraphs referencing the “Governing Laws and Rules,” which as noted include the governing statutes and documents, alleged the Association’s failure to provide the board meeting minutes as requested by appellants violated the OMA, not the governing documents. Appellants prayed for a judgment declaring the Association violated the OMA and specifying the number of violations; an injunction requiring the Association to comply with the OMA; and civil penalties, costs, and attorney fees as provided in the OMA. (See § 4955.) Hence, appellants’ action was plainly one to enforce the OMA, not the Association’s governing documents. (See Black’s Law Dict. (11th ed. 2019) p. 668 [defining “enforce” as “[t]o give force or effect to (a law, etc.); to compel obedience to”].)

In urging us to reach a contrary conclusion, the Association points to appellants’ participation in alternative dispute resolution as statutorily required before filing an “enforcement action,” certification of such participation in the complaint, and litigation of “enforcement issues” at trial as indicators that their action was one to enforce the governing documents. We are not persuaded.

The alternative dispute resolution requirements of the Davis-Stirling Act apply not only to actions to enforce the governing documents of a homeowners association, but also to actions to enforce the OMA. (§§ 5925, subd. (b) [defining “enforcement action”], 5930, subd. (a) [requiring alternative dispute resolution before filing enforcement action], 5950, subd. (a) [requiring party commencing enforcement action to file certificate regarding alternative dispute resolution efforts].) Appellants’ compliance with those requirements did not transform their action to enforce the OMA into one to enforce the governing documents.

Nor did such a transformation occur as a result of appellants’ litigation tactics. The questioning of the Association’s directors at trial about appellants’ landscaping plans, on which the Association relies for its characterization of the action, did not involve any governing document and was designed to show the Association violated the OMA when directors discussed matters in executive session that should have been discussed in a session open to all homeowners and conducted board meetings via private e-mails. Moreover, in determining the nature of the action, we find it significant that none of the governing documents were introduced at trial and that the trial court made no mention of them in its statement of decision. The court described the action as one alleging violations of the OMA and determined no such violations had occurred. The record thus shows the parties litigated and the court decided claims under OMA, not claims under the Association’s governing documents.

Because appellants sought to enforce the OMA, the provision of the OMA concerning costs and attorney fees governs the award in this case. (See Department of Forestry & Fire Protection v. LeBrock (2002) 96 Cal.App.4th 1137, 1141 [attorney fees must be “specifically authorized” by applicable statute]; Covenant Mutual Ins. Co. v. Young (1986) 179 Cal.App.3d 318, 321 [same].) Under that provision, “[a] member who prevails in a civil action to enforce the member’s rights pursuant to this article shall be entitled to reasonable attorney’s fees and court costs. . . . A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.” (§ 4955, subd. (b).) Construing the identically worded predecessor version (former § 1363.09, subd. (b)), the Court of Appeal concluded it authorizes the award of ordinary costs to a prevailing association in an action that is frivolous, unreasonable, or without foundation, but it does not authorize an award of attorney fees to the association in such an action. (That v. Alders Maintenance Assn. (2012) 206 Cal.App.4th 1419, 1427-1430; accord, Retzloff v. Moulton Parkway Residents’ Assn., No. One (2017) 14 Cal.App.5th 742, 748-749 (Retzloff).) Under this authority, the Association could not recover attorney fees from appellants.[4]

In sum, the trial court erred by characterizing appellants’ action as one to enforce the Association’s governing documents and awarding the Association attorney fees under section 5975, subdivision (c). As we have explained, appellants sought to enforce the OMA, which does not allow the Association to recover attorney fees from appellants. We therefore reverse the order granting the Association’s motion for attorney fees.

  1. Costs

We now turn to the trial court’s award of costs to the Association. A homeowners association that prevails in an action alleging violations of the OMA “shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.” (§ 4955, subd. (b).) In opposition to appellants’ motion to strike or tax costs, the Association argued the action was unreasonable and without foundation because appellants had unclean hands that barred the action, rejected a settlement offer “which included everything [they] were seeking,” opposed the motion for summary judgment even though the Association was willing to concede limited liability to end the litigation, and kept on changing the number of OMA violations for which they sought civil penalties. The trial court found appellants'”pursuit of litigation was unreasonable at multiple stages” based on their unclean hands and rejection of a reasonable settlement offer, and denied their motion to strike or tax costs. The court erred in so doing, as we explain below.

Neither the OMA nor any published opinion defines “frivolous,” “unreasonable,” or “without foundation” as those terms are used in section 4955, subdivision (b). Such terms, however, are used in other cost-shifting statutes that courts have construed. For example, in Smith, supra, 188 Cal.App.4th 1, the Court of Appeal construed Business and Professions Code section 809.9, which authorizes an award of costs and attorney fees to the prevailing party “if the other party’s conduct in bringing, defending, or litigating the suit was frivolous, unreasonable, without foundation, or in bad faith.” The Court of Appeal adopted the view that “a matter is frivolous if any reasonable attorney would agree it is completely without merit in the sense that it lacks legal grounds, lacks an evidentiary showing, or involves an unreasonable delay.” (Smith, at p. 33, italics added; see Retzloff, supra, 14 Cal.App.5th at pp. 752-753 [adopting same definition for “frivolous” as used in § 5235, subd. (c)].) The Court of Appeal held an action is “without foundation” if there is no direct or circumstantial evidence supporting the plaintiff’s factual assertions, or if there is no statute, regulation, case law, or other legal authority supporting the plaintiff’s legal contentions. (Smith, at pp. 30-31.) For the term “unreasonable,” the Court of Appeal adopted the “any-reasonable-attorney standard,” which asks “whether any reasonable attorney would have thought the claim tenable” based on “the facts known to the plaintiff when [it] filed or maintained the action.” (Id. at p. 32.)[5] The terms “frivolous,” “unreasonable,” and “without foundation” partially overlap, since to determine whether an action may be described by any one of them requires the court to assess the grounds underlying the plaintiff’s factual or legal positions and the reasoning process linking those grounds to the ultimate conclusions advocated by the plaintiff. (Smith, at p. 33.) To decide whether appellants’ action qualifies as any of the quoted terms, we shall apply the Smith court’s definitions.

We first consider whether appellants’ unclean hands made their prosecution of the action “unreasonable,” as the Association urged and the trial court found. The trial court’s ruling that the unclean hands doctrine barred the action does not necessarily lead to the conclusion that the “`”action must have been unreasonable or without foundation.”‘” (Pollock, supra, 11 Cal.5th at p. 951 [cautioning against such “`”hindsight bias”‘” when awarding costs].) We need not delve deeply into the unclean hands doctrine, nor decide definitively whether the trial court correctly applied the doctrine, to decide whether appellants’ action was “unreasonable” within the meaning of section 4955, subdivision (b). The applicability of the unclean hands doctrine to appellants’ action was sufficiently debatable that a reasonable attorney could have concluded the doctrine did not bar the action.

To decide whether to apply the unclean hands doctrine, which prevents a plaintiff from profiting from its own inequitable conduct in a transaction by barring relief on a directly related cause of action (DD Hair Lounge, LLC v. State Farm General Ins. Co. (2018) 20 Cal.App.5th 1238, 1246; Camp v. Jeffer, Mangels, Butler & Marmaro (1995) 35 Cal.App.4th 620, 638-639), one factor courts consider is analogous case law (Jay Bharat Developers, Inc. v. Minidis (2008) 167 Cal.App.4th 437, 445-446; Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, 1060). This court and others have held the unclean hands doctrine cannot be applied to defeat claims under statutes designed to protect one class of persons from the activities of another. (See, e.g., East West Bank v. Rio School Dist. (2015) 235 Cal.App.4th 742, 752; Mendoza v. Ruesga (2008) 169 Cal.App.4th 270, 279; Ticconi v. Blue Shield of California Life & Health Ins. Co. (2008) 160 Cal.App.4th 528, 544.) The OMA may qualify as that type of statute in that it protects homeowners by prohibiting the board of directors of the homeowners association from holding secret meetings at which it takes action on matters directly affecting the homeowners and their community. (See §§ 4910, subd. (a), 4925; Golden Eagle, supra, 19 Cal.App.5th at p. 416; Damon, supra, 85 Cal.App.4th at p. 475.) It was therefore at least arguable under existing case law that as a matter of law the unclean hands doctrine did not bar appellants’ claims for violations of the OMA. (See East West Bank, at p. 752 [unclean hands doctrine did not apply as a matter of law when no analogous case law supported application]; Smith, supra, 188 Cal.App.4th at p. 41 [position is arguable when consistent with language in some cases].) Because a reasonable attorney could have concluded the claims were not barred, appellants’ decision to pursue them was not “unreasonable” (or “frivolous” or “without foundation”) within the meaning of section 4955, subdivision (b). (Smith, at pp. 30-33 [defining quoted terms].)

We next consider whether appellants’ rejection of the Association’s settlement offer (see fn. 1, ante) shows their continued pursuit of the action was “unreasonable” (§ 4955, subd. (b)), as the trial court found. Again, we must resist the distorting effect of “`”hindsight bias”‘” and not conclude that decision “`”must have been unreasonable or without foundation”‘” simply because appellants recovered nothing at trial when they could have settled for $25,000.01 plus costs and attorney fees. (Pollock, supra, 11 Cal.5th at p. 951.) Rejection of a reasonable settlement offer (i.e., one within the range of reasonably possible trial results) may indicate bad faith (i.e., unreasonable litigation conduct). (Covert v. FCA USA, LLC (2022) 73 Cal.App.5th 821, 834 (Covert); Pinto v. Farmers Ins. Exchange (2021) 61 Cal.App.5th 676, 688.) Any assessment of the reasonableness of the offer must take into account the information known or available to the parties at the time of the offer. (Covert, at p. 834; Arno v. Helinet Corp. (2005) 130 Cal.App.4th 1019, 1025.)

When the Association made its offer, there was no case law on whether e-mail exchanges of the type of which appellants complained constituted board meetings in violation of the OMA, and if so, how many violations occurred in the exchanges. The parties’ positions on those issues varied all the way through the end of trial. The amount of civil penalties, if any, appellants were likely to recover was thus uncertain. Moreover, civil penalties were not the only remedy appellants sought; they also requested declaratory and injunctive relief. The Association did not agree to any such relief in the settlement offer, which therefore did not “include[ ] everything [a]ppellants were seeking,” as the Association erroneously asserts. To the contrary, the offer required appellants to release their claims for declaratory and injunctive relief, as well as any other claims “that could have been asserted by [appellants] in relation to the allegations of the Complaint.” “Requiring resolution of potential unfiled claims not encompassed by the pending action renders the offer incapable of valuation.” (Ignacio v. Caracciolo (2016) 2 Cal.App.5th 81, 87.)

Given the difficulty in valuation and the uncertainty in the law, it is unclear whether the Association’s settlement offer was “`within the “range of reasonably possible results” at trial.'” (Covert, supra, 73 Cal.App.5th at p. 834.) We thus cannot say that no reasonable attorney would have rejected the offer, so that to have done so was “unreasonable” (or “frivolous” or “without foundation”) within the meaning of section 4955, subdivision (b). (Smith, supra, 188 Cal.App.4th at pp. 30-33 [defining quoted terms].)

The Association offers grounds in addition to those relied on by the trial court to affirm the award of costs. It argues appellants’ action was “frivolous, unreasonable, or without foundation” (§ 4955, subd. (b)) because appellants: (1) failed to produce any evidence to support their claim for injunctive relief, which was summarily adjudicated against them; (2) opposed the Association’s attempt to resolve the matter by motion for summary judgment by conceding liability for 10 civil penalties; and (3) kept on changing their position on the number of OMA violations to prolong the litigation and to deplete the Association’s resources. We are not persuaded.

