Category Archives: Case Law

Woolard v. Regent Real Estate Services, Inc.

(2024) 107 Cal.App.5th 783

[Neighbor Disputes; Duty of Care] HOAs do not have a duty to resolve disputes between homeowners outside the confines of the HOA’s governing documents.

Eric Woolard and Breonna Hall, in pro. per., for Cross-complainants and Appellants.

Murchison & Cumming and Darin W. Flagg for Cross-defendants and Respondents.

OPINION

MOORE, Acting P. J.—

This is an appeal following summary judgment in favor of cross-defendants and respondents Regent Real Estate Services, Inc. (Regent), a management company, and Greenhouse Community Association (Greenhouse), a homeowners association. Regent and Greenhouse were unfortunately dragged into litigation that should have remained between two sets of homeowners-Eric Woolard and Breonna Hall, the defendants and cross-plaintiffs on the one hand, and plaintiffs and cross-defendants Eric Smith and Stacy Thorne on the other.[1] As relevant to this appeal, the trial court properly granted summary judgment to Regent and Greenhouse on Woolard and Hall’s cross-complaint. On appeal, Woolard and Hall only raise the negligence cause of action. Woolard and Hall have failed to establish, or even articulate, a duty of care that was breached by Regent and Greenhouse.

Woolard and Hall also claim the trial court erred by striking multiple attempts to disqualify the trial judge. These claims are not reviewable on appeal. Accordingly, the judgment is affirmed.

STATEMENT OF FACTS AND PROCEDURAL HISTORY

I.

BRIEFING

We must, unfortunately, begin by noting that Woolard and Hall’s sole brief does not comply with the California Rules of Court. Each brief must “[s]upport any reference to a matter in the record by a citation to the volume and page number of the record where the matter appears.” (Cal. Rules of Court, rule 8.204(a)(1)(C).) “`It is the duty of a party to support the arguments in its briefs by appropriate reference to the record, which includes providing exact page citations.'” (Duarte v. Chino Community Hospital (1999) 72 Cal.App.4th 849, 856 [85 Cal.Rptr.2d 521]; see Stover v. Bruntz 786*786 (2017) 12 Cal.App.5th 19, 28 [218 Cal.Rptr.3d 551].) If facts are not supported by correct record citations, the party’s arguments may be deemed waived. (Ibid.)

The section labeled “Statement of Facts” in Woolard and Hall’s brief does not include a single reference to the record; it is, essentially, useless to us. The record in this case exceeds 1,200 pages, and it is not our role to go through the record, page by page, searching for the facts that support Woolard and Hall’s assertions.

While we could exercise our discretion to deem Woolard and Hall’s arguments waived and dismiss the appeal, in the interests of justice, we shall do our best to review their arguments. If, however, we cannot locate a fact they assert exists, that fact will be deemed unsupported by the record.

II.

UNDERLYING FACTS

We draw the facts from Regent and Greenhouse’s brief, as supported by references to the record, particularly the separate statement of undisputed material facts (separate statement) submitted in support of their motion for summary judgment.

Woolard and Hall were residents at Greenhouse, as were Smith and Thorne. Both were apparently tenants in their respective units. In 2020, Smith and Thorne filed suit against Woolard and Hall and Regent, among others, for negligence, numerous intentional torts, and premises liability for an incident that occurred on Greenhouse property in December 2019. According to the complaint: “On December 27, 2019, Eric Smith and Stacy Thorne were at their residence located at Greenhouse Condominiums. Plaintiffs’ next door neighbors, [Woolard and Hall], started an argument with Plaintiffs Smith and Thorne which escalated to a physical altercation.” Smith and Thorne alleged punching and kicking, assault with a flashlight, and stabbing Smith, allegedly resulting in severe physical, mental, and emotional injuries.

Subsequently, Woolard and Hall filed a cross-complaint and a first amended cross-complaint, naming both Regent and Greenhouse as cross-defendants. According to them, the physical altercation was the result of long-standing harassment by multiple neighbors. As to Regent and Greenhouse, Woolard and Hall pleaded causes of action for indemnification, apportionment of fault, general negligence (as to both Regent and Greenhouse) and interference with economic relations (as to Greenhouse only). They sought general and punitive damages.

787*787 We reproduce the statement attached to the negligence cause of action included in the complaint in full: “On December 27, 2019, Breonna Hall and Eric Woolard were residents in a unit owned by and rented by co Defendants Terry Eunson and Peter Eunson, at the Greenhouse Condominiums, a residential property controlled by the Defendants Greenhouse Community Association.”

The narrative continues on the next page:[2] “The extent of the harassment went as far as late night walks around their back gates around in attempt to provoke their dogs to bark, then files [sic] complaints with the city for their dogs being a nuisance, and sending violation letters with threats of fines, then ultimately lead to an assault and humiliation of Defendant’s [sic] Woolard and Hall. [¶] The actions of president Jo Hanson, were outrageous as she used another member in the community two doors down from Defendants Hall and Woolard’s home, to obtain information about Woolard and Hall whereabouts and activities, on a daily basis, consistently throughout the day, and encouraged the neighbors to intimidate and record the residents to impose unwarranted fines, and cause the residents and owners emotional distress and grief. [¶] Defendants Hall and Woolard informed Terry Eunson of these issues, consistently as the harassment occurred from every minor incident to every serious disturbance. Terry Eunson emailed Regent Management, sending dozens of emails to Regent Real Estate regarding these never ending issues. [¶] Despite Defendants Regent, Greenhouse, and The Eunsons all failed to provide adequate help resolving issues that escaleted [sic] into a physical altercation inside the defendants and cross complainants Woolard and Hall[s] home, in front of their small children. [¶] The physical injuries sustained and the mental anguish and emotional trauma Woolard and Hall have suffered could have been prevented had the situation been handled properly by Regent, Greenhouse and The Eunsons, instead the problems were ignored and provoked Woolard and Halls complaints were disregarded as Greenhouse took part in contributing to the issue instead of stopping it.”

The narrative continues: “Regent disregarded their obligations and responsibilities in the matter as well ignored the emails sent to inform them of the outrageous and unexceptable [sic] behaviors, acted the the [sic] parties. Regent failed to ackowledge [sic] the Communitys [sic] lack of ethical duties on part of the Greenhouses Directors and chose to deliberatley [sic] ignore every initiation of the behaivor [sic] of members in the commununity [sic], which lead to Woolard and Hall having to be forced to act to protect themselves and their children while being attacked inside their home. Then arrested and evicted from their home, while out on bail, and during a pandemicc [sic] forced on the streets with a new born and two toddlers the 788*788 defendants sustained extreme mental distress and emotional harm. Woolard and Hall have suffered and still suffer mental anguish, humiliation, shame, anxiety, and worry about how theyve [sic] been destroyed financially and emotionally devestated [sic] by the actions and the events herein.”

A successful demurrer dismissed the claim for interference with economic relations, and Woolard and Hall subsequently dismissed the causes of action for indemnification, apportionment of fault, and declaratory relief as to Regent only.

III.

MOTIONS TO DISQUALIFY

Woolard and Hall filed numerous motions to disqualify the trial judge, Honorable Kimberly A. Knill, who was assigned to the case on December 19, 2022, effective January 19, 2023.

The first peremptory challenge was denied as untimely on January 18, 2023. Only the minute order denying the motion is included in the record.

A second request to disqualify Judge Knill was filed on June 2, 2023, alleging the judge could not be impartial. Judge Knill issued an order striking the motion to disqualify, and in the alternative, a verified answer. Woolard and Hall filed a verified statement in support of their objection to the judge, with a declaration by Woolard, on June 21. On June 23, Judge Knill issued an “order striking the statement of disqualification.” (Capitalization & boldface omitted.) No writ review of these rulings was sought.

IV.

DISCOVERY RESPONSES

In Woolard’s interrogatory responses, when asked for the facts supporting Regent’s negligence, he responded that Regent “refused to assist or respond to any complaints,” refused to investigate complaints, “sent out multiple letters falsely accusing [Woolard and Hall] of violating the CC&Rs,” and “refused to take any steps to deescalate the situation.” He also claimed Regent had committed housing discrimination under federal law. Instead, the community manager had advised Woolard and Hall that they do not handle neighborly disputes, and should contact the local police department.

Woolard provided a similar answer as to Greenhouse. “Regent and Greenhouse refused [to] address the matters, refused to contact the individuals 789*789 whom claims were being made against, even despite the clear descriptions of having the complaints mentioned documented on video …” and accused Greenhouse of violating federal housing discrimination law.

V.

MOTION FOR SUMMARY JUDGMENT

In April 2023, Regent and Greenhouse filed a joint motion for summary judgment or alternatively, summary adjudication, on Hall and Woolard’s remaining claims. Regent contended, “Regent was reasonable in all of its actions as to Hall and Woolard and did not otherwise owe a duty of care to contact police or intervene in the dispute with Plaintiffs” and Greenhouse argued that “Hall and Woolard cannot prevail on their remaining claims for Indemnification, Apportionment of Fault, Declaratory Relief and General Negligence against Greenhouse, as Greenhouse was reasonable in all of its actions as to Hall and Woolard and did not otherwise owe a duty of care to contact police or intervene in the dispute with Plaintiffs.”

Greenhouse and Regent moved for summary judgment on the remaining claims—negligence only as to Regent, and negligence, indemnification, and apportionment of fault as to Greenhouse. Robert Griswold, offered as an expert witness on homeowners association matters, submitted a declaration stating that neither Regent nor Greenhouse had fallen below the standard of care in discharging their duties relating to the instant matter. Neither Regent nor Greenhouse had an obligation to involve the police on behalf of community members or tenants. Further, they did not have a responsibility or obligation to intervene and stop acts of physical violence, or to act as peacemaker in the community.

“The standard of care for a homeowner association, such as Greenhouse, and a management company, such as Regent, is that neither should or would be expected to intervene in a neighbor-to-neighbor dispute, as a homeowner association or management company is not a security guard or peacemaker for neighbor-to-neighbor disputes. To the extent any intervention is felt necessary by one of the parties, such intervention would need to come from a combination of the police and/or the legal system, and not from the homeowners association and/or management company. As such, any alleged failure by Regent and/or Greenhouse to intervene in the neighbor-to-neighbor dispute between Hall and Woolard on one side and Smith and Thorne on the other side does not fall below the standard of care.” Finally, Regent and Greenhouse had reasonably responded and investigated any complaints made by Woolard and Hall. “The standard of care for a homeowner association, such as Greenhouse, and a management company, such as Regent, is that if a 790*790 complaint or alleged violation of the rules is received from a resident, then the complaint is to be investigated and provided with a response. Regent and Greenhouse met this standard of care in investigating and responding to the complaints received from Hall and Woolard. This is evidenced by the replies to the communications received from Hall and Woolard.”

Woolard and Hall filed an opposition to the motion for summary judgment. They characterized Griswold’s declaration as by someone “who was paid to sign a declaration.” The opposition also contended they had never alleged that Greenhouse had any duty to contact the police or intervene in the dispute with Smith and Thorne. “Cross-complainants have never stated they ever even expected Cross-defendants to contact or call the police of [sic] make any contact for them or on their behalf, regarding any dispute at all.” Instead, they asserted harassment by Regent and Greenhouse.

The hearing went forward on June 26, 2023, and the court indicated it tentatively intended to grant the motion, and it did so after hearing arguments and taking the matter under submission.

The court’s order accepted Regent and Greenhouse’s contention that they had no duty to intervene in the neighbor dispute or prevent the physical altercation between Woolard and Hall on one side and Smith and Thorne on the other. Duty is a question of law, and Woolard and Hall had not established a legal duty to intervene in a dispute between residents. Nor had they established housing discrimination based on the fact that they have children. The court also concluded the claims for indemnification, apportionment of fault, and declaratory relief were not legally cognizable claims and no triable issues of material facts existed.[3] The court filed a judgment on July 13, 2023.

DISCUSSION

I.

SUMMARY JUDGMENT FRAMEWORK AND STANDARD OF REVIEW

“Summary judgment is appropriate `if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ [Citation.] To prevail on the motion, a defendant must demonstrate the plaintiff’s cause of action has no merit. This requirement can be satisfied by showing either one or more elements of the cause of action cannot be established or that a complete 791*791 defense exists.” (Beltran v. Hard Rock Hotel Licensing, Inc. (2023) 97 Cal.App.5th 865, 876 [315 Cal.Rptr.3d 842] (Beltran).)

“`[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.’ [Citation.] `A prima facie showing is one that is sufficient to support the position of the party in question.’ [Citation.] `There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.'” (Beltran, supra, 97 Cal.App.5th at p. 877.)

“In performing our de novo review, we use the same procedure as the trial court. We first consider the pleadings to determine the elements of each cause of action. Then we review the motion to determine if it establishes facts, supported by admissible evidence, to justify judgment in favor of the moving party. Assuming this burden is met, we then look to the opposition and `decide whether the opposing party has demonstrated the existence of a triable, material fact issue.’ [Citation.] We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Beltran, supra, 97 Cal.App.5th at p. 877.)

II.

THE DUTY ELEMENT

As noted above, the pleadings determine the elements of the cause of action, which in this case, is negligence. “The elements of a cause of action for negligence are duty, breach, causation, and damages.” (Melton v. Boustred (2010) 183 Cal.App.4th 521, 529 [107 Cal.Rptr.3d 481].)

We begin with duty. “Duty `is an essential element’ of the tort of negligence. [Citation.] Duty `may be imposed by law, be assumed by the defendant, or exist by virtue of a special relationship.’ [Citation.] The existence of a legal duty `”`depends upon the foreseeability of the risk and a weighing of policy considerations for and against imposition of liability.'”‘” (Melton v. Boustred, supra, 183 Cal.App.4th at pp. 529-530.) Regent and Greenhouse contend they acted within the scope of their duties and did not owe Woolard and Hall any further duty; accordingly, they are not liable for negligence as a matter of law, and no triable issues of material fact exist.

792*792 We must start by asking just what duty Woolard and Hall seek to impose on Regent and Greenhouse. Their opposition to the motion to summary judgment specifically disclaimed the notion that they were seeking to impose a duty on Regent and Greenhouse “to contact or call the police of [sic] make any contact for them or on their behalf, regarding any dispute at all.” Their brief, when discussing this point, does not have much to offer other than pages of boilerplate law on general principles of duty and foreseeability, of which this court is well aware. They argue that the foreseeability of harm could not have been clearer, but that only begs the question. “[T]hrough their managing agents Regent, Greenhouse Association knew or should have known of the repeated verbal and physical assault and battery incidents occurring against” them. But what duty did they have other than calling the police, if there was potential or ongoing criminal activity? They do not tell us. They spend much time arguing about foreseeability of the harm, but foreseeability alone is not enough. (McGarry v. Sax (2008) 158 Cal.App.4th 983, 997-998 [70 Cal.Rptr.3d 519].)

The admissible evidence we have before us is the declaration of an expert in homeowners associations, who stated under oath that an association’s duty of care does not include mediating, deescalating, or resolving disputes between neighbors. Nor do Woolard and Hall cite any cases that have held differently. Instead, they cite two cases involving a landlord’s duty to a tenant, O’Hara v. Western Seven Trees Corp. (1977) 75 Cal.App.3d 798 [142 Cal.Rptr. 487] (duty to reasonably secure common areas against third party criminal activity), and a case involving a college’s duty to a student, Peterson v. San Francisco Community College Dist. (1984) 36 Cal.3d 799 [205 Cal.Rptr. 842, 685 P.2d 1193] (duty to exercise reasonable care toa prevent assaults on campus) that are both inapplicable here.

Further, there is the issue that Woolard and Hall were tenants, but not owners and members of the association. They are, accordingly, in a very limited relationship with Greenhouse (and Regent as its managing agent). They have no legal standing to maintain a complaint that Greenhouse failed to adequately enforce its own governing documents. (Martin v. Bridgeport Community Assn., Inc. (2009) 173 Cal.App.4th 1024, 1035-1038 [93 Cal.Rptr.3d 405].) Thus, Greenhouse’s duties to Woolard and Hall are more limited than they would be if they were owners.

Woolard and Hall also contend that the trial court made “[c]onflicting rulings,” referring to a motion for summary judgment brought by their landlords as to Smith and Thorne’s claims against them. (Underscoring omitted.) Their landlords, however, are situated differently because their duties as landlords are different. Further, the fact that their landlords failed to meet their burden on summary judgment has no bearing on whether Regent 793*793 and Greenhouse met theirs. They did, and Woolard and Hall failed to establish the existence of a duty as a matter of law. Their negligence claim cannot proceed without it.

Woolard and Hall’s claims of “housing discrimination” are similarly flawed. First, any claim for housing discrimination is not negligence, and it should have been raised as a separate cause of action. Second, despite their repeated claims of “discrimination,” they offer no evidence that any conduct by Regent or Greenhouse was motivated by discriminatory animus based on their membership in a protected class.

The only evidence Woolard and Hall point to are letters sent to them (or possibly their landlords). The letters they state establish discrimination include complaints about “family members engag[ing] in recreation activities in the driveway.” Another stated that “it was reported that your children were playing in and around the driveway, in and out of the driveway in the path of the vehicles driving in the complex. No adult su[p]ervision was noticed, and in the September meeting you were informed that the driveways are never a play area and can be very dangerous, it is a safety [issue].”[4] Greenhouse sending letters about this subject is simply insufficient to establish a triable issue regarding discrimination under state or federal law, even if it were possible to bring a discrimination claim under the guise of negligence, which it is not. Further, Woolard and Hall offer no connection between those complaints and the alleged violent incident that led to this lawsuit, which is required to proceed under a negligence cause of action.

In sum, there is simply no law to support Woolard and Hall’s contentions that Regent and Greenhouse had some unspecified duty to do something to prevent what turned into an allegedly violent dispute. Imposing a duty on homeowners associations or their managing agents to intervene and attempt to resolve disputes between homeowners (or their tenants) would place an untenable burden on these entities. Run by volunteers, they already have enough (and some would argue too much) authority and responsibility. Associations do not have police powers or subpoena power. They cannot compel owners, much less tenants of owners, to sit down and work out their differences, and they cannot adjudicate differences except in the limited context of violations of the association’s governing documents. There was evidence here, in the form of Griswold’s declaration, that the association properly responded to complaints about violations of governing documents that it received.

794*794 Imposing a duty under these facts would leave associations liable for the outcome of such disputes without the tools to prevent them. This would leave ordinary homeowners holding the bag when special assessments were needed to pay judgments or attorney fees. Regent and Greenhouse played no part in the physical altercation at issue here and should never have been dragged into this dispute.

Accordingly, we find no existing duty of care was breached and decline to recognize a new duty of care requiring a homeowners association or its management company to involve itself in disputes between homeowners outside the confines of the governing documents. Summary judgment was properly granted as to both Regent and Greenhouse.

III.

DISQUALIFICATION

The requests for disqualification are not reviewable on appeal. “The determination of the question of the disqualification of a judge is not an appealable order and may be reviewed only by a writ of mandate from the appropriate court of appeal sought only by the parties to the proceeding.” (Code Civ. Proc., § 170.3, subd. (d); see Curle v. Superior Court (2001) 24 Cal.4th 1057, 1063 [103 Cal.Rptr.2d 751, 16 P.3d 166]; Daniel V. v. Superior Court (2006) 139 Cal.App.4th 28, 39 [42 Cal.Rptr.3d 471].) Woolard and Hall never sought writ review, and we have no jurisdiction to review this matter on appeal from a final judgment.

DISPOSITION

The judgment is affirmed. Greenhouse and Regent are entitled to their costs on appeal.

Goethals, J., and Motoike, J., concurred.


[1] Smith and Thorne are not part of this appeal.

[2] It is possible some intended text was missing here, but the pages are consecutively numbered, and we simply cannot tell.

[3] Woolard and Hall state explicitly that they are not seeking review of these three causes of action.

[4] Woolard and Hall also cite to e-mails sent by their landlord to the property manager about various subjects. The e-mails are mostly about other subjects, and their landlord’s subjective views and hearsay statements are not admissible evidence of anything that might be helpful to them.

 

Related Links

HOAs and HOA Managers Are Not Required to Resolve Neighbor Disputes – Published on HOA Lawyer Blog (January, 2026)

Ridley v. Rancho Palma Grande Homeowners Association

(2025) 110 Cal.App.5th 788

[Business Judgment Rule; Reasonable Investigation; Bad Faith] The business judgment rule and rule of judicial deference will not shield an HOA Board from liability where it fails to conduct a reasonable investigation and/or acts in bad faith.

Horvitz & Levy, Andrea M. Gauthier, Scott P. Dixler; Sims, Lawrence & Broghammer, Bobby Dale Sims, Jr., and John T. Hill for Defendants and Appellants.

O’Hara Creech, Terence J. O’Hara and Mary Ann O’Hara for Plaintiffs and Respondents.

OPINION

BROMBERG, J.—

This appeal is from an injunction requiring supplemental repairs to a condominium. The underlying suit arises out of flooding in the crawlspace beneath the condominium owned by Doug Ridley and Sherry Shen. Because this crawlspace is a common area controlled by the homeowners’ association, Rancho Palma Grande Homeowners Association (HOA), the HOA rather than the homeowners was responsible for investigating and remedying the water intrusion. The HOA took more than 19 months to remove the water and begin making meaningful repairs, and in the interim the homeowners’ unit suffered severe damage. Accordingly, the homeowners sued the HOA and its now-former president, Steve Moritz.

After an unusually long bench trial lasting more than 60 court days, the trial court found in favor of the homeowners on all their claims. While many repairs were subsequently performed, others were not, and the trial court issued an injunction requiring the HOA to perform the remaining repairs and compensate the homeowners for lost rent and other expenses.

The HOA and Moritz appeal, arguing that the trial court erred in finding in the homeowners’ favor on any of their claims. We need address only one claim: that the HOA breached its duties under the condominium complex’s covenants and conditions. As explained below, we conclude that the trial court properly found in the homeowners’ favor on this claim. Because this claim supports the injunction being appealed, we affirm.

[792] I. BACKGROUND 

A. The CCRs

Rancho Palma Grande is a condominium complex in Santa Clara with over 100 units. In 1981, the complex’s developers executed a Declaration of Covenants, Conditions and Restrictions (the CCRs) dividing the development into condominiums and establishing a “Home-Owners Association” to manage the complex.

The CCRs grant the HOA a number of powers and duties. One set concerns the maintenance and repair of common areas: The CCRs grant the HOA the power and the duty “[t]o manage, operate, maintain, repair, paint, landscape, care for and preserve the Common Area, and all its facilities, improvements, and landscaping ․ to the standard of maintenance prevalent in the neighborhood ․”

The CCRs contain an exculpation clause limiting the HOA’s liability. Under the clause, the HOA generally is not liable for property damage or personal injury “caused by the elements” or “resulting from electricity, water, rain, dust, or sand which may leak or flow from outside or from any parts of the buildings.” However, this limitation on liability does not apply to damage or injury “caused by gross negligence of the Association.”

In 1991, Doug Ridley, who is now 85 years old, purchased a unit in Rancho Palma Grande located at 2006 Stone Pine Court (the homeowners’ unit). Ridley later married Sherry Shen, and the two lived in the homeowners’ unit for a decade before they moved out and began renting the unit for retirement income.

In 2017, Steve Moritz became president of the HOA.

B. The Undestroyed Well

  1. The April 2018 Flooding

In April 2018, tenants in the homeowners’ unit reported flooding in the crawlspace underneath the unit. The homeowners and the HOA initially thought that the water was from a leaky pipe, which is an owner responsibility. However, a plumber hired by the homeowners did not see anything wrong with the plumbing and concluded that the water came from an underground well or spring. In addition, a plumber hired by the HOA learned from the City of Santa Clara (City) that the water was likely caused by an abandoned but undestroyed well. Because the crawl space is a common area, the HOA [793] accepted responsibility for remedying the water that intruded into it from outside the homeowners’ unit. However, the HOA permitted the homeowners to finish installing a sump pump to remove some of the water.

  1. Initial Opinions and Recommended Actions

In May 2018, hoping to get the City or the Santa Clara Valley Water District to pay for remediating water in the crawlspace, the HOA hired a law firm. The firm contacted the Water District, which reported that it, too, believed that the water was from “an unknown, unregistered well.” The Water District also gave the firm a map showing where there likely was an abandoned but undestroyed well from a farm previously on the land where Rancho Palma Grande is now located. In addition to giving the map to the HOA, the law firm advised the HOA to take “all steps ․ to avoid further damages from the water flow under the unit” because of the “exponential costs involved if not properly addressed.”

In early June, a water restoration consultant, the Anderson Group, recommended that the HOA dry out the crawlspace to reduce the risk of mold developing in the homeowners’ unit. The Anderson Group proposed to use air movers, scrubbers, and filtration devices at a total cost of a little over $7,000. The HOA rejected the proposal. The HOA also received a report finding high moisture levels and mold in the homeowners’ unit and recommending remediation measures. However, the HOA did not implement the recommendations.

A series of drilling contractors confirmed to the HOA that there was likely an undestroyed well underneath or near the homeowners’ unit. In early July, the Pitcher Well Drilling Company informed the HOA that there appeared to be a well either under or close to the rear foundation of the homeowners’ unit. However, Pitcher’s excavator was so large that it could not be used to dig for the well without causing major damage to the homeowners’ unit.

Later in July, a second drilling contractor, Dan Lynch, estimated that it would cost $7,500 to open the floor of the homeowners’ unit with a mini-excavator, dig into the crawlspace, and expose the suspected wellhead. The HOA rejected this proposal. In August, Lynch examined the crawlspace and discovered a hole full of water with bubbles coming up, a sign of a well, which Lynch believed was either under the crawlspace or just outside the rear foundation. Lynch advised the HOA that the hole could continue to grow and sink, and the HOA should move quickly to avoid any further deterioration. Lynch offered, at a cost of $150 per hour, to research historical documents and attempt to triangulate the location of the suspected well, to use a metal detector to look for the well, and to install a fan in the crawlspace. The HOA rejected these proposals as well.

[794] In November, the HOA consulted a third driller, Randy Dougherty. Dougherty noted several possible sources of the water in the crawlspace—an improperly capped well, an underground spring, or a high water table—but advised that an undestroyed well was “probable” and that the well was likely near the rear foundation or close by. Dougherty suggested that the HOA use a magnetometer or ground penetrating radar to search for the well. The HOA did not do so.

  1. The HOA’s Change of Course

Consistent with the opinions of the City, the Water District, and the drilling contractors, Moritz initially believed that water in the crawlspace was from a well, and the HOA took the position that there was likely an undestroyed well underneath the crawlspace. For example, the HOA told the Anderson Group that there was such a well, drafted a letter to the City demanding immediate action to deal with the suspected well, and formed a “well” committee. In addition, when Ridley proposed installing a “French drain” for the water in the crawlspace, the HOA rejected the proposal because it would not destroy the suspected well “which the Association is now required to do, by law.”

However, in July, the first law firm hired by the HOA concluded that neither the City nor the District could be held responsible for the damage caused by the water intruding into the crawlspace under the homeowners’ unit. Sometime later in the year, the HOA changed course. It stopped trying to locate and destroy a well underneath the crawlspace and decided instead to pursue the previously rejected option of installing a French drain, which would cause less damage to the homeowners’ unit and thus be less expensive. Notably, however, the board’s secretary emailed the board that, based upon the latest information received, it did not appear that opening up the homeowner’s unit to find and cap the suspected well would entail “catastrophic expense,” and the trial court observed that the HOA withheld this “critical” communication until right before trial.

In September 2018, the HOA hired a new attorney, Steve Barber. In December, Barber contacted two hydrologists. Although Barber noted that the Water District had recharged the groundwater, he did not mention the opinions of the City, the Water District and the drilling contractors that there likely was an undestroyed well underneath the crawlspace. Unaware that a well might be causing the water intrusion, one of the hydrologists sent a preliminary analysis suggesting a French drain.

In January 2019, Barber sent a letter to the City and the Water District. In the letter, Barber stated that “[s]omeone” had “postulated” a well underneath the homeowners’ unit and that two drilling contractors (Pitcher and Dougherty) had expressed such a belief. However, Barber asserted that the water [795] intrusion was a “one-time event” that had not recurred and that no mold had developed in the unit. He also represented that he had “contacted several experts in the areas of hydrology and engineering,” and “[n]o one with whom we consulted gives credence to the hypothesis that there is an abandoned well” under the homeowners’ unit. Barber asserted as well that “[t]he consensus is that there is a high groundwater table with that abundance of water” under the condominium complex. The letter concluded by asserting that the proper solution was a “French or curtain drainage system.”

Four days later, Moritz forwarded Barber’s letter to Ridley and informed him that the HOA had concluded that the suspected well under Ridley’s unit “most likely does not exist” and that “[n]one of the experts consulted give credence to the hypothesis ․ that an abandoned well exists.” Moritz also stated that a hydrologist had recommended using a French drain to prevent water encroachment and that no mold had been found in or under the unit. Moritz’s annual message to HOA members similarly asserted that a “Soil Engineer’s report” stated that there was no well on HOA property and that a “Certified Industrial Hygienist report” found no mold in or under the property. At trial, Mortiz admitted that many of his statements and those in Barber’s letter were false.

  1. Subsequent Events

In March 2019, two months after Barber represented to the City and Water District that the water intrusion in the crawlspace was a one-time event, the crawlspace flooded. This flooding was worse than the year before, and three to four feet of water remained in the crawlspace through June. Nevertheless, the HOA took no steps to remove the water beyond operating the sump pump that Ridley had installed. During this time period, plumbers hired by the HOA dug exploratory trenches in the backyard of the homeowners’ unit but found no water in the trenches.

In April 2019, the HOA hired an engineer specializing in drainage, Jim Toby, to design a French drain for the homeowners’ unit. Toby was not told that there might be a well underneath the unit, and therefore the plans that he created did not address the problems that a well and the debris surrounding it would create. In June, Toby informed the HOA that he believed that there was a well under the crawlspace.

Nevertheless, the HOA did not reconsider its decision that there was no well underneath the homeowners’ unit. To the contrary, in July 2019, after the homeowners sued and sought a preliminary injunction, Moritz represented to the trial court that the water in the crawlspace was most likely not from an abandoned well but rather than from “a high ground water table under the [796] subject property.” This theory was contradicted by the exploratory trenches dug by HOA’s plumbers: Although a high water table would have saturated the entire area, not just the crawlspace under the homeowners’ unit, as noted above, there was no water in the trenches.

At the end of September, an engineering contractor discovered a sinkhole in the crawlspace. The City prohibited occupation or use of the homeowners’ unit and ordered the HOA to correct the violation. Rather than resume searching for the suspected well, the HOA decided to remove soil from the crawlspace and pour concrete on top of the sinkhole.

Accordingly, in January 2020, workers hired by the HOA cut a hole in the floor of the homeowner’s unit and began removing soil. After about two hours, they discovered a wellhead. The workers were not told that there might be a well underneath the soil that they were removing.

C. Damage to the Homeowners’ Unit

Although tests showed mold in the homeowners’ unit by June 2019, and that month a consultant recommended drying out the crawlspace, the HOA did not immediately take any action to prevent or remediate mold. Later inspections found visible mold in the kitchen. In addition, testing showed several types of mold, some toxic, in patterns consistent with growth from condensation. However, even by the time of trial in 2023, this mold had not been fully remediated.

There was another problem as well. In 2010, Ridley discovered termites and had a formal inspection done, which he passed along to the HOA. However, the HOA did nothing in response to the report, though the unit was fumigated in 2016. By the time of trial, the termite damage was “very severe” and, indeed, “a late stage cancer” for the building. Consequently, the southern exterior wall in the homeowners’ unit and other structures in the house were so decayed that they could not perform their intended function and needed to be replaced.

In addition, in March 2019, an HOA board member noted that the window trim on the south wall was rotting. However, the HOA did not start repairing the trim until April 2021, more than two years later.