We disagree with the Association’s contention that the adverse summary adjudication ruling shows appellants’ request for injunctive relief was “unreasonable and without foundation.” In opposition to the Association’s motion for summary judgment/adjudication, appellants presented evidence the Association had failed to produce minutes for certain board meetings, and argued the failure violated the OMA and warranted injunctive relief. The OMA requires the production of minutes of board meetings and authorizes injunctive relief. (§§ 4950, subd. (a), 4955, subd. (a).) Although the trial court ruled against appellants on the ground they had not met their burden to establish the threat of future harm (see, e.g., Connerly v. Schwarzenegger (2007) 146 Cal.App.4th 739, 751 [“Without a threat of present or future injury, no injunction can lie.”]), their request for injunctive relief was not so lacking in legal or evidentiary support that no reasonable attorney would have pursued it. (See Smith, supra, 188 Cal.App.4th at pp. 30-33 [discussing meanings of “unreasonable” and “without foundation”].)

We also disagree that appellants’ refusal to accept the number of civil penalties the Association was willing to concede to resolve the case by summary judgment and their later changes in position on the number of penalties they were seeking justify the award of costs. The trial court denied the summary judgment motion on the grounds that appellants had raised triable issues of fact on the number of OMA violations for which a penalty could be imposed and the OMA was ambiguous on whether a separate penalty could be awarded to each appellant for each violation. That denial precludes a finding that no reasonable attorney would have thought appellants’ position tenable. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 824; Clark v. Optical Coating Laboratory, Inc. (2008) 165 Cal.App.4th 150, 183-185.) After denial of the summary judgment motion, the parties continued to litigate the case on the assumption the directors’ e-mail exchanges challenged in the complaint violated the OMA. Not until the end of trial, in response to questioning by the court, did the Association take the position the exchanges were not board meetings within the meaning of the OMA. Given the parties’ shared erroneous assumption, the number of e-mails involved, and the lack of case law on point, appellants’ changing position on the number of violations subject to a civil penalty was not so lacking in factual or legal support that it was “frivolous, unreasonable, or without foundation.” (§ 4955, subd. (b); see Smith, supra, 188 Cal.App.4th at pp. 30-33 [defining quoted terms].)

The Association also argues it is entitled to recover costs under Code of Civil Procedure section 998, subdivision (c)(1), which requires a plaintiff that rejects a defendant’s settlement offer and does not obtain a more favorable judgment to pay the defendant’s postoffer costs. We disagree. The cost-shifting provisions of that statute do not apply when a more specific cost-shifting statute applies to the claims at issue. (Cruz v. Fusion Buffet, Inc. (2020) 57 Cal.App.5th 221, 240-241; Arave v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (2018) 19 Cal.App.5th 525, 551-553.) Under the OMA, “[a] prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.” (§ 4955, subd. (b).) Because we have determined appellants’ action does not meet that description, the Association is not entitled to costs.

In sum, we conclude the OMA precluded the Association from recovering any costs from appellants. We therefore need not, and do not, decide whether the particular items appellants have challenged (i.e., court reporter fees and “other” costs) were recoverable. We reverse the order denying appellants’ motion to strike or tax costs, and direct the trial court on remand to deny all costs and strike the amended judgment awarding costs.

III.

DISPOSITION

The judgment is affirmed. The order denying appellants’ motion to strike or tax costs is reversed. The order granting the Association’s motion for attorney fees is reversed. The matter is remanded to the trial court with directions: (1) to vacate the order denying appellants’ motion to strike or tax costs, and to enter a new order granting the motion and denying all costs; (2) to vacate the order granting the Association’s motion for attorney fees, and to enter a new order denying the motion; and (3) to strike the amended judgment. In the interest of justice, the parties shall bear their own costs on appeal.

McCONNELL, P. J. and DATO, J., concurs.


[1] On October 10, 2019, the Association offered, “[i]n full settlement, release and dismissal of the Complaint . . ., including the settlement of all claims asserted or that could have been asserted by [appellants] in relation to the allegations of the Complaint,” to pay appellants $25,000.01 and their “reasonable attorney’s fees and taxable costs” incurred in the action up to the date of the offer. The offer stated it was an offer to compromise under Code of Civil Procedure section 998 and was “subject to the terms and conditions” of the statute. Under the statute, “[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment . . ., the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.” (Code Civ. Proc., § 998, subd. (c)(1).) Such costs include attorney fees when authorized by contract or statute. (Id., § 1033.5, subd. (a)(10).) Appellants allowed the Association’s offer to lapse.

[2] If, as appellants contend, cyberspace qualifies as a “place” within the meaning of section 4090, subdivision (a), because the directors “met” there “to exchange ideas and opinions on [Association] items of business” by sending e-mails to one another, it is unclear how the Association could have discharged its obligation under the OMA to “give notice of the time and place of a board meeting at least four days before the meeting.” (§ 4920, subd. (a).) Appellants provide no answer in their briefs.

[3] As pertinent to appellants’ contention, the cited statute authorizes a director of a corporation to participate in a board meeting “through use of electronic transmission by and to the corporation, other than conference telephone and electronic video screen communication,” provided the director “can communicate with all of the other directors concurrently” and “is provided the means of participating in all matters before the board, including, without limitation, the capacity to propose, or to interpose an objection to, a specific action to be taken by the corporation.” (Corp. Code, § 7211, subd. (a)(6).) This statute does not apply to meetings of the board of directors of a homeowners association. The OMA provides, “Notwithstanding Section 7211 of the Corporations Code,” the board “shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail,” except for an emergency board meeting. (§ 4910, subd. (b).) The use of the “notwithstanding” phrase expresses a legislative intent to have the OMA provision override the Corporations Code provision that would otherwise apply. (Ni v. Slocum (2011) 196 Cal.App.4th 1636, 1647.)

[4] In the trial court, the Association sought attorney fees under section 4955, subdivision (b), on the ground appellants’ action was “unreasonable” and “without foundation.” The court did not award fees on that ground, which the Association has abandoned on appeal. The court did, however, limit the award to fees the Association incurred after appellants rejected the Code of Civil Procedure section 998 settlement offer (see fn. 1, ante), apparently because the court found appellants’ continued litigation thereafter was “unreasonable.” Code of Civil Procedure “section 998 does not grant greater rights to attorney’s fees than those provided by the underlying statute,” but “merely expands the group of those who are treated as prevailing parties and who therefore may be entitled to attorney’s fees as prevailing parties under the relevant statute.” (Mangano v. Verity, Inc. (2008) 167 Cal.App.4th 944, 951; see Ford Motor Credit Co. v. Hunsberger (2008) 163 Cal.App.4th 1526, 1532 [Code Civ. Proc., § 998 “does not independently create a statutory right to attorney fees”].) Because the relevant statute (§ 4955, subd. (b)) gave the Association no right to recover attorney fees from appellants, Code of Civil Procedure section 998 did not authorize the fee-shifting ordered by the court.

[5] We reject appellants’ contention that costs could be awarded to the Association only if the trial court found the entire action was unreasonable when it was filed. Our Supreme Court has held that when a defendant may recover costs for defending a “`frivolous, unreasonable, or groundless'” action, recovery is available if “the court finds the action was objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so.” (Williams v. Chino Valley Independent Fire Dist. (2015) 61 Cal.4th 97, 101, 115, italics added; accord, Pollock v. Tri-Modal Distribution Services, Inc. (2021) 11 Cal.5th 918, 951 (Pollock).) As the Smith court implicitly recognized, an action that was not unreasonable when filed may become so later if factual discoveries or legal developments make the action untenable, because the court must “analyz[e] the facts known to the plaintiff when he or she filed or maintained the action” to determine whether it was unreasonable. (Smith, supra, 188 Cal.App.4th at p. 32, italics added; cf. Zamos v. Stroud (2004) 32 Cal.4th 958, 970 [“continuing to prosecute a lawsuit discovered to lack probable cause” is unreasonable and subjects attorney to liability for malicious prosecution].

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Email Discussions Between HOA Board Members are not “Meetings”
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Lake Lindero Homeowners Association, Inc. v. Barone

(2023) 89 Cal.App.5th 834

[Board Recall; Court Determination of Validity] Corporations Code section 7616 may be used by a court to validate the result of an election to recall an HOA’s Board.

Christopher T. Barone, in pro. per., for Defendant and Appellant.
Kulik Gottesman Siegel & Ware, Thomas M. Ware II and Justin Nash for Plaintiffs and Respondents.

OPINION

EGERTON, J. —

Defendant Christopher T. Barone appeals an order under Corporations Code section 7616 confirming the validity of an election removing the former board of the Lake Lindero Homeowners Association, Inc. (the Association), and electing a new board of directors.[1] Barone makes 838*838 two principal contentions: (1) the election was not valid because it contravened the Association’s bylaws and statutory provision governing board recall elections, and (2) section 7616 did not authorize plaintiffs’ action or the trial court’s order validating the recall election.[2] We reject both contentions and affirm.

839*839 FACTS AND PROCEDURAL HISTORY

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

  1. The Recall and Full Board Election

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

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

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

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

The board did not fix a time for the special meeting or give notice of the meeting to the Association’s members within 20 days of receiving the petition, as is required under section 7511, subdivision (c).[4] When the 20-day 840*840 statutory period expired, Allan, in his capacity as one of the petitioners, sent notice of the special meeting to the Association’s 459 members.

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

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

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

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

At the December 23, 2019 meeting, Murphy determined the required quorum of 25 percent of the membership (115 of the 459 members) had been 841*841 met. (See fn. 7, ante.) Of the 190 ballots received, Murphy counted 156 votes in favor of recalling the entire board.

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

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

  1. The Complaint

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

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

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

  1. The Statement of Decision

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

The court found: The petitioners properly presented the petition for full board recall to the former board; the former board unreasonably violated its duties under the Association’s bylaws and governing statutory law to set a special meeting on the recall election after receipt of the petition; the 842*842 petitioners properly conducted the recall election when the former board failed to do so; the LWV properly executed its duties as inspector of elections and did not prejudice or demonstrate bias against any interested party; and the election was conducted in accordance with the Association’s bylaws and governing statutory law, including provisions prescribing a majority vote and quorum requirements. In making these findings, the court determined defense witnesses testifying to alleged bias or improprieties in the petition and voting process were “not credible.”

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

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

DISCUSSION

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

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

Because the duty of every judicial tribunal is “`”`to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions … [,] [i]t necessarily follows that when … an event occurs which renders it impossible for [the] court, if it should decide the case in favor of [the appellant], to grant him any effectual relief whatever, the court will not proceed to a formal judgment….’ [Citations.]” [Citation.] The pivotal question in determining if a case is moot is therefore whether the court can grant the [appellant] any effectual relief. [Citations.] If events have made such relief impracticable, the controversy has become “overripe” and is 843*843 therefore moot. [Citations.] [¶] … When events render a case moot, the court, whether trial or appellate, should generally dismiss it.'” (Parkford Owners for a Better Community v. County of Placer (2020) 54 Cal.App.5th 714, 722 [268 Cal.Rptr.3d 653].)