D. Proceedings Below

  1. The Pleadings

The homeowners sued the HOA in June 2019. They claimed breach of the CCRs in addition to claims for violating the Davis-Stirling Common Interest [797] Development Act (Civ. Code, § 4000 et seq.), breach of implied warranty, negligence, nuisance, and breach of fiduciary duty. The homeowners amended their complaint in July 2021 to add Moritz, the HOA president, to the negligence and breach of fiduciary duty claims, added a constructive fraud claim against both the HOA and Moritz, and abandoned the warranty claim.

  1. Interim Relief

The parties sought several temporary restraining orders and preliminary injunctions. In July 2019, the homeowners sought to enjoin the HOA from forcibly entering their unit. Although the trial court issued a temporary restraining order, as noted above, the court denied a preliminary injunction in reliance on Moritz’s representation that the water in the crawlspace was likely from a high water table and that the HOA was installing a French drain to remedy the problem. The trial court also denied a later request to require the HOA to investigate “the true source of the water condition” in the crawlspace, and it enjoined the homeowners from interfering with the HOA’s repair work. Later, however, the trial court preliminarily enjoined the HOA from disabling the homeowners’ security cameras.

  1. The Trial

In April 2022, the case went to trial. The trial lasted 67 court days and produced a trial transcript of approximately 7,700 pages. In September 2022, after the parties had rested, the trial court informed the parties that it would issue an interim order concerning disputed repairs and indicated how it would rule. However, it does not appear from the record that the trial court issued a written order, and the trial judge took a medical leave of absence. Upon returning, the court issued further orders concerning, among other things, remediation of the crawlspace.

In late March 2024, after closing briefs and arguments, the trial court began to announce its finding and finished doing so two weeks later. The trial court found in favor of the homeowners on all their claims. The court awarded damages for restoration costs, lost rent, utility, and emotional distress. In addition, finding the defendants’ behavior despicable, the trial court awarded $250,000 in punitive damages against the HOA and $25,000 against Moritz.

In concluding that the HOA breached the CCRs, the trial court determined that the HOA’s duty to repair and maintain common areas included subsidiary duties to investigate and to make repairs in a reasonably timely fashion. The court then found that the HOA failed to properly investigate the suspected well, the mold or the terminate damage and that it is also failed to timely [798] repair the resulting damage. Indeed, the trial court observed even by the trial, six years after the initial flooding, the HOA had not restored the homeowners’ unit to a livable condition.

The trial court also found that the HOA had engaged in “a pattern of falsehood [and] deception.” The court found that in the spring and summer of 2018 “everything pointed very strongly to a well and suggested very strongly that the well was either directly in the crawlspace or just beyond it.” Nevertheless, the HOA decided “to use any means necessary” to convince the City and the Water District that the HOA did not need to locate and destroy the suspected well. Among other things, the HOA failed to disclose the suspected well to experts in an attempt to manipulate them into providing opinions the HOA desired. Barber’s January 2019 letter to the City and Water District made numerous false and misleading statements. Moreover, in what the trial court termed “very conscious acts of deception,” Moritz repeated Barber’s false and misleading statements to Ridley, the HOA membership, and the trial court. The HOA even failed to disclose the suspected well to the workers who eventually discovered it, which the trial court found put the workers at physical risk.

For similar reasons, the trial court found that neither the CCRs’ exculpatory clause nor the business judgment rule and the related rule of judicial deference to condominium associations protected defendants. The court ruled that the exculpatory clause did not protect the HOA because much of plaintiffs’ damages was caused by the HOA’s failure to repair rather than the water intrusion, because the clause was against public policy and unenforceable, and because the HOA was grossly negligent. In particular, the court found gross negligence because the HOA’s conduct was an extreme departure from the ordinary standard of conduct and because the HOA showed a passive or indifferent attitude to the injurious consequences of its conduct. The court also rejected the HOA’s business judgment rule and rule of judicial deference defenses because the HOA did not conduct a reasonable investigation into the suspected well and because the HOA did not act in good faith. In finding bad faith, the court noted the HOA’s disregard of the advice it received and its “extreme acts of dishonesty.”

After the trial court explained its rulings, defendants requested a written statement of decision, which the court agreed to provide. Subsequently, the court held hearings on whether to award expert witness fees, which it did.

  1. The Injunction

On July 25, 2024, the trial court issued an injunction order after trial. The order required the HOA, “by and through is board of directors, including [799] Steve Moritz,” to perform specified work on the crawl space, the south wall, and the interior and kitchen of the homeowners’ unit. In addition, the order stated that “[t]he HOA will remain liable to the Plaintiffs for lost rent of $4,000 per month and utilities of $115 month” until completion of the required work.

  1. Subsequent Proceedings

On September 19, 2024, Moritz and the HOA appealed from the injunction issued on July 25, 2024. The homeowners moved for a calendar preference, which was granted.

While the appeal was pending, the parties filed amended proposed statements of decisions, and the trial court issued a statement of decision on February 26, 2025.

II. DISCUSSION

Although the HOA appeals from the injunction issued after trial, it does not challenge the appropriateness of injunctive relief or the terms of the injunction. Instead, the HOA challenges the claims underlying the injunction. We need address only one of these claims: that the HOA breached its duties under the condominium CCRs. Moreover, while the parties dispute whether the 2019 amended CCRs apply, we need only address the original CCRs adopted in 1981.*

As a general rule, a condominium association’s covenants and restrictions are enforceable equitable servitudes, which benefit all condominium owners (Civ. Code, § 5975, subd. (a)), and individual owners may enforce the covenants and restrictions against the association (id., § 5975, subd. (b)). In addition, because the promises in such covenants and restrictions are of a “contractual nature,” their enforcement is “ ‘subject to contract principles.’ ” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 239, 145 Cal.Rptr.3d 514, 282 P.3d 1217.)

[800] The HOA challenges the trial court’s findings that the HOA breached its duties under the CCRs to investigate and to timely repair as well as the court’s rejection of several affirmative defenses. We address these issues below.

A. Breach of the CCRs

Section 8 of the CCRs imposes on the HOA the duty “[t]o manage, operate, maintain, repair, paint, landscape, care for and preserve the Common Area ․ to the standard of maintenance prevalent in the neighborhood.” It is undisputed that the crawlspace underneath the homeowners’ unit is a common area and that the HOA’s duty to maintain and repair that area includes subsidiary duties to investigate water intrusions and to make repairs in a reasonably timely fashion. The HOA argues that the homeowners failed to present sufficient evidence that the HOA breached these subsidiary duties. As explained below, we conclude that the trial court’s findings of breach are supported by substantial evidence.

  1. The Substantial Evidence Standard

In arguing that the evidence of breach was insufficient, the HOA faces a “ ‘ “daunting burden.” ’ ” (Padideh v. Moradi (2023) 89 Cal.App.5th 418, 438, 305 Cal.Rptr.3d 906.) Factual findings are governed by the substantial evidence standard, and under that standard, appellate courts do “ ‘not reweigh the evidence, evaluate the credibility of witnesses, or resolve evidentiary conflicts.’ ” (In re Caden C. (2021) 11 Cal.5th 614, 640, 278 Cal.Rptr.3d 872, 486 P.3d 1096.) Instead, “the appellate court’s power begins and ends with a determination of whether there is any substantial evidence” (Schmidt v. Superior Court (2020) 44 Cal.App.5th 570, 582, 257 Cal.Rptr.3d 699)—that is, whether there is “ ‘ “ ‘evidence that is reasonable, credible, and of solid value.’ ” ’ ” (People v. Ramirez (2022) 13 Cal.5th 997, 1117, 298 Cal.Rptr.3d 1, 515 P.3d 1085.) In determining whether there is substantial evidence, appellate courts review the record “ ‘ “ ‘in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor.’ ” ’ ” (Carranza v. City of Los Angeles (2025) 111 Cal.App.5th 388, 400, 332 Cal.Rptr.3d 778.)

  1. The Investigation

There is substantial evidence that the HOA failed to conduct a reasonable investigation.

The HOA had notice that the water in the crawlspace under the homeowners’ unit may have been from an undestroyed well. In May 2018, the HOA [801] received reports that both the City and the Water District believed the water in the crawlspace was from an undestroyed well, and the Water District provided the HOA with a map showing the general area in which the well was likely located. Three drilling contractors consulted by the HOA similarly expressed the opinion that the water was likely from an undestroyed well. Moreover, the HOA initially took the same position: In a June 2018 draft letter to the City, the HOA asserted that there was a well underneath the homeowners’ unit, and in August 2018 the HOA rejected Ridley’s proposal for a French drain because the drain would not address the suspected well.

Nevertheless, the HOA made little effort to locate the suspected well. It rejected a proposal to bring in a mini-excavator to dig into the crawlspace to search for the well, which would have required cutting a hole in the floor of the homeowners’ unit. It also refused to take less costly measures. For example, although one of the drillers consulted by the HOA proposed to conduct historical research to better locate the well at a cost of $150 per hour, the HOA rejected the offer and instead Moritz did his own research (but located only one photograph). The HOA likewise rejected recommendations to search for the suspected well using ground penetrating radar, a magnetometer, or a metal detector.

In addition, in late 2018, the HOA adopted the position that the water in the crawlspace was not from an undestroyed well and stopped looking for such a well. The HOA had no basis for this decision. None of the HOA board members had experience dealing with wells; for example, Moritz, who took the lead on the issue, was a librarian for a laboratory, not an engineer. Although one drilling contractor mentioned alternative possibilities, no expert advised the HOA the water in the crawlspace was likely from a source besides an undestroyed well. In addition, the theory that the HOA adopted instead—that the water in the crawlspace was due to a high water table—was, in the opinion of a former Santa Clara County Water District official “crazy” because a high water table would have saturated the entire area, not just the crawlspace.

Moreover, the HOA did not reconsider its position in March 2019 after the crawlspace flooded and a plumber digging trenches around the perimeter of the homeowners’ unit found no water. Nor did the HOA reconsider in June 2019 when Jim Toby, the civil engineer hired to design a French drain, informed the HOA that he believed the water in the crawlspace was likely from a well, or in September 2019 when a sinkhole was discovered in the crawlspace.

In fact, the HOA discovered the undestroyed well only by accident. The HOA failed to actively search for a well during 2018, and in January 2019, it stopped searching for the well altogether. The well was only discovered in [802] January 2020, 19 months after the original flooding of the crawlspace, when workers seeking to fill the sinkhole came upon a well cover.

Based on this evidence, the trial court had more than adequate grounds for finding that the HOA failed to conduct a reasonable investigation.

  1. The Remediation

There is also substantial evidence that the HOA failed to repair the homeowners’ unit in a timely fashion.

Early on, the HOA was advised of the danger posed by the water in the crawlspace and the need to act promptly. In May 2018 the HOA was advised that moisture was seeping into the unit, and the first law firm it retained warned of the “exponential costs” that might result if the problem was not swiftly addressed. Nevertheless, the HOA took no meaningful steps to mitigate the damage caused by the water in the crawlspace until the well was discovered by accident in January 2020. It is true that the HOA allowed Ridley to continue installing a sump pump. However, the HOA rejected the recommendation of its water restoration consultant to dry out the crawlspace. In addition, while the HOA decided to install a French drain to deal with the water in the crawlspace, it did not apply for a permit for the drain until August 2019, more than 15 months after receiving notice of water infiltration.

The HOA also failed to respond to damage in the homeowners’ unit. In June 2018, an industrial hygienist informed the HOA that mold was developing in the unit and recommending remediation measures. By March 2019, mold was visible on kitchen cabinets and floors, and lab results showed elevated levels of mold in the master bedroom and bath. Accordingly, the HOA was told to dry out the crawlspace, clean the kitchen cabinet, and monitor moisture levels. However, the HOA did not timely implement these recommendations, and even by October 2023, it had not fully remediated the mold.

The HOA was similarly delinquent in dealing with the damage to the south wall. In 2010, Ridley informed the HOA that there were termites in the wall. However, other than fumigating the wall in 2016, the HOA did nothing to repair the termite damage before trial. Additionally, in March 2019, a board member noted rotting window trim on the wall, but the Board did not begin repairing the trim until April 2021, more than two years later.

This evidence provided ample basis for the trial court’s finding that the HOA failed to remedy the water, mold, and termite damage in the homeowners’ unit in a timely fashion.

[803]

  1. HOA’s Arguments

The HOA contends that there was insufficient evidence of breach because the expert on condominium practice presented by the homeowners testified that he did not rely on the standard of maintenance prevalent in the neighborhood. This contention is based on the provision in the CCRs requiring the HOA to manage, maintain, and repair common areas, facilities, improvements and landscaping “to the standard of maintenance prevalent in the neighborhood.” This reference to the neighborhood standard does not help the HOA because it concerns the level to which the common areas must be maintained. By contrast, the homeowners’ claim is based the standards of care for investigating and remediating damage. The homeowners’ expert testified to the standard of care observed by an ordinarily prudent condominium board with respect to investigating and remediating damages.

In any event, there was evidence that homes in the neighborhood did not have pools of water on the ground, which shows the prevalent standard of maintenance relevant to the water in the crawlspace under the homeowners’ unit. Thus, even if the homeowners were required to show that the HOA failed to meet the standard prevailing in the community in investigating and repairing, there was substantial evidence supporting the trial court’s finding that the homeowners satisfied that burden.

The HOA also asserts that nothing in the CCRs required it “to rely on certain experts.” While that may be true, the trial court did not interpret the CCRs to require the HOA to rely on any particular expert. Instead, in finding that the HOA failed to conduct a reasonable investigation into the water intrusion, the trial court noted that the HOA ignored the opinions of all the drilling contractors it consulted, the City, the Water District, and the civil engineer it hired to construct the French drain that there was likely an undestroyed well under the crawlspace. While the HOA asserts that it was reasonable to reject several specific recommendations and to delay remediation of some items, it does not—and cannot—argue that the trial court lacked a solid basis for finding that the HOA failed to conduct a reasonable investigation.

Finally, the HOA asserts that the trial court rewrote the CCRs to require the HOA to perform maintenance within a specific time frame. We disagree. Far from adopting a specific deadline, the trial court recognized that the CCRs “do[ ] not provide a specific time that something has to be done” and that therefore repairs had to be done “in a reasonable time.” However, the court concluded that the HOA did not make repairs within a reasonable time because the homeowners’ unit remained in an unlivable condition six years after the initial water intrusion in the crawlspace, not because it failed to meet [804] any specific deadline. In reaching this conclusion, the trial court observed that the CCRs required homeowners to begin repairs within 60 days of the damage to be repaired. However, the trial court did so only to provide guidance on what constitutes a reasonable time for repairs, not to impose a specific deadline.

We therefore conclude that the trial court’s finding that the HOA breached the CCRs is supported by substantial evidence.

B. The Business Judgment Rule and Rule of Judicial Deference Defenses

The HOA also challenges the trial court’s rejection of its rule of judicial deference and business judgment rule defenses. We are not persuaded. The trial court rejected these defenses based on well-supported findings that the HOA failed to conduct a reasonable investigation and did not act in good faith.

Condominium boards are protected by the rule of judicial deference adopted by the Supreme Court in Lamden v. La Jolla Shores Clubdominium Homeowners Association (1999) 21 Cal.4th 249, 87 Cal.Rptr.2d 237, 980 P.2d 940 (Lamden). Under this rule, decisions by condominium boards concerning maintenance and repair of common areas are entitled to judicial deference if, among other things, they are made upon reasonable investigation and in good faith: “[W]here 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 development 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.” (Id. at p. 265, 87 Cal.Rptr.2d 237, 980 P.2d 940.)

The HOA is also protected by the business judgment rule. Although the business judgment rule does not apply to all condominium associations (Lamden, supra, 21 Cal.4th at p. 259, 87 Cal.Rptr.2d 237, 980 P.2d 940), it applies here because the HOA is incorporated. Much like the rule of judicial deference, the business judgment rule creates a presumption that decisions by corporate directors are based on sound business judgment and “ ‘prohibits courts from interfering in business decisions made by the directors in good faith and in the absence of a conflict of interest.’ ” (Lauckhart v. El Macero Homeowners Assn. (2023) 92 Cal.App.5th 889, 906, 310 Cal.Rptr.3d 150 (Lauckhart).)

Both the rule of judicial deference and the business judgment rule are affirmative defenses. (Affan v. Portofino Cove Homeowners Assn. (2010) 189 [805] Cal.App.4th 930, 940, 117 Cal.Rptr.3d 481 (Affan) [rule of judicial deference]; Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1123, 86 Cal.Rptr.3d 145.) As a consequence, defendants invoking these rules bear the burden of establishing the requirements for their application. (Affan, at p. 940, 117 Cal.Rptr.3d 481.) Moreover, where, as here, the trial court found that the defendant failed to satisfy that burden, the issue on appeal is “ ‘whether the evidence compels a finding in favor of the appellant as a matter of law.’ ” (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466, 126 Cal.Rptr.3d 301.) To demonstrate that a finding is compelled, a defendant must show that the evidence supporting that finding was “ ‘(1) “uncontradicted and unimpeached” and (2) “of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.” ’ ” (Ibid.)

The trial court held the rule of judicial deference inapplicable because it found that the HOA did not conduct a reasonable investigation. As shown above, substantial evidence supports this finding. The HOA was on notice in the spring of 2018 that the City and the Water District believed the water in the crawlspace might be from an undestroyed well, and all three of the drilling contractors that the HOA consulted agreed there was likely such a well. Nonetheless, the HOA decided without any advice, expertise, or evidence that there was no well and stopped investigating the possibility. Moreover, the HOA refused to reconsider this decision in spite of additional flooding, the trenches that they dug, the sinkhole that developed, and their civil engineer’s advice. As a consequence, the well underneath the homeowners’ unit was discovered only by accident in January 2020. In challenging the trial court’s finding that it failed to conduct a reasonable investigation, the HOA ignores this evidence and asserts that it “weighed competing interests” and “at times conflicting expert opinions.” However, those considerations do not undermine the evidence upon which the trial court concluded that the HOA failed to conduct a reasonable investigation, much less compel the conclusion that the HOA’s investigation was reasonable.

The trial court also found that the HOA did not act in good faith in refusing to search for a well or remediate the homeowners’ unit. This finding is also well supported. As just noted, the HOA ignored the opinions of the City, the Water District, and its drilling contractors without any colorable basis, and it decided without any expert advice to pursue a remedy—the French drain—that it had rejected earlier as not adequately addressing the undestroyed well.

Moreover, the HOA tried to manipulate other experts into supporting this remedy by not informing them of the possibility of a well. In December 2018, the HOA’s lawyer Stephan Barber contacted two hydrologists and [806] obtained a preliminary recommendation for a French drain but failed to disclose to the hydrologists that the water in the crawlspace might be from an undestroyed well. Then, the HOA tried to use that preliminary analysis and other misrepresentations to persuade the City and the Water District to support the French drain. Barber wrote the City and the Water District that “no qualified expert with whom we have consulted gives any credence to the hypothesis that there is an abandoned artesian well” under the homeowners’ unit and that “[t]he consensus is that there is a high groundwater table with an abundance of water” under the condominium complex. In fact, Barber was personally present when one of the drilling contractors consulted by the HOA stated that, while the water might be coming from an underground spring or a high groundwater table, a well below the homeowners’ unit was the probable source. In addition, as previously noted, at the time that the HOA made this decision no expert had advised it that the water in the crawlspace was likely due to a high water table, and the hydrologist who Barber suggested supported this contention testified that he was “angry” and “shocked” by Barber’s letter suggesting that he supported this position.

The conclusion that the HOA did not act in good faith is reinforced by other evidence of bad faith. First, Moritz repeated the misstatements in Barber’s letter to Ridley, to the association’s membership, and to the courts. Although Moritz admitted to the trial judge that at the time he believed the water in the crawlspace was from a well, he forwarded Barber’s letter to Ridley, and he stated that “[n]one of the experts consulted give credence to the hypothesis postulated by the [relevant government authorities] that an abandoned well exists.” In addition, when the homeowners sued the HOA, Moritz told the association’s membership that the water underneath the homeowners’ unit was likely due to a high water table. And when the homeowners sought a temporary restraining order, Moritz submitted a declaration stating that “[t]he HOA has since determined that the most likely cause of the water is a high ground water table under the subject property.”

Second, the HOA acted in bad faith towards the homeowners. In July 2018, it formed a well committee and appointed Ridley to the committee. Moritz assured Ridley that he would be involved in all the committee’s discussions about the water problem under his unit. However, as Moritz admitted at trial, this statement was false and was made only to placate Ridley. Indeed, almost immediately after Ridley joined the well committee, Ridley was excluded from committee communications. For example, on July 30, 2018, after Ridely raised questions to the committee about mold, the HOA’s manager removed Ridley from the email chain and asked other committee members for their views on how to respond to Ridley. That same day, another committee member distributed mold test results without copying Ridley. And committee members excluded Ridley from an email concerning insurance coverage and the retention of Barber.

[807] Third, the HOA acted without regard to the health and safety of others. For example, in December 2018, without expert advice, Moritz told the homeowners that their unit was habitable and should be rented. Even worse, the HOA sent a contractor to remove the topsoil and fill the sinkhole without telling them that there might be an undestroyed well there. However, as one of the drilling contractors testified, a well like the one found underneath the crawlspace can flow at 500,000 gallons a minute, and if the soil on top of the well is removed and there is no longer any pressure holding the well cap down, water can shoot up like a fire hydrant run over by a car. Accordingly, the trial court found that Mortiz’s failure to disclose the possible presence of a well put workers at risk.

The HOA asserts that the trial court’s focus on the Barber letter and Moritz’s adoption of statements in the letter is “misplaced” because the letter “must be viewed within the context of HOA’s consultation with experts, the weighing of costs, the potential for destroying the unit, and the fact that Ridley had initially proposed the French drain.” However, the HOA does not explain how its consultation with experts, most of whom it ignored, establishes that it acted in good faith. Nor does the HOA explain how any of the factors identified compels the conclusion that it acted in good faith when it made multiple false and misleading statements in support of a solution that it adopted without any colorable basis.

The HOA also asserts that Barber’s statements stemmed from uncertainty over the location of the suspected well and reflected his belief that a French drain was the best solution. However, Mortiz admitted that, when the HOA made the decision to install a French drain in January 2019, no expert had recommended installing such a drain. In addition, Barber’s letter to the City did not merely assert that the location of the undestroyed well was uncertain: In direct contradiction to all the drilling contractors consulted by the HOA, the letter stated that no expert believed that that there was a well “under or near” the unit, and that the consensus was that the water in the crawlspace was due to the “crazy” hypothesis of a “high groundwater table.” (Italics added.) The HOA also asserts that Barber was merely advocating on behalf of his client, but fails to explain how the fact relieves the HOA of responsibility for the misstatements made on its behalf, much less how the fact suggests that the HOA was acting in good faith.

In its reply, the HOA notes Moritz’s testimony that he believed that the statements in Barber’s letter were true when they were made. However, the trial court—which specifically questioned Moritz about these beliefs—found that this testimony was not credible and that the HOA engaged in a pattern of “falsehood” and “deception.” As appellate courts “ ‘defer to the trier of fact on issues of credibility’ ” (Greisman v. FCA US, LLC (2024) 103 Cal.App.5th [808] 1310, 1322, 324 Cal.Rptr.3d 182), the trial court’s rejection of Moritz’s testimony on this point must be respected.

Other explanations offered by the HOA fail for the same reason. For example, the HOA’s attempts to defend Barber’s failure to disclose the suspected well to the hydrologists by pointing to Barber’s testimony that he did not want to influence their opinions. The trial court found this explanation implausible and “pretextual,” another credibility assessment that must be respected. Similarly, while the HOA asserts that Ridley’s exclusion from well committee communications “shows at most a lack of communication,” the trial court disagreed, inferring that Ridley’s exclusion was intentional and the promise to include him pretextual.

Finally, the HOA objects that it engaged in “active decision making” concerning the water intrusion under the homeowners’ unit and resulting repairs and that the trial court engaged in impermissible “second-guessing” and “micromanaging” of these discretionary decisions. This objection begs the question. Under the rule of judicial deference and the business judgment rule, courts are required to defer to the discretionary decision making of a homeowner’s board only if the board acted in good faith. (See, e.g., Lamden, supra, 21 Cal.4th at p. 257, 87 Cal.Rptr.2d 237, 980 P.2d 940; Lauckhart, supra, 92 Cal.App.5th at p. 906, 310 Cal.Rptr.3d 150.) Moreover, while the HOA points to some actions that it took in good faith, such as investigating whether there was an undestroyed well in the spring, summer, and fall of 2018, and to its repair efforts after the inadvertent discovery of the well in January 2020, the trial court found that the HOA acted in bad faith based on its conduct in late 2018 and throughout 2019.

We therefore conclude that substantial evidence supports the trial court’s findings that the HOA failed to conduct a reasonable investigation and acted in bad faith, and therefore the trial court properly rejected the HOA’s rule of judicial deference and business judgment rule defenses. In light of this conclusion, we need not consider the alternative grounds on which the trial court rejected these defenses.

The HOA also challenges the trial court’s rejection of its defense under the CCRs’ exculpatory clause. The court rejected this defense on three alternative grounds: The clause does not apply because the claimed damage was caused by the HOA’s neglect, because the clause is against public policy and unenforceable, and because the HOA was grossly negligent. The HOA challenges each of these rulings. We need address only gross negligence.

“ ‘Gross negligence’ long has been defined in California and other jurisdictions as either a ‘ “ ‘want of even scant care’ ” ’ or ‘ “ ‘an extreme departure from the ordinary standard of conduct.’ ” ’ ” (City of Santa [809] Barbara v. Superior Court (2007) 41 Cal.4th 747, 754, 62 Cal.Rptr.3d 527, 161 P.3d 1095.) Thus, gross negligence may be proven in two different ways. (Davis v. Physician Assistant Board (2021) 66 Cal.App.5th 227, 239-240, 281 Cal.Rptr.3d 207.) First, a defendant is grossly negligent if it exercises “so slight a degree of care as to raise a presumption of conscious indifference to the consequences” as, for example, where a person’s state of mind is “ ‘simply, “I don’t care what happens.” ’ ” (People v. Bennett (1991) 54 Cal.3d 1032, 1036, 2 Cal.Rptr.2d 8, 819 P.2d 849.) Second, a defendant is grossly negligent if its conduct constitutes “ ‘an extreme departure from what a reasonably careful person would do in the same situation to prevent harm to oneself or to others.’ ” (Epochal Enterprises, Inc. v. LF Encinitas Properties, LLC (2024) 99 Cal.App.5th 44, 56, 317 Cal.Rptr.3d 573.)

The trial court found both an extreme departure by the HOA from the ordinary standard of care and an indifference towards the consequences of its conduct. Both findings are supported by substantial evidence.

There was ample evidence of an extreme departure from the ordinary standard of care. As noted above, the HOA was informed in May 2018 that the City believed that the water in the crawlspace was likely from an undestroyed well that had to be located and destroyed, and all three drilling contractors consulted by the HOA expressed the same opinion. Nevertheless, the HOA rejected these opinions and, without any expert advice, decided that there was no well and took the “crazy” position that the water in the crawlspace was from a high groundwater table. In addition, the HOA maintained this position in the face of evidence—flooding in March 2019, the absence of water in the trenches dug near the unit, and the sinkhole found in September 2019—that the water in the crawlspace was not from a high groundwater table. Finally, rather than trying to determine the true source of the water in the crawlspace and the best remedy for it, the HOA tried to manipulate the opinions of the hydrologists it consulted by not disclosing the potential well and then misrepresented the opinions it had received to the City, the Water District, its membership, and the courts. This record provides substantial evidence that the HOA’s conduct constituted an extreme departure from what a reasonably careful person would do.

There also was substantial evidence that the HOA acted with indifference to the dangerous consequences of its conduct. For example, as early as May 2018, the HOA was informed of the “exponential” loss that might occur if it did not address quickly the water in the crawlspace. Two months later, an industrial hygienist informed the HOA that mold was developing in the homeowners’ unit, and by March 2019 mold was visible on kitchen cabinets and floors. Nevertheless, the HOA took no meaningful action to remove the water in the crawlspace until discovery of the well in January 2020 and [810] before then asserted without basis that the homeowners’ unit was habitable, despite the danger that some of the mold in the unit was toxic—as it turned out to be. In addition, the HOA sent workers to dig out the sinkhole without informing them that they might be removing the soil above an undestroyed well, despite the danger of an explosion when the soil was removed. This evidence provided ample basis for finding that the HOA was indifferent not only to the property damage that its inaction could cause, but also to the health of tenants and the physical safety of workers.

In its opening brief, the HOA did not attempt to explain why this evidence was insufficient to show gross negligence. The HOA merely asserted that it never disclaimed responsibility and took multiple steps to resolve the water intrusion, mold, and damage to the south wall. While that is true, the HOA was nonetheless grossly negligent in deciding without any reasonable basis to ignore the opinions of the City, the Water District, and its drilling contractors that there was a well and also for delaying 19 months before taking any meaningful action to remedy or reduce the damage to the homeowners’ unit.

In its reply brief, the HOA asserts that it “had reasons for its maintenance decisions” and that the false and misleading statements by Barber and Moritz “reflected the HOA’s belief that the best approach at the time was to proceed with a French drain.” However, the HOA fails to explain why the trial court could not find the HOA grossly negligent based on the contrary evidence in the record. (See City of San Buenaventura v. United Water Conservation Dist. (2022) 79 Cal.App.5th 110, 120, 294 Cal.Rptr.3d 491 [“ ‘ “As a general rule,” ’ ” appellate courts “ ‘ “will look only at the evidence and reasonable inferences supporting the successful party, and disregard the contrary showing.” ’ ”].) The HOA also asserts that, at the time that it sent workers into the sinkhole, there was no evidence that there was a well directly underneath the unit. In fact, while there was no definitive evidence of the location of the well, as has been repeatedly noted, the HOA was informed by all three drilling contractors that it consulted that an undestroyed well was likely either under the crawlspace or just outside the rear foundation. Finally, in attempting to defend Moritz’s insistence that the homeowners’ unit was habitable, the HOA notes that Ridley rented out the unit in October 2018. However, the HOA fails to acknowledge Ridley had a mold test done after the tenant in question moved out, and that this test, which Ridley shared with the HOA, showed that mold was present.

In short, the HOA has not shown any error in the trial court’s finding of gross negligence. We therefore affirm the court’s rejection of the HOA’s exculpatory clause defense and, because the court’s finding of breach is otherwise justified, we affirm the determination that the HOA breached the CCRs and the injunction issued based upon that breach.

[811] III. DISPOSITION

The injunction order issued July 25, 2024 is affirmed. Respondents are entitled to recover costs on appeal. (Cal Rules of Court, rule 8.278(a)(1), (3).)


The homeowners did not include Moritz in their CCRs claim. However, we need not consider the claims against Moritz to review the injunction on appeal because the injunction does not impose any obligations upon Moritz personally. Instead, the injunction was issued against the HOA, “by and through its board of directors, including Steve Moritz,” and it stated that “[t]he HOA”—not the HOA’s board or Moritz—“will remain liable” for lost rent. Moreover, Moritz has left the board. Because the HOA plainly has standing to bring this appeal, and Moritz does not seek any relief beyond that sought by the HOA, we need not determine whether Moritz is aggrieved and has standing. (See, e.g., Cesar V. v. Superior Court (2001) 91 Cal.App.4th 1023, 1035, 111 Cal.Rptr.2d 243; In re Sarah S. (1996) 43 Cal.App.4th 274, 282, fn. 10, 50 Cal.Rptr.2d 503.)

BROMBERG, J.

WE CONCUR: DANNER, ACTING P. J. WILSON, J.

11640 Woodbridge Condominium HOA v. Farmers Insurance Exchange

(2025) 110 Cal.App.5th 211

[Insurance; Exclusions] A condominium association’s insurance carrier providing an “all risks” policy has the burden to prove a specific coverage exclusion applies.

Shernoff Bidart Echeverria, William M. Shernoff, Travis M. Corby and Cooper Johnson for Plaintiff and Appellant.

Woolls Peer Dollinger & Scher, Galil S. Cooper and H. Douglas Galt for Defendant and Respondent.