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

Eye Dog Foundation is instructive. In that case, the plaintiff sought injunctive relief and a declaratory judgment to invalidate provisions of the Business and Professions Code covering “the subject `Guide Dogs for the Blind,'” the enforcement of which had led to the suspension of the plaintiff’s business license to train seeing eye dogs. (Eye Dog Foundation, supra, 67 Cal.2d at p. 540.) Several months after the trial court entered a judgment upholding all but one section of the challenged provisions, the regulatory state board formally reinstated the plaintiff’s license after the plaintiff took action to comply with the challenged statutes. (Id. at pp. 540-541.) Recognizing that the pending appeal could no longer result in effective relief enjoining 844*844 enforcement of the challenged statutes, our Supreme Court nonetheless held the appeal was not moot because the plaintiff “not only sought injunctive but declaratory relief, to wit, a declaratory judgment that the subject legislation is unconstitutional on its face and as applied to plaintiff’s operation,” such that there “remain[ed] material questions for the court’s determination” on appeal. (Id. at p. 541.) As our high court explained, an exception to the general mootness doctrine “has been applied to actions for declaratory relief” in such circumstances “upon the ground that the court must do complete justice once jurisdiction has been assumed [citation], and the relief thus granted may encompass future and contingent legal rights.” (Ibid.)

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

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

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

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

845*845 It is undisputed that the recall election was approved by a vote of 156 in favor of recalling the entire board, with 190 ballots received out of 459 total membership votes. Barone contends this was insufficient to approve the recall under article VI, section 3 of the Association’s bylaws, which provides: “The entire Board of Directors or any individual Director may be removed from office with or without cause at any time by a vote of the majority of the votes held by the entire membership of record at any regular or special meeting of members.” (Italics added.) Because a majority of the 459 votes held by the entire membership of record is 230 votes, Barone contends the trial court erred in declaring the recall election valid.

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

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

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

846*846 Section 7151, subdivision (e) provides: “The bylaws may require, for any or all corporate actions (except as provided in paragraphs (1) and (2) of subdivision (a) of Section 7222 …) the vote of a larger proportion of, or all of, the members or the members of any class, unit, or grouping of members or the vote of a larger proportion of, or all of, the directors, than is otherwise required by this part.”

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

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

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

Barone does not dispute the foregoing facts. Rather, he argues the 25 percent quorum provision in the Association’s bylaws “conflict[s]” with sections 7222 and 5034, which, he emphasizes, “contain[] no language about a `reduced quorum.'” Contrary to Barone’s premise, neither section 5034 nor 847*847 section 7222 governs minimum quorum requirements for a nonprofit mutual benefit corporation. The relevant statute is section 7512.

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

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

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

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

Barone’s arguments raise questions of statutory interpretation subject to our independent de novo review. (Committee to Save the Beverly Highlands Homes Assn. v. Beverly Highlands Homes Assn. (2001) 92 Cal.App.4th 1247, 848*848 1261 [112 Cal.Rptr.2d 732].) “In the construction of statutes, the primary goal of the court is to ascertain and give effect to the intent of the Legislature. [Citations.] The court looks first to the language of the statute; if clear and unambiguous, the court will give effect to its plain meaning.” (Id. at p. 1265.) “The words used should be given their usual, ordinary meanings and, if possible, each word and phrase should be given significance. [Citations.] The words used `must be construed in context, and statutes must be harmonized, both internally and with each other, to the extent possible.'” (Ibid.)

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

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

We similarly conclude the language of section 7616 is broad enough to provide a procedural vehicle for vindicating plaintiffs’ recall rights under the Association’s bylaws, even absent an express reference to recall elections in the statute’s text. Article VI, section 3 of the bylaws authorizes a recall of the entire board of directors and makes the election of a new board part and 849*849 parcel of the recall process: “The entire Board of Directors or any individual Director may be removed from office with or without cause at any time by a vote … at any regular or special meeting of members duly called, and a successor or successors may then and there be elected to fill the vacancy or vacancies thus created.[13] (Italics added.) In adjudicating plaintiffs’ claim under section 7616 to enforce this provision of the bylaws, the statute not only unambiguously directed the trial court to “determine the validity of [the new board’s] election” (§ 7616, subd. (a)), but also authorized the court, “in conformity with the [recall provision of the] bylaws …, [to] determine the person entitled to the office of director … and [to] direct such other relief as may be just and proper” (id., subd. (d)). Because the trial court could not determine the validity of the election or “the person entitled to the office of director” without adjudicating the validity of the underlying recall election, it was “just and proper” for the court to enter an order under section 7616 confirming the recall election was valid. (§ 7616, subd. (d); see Kaplan, supra, 98 Cal.App.4th at p. 721.)

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

As we have said and as the trial court correctly recognized, section 7616, subdivision (d) authorizes the court to “direct such other relief as may be just and proper” in connection with confirming the validity of a board election. Here, the complaint alleged Barone, in his role as CEO and with the sanction of a majority of the former board, was engaged in frustrating the 850*850 new board’s efforts to fulfill its duties under the Association’s bylaws. Having confirmed the validity of the new board’s election, the statute plainly authorized the trial court to enter an order confirming Barone had no authority to act on behalf of the Association, as was “just and proper” under the Association’s bylaws. (§ 7616, subd. (d).) Plaintiffs properly named Barone as a defendant in their section 7616 claim.[15]

DISPOSITION

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Fowler v. Golden Pacific Bancorp, Inc.

(2022) 80 Cal.App.5th 205

[Director Inspection Rights; Limited in Extreme Cases; A director’s absolute record inspection rights may be limited only in extreme cases where inspection would produce an absurd result.

Law Office of Stephanie J. Finelli and Stephanie J. Finelli for Defendant and Appellant.
Tisdale & Nicholson and Michael D. Stein for Plaintiff and Respondent.

OPINION

KRAUSE, J.—

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

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

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

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

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

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

FACTUAL AND PROCEDURAL BACKGROUND

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

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

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

In September 2018, two months after Bancorp filed the malpractice lawsuit, Fowler delivered to Bancorp a written demand to inspect and copy the following books and records pursuant to section 1600 et seq.:

  1. A list of the names, addresses, e-mail addresses, and holdings of all Bancorp shareholders;
  2. A breakdown of the expense and income balance sheet items labeled “Other” for Bancorp and its wholly owned subsidiary bank;
  3. A breakdown of where on the 2017 and 2018 consolidated financial statements the BillFloat settlement payment was booked, and where KMTG’s legal fees for 2016, 2017, and 2018 were booked;
  4. Any change in control/severance/golden parachute agreements for Bancorp-affiliated parties;
  5. Any resolutions approving change in control agreements or an increase in director fees and/or bonuses for 2016, 2017, and 2018;
  6. Any documents evidencing payment of the personal legal fees of Bancorp president and chief executive officer, Virginia Varela, in 2016, 2017, and 2018;
  7. The loan file pertaining to the Axis Energy SBA loan; and
  8. The bank’s accounting books and records, and meeting minutes for its board and committees from September 2017 through the date of the request.

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

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

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

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

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

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

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

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

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

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

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

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

DISCUSSION

I

Mootness

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

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

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

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

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

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

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

II

Bancorp’s Request for Additional Briefing

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

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

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

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

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

III

Fowler’s Right To Inspect Corporate Records

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

[218] A. The scope of a director’s inspection rights

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

DISPOSITION

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

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

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

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

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

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

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

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

 

Artus v. Gramercy Towers Condominium Assn. (2022)

(2022) 76 Cal.App.5th 1043

[Attorney’s Fees; Prevailing Party] Nether party achieved litigation objective to warrant the status as the prevailing party entitled to its attorneys’ fees.

Attorney for Plaintiff and Appellant Kazuko Artus: Millstein & Associates, David J. Millstein, San Francisco, Owais Bari;
Attorney for Defendant and Appellant Gramercy Towers Condominium Association: Angius & Terry LLP, Cang N. Le, Riverside, Joshua D. Mendelsohn, Westlake Village; Tinnelly Law Group, Cang N. Le, Riverside, Joshua D. Mendelsohn, Westlake Village.

OPINION

Richman, Acting P. J.

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

BACKGROUND

The General Setting

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

The governing documents of the GTCA consist of: (a) First Restated Articles of Incorporation filed March 20, 2008, as amended in 2010; (b) First Restated Bylaws executed March 11, 2008, and various Amendments; and (c) Declaration of Covenants, Conditions and Restrictions executed February 29, 2008. GTCA also has operating rules and guidelines adopted by the board of directors.

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

The Lawsuit Here

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

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

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

GTCA Amends the Rules and Moves for Summary Judgment

In 2018, the GTCA revoked the 2016 Alternative Election Rules, and in their place adopted Restated and Amended Election Rules (2018 Election Rules). At the same time the board rescinded the Sale and Leasing Guidelines that had been in place (usually referred to as the Alotte Guidelines) and adopted a new set of “Sale and Leasing Guidelines.”

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

The Motions for Attorney Fees

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

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

Both sides sought over $300,000 in attorney fees, in pleadings and documents that can only be described as voluminous: from September 2 through October 18, the motions, memoranda, declarations, and exhibits in support of and opposition to the motions totaled 1867 pages!

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

Both sides filed their charts and their further positions based on those charts, adding an additional 217 pages of material filed between May 19 and June 5, 2020. So, over 2000 pages of material had been presented to Judge Kahn when the motions came on for hearing on June 5, a lengthy hearing that generated a reporter’s transcript of 58 pages. And one reading that transcript—with Judge Kahn’s questions, his comments, and his colloquy with counsel—cannot but be impressed by the depth and breadth of Judge Kahn’s understanding of the litigation.

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

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

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

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

DISCUSSION: Dr. Artus’s Appeal

Dr. Artus asserts two fundamental arguments on appeal, that: (1) Judge Kahn erred in finding she was not a prevailing party, and (2) she was entitled to attorney fees under Code of Civil Procedure section 1021.5.1 Both arguments are based on a claimed standard of review that is wrong, and we thus begin with the standard of review.

The Standard of Review

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

[1] [2] [3]The relevant cases hold that the standard of review is abuse of discretion.  Rancho Santa Fe Assn. v. Dolan-King (2004) 115 Cal.App.4th 28, 8 Cal.Rptr.3d 614 ( Rancho Santa Fe) is illustrative, a case involving the predecessor to the very statute involved here: “Ordinarily, an award of attorney fees under a statutory provision, such as  [Civil Code] section 1354, subdivision (f), is reviewed for abuse of discretion.” ( Rancho Santa Fe, at p. 46, 8 Cal.Rptr.3d 614.) As an earlier case put it, a court’s ruling on who is the prevailing party “should be affirmed on appeal absent an abuse of discretion.” ( Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574, 26 Cal.Rptr.2d 758 ( Heather Farms).) As we ourselves have put it, “the trial ‘ “ ‘court is given wide discretion in determining which party has prevailed ….’ ” [Citation.]’ ” ( Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158, 70 Cal.Rptr.2d 769.)

*4 The same standard of review applies to Civil Code section 5145. ( Rancho Mirage Country Club Homeowners Association v. Hazelbaker (2016) 2 Cal.App.5th 252, 260, 206 Cal.Rptr.3d 233 [suggesting that the prevailing party inquiry is the same for all Davis-Sterling Act fee provisions]; see generally  Artus I, supra, 19 Cal.App.5th at p. 944, 228 Cal.Rptr.3d 496.) And also for fee orders in section 1021.5 cases. ( Karuk Tribe of Northern California v. California Regional Water Quality Control Bd., North Coast Region (2010) 183 Cal.App.4th 330, 363, 108 Cal.Rptr.3d 40 ( Karuk) [“ ‘ “normal standard of review is abuse of discretion” ’ ”].)

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

(1) “ ‘The analysis of who is a prevailing party under the fee-shifting provisions of the [Davis-Sterling] Act focuses on who prevailed “on a practical level” by achieving its main litigation objectives.’ ( Rancho Mirage Country Club Homeowners Association v. Hazelbaker, supra, 2 Cal.App.5th at p. 260, 206 Cal.Rptr.3d 233 quoting  Heather Farms, supra, 21 Cal.App.4th 1568, 26 Cal.Rptr.2d 758)”; and

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

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

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

Dr. Artus Has Not Demonstrated an Abuse of Discretion

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

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

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

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

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

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

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

Having defined the four main litigation objectives, Judge Kahn then went on to analyze them, one-by-one, to conclude that Dr. Artus had prevailed in only one, holding as follows:

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

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

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

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

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

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

Dr. Artus Has Not Demonstrated the Right to Attorney Fees under Code of Civil Procedure section 1021.5

*7 [5]As noted, Dr. Artus also sought attorney fees based on section 1021.5. Judge Kahn rejected it, concluding that Dr. Artus was not a “successful party” under that section, and for the “further reason [that she] failed to show, as required for a [section] 1021.5 fees award, that this lawsuit resulted in a ‘significant benefit’ to the ‘general public or a large class of persons.’ ” As he went on to explain, “Her one real win—which requires GTCA to incur greater effort in preparing its notice materials for proposed rules changes—is of questionable significance to the vast majority of GTCA members and will likely result in higher assessments to GTCA members to pay for the increased costs to ‘dot every i and cross every t’ in the notice materials to avoid disputes from Dr. Artus. Indeed, crediting the declarations of GTCA’s staff and volunteers it appears that few of the governance disputes raised by Dr. Artus are of concern to other GTCA members. Dr. Artus has made no contrary showing.”

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

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

In  Karuk, supra, 183 Cal.App.4th 330, 108 Cal.Rptr.3d 40, we discussed at length section 1021.5 and its operation, included within which was this explanation how an award made pursuant to this statute is reviewed:

[6] [7] [8]“ ‘ “The Legislature adopted section 1021.5 as a codification of the private attorney general doctrine of attorney fees developed in prior judicial decisions…. [T]he private attorney general doctrine ‘rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible.’ Thus, the fundamental objective of the doctrine is to encourage suits enforcing important public policies by providing substantial attorney fees to successful litigants in such cases.” [Citation.]’ ” ( Karuk, supra, 183 Cal.App.4th at p. 362, 108 Cal.Rptr.3d 40.)

[9] [10] [11]“Put another way, courts check to see whether the lawsuit initiated by the plaintiff was ‘demonstrably influential’ in overturning, remedying, or prompting a change in the state of affairs challenged by the lawsuit. (E.g.,  Folsom v. Butte County Assn. of Governments (1982) 32 Cal.3d 668, 687, 186 Cal.Rptr. 589, 652 P.2d 437;  RiverWatch v. County of San Diego Dept. of Environmental Health (2009) 175 Cal.App.4th 768, 783, 96 Cal.Rptr.3d 362;  Lyons v. Chinese Hospital Assn. (2006) 136 Cal.App.4th 1331, 1346, fn. 9, 39 Cal.Rptr.3d 550.) ‘ “Entitlement to fees under [section] 1021.5 is based on the impact of the case as a whole.” ’ ( Punsly v. Ho (2003) 105 Cal.App.4th 102, 114, 129 Cal.Rptr.2d 89, quoting what is now Pearl, Cal. Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2008) § 4.11, p. 100.) As for what constitutes a ‘significant benefit,’ it ‘may be conceptual or doctrinal, and need not be actual and concrete, so long as the public is primarily benefited.’ ( Planned Parenthood v. Aakhus (1993) 14 Cal.App.4th 162, 171, 17 Cal.Rptr.2d 510.)

*8 “Thus, a trial court which grants an application for attorney fees under section 1021.5 has made a practical and realistic assessment of the litigation and determined that (1) the applicant was a successful party, (2) in an action that resulted in (a) enforcement of an important right affecting the public interest and (b) a significant benefit to the general public or a large class of persons, and (3) the necessity and financial burden of private enforcement of the important right make an award of fees appropriate.

[12] [13]“ ‘ “On review of an award of attorney fees … the normal standard of review is abuse of discretion. However, de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of attorney fees … have been satisfied amounts to statutory construction and a question of law.” ’ ( Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175, 39 Cal.Rptr.3d 788, 129 P.3d 1, quoting  Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142, 118 Cal.Rptr.2d 569.)” ( Karuk, supra, 183 Cal.App.4th at p. 363, 108 Cal.Rptr.3d 40.)

Applying those rules, we went on in  Karuk to reverse an award of $138,000 in attorney fees, concluding that three of the statutory requisites to an award under section 1021.5 were absent. ( Karuk, at p. 364, 108 Cal.Rptr.3d 40.) Likewise here.

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

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

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

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

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

Dr. Artus argues that partial or interim success is enough for an award of attorneys’ fees under section 1021.5, citing to  Bowman, supra, 131 Cal.App.4th at p. 178, 31 Cal.Rptr.3d 447 and  La Mirada, supra, 22 Cal.App.5th at p. 1160, 232 Cal.Rptr.3d 338. To the contrary, as Dr. Artus herself knows, she has already failed on a similar argument in  Artus I, supra, 19 Cal.App.5th at p. 927, 228 Cal.Rptr.3d 496, where Division One noted the “well-established principles that fees and costs are ordinarily not granted for interim success, and that the prevailing party is determined, and fees and costs awarded, at the conclusion of the litigation.”

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

DISCUSSION: GTCA’s Appeal

GTCA Has Not Shown an Abuse of Discretion

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

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

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

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

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

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

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

“The three cases cited by GTCA to support its position that it prevailed in this lawsuit are readily distinguishable. In  Almanor [Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 201 Cal.Rptr.3d 268] the determination that a homeowners’ association was the prevailing party came after a trial where the parties fully litigated the claims and cross-claims of both parties. In  Salehi v. Surfside III Condominium Owners’ Association (2011) 200 Cal.App.4th 1146, 132 Cal.Rptr.3d 886 the court held that the defendant homeowners’ association was a prevailing party because the plaintiff dismissed his claims on the eve of trial due to the unavailability of a witness without seeking a continuance. In  Villa De La Palmas Homeowners Association [v. Terifaj] (2004) 33 Cal.4th 73, 14 Cal.Rptr.3d 67, 90 P.3d 1223 a plaintiff homeowners’ association was the prevailing party because it obtained an injunction which achieved its main litigation objective. Unlike this lawsuit, in none of the cases relied on by GTCA did the prevailing party association take any action outside the lawsuit, unilateral or otherwise, that precipitated dismissal of its member’s claims based on mootness or any similar ground.[3]

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

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

DISPOSITION

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

We concur:
Stewart, J.
Mayfield, J.*

Footnotes

*    Superior Court of Mendocino County, Judge Cindee Mayfield, sitting as assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

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

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

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

Brown v. Montage at Mission Hills, Inc.

(2021) 68 Cal.App.5th 124

[Rent Restrictions; Short-term Rentals] A restriction on short-term rentals is a “prohibition” within the meaning of Civil Code section 4740 and is enforceable only against owners who purchased properties after the restriction was in effect.

APPEAL from the Superior Court of Riverside County, Super. Ct. No. PSC1801783, Kira L. Klatchko, Judge. Reversed.

Slovak Baron Empey Murphy & Pinkney, Shaun M. Murphy and David A. Smith for Plaintiff and Appellant.
Fiore, Racobs & Powers and Julie R. Balbini for Defendant and Respondent.

OPINION

RAPHAEL, J.

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

I. FACTUAL AND PROCEDURAL BACKGROUND

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

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

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

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

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

II. DISCUSSION

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

III. DISPOSITION

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

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


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

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

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

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

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).

Eith v. Ketelhut

(2018) 31 Cal.App.5th 1

[Commercial Use; Board Deference] A Board’s determination of whether a business or commercial activity affects the residential character of a HOA was entitled to judicial deference.

[Certified for Partial Publication]

OPINION

In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden), our Supreme Court cautioned courts to give judicial deference to certain discretionary decisions of duly constituted homeowners association boards. The judicial deference rule does not encompass legal questions that may involve the interpretation of the covenants, conditions, and restrictions (CC&Rs) of a homeowners association. Courts decide legal questions.

Here, homeowners cultivated a vineyard for the purpose of making wine to be sold to the public. The CC&Rs did not prohibit the cultivation of a vineyard for this purpose, but they did prohibit “any business or commercial activity.” The operation of the vineyard may have constituted “business or commercial activity” in the literal sense of that term. But a literal interpretation in the present case would elevate form over substance and lead to absurd results. (See SDC/Pullman Partners v. Tolo Inc. (1997) 60 Cal.App.4th 37, 46 [70 Cal.Rptr.2d 62] [“literal language of a contract does not control if it leads to absurdity”].) Because the wine was made, bottled, and sold commercially offsite, and the activity at the vineyard did not affect the residential character of the community, we conclude there was no business or commercial activity within the meaning of the CC&Rs. The homeowners association board acted within its discretion in allowing the continued operation of the vineyard, and its decision is entitled to judicial deference.

This appeal is from a judgment and a postjudgment award of attorney fees and costs in favor of Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) and other parties. The Ketelhuts cross-appeal from the award of attorney fees and costs. In the appeal from the judgment, the central issue is whether the Ketelhuts, homeowners in a residential common interest development, violated a restrictive covenant requiring that they not use their property for any business or commercial activity. The Ketelhuts operated a vineyard on their property. After harvesting the grapes, they sent them to a winery to be made into wine. They sold the wine over the Internet.

Other homeowners objected to the operation of what they considered to be a commercial vineyard in violation of the prohibition against any business or commercial activity. The board of directors (Board) of the homeowners association — Los Robles Hills Estates Homeowners Association (HOA) — decided that the vineyard was not being used for business or commercial activity.

Plaintiffs/homeowners Felipa Richland Eith and Jeffrey Eith (the Eiths), Thomasine Mitchell and John Mitchell (the Mitchells), Stacy Wasserman, [5] Philip Chang, Morrey Wasserman, and Eileen Gabler (hereafter collectively referred to as plaintiffs) brought an action against the Ketelhuts, HOA, and Board members Michael Daily, Jeanne Yen, and Frank Niesner (hereafter collectively referred to as defendants). The court conducted a lengthy bifurcated trial on the eighth and ninth causes of action. The eighth cause of action concerned whether the operation of the vineyard was a prohibited business or commercial activity. The ninth cause of action sought to quiet title to a common area.

The trial court did not decide whether the operation of the vineyard was a prohibited business or commercial activity. Instead, it invoked the judicial deference rule of Lamden, supra, 21 Cal.4th 249. Pursuant to this rule, the trial court deferred to the Board’s decision that the vineyard was not being used for business or commercial activity. The court entered judgment in favor of defendants on both the eighth and ninth causes of action. The resolution of these two causes of action rendered the remaining causes of action moot.

The trial court correctly applied the Lamden judicial deference rule to the Board’s decision that the Ketelhuts’ operation of the vineyard was not a prohibited business or commercial use. We further conclude that, as a matter of law, it is not a prohibited business or commercial use. In addition, we reject plaintiffs’ claim that the judgment is void because the trial judge did not disclose contributions made by defendants’ counsel to his campaign for re-election to the superior court. We affirm the judgment as well as the postjudgment award of attorney fees and costs.

Factual Background

In 1966, the Janss Corporation (Janss) developed a 28-lot residential subdivision (Los Robles Hills Estates) in the City of Thousand Oaks. The subdivision is a common interest development subject to the Davis-Stirling Common Interest Development Act. (Civ. Code, § 4000 et seq.) “Common interest developments are required to be managed by a homeowners association [citation], defined as `a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development’ [citation], which homeowners are generally mandated to join [citation].” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81 [14 Cal.Rptr.3d 67, 90 P.3d 1223].)