OPINION

EDMON, P. J.—

In 2021, while a building owned by appellant 11640 Woodbridge Condominium Homeowners’ Association (HOA) was being reroofed, two rainstorms penetrated the partially constructed roof and caused extensive interior damage. The HOA made a claim under its condominium policy, which was underwritten by respondent Farmers Insurance Exchange (Farmers). Farmers denied the claim, concluding that the HOA’s losses resulted from nonaccidental faulty workmanship, which the policy did not cover.

The HOA then brought the present action, alleging breach of contract and breach of the implied covenant of good faith and fair dealing against Farmers. Farmers moved for summary judgment, and the trial court granted the motion, concluding there was no coverage under the condominium policy as a matter of law.

We reverse. As we discuss, the condominium policy was an “all-risks” policy, which covered all damage to the HOA’s property unless specifically excluded. There are triable issues of material fact as to whether the exclusions relied on by Farmers—the water damage exclusion and the faulty workmanship exclusion—preclude coverage in the present case. We thus reverse the summary judgment.

215*215 FACTUAL AND PROCEDURAL BACKGROUND

I. The roof replacement and property damage.

In 2021, the HOA hired Nelson Alcides Bardales, doing business as Local Roofer (Bardales), to replace the roof of the condominium complex building (the building).[1] The proposal prepared by Bardales identified the following scope of work:

“Tear off Existing Roof Down to Wood Sheeting

“Inspect and Replace any Dry Rot Wood

“Prepare Surface to Receive New Roof System

“Build New Wood Platforms for A/C Units

“Install One Layer #28 Glass Ply[[2]]

“Hot Mop[[3]] 3 Layers #11 Glass Ply

“Install All New Vent and Pipes with 509 Roof Cement

“Hot Mop One Layer of 72 Cap Sheet Over A/C Unit Platforms and Walls

“Install New Sheet Metal Pans Under A/C Units

“Top Mop and Seal with #5 Granite Rock”

Bardales began the job on about September 29, and over the next five days he removed approximately 80 percent of the roof membrane.[4] Bardales intended to replace those portions of the plywood sheets that showed evidence of dry rot, and then to install new layers of the new roof membrane. However, on October 4, after the roof membrane was removed, there was a 216*216 rainstorm that damaged the exposed insulation and plywood. As a result, water entered about half the condominium units.

Because of the damage caused by the rain, Bardales had to remove and replace about 80 percent of the insulation and plywood. He then added a layer of “base paper” and “base felt,” hot-mopped and tarred much of the roof, and covered the entire roof with tarps before the next rain was expected. However, a second heavy rainstorm on about October 25, 2021, blew off some of the tarps and penetrated the exposed felt layer. As a result, water entered all of the condominium units, causing significant damage.

II. The condominium policy.

The HOA was insured under a Condo/Townhome Premier Policy (policy) written by Farmers for the period October 14, 2020, to October 14, 2021. Under the policy, Farmers agreed to pay for “direct physical loss of or damage to Covered Property” at the HOA’s premises “caused by or resulting from any Covered Cause of Loss.” The policy defined the relevant terms as follows:

—”Covered Property” includes any “[b]uilding and structure described in the Declarations,” including “[c]ompleted additions,” “[p]ersonal property owned by [the HOA],” and, if not covered by other insurance, “[a]dditions under construction, alterations[,] and repairs to the building or structure.” “Covered Property” excludes, among other things, “[p]ersonal property owned by, used by[,] or in the care, custody[,] or control of a unit-owner.” (Italics added.)

—”Covered Causes of Loss” are “Risks of Direct Physical Loss” unless the loss is “[e]xcluded in Section B” or “[l]imited in Paragraph A.4.” (Italics added.)

The policy also contained two coverage exclusions that are relevant to our analysis:

Water damage exclusion: Farmers will not pay for loss or damage caused directly or indirectly by “[w]ater,” “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” However, Farmers will pay for “[w]ater damage to the interior of any building or structure caused by or resulting from rain, … whether driven by wind or not, if … [t]he building or structure first sustains damages by a Covered Cause of Loss to its roof or walls through which the rain … enters.”

Faulty workmanship exclusion: Farmers will not pay for loss or damage “caused by or resulting from” specified exclusions, including, among others, 217*217 “[f]aulty, inadequate or defective … [p]lanning, zoning, development, surveying, siting … [and] workmanship, repair, construction [or] renovation.” (Italics added.) However, “if an excluded cause of loss … results in a Covered Cause of Loss,” Farmers “will pay for the loss or damage caused by that Covered Cause of Loss.”

III. The insurance claim.

The HOA made a claim for water damage under the policy on October 6, and again after the October 25 rain. As part of its investigation of the claim, Farmers retained Pete Fowler Construction Services, Inc. (Fowler), to inspect the HOA’s roof. Fowler reported that Bardales failed to follow industry standards by removing nearly the entire roof membrane at once, rather than in small sections. Bardales did not have the capacity to quickly tar the areas where the roof had been removed, and tarps placed over the building did not provide sufficient temporary rain protection. The building thus was completely exposed during subsequent rainstorms.

Based on Fowler’s investigation, Farmers denied the HOA’s claim on November 1. Its denial letter said: “[O]ur investigation found that roofing company Local Roofer was retained for a roof replacement operation. Local Roofer removed the existing roof down to the roof deck sheathing before a storm approached. During the storm events, rainwater entered into the building through the partial remaining roof elements not intended or expected to be an effective barrier against a rainstorm. Rainwater entered the building through openings in the roof intentionally made by Local Roofer during their reroof processes and not as a result of a covered accidental event. While the roof was tarped, and a section of the tarp blew off the roof, the blowing of a tarp off a roof does not create an opening in the roof. Instead, the roof sheathing with or without a tarp is not a roof and the opening in the roof was caused by the roofers replacing the roof, not wind. Further, Local Roofer did not meet the standard of care in their roofing processes. Thus, the removal of roof surfacing in addition to not being accidental, excludes faulty workmanship. Unfortunately, your E3422-3 Condominium Property Coverage Form excludes water in any form, and negligent work. There is no coverage for the loss sustained.”

IV. The present action.

The HOA filed the present action against Farmers and Bardales in January 2022. The complaint alleged that Bardales removed the entire top layer of the building’s roof down to the plywood decking that served as the roof’s foundation. Because the roof was not fully protected from the elements, when storms hit the area on October 4 and 25, “the building’s roof was damaged[,] 218*218 ultimately resulting in water intrusion to the walls and its interior.” Specifically, “[m]any of the complex’s 31 units suffered collapsed ceilings and water-logged walls, forcing the residents to move out. The common areas and great room also suffered extensive damage. The cost of remediation and repair has been estimated at more than $3.5 million.”

As against Farmers, the HOA asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing.[5] Specifically, the HOA alleged that the water exclusion to the policy did not apply because the HOA’s building “sustained damage first to its roof and walls, through which the rain entered.” The HOA also alleged that the faulty workmanship exclusion did not apply because California courts have interpreted this provision not to apply to “faulty processes” employed by a contractor, and because the building “first sustained damage to its roof before water entered the building.” Therefore, “whether [the HOA’s] loss was caused by the storm or by Local Roofer’s faulty process, or by both, the loss was covered by the Policy,” and Farmers “knowingly and intentionally misconstrued the Policy’s exclusions … to deny coverage.”

V. Farmers’ motion for summary judgment.

Farmers filed a motion for summary judgment in February 2023, urging that coverage was excluded by both the water damage exclusion and the faulty workmanship exclusion. First, Farmers noted that the HOA’s policy specifically excluded coverage for damage caused by water unless the water damage was caused by “a Covered Cause of Loss” to the insured’s roof or walls. Although the damage in the present case unquestionably was caused by water, Farmers asserted that the water did not enter the building as the result of a covered cause of loss. Farmers said: “In the first rain event, the water entered through the sheathing exposed by Bardales’ removal of the entire roof at once. It rained while the roof was off. In the second rain event, the water entered through gaps between tarps placed as temporary covering over unwaterproofed areas of the incomplete roof. Covered by a tarp or not, there was no damage to the building through which the rain entered. The rain entered through openings intentionally created by Bardales. In California, insurance is not available for losses that are not fortuitous and accidental.” Further, Farmers urged: “Plaintiff cannot defeat application of the exclusion by contending that the roof decking or sheathing was a `roof’, since it admits that the sheathing without tarps was not impervious to water penetration. Nor does it defeat application of the exclusion if Plaintiff contends that the tarps were blown off the unfinished roof by wind (contrary to Bardales’ personal percipient observation). A tarp is not a roof as a matter of California law. It is merely a temporary covering, or … a `nonstructural band-aid.'”

219*219 Farmers also contended that the policy did not cover the HOA’s water damage under the faulty workmanship exclusion. It urged that Bardales was negligent, and his negligence caused rainwater to penetrate the interior of the building. Specifically, Farmers asserted: “Bardales’ work was faulty, inadequate and defective in at least the following ways: by planning to remove the entire roof all at once rather than one section at a time; by workmanship in removing entire roof all at once yet failing to protect against water penetration in the event of rain knowing the sheathing was not impervious to such penetration by itself; by failing to timely repair the wet insulation; by constructing the lower layers of the roof without protection of the building from water penetration; and by using inadequate materials used in repair and construction in that the tarps used were inadequate to protect the building from water penetration.”

In support of its motion for summary judgment, Farmers submitted the declaration of claims adjuster Taylor Von Ahlefeld. He explained: “Section B, Exclusions, section B.1.f(1)(a) and (2)(b)(i), excludes all damage from water, directly or indirectly, except in specified limited circumstances. The policy further states: `Such loss or damage is excluded … regardless of any other cause or event that contributes concurrently or in any sequence to the loss.’ For coverage to apply, the water must enter the building through physical damage first caused to the building (usually the roof) by a covered cause of loss. Typically, that covered cause of loss is wind, hail, or a falling tree or object. Here, there was no such covered cause of loss. Based on the facts developed at the time of my investigation, it was clear that the water entered through openings intentionally uncovered or created by a contractor during re-roofing operations. Intentionally created openings are not a covered cause of loss. Even if tarps blew off the roof, the tarps were not a roof, but only temporary coverings of exposed areas….

“In addition, to prevent this first party property policy issued to the property owner from becoming a liability policy that protects negligent third-party contractors—who are not even the company’s insureds—from the consequences of their own negligence, under section B.3.c.(2), negligent or faulty workmanship is also and separately excluded. That exclusion states that the Policy `will not pay for loss or damage caused by or resulting from’ … `Faulty, inadequate, or defective’ … `planning,’ `workmanship,’ `repair,’ `construction,’ `renovation,’ `remodeling,’ or … `maintenance.’ All those things applied to this situation in my judgment…. While the roofer’s negligent work did cause damage, that damage did not result from a covered cause of loss under the plain terms of the Woodbridge Policy…. [¶] … Therefore, I was unable to find coverage for this loss.”

The HOA opposed the motion for summary judgment. It asserted that Bardales’s negligence—namely, his “flawed process”—was a covered cause 220*220 of harm and was the efficient proximate cause of the damage. Alternatively, the HOA urged that there was coverage under the water damage exception because the roof was damaged before rainwater entered the building.

The trial court granted the motion for summary judgment, concluding that the policy did not cover the HOA’s losses because both the water damage exclusion and the faulty workmanship exclusion applied. The trial court entered judgment on July 13, 2023. The HOA timely appealed.

DISCUSSION

I. Legal principles.

A. Standard of review.

Summary judgment is proper if the papers submitted show there is no triable issue as to any material fact and the moving party is entitled to prevail on a cause of action as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 [107 Cal.Rptr.2d 841, 24 P.3d 493] (Aguilar).) A defendant moving for summary judgment has the initial burden to show the plaintiff cannot establish one or more elements of the challenged cause of action or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (p)(2).) A defendant meets its burden by presenting affirmative evidence that negates an essential element of the plaintiff’s claim, or by submitting evidence that demonstrates “the plaintiff does not possess, and cannot reasonably obtain, needed evidence” to prove an essential element of the plaintiff’s claim. (Aguilar, at p. 855.)

If the defendant makes a sufficient showing, the burden then shifts to the plaintiff to demonstrate a triable issue of material fact exists. (Code Civ. Proc., § 437c, subd. (p)(2).) A triable issue of fact exists if the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion. (Aguilar, supra, 25 Cal.4th at p. 850.)

On appeal from a summary judgment, we review the record de novo and independently determine whether triable issues of material fact exist. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767 [107 Cal.Rptr.2d 617, 23 P.3d 1143]; Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334 [100 Cal.Rptr.2d 352, 8 P.3d 1089].) We “view the evidence in a light favorable” to the nonmoving party, resolving any evidentiary doubts or ambiguities in that party’s favor. (Saelzler, at p. 768.)

B. Principles of insurance interpretation.

The principles governing the interpretation of insurance policies in California are well settled. “`Our goal in construing insurance contracts, as 221*221 with contracts generally, is to give effect to the parties’ mutual intentions. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264 [10 Cal.Rptr.2d 538, 833 P.2d 545]; see Civ. Code, § 1636.) “If contractual language is clear and explicit, it governs.” (Bank of the West, at p. 1264; see Civ. Code, § 1638.) If the terms are ambiguous [i.e., susceptible of more than one reasonable interpretation], we interpret them to protect “`the objectively reasonable expectations of the insured.'” (Bank of the West, at p. 1265, quoting AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822 [274 Cal.Rptr. 820, 799 P.2d 1253].) Only if these rules do not resolve a claimed ambiguity do we resort to the rule that ambiguities are to be resolved against the insurer. (Bank of the West, at p. 1264).’ (Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 501 [30 Cal.Rptr.3d 787, 115 P.3d 68].) The `tie-breaker’ rule of construction against the insurer stems from the recognition that the insurer generally drafted the policy and received premiums to provide the agreed protection. (See Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 552 [79 Cal.Rptr.3d 721, 187 P.3d 424]; La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity Co. (1994) 9 Cal.4th 27, 37-38 [36 Cal.Rptr.2d 100, 884 P.2d 1048].)” (Minkler v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315, 321 [110 Cal.Rptr.3d 612, 232 P.3d 612] (Minkler).)

To ensure that coverage conforms to the objectively reasonable expectations of the insured, “in cases of ambiguity, basic coverage provisions are construed broadly in favor of affording protection, but clauses setting forth specific exclusions from coverage are interpreted narrowly against the insurer. The insured has the burden of establishing that a claim, unless specifically excluded, is within basic coverage, while the insurer has the burden of establishing that a specific exclusion applies.” (Minkler, supra, 49 Cal.4th at p. 322.) The court is not required “`to select one “correct” interpretation from the variety of suggested readings'”; instead, where there are multiple plausible interpretations of a policy, a court must find coverage if there is a “`reasonable interpretation under which recovery would be permitted.'” (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 655 [3 Cal.Rptr.3d 228, 73 P.3d 1205].)

II. The present policy: all-risks coverage, with exclusions for water damage and faulty workmanship.

A. Background.

First party property insurance indemnifies property owners against loss to property. (Another Planet Entertainment, LLC v. Vigilant Ins. Co. (2024) 15 Cal.5th 1106, 1122 [320 Cal.Rptr.3d 843, 548 P.3d 303] (Another Planet), citing 10A Couch on Insurance (3d ed. 2024) § 148:1.) There are two 222*222 general categories of first party property insurance. “Named perils” or “specific perils” policies provide coverage only for the specific risks enumerated in the policy and exclude all other risks. (7 Couch on Insurance, supra, § 101:7.) “All-risk” policies provide coverage for all risks unless the specific risk is excluded. (Ibid.Another Planet, at p. 1122.)