Janss created HOA to manage the development. It deeded to HOA an 18.56-acre parcel that the trial court and parties referred to as a “common area.” The deed provides, “This conveyance is made on condition that said property shall be used solely for purposes of recreation or decoration or both, and in the event that said property is otherwise used, it shall automatically revert to grantor herein.”

[6] The development is subject to a recorded declaration of the CC&Rs. Paragraph 1.01 of the CC&Rs provides, “No lot shall be used for any purpose (including any business or commercial activity) other than for the residence of one family and its domestic servants ….” Subparagraph 3 of paragraph 2.03 provides that “[f]or good cause shown … deviations from the applicable deed restrictions” may be allowed “to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use.” Paragraph 5.07 provides, “Every person acquiring a lot … covenants to observe, perform and be bound by this Declaration of Restrictions.”

In June 2003, the Ketelhuts purchased in the development a 1.75-acre lot on Pinecrest Drive (the Property). In 2005, they planted a vineyard consisting of 600 plants. The plants extended “just under .4 acres” into the 18.56-acre common area. In their brief, defendants acknowledge, “Unbeknownst to the Ketelhuts and [HOA], some of the grape plants encroached on the [common area].” In 2011, when HOA learned of the encroachment, its counsel wrote a letter to the Ketelhuts’ counsel “demanding that [the Ketelhuts] immediately remove the vines from the common area, as well as any other items that may be located upon the Association’s common area.”

Before planting the grape vines, the Ketelhuts submitted a landscape plan (exhibit 244) to the Board. It was approved by the Board’s architectural committee (the Committee). The plan divided the Property into three separate vineyards. One would grow grapes for Cabernet Sauvignon, the second for Sangiovese, and the third for Merlot. The plan did not indicate the number of grape vines that would be planted. The Ketelhuts did not inform the Board or the Committee that the grapes grown on the Property would be used to make wine that would be offered for sale to the public.

Pranas Raulinaitis, who served on the Committee in 2005, testified that the Committee members “viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood.” It “never entered into [his] mind” that “the vineyard was being planted for commercial sale of wine to the public.”

The first harvest was in 2008. At that time, Jeffrey Ketelhut “harvested the grapes … with the intention of bottling them for sale.” He “commenc[ed the] wine business in 2009.” Jeffrey Ketelhut admitted that “the sale[] of wine is a business” and that the vineyard “operates like a business.” But he characterized the vineyard “as a hobby where I do it in my spare time.” “[M]y purpose in getting involved wasn’t to generate a profit and this become a livelihood. This was a hobby. I enjoy gardening …. [T]hat was therapy for me.” The Ketelhuts never determined whether, excluding attorney fees, the vineyard generated a profit. Including attorney fees, it has not generated a profit in any year.

[7] Although the Ketelhuts’ tax returns were not produced, Jeffrey Ketelhut testified that he had filed Internal Revenue Service schedule C (form 1040) for the vineyard. Pursuant to Evidence Code sections 459 and 452, subdivision (h), we take judicial notice that schedule C is entitled “Profit or Loss From Business (Sole Proprietorship).” We also take judicial notice that, since 2009, page 1 of the instructions for schedule C has provided, “Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business.” (Italics added.)

In 2009, the Ketelhuts filed in Ventura County a fictitious business name statement showing that they were doing business at the Property as “Los Robles Hills Winery” and “Puerta del Cielo Vineyards.” They applied for and obtained a “Type 17 and Type 20 license [from the Department of Alcoholic Beverage Control], which [permits] retail and wholesale [sales] over the internet only.” They also obtained “a Thousand Oaks business license.” The licenses showed that the business was located at the Property. But in 2012, the location of the business was changed to a Camarillo address.

The Ketelhuts began selling wine in May 2010. With one exception, they have sold only wine made from grapes grown on the Property. The exception occurred in 2011, when they made wine from sauvignon blanc grapes that they had purchased. In 2015, the Ketelhuts harvested 2,000 pounds of grapes. They invited family, friends, and neighbors to participate in the harvesting. Jeffrey Ketelhut testified, “[I]t took us an hour-and-a-half to pull down all the grapes.”

After the grapes are harvested, they are transported to “Camarillo Custom Crush [in Camarillo], where all the winemaking takes place.” Camarillo Custom Crush puts the wine into bottles that bear the Ketelhuts’ personal label. The Ketelhuts do not store wine on the Property. They have a storage facility in Malibu. They do not ship bottles of wine from the Property.

“In a typical year,” the Ketelhuts are “fortunate” to produce two barrels of wine. “[A] single barrel can hold up to 30 cases.” Each case contains 12 bottles. Thus, the maximum typical annual production is 720 bottles of wine. But in 2009, the Ketelhuts “produced 132 cases,” which is 1,584 bottles of wine.

At the time of trial in November 2015, the wine production was “dwindling” because they had “los[t] vines [due] to drought.” The original 600 [8] plants had been reduced to about 400. Jeffrey Ketelhut estimated that production for 2014 and 2015 would be 50 cases per year. The wine for these years was still being stored in barrels.

The Ketelhuts retain ownership of the bottled wine. They advertise on Facebook, Twitter, their personal website, “and through [their] wholesale accounts.” The logo “Los Robles Hills Winery” and their website address are displayed on the exterior of their truck, which they park in the driveway of the Property. “[T]hey keep the truck covered” while it is on the Property.

The Ketelhuts “sold wine to a number of restaurants and hotels in the local area.” But because of plaintiffs’ lawsuit, they “let those [local sales] lapse.” At the time of trial, they were “still offer[ing] retail sales and wholesale sales,” but were probably giving “at least 60 percent” of their wine to “charity.” For the last two years, their retail sales have been “zero.” Their wines appear on the menu at “a few” restaurants.

Exhibit No. 35 contains copies of pages from the Ketelhuts’ website. The pages are dated May 22, 2014. The wines for sale range in price from $27 to $42 per bottle.

In January 2011, the Ventura County Star published an article about the Ketelhuts’ “winery.” The article said that they “were hosting wine tastings by appointment at [their] home tasting room.” In March 2011, the Department of Alcoholic Beverage Control informed the Ketelhuts that someone had complained about the wine tastings. The Ketelhuts denied hosting wine tastings on the Property.

In its statement of decision, the trial court found: “There was … no retail traffic to the premises or tasting room on the premises at [the Property]. What was accomplished [there] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo.”

Some homeowners complained about the vineyard. In August 2011 counsel for plaintiffs Felipa Eith and Stacy Wasserman wrote a letter to the Ketelhuts “indicating that the commercial vineyard was a violation of the CC&Rs and that [they] should stop that aspect of [their] business.” The letter did not demand that the Ketelhuts stop growing grapes on the Property. It demanded that they “[c]ease operating a commercial vineyard.” The letter also demanded that the Ketelhuts “[r]emove all encroaching plants, irrigation and any other vineyard materials … from the … common area.”

The Board, which consisted of five homeowners, investigated the Ketelhuts’ operation of the vineyard. It interviewed other homeowners. In [9] June 2011, it conducted a meeting that was open to all of the homeowners. The Ketelhuts appeared and answered questions. After the meeting, three of the five board members — defendants Daily, Yen, and Niesner — concluded that the Ketelhuts were not using the Property for a nonresidential purpose in violation of paragraph 1.01 of the CC&Rs. They found that there was no prohibited business or commercial activity on the Property.

Board member Daily considered the vineyard to be “landscaping” rather than a business. He explained: “They were growing grape vines just like I grow fruit trees and Mr. Krupnick [a homeowner] grows avocado trees, and people grow grass in their yard. It was landscape.” “[T]herefore I wasn’t going to, as a board member, try to restrict them from growing grapes. Like I wouldn’t restrict anybody else from growing fruit or whatever.” “Their growing grapes was part of their landscape plan.”

On the other hand, Daily understood that “the growing phase of their winery was part of the business.” “You have to have grapes in order to make wine.” Daily continued: “I believe that aspect to their business [growing grapes] is acceptable because it’s their landscape.” “The growing of grapes is certainly not something prohibited by the CC&R’S and if somebody takes those grapes in a very limited way without impact on the community, then I don’t really care what they do with them. They can make jelly and sell it. That’s fine with me.” “I considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable.”

Daily did not “know how to define the difference between business and commercial” activity. He said: “[W]hen I think of commercial activity, I think of something, you know, in a building, you know, off site. That’s what I think of as commercial activity.”

Board member Yen testified that “commercial activity” within the meaning of the CC&Rs “is something that would cause a stress in the community, whether it be traffic, whether it be individuals, that it’s something that disrupts our quality in our community and impacts your neighbors. That’s commercial activity.” Yen did “not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community.”

Procedural Background

Plaintiffs filed a complaint consisting of nine causes of action. The trial court bifurcated the eighth and ninth causes of action and tried them first. The trial began in July 2015 and ended in November 2015.

[10] The eighth cause of action is against HOA and the Ketelhuts. It seeks declaratory and injunctive relief. It requests “a judicial determination and decree that the CC&Rs and Grant Deed prohibit” the Ketelhuts from (1) operating their “Business” and “commercial enterprise,” including the vineyard, on the Property and the common area, and (2) encroaching on the common area. The eighth cause of action also requests the issuance of a permanent injunction prohibiting the Ketelhuts from operating their business on the Property and encroaching on the common area.

The ninth cause of action is against all defendants. It seeks to quiet title to the common area. It claims that each of the 28 lot owners has an undivided 1/28th ownership interest in the common area and is “entitled to the non-exclusive possession” of that area. The ninth cause of action sought a judicial declaration that HOA has “no estate, right, title or interest” in the common area.

The remaining seven causes of action are for nuisance; trespass; breach of the CC&Rs; breach of HOA’s fiduciary duty; breach of fiduciary duty by Board members; and “willful, wanton misfeasance and gross negligence.” In its statement of decision, the trial court said it had ordered that “[t]he remaining causes of action, for which a jury had been demanded, would be set for trial as may be necessary following determination of the Declaratory Relief and Quiet Title causes of actions.”

Prior to trial on the eighth and ninth causes of action, all plaintiffs except Felipa Eith dismissed the entire action against HOA and Board members.

Statement of Decision

On the eighth cause of action for declaratory and injunctive relief, in its statement of decision, the trial court said that it was “faced with … whether or not to exercise its independent analysis of whether or not what the Ketelhuts were doing is a business or commercial activity, or to determine if the HOA had the discretionary authority to allow the Ketelhuts to do what they did under what is commonly known as the business judgment rule.” The court applied the “deferential business judgment standard adopted by [Lamden, supra, 21 Cal.4th 249].”

The trial court ruled: “The Court finds here that the defendant HOA and its individual directors acted in good faith in addressing the activities of the defendants Ketelhut, and that this decision should not be re-examined within the context of this litigation…. As noted in Beehan v. Lido Isle [Community Assn.] (1977) 70 Cal.App.3d 858 @ 865 [137 Cal.Rptr. 528], `The board of directors may make incorrect decisions, as well as correct ones, so long as it [11] is faithful to the corporation and uses its best judgment.’ … The Court finds that this board of directors used it[s] best judgment and acted in a reasonable manner under the circumstances presented to it. As such, the Court does not grant the relief that plaintiffs seek, but finds in favor of the defendants on the cause of action for declaratory relief.” (Italics added.)

On the ninth cause of action to quiet title to the common area, the trial court found that the area was deeded to HOA in 1966. “[N]o fractional interest in the property was deeded to any homeowners. Since that time, there have been no other documents, recorded or otherwise, that purport[] to grant to the homeowners the 1/28 fractional interest that they are seeking in this action.” Therefore, “title to the 18.5 acre common area is confirmed and quieted to [HOA].”

Judgment

On the eighth and ninth causes of action, the trial court entered judgment in favor of defendants. The judgment does not mention the remaining seven causes of action. In its statement of decision, the trial court said, “The rulings here made moot plaintiffs[‘] remaining causes of action. The case is therefore not set for further trial on those issues.”

Thus, the judgment disposed of all nine causes of action and is appealable under the one final judgment rule of Code of Civil Procedure section 904.1, subdivision (a). “Judgments that leave nothing to be decided between one or more parties and their adversaries … have the finality required by section 904.1, subdivision (a). A judgment that disposes of fewer than all of the causes of action framed by the pleadings, however, is necessarily `interlocutory’ (Code Civ. Proc., § 904.1, subd. (a)), and not yet final, as to any parties between whom another cause of action remains pending.” (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 741 [29 Cal.Rptr.2d 804, 872 P.2d 143].)

PLAINTIFFS’ APPEAL

The Judgment Is Not Void Because of the Trial Judge’s Alleged Disqualification

A. Factual and Procedural Background

The complaint was filed on August 31, 2011. The case was assigned to Judge Henry J. Walsh.

[12] After a contested judicial election, Judge Walsh was reelected in 2012. On February 10, 2016, the Commission on Judicial Performance admonished Judge Walsh for failing to disclose contributions made to his 2012 campaign by attorneys who had appeared before him after the election. The Commission noted, “In 2010, effective January 1, 2011, subdivision (a)(9)(C) was added to Code of Civil Procedure section 170.1 to require judges to disclose campaign contributions of $100 or more.”

On the same day that Judge Walsh was admonished, he signed the judgment in the instant case.[1] The next day, plaintiff Felipa Eith filed a request for a stay of all further action by Judge Walsh pending a hearing on a not yet filed motion to disqualify him.

On March 2, 2016, Felipa Eith filed a motion to disqualify Judge Walsh for cause pursuant to Code of Civil Procedure section 170.1. The ground for the motion was that the judge had received campaign contributions from defendants’ counsel and had not disclosed them to plaintiffs. Eith alleged, “Recent inspection of recorded and filed election documents (Form 460) establishes that during the pendency of the instant action Judge Walsh solicited, accepted and kept secret from Plaintiffs and plaintiffs’ counsel, monetary contributions to his campaign from defense counsel [firm, partners, or staff attorneys] in the amount of $2,600.00 ….” (Original brackets.) A minute order entered nine days later on March 11, 2016, states: “Without conceding the merit of allegations of prejudice made by Ms. Eith, the court recuses itself from the case, and refers it to the supervising civil judge for re-assignment.”

Plaintiffs filed a motion for a new trial. They argued that Judge Walsh’s failure to disclose the campaign contributions denied them their right to a fair trial. Plaintiffs claimed that, if Judge Walsh had made a timely disclosure, they “would certainly have sought his disqualification in 2012 to preclude the possibility that he would preside at trial.”

Judge John Nho Trong Nguyen denied the motion for a new trial. He ruled, “When the facts are viewed as a whole they show that no person aware of them might reasonably entertain a doubt that Judge Walsh would be able to be impartial.”

[13]

B. Analysis

Plaintiffs argue that the judgment is void because Judge Walsh was disqualified years before the trial when he failed to disclose contributions made by defendants’ counsel. If Judge Walsh were so disqualified, the judgment would be void. In Christie v. City of El Centro (2006) 135 Cal.App.4th 767, 776 [37 Cal.Rptr.3d 718], the court “conclude[d] that because [the trial judge] was disqualified at the time he granted the City’s motion for nonsuit, that ruling was null and void and must be vacated regardless of a showing of prejudice.” The court rejected the city’s claim “that the grant of nonsuit need not be overturned because [the judge] was not disqualified until later” when a motion to disqualify him was granted: “[D]isqualification occurs when the facts creating disqualification arise, not when disqualification is established. [Citations.] The acts of a judge subject to disqualification are void or, according to some authorities, voidable. [Citations.] Relief is available to a party who, with due diligence, discovers the grounds for disqualification only after judgment is entered or appeal filed. [Citations.] Although a party has an obligation to act diligently, he or she is not required to launch a search to discover information that a judicial officer should have disclosed. [Citations.]” (Id. at pp. 776-777.)

The relevant statute is Code of Civil Procedure section 170.1, subdivision (a)(9), which provides: “A judge shall be disqualified” if: “(A) The judge has received a contribution in excess of one thousand five hundred dollars ($1500) from a party or lawyer in the proceeding, and either of the following applies: [¶] (i) The contribution was received in support of the judge’s last election, if the last election was within the last six years. [¶] (ii) The contribution was received in anticipation of an upcoming election. [¶] (B) Notwithstanding subparagraph (A), the judge shall be disqualified based on a contribution of a lesser amount if subparagraph (A) of paragraph (6) applies.” (Italics added.) Subparagraph (A) of paragraph (6) of subdivision (a) provides that a judge shall be disqualified if “[f]or any reason: [¶] (i) The judge believes his or her recusal would further the interests of justice. [¶] (ii) The judge believes there is a substantial doubt as to his or her capacity to be impartial. [¶] (iii) A person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial.” (Italics added.)

(1) The California Supreme Court Committee on Judicial Ethics Opinions (CJEO) issued an opinion on mandatory disqualification based on a contribution of more than $1,500: CJEO Formal Opinion 2013-003 (). CJEO concluded, and we agree, that the $1,500 disqualification threshhold “applies to the individual lawyer appearing in the matter.” (Id. at p. 11.) “[T]he Legislature did not intend the $1,500 threshold for disqualification to apply to aggregated contributions from multiple individuals from the [14] same law firm, nor to all individuals practicing law in a contributing law firm. A judge receiving such contributions however, is also required to make a determination as to whether disqualification is called for under section 170.1, subdivision (a)(6)[A](iii) and (9)(B).” (Ibid.) “[M]andatory disqualification for individual attorney contributions over the $1,500 threshold, together with discretionary disqualification for aggregated and law firm contributions, sufficiently ensures the public trust in an impartial and honorable judiciary.” (Ibid.)

In their opening briefs, plaintiffs list the contributions of all of the lawyers who allegedly represented defendants during the five years of litigation. No lawyer contributed more than $1,500 to Judge Walsh’s campaign. Thus, the mandatory disqualification provision is inapplicable. (Code Civ. Proc., § 170.1, subd. (a)(9)(A).)

(2) Plaintiffs have failed to show that Judge Walsh was disqualified because “[a] person aware of the facts might reasonably entertain a doubt that [he] would be able to be impartial.” (Code Civ. Proc., § 170.1, subd. (a)(6)(A)(iii).) Thus, we reject plaintiffs’ claim that Judge Nguyen abused his discretion in denying their motion for a new trial. (See Garcia v. Rehrig Internat., Inc. (2002) 99 Cal.App.4th 869, 874 [121 Cal.Rptr.2d 723] [“`”`The determination of a motion for a new trial rests so completely within the court’s discretion that its action will not be disturbed unless a manifest and unmistakable abuse of discretion clearly appears'”‘”]; Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649-650 [40 Cal.Rptr.3d 501] [“an appealed judgment is presumed correct, and plaintiff bears the burden of overcoming the presumption of correctness”].)

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The Trial Court Properly Applied the Judicial Deference Rule Adopted by Our Supreme Court in Lamden

(3) In its statement of decision, the trial court applied the rule of judicial deference adopted by our Supreme Court in Lamden, supra, 21 Cal.4th 249. The plaintiff homeowner in Lamden complained that a condominium development’s community association had wrongly decided to treat a termite infestation “locally (`spot-treat’).” (Id. at p. 252.) The plaintiff wanted the association to fumigate the building. The Supreme Court stated, “[W]e adopt [15] today for California courts a rule of judicial deference to community association board decisionmaking that applies … when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors. [Citation.]” (Id. at p. 253.) The rule is as follows: “Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Ibid.)

The Supreme Court explained: “The formulation we have articulated affords homeowners, community associations, courts and advocates a clear standard for judicial review of discretionary economic decisions by community association boards, mandating a degree of deference to the latter’s business judgments sufficient to discourage meritless litigation …. [¶] Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations’ discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.)

Some courts have narrowly construed the Lamden rule. In Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 940 [117 Cal.Rptr.3d 481], the court observed: “It is important to note the narrow scope of the Lamden rule. It is a rule of deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance…. The Supreme Court’s precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria. [Citations.]” (See also Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 122 [82 Cal.Rptr.3d 389].)

Most courts have broadly construed the Lamden rule. In Haley v. Casa Del Rey Homeowners Assn. (2007) 153 Cal.App.4th 863, 875 [63 Cal.Rptr.3d 514], the court concluded that Lamden “reasonably stands for the proposition that the Association had discretion to select among means for remedying violations of the CC&R’s without resorting to expensive and time-consuming litigation, and the courts should defer to that discretion.”

[16] In Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 820 [76 Cal.Rptr.3d 41] (Harvey), the CC&Rs allowed the board “to designate storage areas in the common area.” They also gave the board “the exclusive right to manage, operate and control the common areas.” (Ibid.) The court held, “Under the `rule of judicial deference’ adopted by the court in Lamden, we defer to the Board’s authority and presumed expertise regarding its sole and exclusive right to maintain, control and manage the common areas when it granted the fourth floor homeowners the right, under certain conditions, to use up to 120 square feet of inaccessible attic space common area for rough storage.” (Id. at p. 821.)

In Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466, 473 [185 Cal.Rptr.3d 376] (Watts), this court rejected the plaintiffs’ claim “that the rule applying judicial deference to association decisions applies only to ordinary maintenance decisions.” We reasoned: “It is true the facts in Lamden involve the association board’s decision to treat termites locally rather than fumigate. But nothing in Lamden limits judicial deference to maintenance decisions.” (Ibid.) “[T]here is no reason to read Lamden so narrowly.” (Ibid.) “Common interest developments are best operated by the board of directors, not the courts.” (Ibid.) We applied the judicial deference rule to the board’s adoption of rules and imposition of fees relating to short-term rentals of condominium units. We noted that, in Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [97 Cal.Rptr.2d 280] (Dolan-King), “the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.” (Watts, supra, 235 Cal.App.4th at p. 473.)

Based on Lamden, Haley, Harvey, Watts, and Dolan-King, the judicial deference rule applies to an association board’s discretionary decisions concerning the operation of the common interest development, e.g., the board’s maintenance and repair decisions (Lamden), its selection of the appropriate means to remedy a violation of the CC&Rs (Haley), its designation of storage space in a common area (Harvey), its adoption of rules relating to short-term rentals (Watts), or its approval or rejection of a homeowner’s improvement plan (Dolan-King). As we observed in Watts, “Common interest developments are best operated by the board of directors, not the courts.” (Watts, supra, 235 Cal.App.4th at p. 473.)

Here, the Board made a decision concerning the operation of the common interest development. The Board decided whether the Ketelhuts violated the CC&Rs’ prohibition against the use of the Property for business or commercial activity. The Board reasoned that the CC&Rs’ prohibition did not encompass the operation of the vineyard because it did not affect the residential character of the community. Board member Daily testified, “I [17] considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable.” Board member Yen did “not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community.”

(4) We do not defer to the Board’s interpretation of the CC&Rs. The interpretation of CC&R’s is a legal question to be decided by the courts, not the Board. “CC&R’s are interpreted according to the usual rules for the interpretation of contracts generally, with a view toward enforcing the reasonable intent of the parties. [Citations.]” (Harvey, supra, 162 Cal.App.4th at p. 817.) “`”[N]ormally the meaning of contract language … is a legal question.” [Citation.] “Where, as here, no conflicting parol evidence is introduced concerning the interpretation of the document, `construction of the instrument is a question of law, and the appellate court will independently construe the writing.'” [Citation.]'” (Cohen v. Five Brooks Stable (2008) 159 Cal.App.4th 1476, 1483 [72 Cal.Rptr.3d 471]; see also Legendary Investors Group No. 1, LLC v. Niemann (2014) 224 Cal.App.4th 1407, 1413 [169 Cal.Rptr.3d 787] [“contract interpretation is a legal question for the court”].)