“`Historically, property insurance grew out of the insurance against the risk of fire which became available for ships, buildings, and some commercial property at a time when most of the structures in use were made wholly or primarily of wood.’ (10A Couch on Insurance, supra, § 148:1.) `On this side of the Atlantic, fire insurance first developed in the middle of the eighteenth century…. [T]his was insurance against only one cause of loss, or peril—fire. Over time other insured perils, such as wind and hail, were added. These insured perils were each specified in the insurance policy. For this reason, such insurance came to be known as “specified-risk” coverage. It insured property against the risk of damage or destruction resulting from specified causes of loss.’ (Abraham, Peril and Fortuity in Property and Liability Insurance (2001) 36 Tort Trial & Ins. Prac. L.J. 777, 782-783, fn. omitted.) By contrast, marine insurance developed `standardized forms that insured an ocean-going vessel and its cargo against “perils of the high seas.” Whereas the development of fire insurance for property on land focused on the danger presented by a specified cause of loss, marine insurance typically provided coverage for all risks associated with a particular shipment or voyage.’ (5 New Appleman on Insurance Law Library Edition (2023) § 41.01[1], fn. omitted.) `[B]y the middle of the twentieth century, insurers adopted the marine insurance approach by offering all-risk commercial and homeowners’ property insurance. The operative phrase in such policies is contained in the section labeled “Perils Insured Against,” and provides coverage against the risk of “direct physical loss” to covered property.’ (Abraham, at p. 783, fn. omitted.)

“`As with any insurance, property insurance coverage is “triggered” by some threshold concept of injury to the insured property. Under narrow coverages like theft, the theft is itself the trigger. Under most coverages, however, the policy specifically ties the insurer’s liability to the covered peril having some specific effect on the property. In modern policies, especially of the all-risk type, this trigger is frequently “physical loss or damage” … (10A Couch on Insurance, supra, § 148:46.)” (Another Planet, supra, 15 Cal.5th at pp. 1122-1123.)

B. The condominium policy.

The condominium policy at issue in this case covers “direct physical loss of or damage to Covered Property … caused by or resulting from any 223*223 Covered Cause of Loss.” “Covered Causes of Loss” are defined as “Risks of Direct Physical Loss unless the loss is Excluded in Section B…. [¶] or Limited in Paragraph A.4.” This language is far from a model of clarity— read literally, the policy says Farmers will pay for “direct physical loss of or damage to” the HOA’s property caused by “[r]isks of [d]irect [p]hysical loss.” Nonetheless, the language unquestionably gives rise to an “all risks” or “open peril” policy. (See Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 751 & fn. 2 [27 Cal.Rptr.3d 648, 110 P.3d 903] [property policy insuring against “`risks of direct physical loss to property'” unless excluded or caused by one of several specifically named perils was an “`open peril'” policy]; Jordan v. Allstate Ins. Co. (2004) 116 Cal.App.4th 1206, 1218-1219 [11 Cal.Rptr.3d 169] [“the Allstate policy is an `all-risk’ policy (i.e., it provides coverage for all risks of loss, except those expressly excluded)”].) The policy thus insures the HOA against all physical loss or damage to the HOA’s covered property unless specifically excluded.

In support of its motion for summary judgment, Farmers asserted that there was no coverage for the HOA’s losses under two policy exclusions: (1) the water damage exclusion, and (2) the faulty workmanship exclusion. We discuss these exclusions below.

III. The water damage exclusion.

As noted above, the policy provides that Farmers will not pay for loss or damage caused directly or indirectly by “[w]ater,” “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” However, Farmers will pay for “[w]ater damage to the interior of any building or structure caused by or resulting from rain … if … [t]he building or structure first sustains damages by a Covered Cause of Loss to its roof or walls through which the rain … enters.”

Farmers contends that the water damage exclusion bars coverage because “[t]he roof at the subject property had been entirely removed,” and thus “[t]here was no roof to be damaged when it started to rain.” Alternatively, Farmers contends that even if a “roof” remained, water entered through deliberately created openings in the roof, which was not “damage” within the meaning of the policy. The HOA disagrees, urging that “the building did suffer damage that allowed water to enter”—specifically, “the roof was damaged by [Bardales] stripping down the existing roof and exposing it to rain.” The HOA urges that this damage to the roof rendered the interior rain damage a covered cause of loss.

As we discuss, there are triable issues of material fact as to coverage under the water damage exclusion. This exclusion therefore cannot support summary judgment for Farmers.

224*224 A. Case law addressing property coverage during roof repairs.

We are aware of just one California case that has addressed all-risk property coverage for losses that occur during roof repairs. In Diep v. California Fair Plan Assn. (1993) 15 Cal.App.4th 1205 [19 Cal.Rptr.2d 591] (Diep), a contractor removed a portion of the roof of a warehouse while making roof repairs and covered the opening with plastic sheeting. The plastic sheeting was torn during two rain storms, allowing rain to enter the warehouse and damage the plaintiff’s merchandise. (Id. at p. 1206.) The plaintiff made a claim under an insurance policy that provided, in relevant part, that the insurer “`shall not be liable for loss to the interior of the building(s) or the property covered therein caused: [¶] (1) by rain, snow, sand or dust, whether driven by wind or not, unless the building(s) covered or containing the property covered shall first sustain an actual damage to roof or walls by the direct action of wind or hail and then shall be liable for loss to the interior of the building(s) or the property covered therein as may be caused by rain, snow, sand or dust entering the building(s) through openings in the roof or walls made by direct action of wind or hail.'” (Id. at p. 1208.) The insurer moved for summary judgment, contending there was no coverage because the plastic sheeting did not constitute a “roof.” The trial court agreed and granted the motion for summary judgment. (Id. at p. 1207.)

The Court of Appeal affirmed. (Diep, supra, 15 Cal.App.4th at p. 1206.) It noted that the loss would be covered if the plastic sheeting constituted a “roof” because it was undisputed that wind blew the sheeting open, allowing the rain to enter and damage the plaintiff’s inventory. However, the court reasoned that while “roof” has many different meanings, it “is commonly considered to be a permanent part of the structure it covers.” (Id. at p. 1208.) In the case before it, the court found that the plastic sheeting was “a nonstructural band-aid,” not a “roof,” and thus the policy did not cover the resulting water damage. (Id. at pp. 1209, 1211.)

Some courts in other jurisdictions have similarly concluded. (See, e.g., Fourth Street Place, LLC v. Travelers Indemnity Co. (2011) 127 Nev. 957, 966 [270 P.3d 1235, 1241] [“tarps used to cover the areas of the Building’s roof exposed by removal of the waterproof membrane did not constitute a `roof’ for purposes of the Policy’s rain limitation”]; Lobell v. Graphic Arts Mut. Ins. Co. (N.Y.App.Div. 2011) 83 A.D.3d 911, 913 [921 N.Y.S.2d 306, 308] [“Contrary to the plaintiffs’ contention, the tarps that had been placed over the openings in the first floor ceiling of their building did not come within the definition of the term `roof’ as used in the `windstorm or hail’ provision of the policy, which provided that damage to personal property caused by rain was not covered unless the rain entered the home as a result of wind or hail causing an opening in a `roof'”]; New Hampshire Ins. Co. v. Carter (Fla. Dist. 225*225 Ct. App. 1978) 359 So.2d 52, 53 [policy did not cover damage caused by rain that entered through partially constructed roof]; Camden Fire Ins. Assn. v. New Buena Vista Hotel Co. (1946) 199 Miss. 585, 593-600 [24 So.2d 848, 848-851] [same].)

Other courts, however, have differently interpreted the water exclusion language of all-risk property policies. In Dewsnup v. Farmers Ins. Co. of Or. (2010) 349 Or. 33 [239 P.3d 493] (Dewsnup), the plaintiff undertook repairs to his home’s roof, which was made up of a plywood sublayer and an outer layer of wood shakes, by removing the outer layer and replacing it temporarily with plastic sheets stapled to the plywood. That night, a storm blew off the plastic sheets, allowing rain to enter the plaintiff’s home through the joints between the plywood. (Id. at p. 495.) The plaintiff made a claim under his homeowner insurance policy, but the insurer denied it, concluding that the property damage was not covered because the plastic tarp was not a “roof” within the meaning of the policy. (Ibid.) The trial court granted the insurer’s motion for summary judgment, and the Court of Appeal affirmed. (Id. at p. 495.)

The Oregon Supreme Court reversed. It explained that “[t]he ordinary meaning of the terms `roof’ and `roofing’ do not expressly require that a roof must be permanent, as defendant argues. To be sure, a `roof,’ which consists, in part, of `roofing’ materials, should be reasonably suitable to `maintain a cover upon [a building’s] walls’ in order to serve its function. [Citation.] `Roofing,’ to do the same, must provide some level of `protection from the weather.’ [Citation.] Taken together, those definitions imply requirements of structural integrity and protection from the elements.” (Dewsnup, supra, 239 P.3d at p. 497.) However, the court noted, “those are functional elements, not necessarily durational ones. No roof is permanent. When a roof is sufficiently durable to serve the functional purposes described above, it is still a `roof’ within the ordinary understanding of that term, even if it is not necessarily permanent.” (Ibid.) In the case before it, the court concluded that a reasonable juror could conclude that plastic sheeting secured to a plywood sublayer was a “roof” because it was “suitable to protect the house for the duration of the repair.” (Id. at p. 500.) Accordingly, the insurer’s motion for summary judgment should have been denied. (Ibid.)

The New Jersey Court of Appeal similarly concluded in Victory Peach Group, Inc. v. Greater New York Mutual Ins. Co. (App.Div. 1998) 310 N.J. Super. 82 [707 A.2d 1383] (Victory Peach). There, the insured attempted to repair his roof by cutting troughs in the roof to improve drainage. Because the repairs were not completed at the end of the day, the insured covered the area with vinyl tarpaulins nailed to the roof. That night, a rainstorm ripped off the tarpaulins, allowing rain to enter the building and damage its contents. (Id. 226*226 707 A.2d at p. 1384.) The property insurer denied coverage for the damage, and a jury returned a liability judgment for the insured. The insurer appealed. (Id. at p. 1383.)

The appellate court affirmed the judgment for the insured. It noted that the applicable insurance policy covered rain damage to a building’s interior if “`[t]he building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain … enters,'” and also covered “`[a]dditions under construction, alterations[,] and repairs to the building or structure.'” (Victory Peach, supra, 707 A.2d at pp. 1386, 1384.) Thus, the court reasoned: “[W]ere the rain to have entered through the old defects in the roof observed by [the insured] and which necessitated the repairs, that would be a `Covered Cause of Loss.’ [Fn. omitted.] Likewise, the entry of the rain through the unfinished repairs would seem to be a `risk of direct physical loss’ and, thus, a `Covered Cause of Loss.’ No exclusions apply. The limitation cannot apply by its own terms, since the roof did sustain damage by a `Covered Cause of Loss.'” (Id. at p. 1386.)

In reaching this conclusion, the court rejected the insurer’s assertion that there could be no coverage because the damage was to temporary repairs, not to the roof. The court explained: “First, since the repairs themselves are `covered property,’ the entry of the rain through the damage to those repairs would constitute a `Covered Cause of Loss’…. Second, we simply do not accept the factual proposition that the repairs to the roof made the roof something other than a roof. At the least, the provision is ambiguous.” (Victory Peach, supra, 707 A.2d at p. 1386.) Moreover, the court said, the burden was on the insurer, as the drafting party, to bring the case within an exclusion or limitation. In the case before the court, the insurer “[q]uite simply … has not done so.” (Id. at p. 1387.)

The court also similarly concluded in Wellsville Manor LLC v. Great American Ins. Co. (E.D.N.Y., Oct. 1, 2024, No. 22-CV-1229 (MKB)) 2024 WL 4362599, p. *1 (Wellsville Manor). There, the insured retained a contractor to replace the entire roof of a commercial property. (Id. at p. *2.) During construction, the contractor removed the gravel ballast, which was one of four layers of the roof and the layer responsible for preventing upward movement of the roof membrane due to wind. (Ibid.) A storm subsequently loosened the roof membrane and allowed water to enter the premises. (Ibid.) The insurer denied coverage for the water damage, concluding that the damage was not caused by a covered cause of loss, and the insured sued for breach of contract. (Id. at p. *3.)

The insurer moved for summary judgment of the insured’s claim, asserting that the premises were not covered by a “roof” because the contractor had 227*227 removed the roof’s top layer and had failed to install a temporary ballast. (Wellsville Manor, supra, 2024 WL 4362599 at p. *7.) The district court disagreed and denied the insurer’s motion for summary judgment. It explained: “The Court finds that the removal of the permanent ballast is insufficient to establish that there was no roof on the Premises the day of the loss. First, `roof’ is not defined in the Policy. Second, it is defined in the dictionary as `the cover of a building,’ [citation], or `the covering that forms the top of a building,’ [citation]. Under these definitions, the three remaining layers of protection, even without the permanent ballast, were sufficient to constitute a covering over the Premises such that there was a `roof’ on the Premises the day of the loss.” (Id. at p. *8.) Moreover, “even if the Court were to conclude that the term `roof’ is ambiguous and subject to two meanings, the Court is required to construe the term in favor of Plaintiff. [Citations.] The Court therefore finds that the membrane and remaining two layers were sufficient to constitute a `roof’ within the meaning of the roof limitation provision of the Policy.” (Ibid.; see also Sloan v. Allstate Ins. Co. (Mo. Ct. App. 1998) 977 S.W.2d 72 [summary judgment for insurer reversed; although half of roof had been removed, the insured’s contention that water damage occurred after wind damaged both the remaining and temporary roof created triable issues of material fact as to coverage]; Homestead Fire Ins. Co. v. De Witt (1952) 1952 OK 189 [206 Okla. 570, 245 P.2d 92] [affirming judgment for insured; where wind blew off canvas covering opening in roof during renovation, resulting interior rain damage was covered by property policy].)

B. Analysis.

Consistent with Dewsnup, Victory Peach, and Wellsville Manor, we conclude that there are triable issues of fact as to whether the water exclusion applied in the present case.

As an initial matter, we reject Farmers contention that the property was without a “roof” when it suffered rain damage in October 2021.[6] The policy does not define “roof,” and we agree with the cited cases that a common sense meaning of “roof” includes a covering over a building that provides structural integrity and protection from the elements. We note in this regard that because no roof is permanent, all roofs must be periodically replaced. Replacing a roof requires removing worn outer layers and replacing them with new materials, thus leaving a structure not fully protected from the elements for a least a short time. Yet, nothing in the relevant condominium policy informed an insured that it would be without coverage for rain damage during periodic reroofing. To the contrary, the policy defines “covered property” to include “[a]dditions under construction, alterations and repairs to 228*228 the building or structure,” unless covered by other insurance. In view of this language, we conclude that a roof under repair remains a “roof” within the meaning of the policy.

In the present case, therefore, the property was never without a “roof” because Bardales removed just some of the roof’s outer layers, leaving the lower layers intact. Specifically, at the time of the first rainstorm, Bardales had removed much of the roof’s top layers, but other layers, including the plywood sheathing and insulation, remained. By the time of the second rainstorm, Bardales had replaced about 80 percent of the insulation and plywood, added a layer of “base paper” and “base felt,” hot-mopped and tarred much of the roof, and covered the entire roof with tarps. Like the courts in Dewsnup, Victory Peach, and Wellsville Manor, we conclude that the remaining layers of roof, even without the roof membrane, were sufficient to constitute a “roof” within the meaning of the policy.

Having concluded that the property had a “roof” at all points during the repairs, we must consider whether rain entered the property through “damage” to the roof caused by a “Covered Cause of Loss.” Farmers asserts that the policy covers only losses caused by “perils”—i.e., by “`fortuitous … forces … which bring about the loss.'” It thus urges there is no coverage here because rainwater entered the property through openings in the roof deliberately created by Bardales, not as the result of fortuitous weather damage. But the words “perils” and “fortuities” do not appear anywhere in the policy. Instead, the policy defines “Covered Cause of Loss” to mean any cause of physical damage to the property not otherwise excluded, and nowhere in the policy’s several pages of exclusions is there an exclusion for losses that result from deliberate conduct.

Moreover, the policy does not purport to exclude losses that result from workmanship generally, but only from such “workmanship, repair [or] construction” that is “faulty, inadequate or defective.” Under the maxim expressio unius est exclusio alterius, “[t]he fact that [a] contract expressly so provides tends to negate any inference that the parties also intended another consequence to flow from the same event.” (Stephenson v. Drever (1997) 16 Cal.4th 1167, 1175 [69 Cal.Rptr.2d 764, 947 P.2d 1301]; see G & W Warren’s, Inc. v. Dabney (2017) 11 Cal.App.5th 565, 576 [218 Cal.Rptr.3d 75].) Accordingly, the exclusion for damages caused by negligent workmanship suggests that the policy does not exclude damages caused by workmanship that was not negligent.