(5) In our review of the CC&Rs, we conclude that the Board correctly interpreted the prohibition of business or commercial activity. The prohibition does not encompass activity that has no effect on the community’s residential character. The purpose of the prohibition is to preserve the community’s residential character.

The trial court properly deferred to the Board’s discretionary decision that the Ketelhuts’ operation of the vineyard did not violate the prohibition against business or commercial activity because it did not affect the community’s residential character. The Board made its decision “upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members.” (Lamden, supra, 21 Cal.4th at p. 253.) The Board interviewed homeowners and conducted a public hearing at which the Ketelhuts answered questions. Yen testified that the Board’s decision was “based on our looking at it from the scope of the community: Is it creating any stress for the community, is it impairing the community’s functioning, is it invasive to the community, and have we received any complaints regarding what is happening.” “Our decision and focus of discussion was on the impact o[n] the community.”

“Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments ….” (Lamden, supra, 21 Cal.4th at pp. 270-271.) The Board members lived in the community and had discussed the Ketelhuts’ vineyard with other homeowners. They [18] were in a much better position than the courts to evaluate the vineyard’s effect on the community. We “should defer to the [B]oard’s authority and presumed expertise.” (Id. at p. 265.)

The Board Correctly Decided That the Operation of the Vineyard Is Not Prohibited Business or Commercial Activity

As an alternative holding, we conclude that as a matter of law, the Ketelhuts’ operation of the vineyard is not prohibited business or commercial activity because it does not affect the community’s residential character.

No signs advertising wine sales are posted on the Property. Although the Ketelhuts’ logo “Los Robles Hills Winery” and their website address are displayed on the exterior of their truck, “they keep the truck covered” while it is on the Property. The wine is made and bottled in Camarillo. The bottled wine is stored in Malibu. It is not shipped from the Property. The trial court found that there is “no retail traffic” to the Property, which does not have a wine-tasting room. The court said, “What was accomplished [on the Property] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo.”

Had the Ketelhuts retained the wine for their personal use or given it away to friends or charity, there would have been no basis for finding business or commercial activity. All activities relating to the vineyard would have been permissible. That the Ketelhuts offered the wine for sale over the Internet did not transform their use of the Property into prohibited business or commercial activity. At all times the operation of the vineyard was fully consistent with residential use. No homeowner familiar with the vineyard’s operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public. The business or commercial activity of making and selling the wine did not occur on the Property. Board member Daily testified, “They were growing grape vines just like I grow fruit trees and Mr. Krupnick grows avocado trees, and people grow grass in their yard.” Moreover, instead of being a blight on the community, the vineyard was an aesthetic enhancement. Pranas Raulinaitis, who served on the Committee that approved the Ketelhut’s landscape plan in 2005, testified that the Committee members “viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood.”

We recognize that the growing of grapes on the Property is an integral part of the Ketelhuts’ winemaking business. As Daily testified, “You have to have grapes in order to make wine.” But absurd consequences would flow from construing the CC&Rs as prohibiting any business or commercial activity whatsoever irrespective of its effect on the residential character of the community.

[19] For example, some appellate attorneys work at home, reading records, doing research, and writing briefs, but meet with clients elsewhere. Although these attorneys are engaged in the business of practicing appellate law at their home offices, their business activities do not affect the residential character of their communities.

It would be absurd to construe the CC&Rs as prohibiting such harmless conduct, just as it would be absurd to construe them as prohibiting the Ketelhuts from operating their vineyard. “`In construing a contract the court … should adopt that construction which will make the contract reasonable, fair and just [citation]; … [and] should avoid an interpretation which will make the contract … harsh, unjust or inequitable [citations], or which would result in an absurdity [citations] …'” (Wright v. Coberly-West Co. (1967) 250 Cal.App.2d 31, 35-36 [58 Cal.Rptr. 213].)

There will be instances, of course, where a homeowner’s activity constitutes prohibited business activity even though the business is primarily conducted off the residential premises. For example, if a homeowner conducted a trucking business off the premises except that the trucks were stored on the premises when not in use, the homeowner might be in violation of the business prohibition. The presence of the commercial trucks would detract from the community’s residential character. (See Smart v. Carpenter (2006) 2006-NMCA-056 [139 N.M. 524, 134 P.3d 811].)

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Disposition

The judgment and postjudgment award of attorney fees and costs are affirmed. The parties shall bear their own costs on appeal.

Perren, J., concurred.

PERREN, J., Concurring. —

I concur.

In a vain effort to “define what may be indefinable,” Justice Potter Stewart opined, “I know it when I see it ….”[1] In like manner, the dissent “know[s] unfairness when [it] sees it” — when it sees how the Ketelhuts harvest their [20] grapes and make and sell their wine. (Dis. opn. post, at p. 20.) The majority sees it otherwise. In my opinion this is not a matter for such subjectivity. Rather, we should defer to the good faith exercise of discretion and “`the board’s authority and presumed expertise.'” (Maj. opn. ante, at p. 15, quoting Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 [87 Cal.Rptr.2d 237, 980 P.2d 940].)

Both the majority and the dissent appeal to “`Common sense.'” (Maj. opn. ante, at p. 15; dis. opn. post, at p. 22.) In doing so they quote from Lamden: I join with them and set forth the full closing of that opinion: “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations’ discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments. Beneficial corollaries include enhancement of the incentives for essential voluntary owner participation in common interest development governance and conservation of scarce judicial resources.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn., supra, 21 Cal.4th at pp. 270-271, italics added.)

This dispute and the resulting expense and acrimony are strong testament to the wisdom of such deference.

YEGAN, J., Dissenting. —

I know unfairness when I see it. The judgment should be reversed because plaintiffs are entitled to a ruling from the trial court that Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) were conducting a business in violation of the Covenants, Conditions, and Restrictions running with the land. (CC&Rs.) It does not matter whether the Ketelhuts could win an award for having the most beautiful vineyard in the world. It does not matter whether the wine from the grapes rivals the finest wines of the Napa Viticulture. As I shall explain, the facts unerringly point to the conclusion that the Ketelhuts were conducting a vineyard business on their property (the Property).

There will, of course, be situations in which the conducting of a business at a residence in violation of the CC&Rs will be so trivial to the neighborhood that it will be deemed not to be in violation of the CC&Rs. There is no reason to list them and one is only limited by imagination. As Colonel Stonehill said, “I do not entertain hypotheticals. The world, as it is, is vexing enough.” (True Grit (Paramount Pictures 2010).) So here, we need only decide whether the maintenance of the vineyard as a business is in violation of the CC&Rs.

[21]

Judicial Deference Rule

The judicial deference rule applies where an association board “exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden).) In Lamden our Supreme Court concluded that the courts should defer to the board’s treatment of a termite problem because it was “a matter entrusted to [the board’s] discretion under the [CC&Rs] and [now repealed] Civil Code section 1364 ….” (Id. at pp. 264-265.) Here, there is no statute or provision in the CC&Rs entrusting to the discretion of the Los Robles Hills Estates Homeowners Association Board of Directors (Board) whether a homeowner is engaging in prohibited business or commercial activity within the meaning of the CC&Rs. This is a straightforward legal question to be decided by the courts, not members of the Board who lack legal expertise. (See Smart v. Carpenter (2006) 2006-NMCA-056 [139 N.M. 524, 134 P.3d 811, 814] [it “is a question of law” whether homeowner violated covenant prohibiting “`commercial activity or business’ on any tract in the Subdivision”].)

The inapplicability of the judicial deference rule is supported by Dover Village Assn. v. Jennison (2010) 191 Cal.App.4th 123 [119 Cal.Rptr.3d 175] (Dover Village). There, the issue was whether a sewer pipe was ordinary “common area to be maintained and repaired by the Association” or “`[an] exclusive use common area'” designed to serve a particular homeowner who would be responsible for its maintenance. (Id. at pp. 126, 127.) The association decided that the sewer pipe was the defendant homeowner’s responsibility because it exclusively serviced his condominium. The appellate court concluded that the sewer pipe was not an exclusive use common area. It rejected the association’s argument that, under Lamden, it should defer to the association’s decision: “The argument fails because it confuses a legal issue governed by statutory and contract text with matters that genuinely do lend themselves to board discretion. [¶] … [¶] There is an obvious difference between a legal issue over who precisely has the responsibility for a sewer line [or whether a homeowner is engaged in prohibited business or commercial activity within the meaning of the CC&Rs] and how a board should go about making a repair that is clearly within its responsibility…. [W]e know of no provision in the Davis-St[e]rling Act or the CC&R’s that makes the Association or its board the ultimate judge of legal issues affecting the development.” (Id. at p. 130.)

The court considered Lamden to be “a nice illustration of matters genuinely within a board’s discretion.” (Dover Village, supra, 191 Cal.App.4th at [22] p. 130.) Unlike Lamden, the legal issue here is not genuinely within the Board’s discretion. In Lamden the Supreme Court noted, “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.) In contrast to Lamden, the Board is not equipped to determine whether the Ketelhuts were engaged in business or commercial activity in violation of the CC&Rs.

If the judicial deference rule applied here, there would be few board decisions to which it did not apply. The judicial deference rule “does not create a blanket immunity for all the decisions and actions of a homeowners association.” (Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 940 [117 Cal.Rptr.3d 481].)

The Vineyard Is Business or Commercial Activity Within the Meaning of the CC&Rs

The majority opinion concludes that, as a matter of law, the Ketelhuts’ operation of the vineyard is not a prohibited business or commercial activity because it does not affect the residential character of the community. But paragraph 1.01 of the CC&Rs does not say, “No lot shall be used for any purpose (including any business or commercial activity [that does not affect the residential character of the community]) other than for the residence of one family and its domestic servants ….” (Italics added.) “`”In construing a contract which purports on its face to be a complete expression of the entire agreement, courts will not add thereto another term, about which the agreement is silent. [Citation.]”‘ [Citation.]” (Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, 602 [106 Cal.Rptr.2d 1].) On its face paragraph 1.01 prohibits any business or commercial activity without qualification or exception. Subparagraph 3 of paragraph 2.03 of the CC&Rs provides that “[f]or good cause shown … deviations from the applicable deed restrictions” may be allowed “to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use.” (Italics added.) How can the operation of a commercial vineyard not qualify as commercial use?

There may be cases where business or commercial activity is so de minimis or concealed that it does not violate the CC&Rs, such as the example given in the majority opinion of an appellate attorney with a home office who sees no clients on the premises. But the Ketelhuts’ operation of their commercial vineyard was neither de minimis nor concealed. They filed a fictitious business name statement and were issued both a business license [23] and an alcoholic beverage sales license. The licenses originally indicated that the business was located at the Property. Board member Yen testified: “[A] notice of intent to sell [alcoholic beverages] … was posted on their front where their mailbox was, and it needed to be posted elsewhere because you’re not supposed to be advertising a business in the community. So they were advised not to post it there.” The Ketelhuts advertised on Facebook, Twitter, their personal website, “and through [their] wholesale accounts.” They filed an Internal Revenue Service schedule C (form 1040) to report their business income or loss. The logo “Los Robles Hills Winery” and their website address were displayed on the exterior of their truck. Although the Ketelhuts covered the truck while it was parked on the Property, the logo and website address were openly displayed when they drove the truck to and from the Property.