We therefore conclude that rain damage resulting from roof repairs are covered unless expressly excluded by another provision of the policy, such as the faulty workmanship exclusion. We turn now to that question.

229*229 IV. The faulty workmanship exclusion.

The policy’s faulty workmanship exclusion says that Farmers will not pay for loss or damage “caused by or resulting from” specified exclusions, including from “negligent work,” defined as “[f]aulty, inadequate or defective… workmanship, repair, construction, renovation [or] remodeling” and “[p]lanning, zoning, development surveying, siting.” Farmers urges this exclusion applies because it is undisputed that all of the HOA’s losses were “caused by or result[ed] from” faulty workmanship—namely, by Bardales’s decision to remove the entire roof before replacing any part of it.[7]

The HOA urges that the term “faulty workmanship” is ambiguous because it “is reasonably susceptible to at least two different interpretations: (1) the flawed quality of a finished product or (2) a flawed process.” The HOA suggests that in the present case, only Bardales’s process was faulty because the roof repairs were uncompleted at the time of the rain damage. The HOA thus contends that the faulty workmanship exception should not apply because it is reasonable to interpret “faulty workmanship” to apply only to a flawed product. Alternatively, the HOA urges that even if “faulty workmanship” applies to both faulty products and processes, Farmers was not entitled to summary judgment because it did not establish that Bardales’s alleged faulty workmanship was the sole cause of the HOA’s losses.

To support its proposed distinction between a faulty “product” and a faulty “process,” the HOA relies on the Ninth Circuit’s analysis in Allstate Ins. Co. v. Smith (9th Cir. 1991) 929 F.2d 447 (Allstate). There, the insured bought an all-risk policy covering his business property for “`loss or damage resulting from direct physical loss,'” with exceptions for, among other things, faulty workmanship. The insured suffered a property loss as the result of a rainstorm that occurred after a contractor had removed most of the roof of the insured’s building to make repairs. The insured filed an insurance claim, and the insurer sought a declaratory judgment that the insured’s losses were not covered because they were caused by faulty workmanship. The district court agreed and entered judgment for the insurer. The insured appealed. (Id. at pp. 448-449.)

The Ninth Circuit reversed, concluding that “faulty workmanship” was ambiguous because it could mean either a flawed product (a negligently constructed roof) or a flawed process (failing to properly cover the exposed 230*230 roof during construction). (Allstate, supra, 929 F.2d at p. 449.) The court therefore interpreted “faulty workmanship” in the manner most favorable to the insured and concluded that the exclusion did not apply because the insured’s losses “were not caused by a flawed product, but by failure to protect the premises during the roof repair process.” (Id. at p. 450.)

We are unpersuaded by Allstate‘s analysis, as we conclude, in line with other cases that have declined to follow Allstate, that “workmanship” unambiguously refers both to the way a contractor creates a finished product and the finished product itself. (See, e.g., Fourth Street Place, LLC v. Travelers Indemnity Co., supra, 270 P.3d at p. 1242 [“the plain and ordinary meaning of the term `workmanship’ encompasses the quality of the process utilized to achieve the finished product and the quality of the finished product itself” (italics added)]; Wider v. Heritage Maintenance, Inc. (N.Y. 2007) 14 Misc.3d 963, 975 [827 N.Y.S.2d 837] [“An ordinary business-person applying for a commercial property insurance policy and reading the language of this exclusion would understand that, depending on the type of work done, the faulty workmanship exclusion could apply to the process of doing the work or the finished product”]; Schultz v. Erie Ins. Group (Ind. Ct. App. 2001) 754 N.E.2d 971, 976 [“while the term `faulty workmanship’ allows at least two definitions, we see no reason why it must mean either a `flawed product’ or a `flawed process.’ Since `workmanship’ denotes both `process’ and `product,’ an insurer could just as likely have both perils in mind when it drafts a policy’s list of exclusions”].)

However, although we do not adopt Allstate‘s reasoning, we nonetheless conclude that the faulty workmanship exclusion does not unambiguously exclude coverage in this case. To establish the absence of coverage, Farmers had to demonstrate that there were no triable issues regarding the cause of the damage to the HOA’s property—or, stated differently, that the undisputed evidence established that the damage to the HOA’s property was “caused by or result[ed]” from Bardales’s negligence. But there was evidence that roof damage was caused not only by Bardales’s alleged negligence, but also by wind and rain. Specifically, Bardales testified that rain damaged the exposed plywood and insulation layers on October 4, and wind blew off tarps Bardales placed over the partially constructed roof on October 25. Farmers did not establish that the damage to the plywood, insulation, and tarps—that is, to the “roof”—did not contribute, at least in part, to the interior water damage.

Moreover, as the HOA notes, Farmers introduced no evidence that the roof repairs could have been done in a way that would have fully protected the property in the event of a rainstorm. That is, while Farmers evidence suggested that Bardales failed to follow industry standards by removing nearly the entire roof membrane at once, it did not establish that compliance 231*231 with industry standards would have avoided rain damage entirely—and thus that the damage resulted entirely from Bardales’s alleged negligence.

Farmers suggests that the HOA has admitted that Bardales’s negligence caused all of its damages, but the portions of the record Farmers cites do not bear out that assertion. Specifically, Farmers notes that when asked in an interrogatory to describe “the location and nature of all physical damage first sustained to the building roof and walls through which the rain entered,” the HOA responded that “[t]he physical damage first sustained to the building and walls through which the rain entered the building was from the methods and construction, and flawed process undertaken by [Bardales] in removing the entire top layer of the building’s roof down to the roof decking instead of removing it part by part.” But nothing in that response suggests that Bardales’s alleged negligence was the sole cause of roof damage; to the contrary, the response identifies both “construction” and a “flawed process undertaken by [Bardales]” as causes of damage. Moreover, in the next sentence of the interrogatory response, the HOA identified a third cause of damage—namely, that “[w]ind also blew off the temporary roof coverings put in place by [Bardales].”

Farmers also suggests that the HOA’s complaint alleged that Bardales’s alleged negligence was the sole cause of loss. Specifically, Farmers quotes the HOA’s allegation that the roof was not fully protected by the elements “[b]ecause the processes employed by [Bardales] were faulty” and its “processes for protecting the roof were not sufficient.” Unquestionably, the HOA alleged that Bardales was negligent, but these allegations do not, as Farmers suggests, constitute a judicial admission that his negligence was the sole cause of damage. To the contrary, the HOA also alleged that roof decking “[g]enerally … can provide adequate protection against wind and rain,” “the building’s roof was damaged” by “storms,” and “the water damage was not excluded since the building first sustained damage to its roof before water entered the building.” In short, the complaint alleged that Bardales’s negligence was a cause, but not the sole cause, of the HOA’s losses.

For the foregoing reasons, therefore, Farmers did not establish that but for Bardales’s alleged negligence, no rain would have entered the HOA’s property. It thus did not demonstrate that it was entitled to summary judgment under the faulty workmanship exclusion.[8]

232*232 V. Farmers is not entitled to summary adjudication of the HOA’s bad faith cause of action.

Farmers contends that even if this court were to reverse the grant of summary adjudication on the HOA’s breach of contract claim, we nonetheless should affirm summary adjudication of the HOA’s bad faith claim. Specifically, Farmers urges that, even if it misconstrued the policy language, its denial of the HOA’s claim was based on an objectively reasonable interpretation, and thus it cannot be charged with insurance bad faith.

We disagree. “An insurer is said to act in `bad faith’ when it not only breaches its policy contract but also breaches its implied covenant to deal fairly and in good faith with its insured. `A covenant of good faith and fair dealing is implied in every insurance contract. [Citations.] The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the agreement’s benefits. To fulfill its implied obligation, an insurer must give at least as much consideration to the interests of the insured as it gives to its own interests. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.'” (Jordan v. Allstate Ins. Co. (2007) 148 Cal.App.4th 1062, 1071-1072 [56 Cal.Rptr.3d 312], italics omitted.)

As discussed above, “in cases of ambiguity, basic coverage provisions are construed broadly in favor of affording protection.” (Minkler, supra, 49 Cal.4th at p. 322; see also MacKinnon v. Truck Ins. Exchange, supra, 31 Cal.4th at p. 655 [where there are multiple plausible interpretations of a policy, a court must find coverage if there is a “`reasonable interpretation under which recovery would be permitted'”].) Here, there is a reasonable interpretation under which recovery would be permitted, and thus Farmers is not entitled to summary adjudication of its bad faith claim.

We reach a similar conclusion with regard to punitive damages. An insurer may be liable for punitive damages if the insured can prove not only that the insurer denied or delayed the payment of policy benefits unreasonably or without proper cause, but, in doing so, was guilty of malice, oppression or fraud. (Jordan v. Allstate Ins. Co., supra, 148 Cal.App.4th at p. 1080, citing Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287, 305 [250 Cal.Rptr. 116, 758 P.2d 58].) Farmers has not demonstrated by undisputed evidence that this standard was unmet in the present case. Accordingly, it is not entitled to summary adjudication of its punitive damages claim.

233*233 DISPOSITION

The judgment is reversed. Appellant 11640 Woodbridge Condominium Homeowners’ Association is awarded its appellate costs.

Adams, J., and Hanasono, J.,[*] concurred.


[1] All subsequent date references are to 2021 unless otherwise stated.

[2] “Glass Ply” is a roofing layer consisting of a fiberglass membrane coated with waterproofing asphalt. ( [as of Mar. 28, 2025].)

[3] “Hot mopping” is a method of installing a roof that involves laying down a base layer of felt, which is then saturated with hot liquid asphalt. ( [as of Mar. 27, 2025], archived at .)

[4] The reference to the roof membrane appears to originate in Bardales’s deposition testimony, but nothing in the summary judgment record or the parties’ appellate briefs describes which layers of the roof constitute the “membrane.”

[5] The HOA also asserted a cause of action against Bardales for professional negligence.

[6] In so concluding, we reject the contrary analysis of Diep, supra, 15 Cal.App.4th 1205.

[7] The parties disagree about the proper characterization of Bardales’s alleged negligence: The HOA asserts Bardales’s alleged negligence was “faulty workmanship,” while Farmers characterizes it as defecting “planning.” We need not decide whether the alleged negligence constitutes faulty “workmanship” or faulty “planning” because both are excluded under the policy if they are direct causes of loss.

[8] Having so concluded, we need not consider whether the rain damage was a covered “resulting” or “ensuing” loss within the meaning of section B.3 of the policy.

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

Related Links

Franklin v. Marie Antoinette Condominium Owners Assn.

(1993) 19 Cal.App.4th 824

[CC&Rs; Exculpatory Clause] An exculpatory clause in the CC&Rs limiting the HOA’s liability is not against public policy.

Schlegel, Stone & Manning, Michael H. Manning, Brian G. Hummel, Horvitz & Levy, Daniel J. Gonzalez, Richard L. Hasen and Gerald M. Serlin for Defendant and Appellant.
Greenberg, Glusker, Fields, Claman & Machtinger and Jeffrey Spitz for Plaintiff and Respondent.

OPINION

ORTEGA, J.

This appeal concerns an exculpatory clause contained in the declaration of covenants, conditions and restrictions (CC&R’s) governing the relationship between an association of condominium homeowners and the condominium owners. If applied to this case, the exculpatory clause will relieve the association of its contractual liability to pay the plaintiff condominium owner for water damage to her unit caused by a central plumbing [19 Cal.App.4th 826] leak. We reverse the judgment with directions to enter judgment for the defendant association.

I. FACTS AND PROCEDURAL BACKGROUND

The condominium project, known as the Marie Antoinette Tower (the Tower), is a 16-floor residential building on Wilshire Boulevard near Westwood Village in Los Angeles. The Tower was originally built as apartments in 1962, and was converted to condominiums in 1978.

Defendant Marie Antoinette Condominium Owners Association, Inc. (the Association), a nonprofit corporation duly organized and existing under California law (see Civ. Code, § 1363) (unless otherwise indicated, all further statutory references are to the Civil Code), is comprised of all Tower condominium owners. The CC&R’s provide that the owners own the Tower’s common area as tenants in common. (See §§ 1351, subds. (b) and (f), 1362.) The CC&R’s further provide that the Association is responsible for maintaining and repairing the common area, and the owners are responsible for maintaining and repairing their individual units. (See § 1364, subd. (a).) fn. 1

In 1984, plaintiff Florence Franklin purchased a condominium in the Tower. After painting and remodelling her unit by installing new hardwood floors, crown and base moldings, bathroom fixtures, doors and frames, plaintiff moved into the Tower in March 1985.

The water damage to plaintiff’s hardwood floors became apparent in mid-1986 beginning with a small area at the threshold leading from the hallway to the master bedroom. The damage later spread to other parts of the floor. fn. 2 [19 Cal.App.4th 827] The moisture underneath the floorboards caused the wood to rise, swell or buckle. fn. 3

Plaintiff notified the Tower’s manager about the water damage to her hardwood floors in mid-1986. The manager told plaintiff the damage was caused by a leak beneath the sink in her master bedroom bathroom and was her sole responsibility. After the manager reported his opinion on plaintiff’s claim to the Association’s board (the Board), the Board asked the Association’s insurer to send out an investigator. fn. 4

After receiving the insurance investigator’s report of “no evidence of [a] central plumbing breakdown,” the Board decided “it would be inappropriate to either make an offer to pay [plaintiff’s] claim … or to have [the Association’s] insurance company process” plaintiff’s claim.

Plaintiff filed suit against the Association in February 1987, alleging its failure to maintain and repair the central plumbing had caused water damage to her hardwood floors.

During this period, the Association was repairing various leaks in the Tower’s plumbing system as they occurred. By about mid-1987, most of the Board members (including plaintiff, who served on the Board from early summer 1985 through August 1987) realized the building’s rusting steel pipes needed replacement. Eventually, the Board successfully lobbied a majority of the owners to obtain approval of a special assessment of approximately $20,000 per owner to repipe the Tower’s plumbing system and renovate the heating and air conditioning system. fn. 5 The replacement and repairs were completed in 1990. [19 Cal.App.4th 828]

This case was tried in July 1991 without a jury on three causes of action: breach of contract, negligence, and nuisance. fn. 6

The parties presented conflicting expert opinion testimony on causation. The Association’s witnesses attributed the water damage to a leak under the sink in plaintiff’s master bedroom bathroom. Plaintiff’s witnesses, on the other hand, attributed the water damage to a leak in the central plumbing system.

The trial court found the damage was caused by a leak in the central plumbing system. The court concluded the system had deteriorated to the point of constituting a breach of the contractual duty to maintain and repair the common area, but not to the point of constituting a nuisance or establishing negligence on the part of the Association. The court found for plaintiff on her breach of contract claim only. The court entered judgment for plaintiff awarding her damages of $74,015 and costs and attorney fees of $169,315.30. Defendant Association has appealed.

II. BREACH OF CONTRACT 

[1] The Association contends, as it did at trial, that plaintiff’s cause of action for breach of contract is barred by the exculpatory clause contained in the CC&R’s.

Preliminarily, we note the parties assume the CC&R’s formed a contract between the Association and the condominium owners. (See Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 512 [229 Cal.Rptr. 456, 723 P.2d 573, 59 A.L.R.4th 447], which discussed a condominium owner’s breach of contract allegation without expressly deciding whether CC&R’s constitute a contract between the association and the owners. See also Sproul & Rosenberry, Advising Cal. Condominium and Homeowners Associations (Cont.Ed.Bar 1991) § 6.43, pp. 295-297, which cites cases in other jurisdictions which have refused to treat CC&R’s as contracts between the owners and the association under different fact situations.)

Although the CC&R’s require the Association to maintain and repair the common area (see § 1364, subd. (a)), the CC&R’s do not require the [19 Cal.App.4th 829] Association to reimburse a condominium owner for property damage caused by a central plumbing leak which occurred in the absence of negligence by the Association. The CC&R’s contain an exculpatory clause which states in relevant part: “[T]he Association … shall [not] be liable for … damage to … property in the project … resulting from … water … which may leak or flow from outside of any unit or from any part of the building, or from any pipes, drains, conduits, appliances or equipment or from any other place or cause, unless caused by the gross negligence of … the Association, its Board, officers, the manager or his staff.” fn. 7

In ascertaining the parties’ intent, we are guided by the following principles. “The language of the instrument must govern its interpretation if it is clear and explicit. [Citation.] Generally, the words of a contract are to be understood in their ordinary and popular sense [citations] unless a contrary intent is shown, such as a specialized meaning due to trade custom and practice or a prior course of dealing [citations]. [] The interpretation of a written contract is solely a judicial function unless the interpretation turns on the credibility of extrinsic evidence. [Citations.]” (Appalachian Ins. Co. v. McDonnell Douglas Corp., supra, 214 Cal.App.3d at p. 11.)

On appeal, neither party contends the exculpatory clause is ambiguous or that its interpretation turns on the credibility of extrinsic evidence. Both parties assume the exculpatory clause, if enforced according to its terms, relieves the Association of any contractual liability to pay for property damage to plaintiff’s floors caused by a leak in the common plumbing system.

Plaintiff contends the exculpatory clause is unenforceable, however, because it affects the public interest. fn. 8 Plaintiff relies primarily upon Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642 [191 Cal.Rptr. 209], a [19 Cal.App.4th 830] suit between homeowners and a homeowners association. fn. 9 In Cohen, the court held plaintiffs’ cause of action (for breach of the duty to act in good faith and to avoid arbitrary decisions in applying the CC&R’s) was not barred by the exculpatory clauses contained in the CC&R’s. We quote at length the passages from Cohen which plaintiff contends are applicable to this case:

“The law has traditionally viewed with disfavor attempts to secure insulation from one’s own negligence or wilful misconduct, and such provisions are strictly construed against the person relying on them, particularly where such person is their author. [Citations.] Here, the Association is the creation and successor of the author, S & S Construction Company, and therefore subject to this rule of strict construction. fn. 10 [19 Cal.App.4th 831]

“Furthermore, it is the express statutory policy of this state that ‘[a]ll contracts which have for their object, directly or indirectly, to exempt any[ ]one from the responsibility for his own fraud[,] or willful injury to [the] person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.’ (Civ. Code, § 1668.)

“This public policy applies with added force when the exculpatory provision purports to immunize persons charged with a fiduciary duty from the consequences of betraying their trusts. [Citations.]

“Moreover, the California Supreme Court has evinced a clear policy of enforcing only those exculpatory provisions which do not affect ‘the public interest.’ (Tunkl v. Regents of the University of California (1963) 60 Cal.2d 92, 96 ….) Factors to be considered in determining whether a business or transaction affects a public interest include: (a) whether the matter is suitable for public regulation; (b) whether the party provides a service of importance to the public; (c) whether the party invoking it possesses a bargaining advantage against any member of the public who seeks such service; (d) and whether one party is particularly subject to the other’s control and the risk of his or her carelessness. (Id., at pp. 98-101.) [19 Cal.App.4th 832]

“Applying one or more of these criteria, the courts have invalidated exculpatory clauses invoked by banks (Hiroshima v. Bank of Italy (1926) 78 Cal.App. 362 …; Vilner v. Crocker National Bank (1979) 89 Cal.App.3d 732 …), hospitals (Tunkl v. Regents of the University of California, supra, 60 Cal.2d 92; Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465 …), and apartment complexes (Henrioulle v. Marin Ventures, Inc. (1978) 20 Cal.3d 512 …).

“For the reasons earlier stated, we view the Association of homeowners as occupying a particularly elevated position of trust because of the many interests it monitors and services it performs. Therefore, we hold that the exculpatory provisions contained in the Declaration constitute no bar to suit against the Association.” (Cohen v. Kite Hill Community Assn., supra, 142 Cal.App.3d at pp. 654-655.)

Plaintiff contends this case “presents almost an identical situation to that before the court in Cohen.” The exculpatory clauses in Cohen, however, purported to relieve the association of its responsibility to adhere to the architectural standards set forth in the CC&R’s. As the court in Cohen recognized, the issue there was “whether the exculpatory clauses effectively cancelled out that duty and thereby immunized the Association from suit.” (Cohen v. Kite Hill Community Assn., supra, 142 Cal.App.3d at p. 654.)

Here, on the other hand, the Association will be required to maintain the common area whether or not it is liable for breach of contract damages in this case. Enforcing the exculpatory clause in this case will not relieve the Association of its statutory duty to maintain and repair the common area. (§ 1364, subd. (a).) Moreover, a condominium owner may enforce the CC&R’s under the law of equitable servitudes without resorting to a breach of contract cause of action. (§ 1354; see Sproul & Rosenberry, Advising Cal. Condominium and Homeowners Associations, supra, § 6.43, p. 297.) fn. 11

Although the exculpatory clause purports to provide immunity from negligence liability, that is now a moot issue due to the trial court’s finding of [19 Cal.App.4th 833] no negligence. Plaintiff’s dire prediction that enforcing the exculpatory clause in this case “would place every condominium owner at the mercy of their homeowners’ association, which would be free to disregard its obligations with impunity” is simply unfounded. This is not an action for declaratory relief to establish the extent of the Association’s immunity from liability under the exculpatory clause. Accordingly, we need not decide whether the release from negligence liability is valid. fn. 12

The narrow issue before us is whether the nonnegligent Association may contractually shift the risk of loss to the condominium owner, who may look only to the insurance proceeds for her recovery against the Association. fn. 13

Although plaintiff disputes the merits of the exculpatory clause, we find this contractual allocation of risk to be reasonable and fair to the condominium owners as a whole. Here, the condominium owners voluntarily agreed to bear the risk of loss and limit their recovery against the nonnegligent Association to that which is recoverable under the insurance policy. Any condominium owner who desires to purchase additional insurance may do so.

By reducing the Association’s risk of liability, the condominium owners have reduced their own risk. The condominium owners are, after all, the ones who are assessed to pay for improvements, insurance premiums, liability judgments not covered by insurance, and the like. Plaintiff is only one of many owners who collectively entered into the contract (CC&R’s) with the Association. A reasonable and fair reduction of the Association’s risk which mutually benefits the condominium owners as a whole does not suddenly become violative of public policy upon the nonnegligent infliction of property damage to an individual unit. While plaintiff may bear the loss in this case, she may benefit in the next. As was pointed out by our Supreme Court, “no public policy opposes private, voluntary transactions in which one party, for a consideration, agrees to shoulder a risk which the law would [19 Cal.App.4th 834] otherwise have placed upon the other party ….” (Tunkl v. Regents of University of California (1963) 60 Cal.2d 92, 101 [32 Cal.Rptr. 33, 383 P.2d 441, 6 A.L.R.3d 693].)

In discussing the somewhat related “question of the individual unit owner’s tort liability in cases arising in the common areas,” Presiding Justice Roth suggested that insurance taken out by the association for the protection of the condominium owners provides “[o]ne practical answer.” (White v. Cox (1971) 17 Cal.App.3d 824, 832 [95 Cal.Rptr. 259, 45 A.L.R.3d 1161] (conc. opn. of Roth, P. J.).) Presiding Justice Roth further reflected: “It might then be argued depending on the terms of the written declaration between unit owners that, at least as between suing and defendant unit owners, the maximum amount of liability of defendant unit owners has been contractually limited to the maximum of the insurance taken out by the association.” (Ibid.) We believe this sound reasoning carries equal force when applied to the question of the nonnegligent Association’s ability to avoid contractual liability for property damage caused by a central plumbing leak.

The Association, unlike commercial or residential landlords in business to make a profit, is a nonprofit corporation. (See Sproul and Rosenberry, Advising Cal. Condominium and Homeowners Associations, supra, § 6.4, pp. 250-251.) As the trial court pointed out below in its statement of decision, the Board “was made up of unpaid volunteers from among the owners of condominiums in the building, who despite the strict contractual obligations of the CC&Rs did their conscientious best to attend to the problems and complaints that came to them. To effectuate major and expensive repairs as ultimately transpired with the repiping of the building, the Board of the Association needed the approval of a majority of the condominium owners in the building. To accomplish this critical requirement, they literally had to politic and campaign. These volunteers were not professionals in the skills of building management and maintenance, and their efforts while perhaps less than proficient, are not demonstrative of individual or group negligence.”

The Legislature recognized the need to provide immunity under appropriate conditions to the individual volunteer board members who manage residential condominiums. (§ 1365.7.) The exculpatory clause in this case takes the additional reasonable step of providing immunity under appropriate conditions to the Association. We conclude the exculpatory clause does not, as applied to this case, violate public policy. [19 Cal.App.4th 835]

DISPOSITION

We reverse the judgment and direct the trial court to enter judgment for the defendant. Defendant is awarded costs on appeal.

Spencer, P. J., and Vogel (Miriam A.), J., concurred.


FN 1. “Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas, other than exclusive use common areas, and the owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.” (§ 1364, subd. (a).)

FN 2. The damage was first noticed while plaintiff was away on a four-month vacation in mid-1986. During her absence, the daughter of a friend (Anderson) stayed in the condominium. Anderson discovered a leak beneath the sink in the master bedroom bathroom, which she reported to the Tower doorman and had repaired. About six weeks later, Anderson began to notice some raising, swelling or buckling of the floorboards, beginning with the area at the threshold leading from the hallway to the master bedroom. After plaintiff returned from her vacation, the damage began to spread to other parts of the floor.

FN 3. In addition to the floors, plaintiff’s complaint listed other areas that were damaged. In November 1986 the interior condominium walls, crown moldings, base moldings, doors and kitchen cabinets began cracking or warping. In December 1986 water began leaking from the heating and air conditioning vents into plaintiff’s condominium, which she testified did not receive adequate heating or cooling. The trial court’s statement of decision did not, however, mention the damaged walls, moldings, doors, cabinets, leaking vents, and faulty heating and air conditioning. The statement of decision mentioned only the damaged floors. Accordingly, we will limit our discussion in this opinion to the damaged floors.

FN 4. The CC&R’s require the Association to purchase a “blanket policy or policies of fire and casualty insurance with a special form all-risk coverage endorsement for the full insurable replacement cost of the Common Area and the units … insuring the Board, the Association, the owner or owners of each unit … and their mortagagee(s) … against loss due to fire and other casualty customarily insured against by homeowners ….”

FN 5. After the completion of this project in 1990, plaintiff no longer had water leaking into her unit from the heating and air conditioning vents.

FN 6. Plaintiff’s causes of action for intentional infliction of emotional distress and breach of fiduciary duty were dismissed after the trial court sustained a demurrer without leave to amend.

FN 7. We do not suggest, nor do the parties, that the exculpatory clause relieves the Association of its duty under another provision of the CC&R’s to purchase casualty insurance on behalf of the condominium owners. Even if relieved of its contractual liability to pay for property damage, the Association must still provide insurance for the condominium owners. “A court must view the language in light of the instrument as a whole and not use a ‘disjointed, single-paragraph, strict construction approach.’ [Citation.] If possible, the court should give effect to every provision. [Citations.] An interpretation which renders part of the instrument to be surplusage should be avoided. [Citations.]” (Appalachian Ins. Co. v. McDonnell Douglas Corp. (1989) 214 Cal.App.3d 1, 12 [262 Cal.Rptr. 716].)

FN 8. In Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at page 500, footnote 9, the court took “judicial notice of the fact that a rapidly growing share of California’s population reside in condominiums, cooperatives and other types of common-interest housing projects. Homeowner associations manage the housing for an estimated 15 percent of the American population and, for example, as much as 70 percent of the new housing built in Los Angeles and San Diego Counties. [Citation.] Nationally, ‘[t]hey are growing at a rate of 5,000 a year and represent more than 50 percent of new construction sales in the urban areas. Projects average about 100 units each, so the associations affect some 10 million owners,’ [citation]. [H]ousing experts estimate that there already are 15,000 common-interest housing associations in California. While in some projects the maintenance of common areas is truly cooperative, in most of the larger projects control of the common area is delegated or controlled by ruling bodies that do not exercise the members’ collective will on a one-person, one-vote basis. [Citation.]”

FN 9. In Cohen, article VII, section 1 of the CC&R’s set forth standards by which the association’s architectural committee was to approve or deny an individual homeowner’s construction or improvement plans. At the same time, however, the CC&R’s purported to release the association from its duty to comply with the provisions of article VII, section 1. Moreover, the CC&R’s purported to absolve the association, its board, its committees, and its members from liability to any member, homeowner, or the association for ” ‘any damage, loss or prejudice suffered or claimed on account of any decision, approval or disapproval of plans or specifications (whether or not defective), course of action, act, omission, error, negligence or the like made in good faith within which such Board, committee, or persons reasonably believed to be the scope of their duties.’ ” (Cohen v. Kite Hill Community Assn., supra, 142 Cal.App.3d at p. 650.)

The solid slump stone fence at issue in Cohen was approved by the architectural committee despite the neighboring owners’ (plaintiffs) objection that the fence would obstruct their view and violate the CC&R’s. The CC&R’s called for a two-foot slump stone base topped by a three-foot wrought iron fence to preserve the surrounding view. After failing to persuade their neighbor and the association to modify or prevent the construction of the nonconforming fence, the plaintiffs filed suit.

The trial court in Cohen sustained the association’s demurrer, but the appellate court reversed the judgment of dismissal.

FN 10. We note section 1370, enacted in 1985 (two years after Cohen was decided), provides: “Any … declaration … for a common interest development shall be liberally construed to facilitate the operation of the common interest development, and its provisions shall be presumed to be independent and severable….” (Italics added.)

In criticizing Cohen, Sproul and Rosenberry stated: “The authors believe that California courts should recognize that California developments need 30,000-40,000 residents each year to serve on boards (most of whom serve without compensation), and should therefore not adhere to such a strict interpretation of exculpatory clauses as that taken in Cohen. Although exculpatory clauses were not at issue in Jaffe v Huxley Architecture (1988) 200 [Cal.App.]3d 1188, 1193, …, the court acknowledged that board members are seldom professional managers and that ‘the specter of personal liability would serve to greatly discourage active and meaningful participation by those most capable of shaping and directing homeowner activities.’ [] Courts in other jurisdictions have upheld exculpatory clauses. See Nido v Ocean Owners’ Council (Va 1989) 378 SE2d 837; Kelley v Astor Investors, Inc. (Ill 1985) 478 NE2d 1346; Kleinman v High Point of Hartsdale I [Condominium] (Sup Ct 1979) 438 NYS2d 47.” (Sproul & Rosenberry, Advising Cal. Condominium and Homeowners Associations, supra, § 6.34, p. 280.)

We note that of the three decisions cited by Sproul and Rosenberry, only one is similar to our case. Nido v. Ocean Owners’ Council (1989) 237 Va. 664 [378 S.E.2d 837], involved water leakage from the common areas which caused damage to the plaintiff’s condominium. The plaintiff filed suit against the condominium owners’ council to recover damages under two of the same theories raised here, breach of contract and negligence. As in this case, the owners’ council was found to be not negligent. As for the breach of contract cause of action, the owners’ council was found to be immune under an exculpatory clause. Section 6.5 of the association’s by-laws provided: “The Council shall not be liable for any failure of water supply or other services … or for injury or damage to person or property caused by the natural elements … or resulting from electricity, water, snow or ice which may leak or flow from any portion of the Common Elements.” (Id. at p. 838.)

FN 11. Section 1354 provides: “The covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both. In any action to enforce the declaration, the prevailing party shall be awarded reasonable attorney’s fees and costs.”

FN 12. Section 1370 provides that CC&R’s “shall be liberally construed to facilitate the operations of the common interest development, and its provisions shall be presumed to be independent and severable….”

FN 13. The trial court found the damage was caused by a leak in the central plumbing, which had deteriorated to the point that the Association had breached its contractual duty to maintain and repair the common area. While the Association challenges on appeal the sufficiency of the evidence to support these findings, we do not reach that issue since the findings are not necessary to our decision of whether the Association may contractually shift the risk of loss to the condominium owner.

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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.