The Ketelhuts sought and obtained publicity for their winery by giving an interview to the local newspaper, the Ventura County Star. In January 2011 the newspaper published an article about the winery. Until he read the article, plaintiff John Mitchell was not aware that the Ketelhuts were growing grapes for a commercial purpose. Mitchell “knew that they weren’t supposed to be doing an activity like that because of the CC&Rs,” which “exclude any business activity.”

A copy of the newspaper article was marked as exhibit 54, but it was neither offered nor received into evidence. I quote from the article because it was before the trial court, witnesses testified as to its content, Felipa Eith quoted from the article during her examination of Jeffrey Ketelhut, and the article arguably is judicially noticeable not to prove the truth of the facts reported, but to prove the extent to which the commercial nature of the vineyard was publicized. (Evid. Code, §§ 452, subd. (h), 459.)

The article takes up the entire front page of the newspaper’s Sunday “Business” section (“Section E”). It is entitled, “GRAPE expectations[:] T.O. [Thousand Oaks] couple’s home vineyard about to pay off.” The article includes photographs of the vineyard, the Ketelhuts, and bottles of wine produced from grapes grown at the vineyard. The bottles are labeled, “Los Robles Hills.” One of the photographs of the Ketelhuts is captioned, “Jeff and Marcella Ketelhut, owners of the commercial vineyard in the Conejo Valley, enjoy discussing the challenges of wine production.” (Italics added.) The article includes the website address of the Ketelhuts’ winery.

The article states in part: “For Jeff and Marcella Ketelhut, the dream of owning a winery has come to fruition on the slopes near their Thousand Oaks home.” “The Ketelhuts are not yet making a profit but said they are selling their wine, at $35 a bottle, through their website, by word of mouth and by [24] hosting wine tastings by appointment at their home tasting room. [¶] … The couple also has planted a selection of olive trees on the property and hopes to begin producing cured olives and olive oil for sale in the near future. [¶] They said they are exploring ways to expand their commercial enterprise, given the potential they believe exists in the Conejo Valley. [¶] `We wanted to try it for a few years, and initially it was more of a fun thing, but now we’re barely doing any marketing and the stuff is flying off the shelves,’ said Marcella.” The article observes that “the Ketelhuts’ Los Robles Hills Winery [is] on the list of 15 [wineries] that make up the Ventura County Wine Trail.” Jeffrey Ketelhut testified that in 2010 the Ketelhuts had become “members of the Ventura County Wine Trail.”

Through the newspaper article, the Ketelhuts proclaimed to Ventura County residents that they were operating a commercial vineyard on the Property. It is understandable that homeowners, such as John Mitchell, would be alarmed by this development, which appeared to be a blatant violation of the CC&Rs’ prohibition against “any business or commercial activity.” Homeowners could view the article as a public flaunting by the Ketelhuts of their violation.

The majority opinion states, “No homeowner familiar with the vineyard’s operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public.” (Maj. opn., ante at p. 18.) But the newspaper article put the entire community on notice that the Ketelhuts were operating a commercial vineyard.

Moreover, the vineyard was in plain view of the homeowners. Richard Monson testified that, “[w]hen [he] drove past the Ketelhuts’ home,” he “noticed the grapevines on the hillside.” Because the grapevines were visible to everyone, they would be a continual source of aggravation to homeowners who objected to a commercial agricultural operation in their community. The majority opinion says that the vineyard was an “aesthetic enhancement.” (Maj. opn., ante at p. 18.) But to the homeowners who objected to its presence, it was an eyesore.

The Ketelhuts’ commercial vineyard was not permissible because, as Board member Daily testified, “Their growing grapes was part of their landscape plan.” The landscape plan, which was approved in 2005 by the Board’s architectural committee (the Committee), did not indicate that the vineyard would be used to grow grapes to make wine that would be offered for sale to the public. In 2005 the Ketelhuts did not inform the Committee of this future commercial use. Had it been so informed, the Committee probably would not have approved the landscape plan.

Difficulties may arise in applying the majority opinion’s standard of whether business or commercial activity affects the residential character of [25] the community. With such a vague standard, where does one draw the line between activity that affects and activity that does not affect residential character? This is a purely subjective determination.

A New Meaning for CC&Rs

Traditionally, CC&Rs are restrictions and limitations on land use. Now at the whim of the Board, CC&Rs mean “choices, creativity, and recommendations.” A homeowner has a choice and may be creative in the use of property. The traditional CC&Rs have been transformed into recommendations that the Board may elect not to enforce. Rather than having the force of law, the CC&Rs have the backbone of a chocolate éclair. And, of course, the Board’s composition may change and there will be inconsistency in just how much business or commercial activity will be allowed.

CC&Rs play a vital role in protecting the reasonable expectations of parties when they purchase land. This concept is lost in the majority opinion. Future buyers in the development should be expressly advised that business or commercial activity is allowed at the discretion of the Board. This may actually devalue the land.

Finally, to monetarily punish plaintiffs with attorneys’ fees is not only unfair, it is unconscionable. The Ketelhuts were the “first movers.” They created the entire problem by operating a commercial vineyard and publicizing it in the local newspaper. They are at fault and they should pay for it.

[*] Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is certified for partial publication. The portions of this opinion to be deleted from publication are identified as those portions between double brackets, e.g., [[/]].

[1] The Eiths “posit that the 2/10/16 handwritten date appearing adjacent [to] the signature line [on the judgment] is suspect” and “therefore unreliable.” The Eiths contend that the handwritten date “was likely backdated.” (Capitalization & boldface omitted.) We reject the contention because it is based on speculation. There is a “presumption that judicial duty is properly performed.” (People v. Coddington (2000) 23 Cal.4th 529, 644 [97 Cal.Rptr.2d 528, 2 P.3d 1081], overruled on another ground in Price v. Superior Court (2001) 25 Cal.4th 1046, 1069, fn. 13 [108 Cal.Rptr.2d 409, 25 P.3d 618].) The Eiths have not overcome this presumption.

[*] See footnote, ante, page 1.

[*] See footnote, ante, page 1.

[1] Jacobellis v. Ohio (1964) 378 U.S. 184, 197 [12 L.Ed.2d 793, 84 S.Ct. 1676] (conc. opn. of Stewart, J.).

Sands v. Walnut Gardens Condominium Association Inc.

(2019) 35 Cal.App.5th 174

[Maintenance; Board Deference] No independent tort liability for failing to maintain common areas; Rule of Judicial Deference does not protect failure to perform inspections or preventative maintenance.

Law Office of Jeff A. Lesser and Jeff A. Lesser for Plaintiffs and Appellants.
Slaughter, Reagan & Cole, Barry J. Reagan and Gabriele M. Lashly for Defendant and Respondent.

[175]

OPINION

WILEY, J.—

This case is about whether condominium owners can make their homeowners association pay for a water leak. Monique Sands and her parents sued and went to trial against the Walnut Gardens Condominium Association Inc. and its property manager for breach of contract and negligence. The trial court granted a nonsuit. The Sandses settled with the property manager but have appealed against the association. The Sandses argue the trial court erred by granting the nonsuit, by excluding certain evidence, and by denying their motion for a new trial. We reverse and remand the contract nonsuit and affirm the tort nonsuit. We do not reach other issues.

[176] I

We summarize the facts. When reviewing a nonsuit, we view facts in the plaintiff’s favor and disregard conflicting evidence. (O’Neil v. Crane Co. (2012) 53 Cal.4th 335, 347 [135 Cal.Rptr.3d 288, 266 P.3d 987].)

The Sandses owned a unit in the Walnut Gardens development. A pipe on the roof broke and water entered the Sandses’ bedroom. The association’s agent hired people to repair the pipe and roof. The association had responsibility to maintain its common areas, including this piping and roof. The Sandses sued the association for breach of contract and negligence. The trial court selected a jury, heard the Sandses’ two witnesses in their case-in-chief, and granted a nonsuit.

II

We reverse the nonsuit on the breach of contract claim.

(1) Our review of nonsuit judgments is limited. To allow the opposing party to cure defects in proof, we may affirm only on logic stated in the motion for nonsuit, unless the defect would have been impossible to cure. (Lawless v. Calaway (1944) 24 Cal.2d 81, 94 [147 P.2d 604] (Lawless).)

(2) The Sandses claimed a breach of contract. The contract, they say, was the association’s covenants, conditions, and restrictions, one part of which required the association to keep the project in “a first class condition.” The Sandses’ first witness, however, testified the association was performing no preventive maintenance at all, even though preventive maintenance was desirable. The roof and pipes over the Sandses’ unit had not been inspected or maintained in years.

The association’s oral motion for nonsuit was concise to a fault. It first argued there was “a complete absence of evidence” to show a breach of contract. This first argument was incorrect. Reasonable jurors could have concluded a total failure to maintain common areas breached a promise to keep these areas in first class condition.

The association next argued no evidence showed the association was “on notice that it needed to make repairs or do something to the roof or the pipes.” This argument too was incorrect. The property manager testified “[m]aintenance wasn’t happening. It was a very sad situation for the homeowners.” A jury could find buildings need maintenance to remain in first class condition. The association knew “[m]aintenance wasn’t happening.” As a prima facie matter, no more was needed.

[177] In the course of granting the motion, the trial court added oral reasoning beyond the contents of the nonsuit motion. The court said the Sandses’ lack of expert testimony would force the jury to “speculate” about how a pipe broke and the roof leaked. By suggesting expert testimony was essential, this contract analysis erred. A complete lack of preventive maintenance is evidence the association did not keep the roof or pipes in first class condition. The jury would not need experts to grasp this.

(3) Neither the motion nor the court’s rationale challenged the idea that covenants, conditions, and restrictions comprise a contract between the association and individual owners. (See Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 240 [145 Cal.Rptr.3d 514, 282 P.3d 1217].) Nor did the motion or rationale hint at the rule of deference governing owner suits against homeowner associations. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 [87 Cal.Rptr.2d 237, 980 P.2d 940].) The nonsuit argument did not consider these points. Therefore neither do we. Defects unspecified in a nonsuit motion will be considered on appeal only if the plaintiff could not have cured the defects at trial. (See Lawless, supra, 24 Cal.2d at p. 94.)

We reverse and remand the nonsuit judgment about the contract.

III

We affirm the nonsuit tort judgment.

The association argued there was no evidence “as far as negligence [was] concerned” showing the association “was on notice of any condition that required repair.” The trial court rightly decried this effort to “tortify” a creature of private ordering. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 554 [87 Cal.Rptr.2d 886, 981 P.2d 978] [“If every negligent breach of a contract gives rise to tort damages the limitation [that `breach of contract is tortious only when some independent duty arising from tort law is violated’] would be meaningless, as would the statutory distinction between tort and contract remedies.”].)

Outside the covenants, conditions, and restrictions, the association had no independent duty as to the pipes and roof arising from tort law. The Sandses’ trial counsel conceded the evidence for their negligence claim was “pretty much the same, under the same thing as a contract….” The Sandses give us no authority for a cause of action in tort. They state: “As with the Cause of Action for Contract, the duties and obligations for which the HOA, Walnut Gardens, was responsible, are found in the [covenants, conditions, and restrictions]….”

[178] Even had the association omitted this issue in its nonsuit motion, nothing the Sandses could have done at trial would have summoned into existence a tort claim barred by law. (See Lawless, supra, 24 Cal.2d at p. 94.)

DISPOSITION

We affirm the nonsuit of the tort claim and reverse and remand the nonsuit on the contract claim. The parties will bear their own costs.

Bigelow, P. J., and Stratton, J., concurred.

Related Links

Limitation on HOA Tort Liability for Maintenance Failures
– Published on HOA Lawyer Blog (January 2020)