[Commercial Use; Board Deference] A Board’s determination of whether a business or commercial activity affects the residential character of a HOA was entitled to judicial deference.
[Certified for Partial Publication]
OPINION
In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden), our Supreme Court cautioned courts to give judicial deference to certain discretionary decisions of duly constituted homeowners association boards. The judicial deference rule does not encompass legal questions that may involve the interpretation of the covenants, conditions, and restrictions (CC&Rs) of a homeowners association. Courts decide legal questions.
Here, homeowners cultivated a vineyard for the purpose of making wine to be sold to the public. The CC&Rs did not prohibit the cultivation of a vineyard for this purpose, but they did prohibit “any business or commercial activity.” The operation of the vineyard may have constituted “business or commercial activity” in the literal sense of that term. But a literal interpretation in the present case would elevate form over substance and lead to absurd results. (See SDC/Pullman Partners v. Tolo Inc. (1997) 60 Cal.App.4th 37, 46 [70 Cal.Rptr.2d 62] [“literal language of a contract does not control if it leads to absurdity”].) Because the wine was made, bottled, and sold commercially offsite, and the activity at the vineyard did not affect the residential character of the community, we conclude there was no business or commercial activity within the meaning of the CC&Rs. The homeowners association board acted within its discretion in allowing the continued operation of the vineyard, and its decision is entitled to judicial deference.
This appeal is from a judgment and a postjudgment award of attorney fees and costs in favor of Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) and other parties. The Ketelhuts cross-appeal from the award of attorney fees and costs. In the appeal from the judgment, the central issue is whether the Ketelhuts, homeowners in a residential common interest development, violated a restrictive covenant requiring that they not use their property for any business or commercial activity. The Ketelhuts operated a vineyard on their property. After harvesting the grapes, they sent them to a winery to be made into wine. They sold the wine over the Internet.
Other homeowners objected to the operation of what they considered to be a commercial vineyard in violation of the prohibition against any business or commercial activity. The board of directors (Board) of the homeowners association — Los Robles Hills Estates Homeowners Association (HOA) — decided that the vineyard was not being used for business or commercial activity.
Plaintiffs/homeowners Felipa Richland Eith and Jeffrey Eith (the Eiths), Thomasine Mitchell and John Mitchell (the Mitchells), Stacy Wasserman, [5] Philip Chang, Morrey Wasserman, and Eileen Gabler (hereafter collectively referred to as plaintiffs) brought an action against the Ketelhuts, HOA, and Board members Michael Daily, Jeanne Yen, and Frank Niesner (hereafter collectively referred to as defendants). The court conducted a lengthy bifurcated trial on the eighth and ninth causes of action. The eighth cause of action concerned whether the operation of the vineyard was a prohibited business or commercial activity. The ninth cause of action sought to quiet title to a common area.
The trial court did not decide whether the operation of the vineyard was a prohibited business or commercial activity. Instead, it invoked the judicial deference rule of Lamden, supra, 21 Cal.4th 249. Pursuant to this rule, the trial court deferred to the Board’s decision that the vineyard was not being used for business or commercial activity. The court entered judgment in favor of defendants on both the eighth and ninth causes of action. The resolution of these two causes of action rendered the remaining causes of action moot.
The trial court correctly applied the Lamden judicial deference rule to the Board’s decision that the Ketelhuts’ operation of the vineyard was not a prohibited business or commercial use. We further conclude that, as a matter of law, it is not a prohibited business or commercial use. In addition, we reject plaintiffs’ claim that the judgment is void because the trial judge did not disclose contributions made by defendants’ counsel to his campaign for re-election to the superior court. We affirm the judgment as well as the postjudgment award of attorney fees and costs.
Factual Background
In 1966, the Janss Corporation (Janss) developed a 28-lot residential subdivision (Los Robles Hills Estates) in the City of Thousand Oaks. The subdivision is a common interest development subject to the Davis-Stirling Common Interest Development Act. (Civ. Code, § 4000 et seq.) “Common interest developments are required to be managed by a homeowners association [citation], defined as `a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development’ [citation], which homeowners are generally mandated to join [citation].” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81 [14 Cal.Rptr.3d 67, 90 P.3d 1223].)
Janss created HOA to manage the development. It deeded to HOA an 18.56-acre parcel that the trial court and parties referred to as a “common area.” The deed provides, “This conveyance is made on condition that said property shall be used solely for purposes of recreation or decoration or both, and in the event that said property is otherwise used, it shall automatically revert to grantor herein.”
[6] The development is subject to a recorded declaration of the CC&Rs. Paragraph 1.01 of the CC&Rs provides, “No lot shall be used for any purpose (including any business or commercial activity) other than for the residence of one family and its domestic servants ….” Subparagraph 3 of paragraph 2.03 provides that “[f]or good cause shown … deviations from the applicable deed restrictions” may be allowed “to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use.” Paragraph 5.07 provides, “Every person acquiring a lot … covenants to observe, perform and be bound by this Declaration of Restrictions.”
In June 2003, the Ketelhuts purchased in the development a 1.75-acre lot on Pinecrest Drive (the Property). In 2005, they planted a vineyard consisting of 600 plants. The plants extended “just under .4 acres” into the 18.56-acre common area. In their brief, defendants acknowledge, “Unbeknownst to the Ketelhuts and [HOA], some of the grape plants encroached on the [common area].” In 2011, when HOA learned of the encroachment, its counsel wrote a letter to the Ketelhuts’ counsel “demanding that [the Ketelhuts] immediately remove the vines from the common area, as well as any other items that may be located upon the Association’s common area.”
Before planting the grape vines, the Ketelhuts submitted a landscape plan (exhibit 244) to the Board. It was approved by the Board’s architectural committee (the Committee). The plan divided the Property into three separate vineyards. One would grow grapes for Cabernet Sauvignon, the second for Sangiovese, and the third for Merlot. The plan did not indicate the number of grape vines that would be planted. The Ketelhuts did not inform the Board or the Committee that the grapes grown on the Property would be used to make wine that would be offered for sale to the public.
Pranas Raulinaitis, who served on the Committee in 2005, testified that the Committee members “viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood.” It “never entered into [his] mind” that “the vineyard was being planted for commercial sale of wine to the public.”
The first harvest was in 2008. At that time, Jeffrey Ketelhut “harvested the grapes … with the intention of bottling them for sale.” He “commenc[ed the] wine business in 2009.” Jeffrey Ketelhut admitted that “the sale[] of wine is a business” and that the vineyard “operates like a business.” But he characterized the vineyard “as a hobby where I do it in my spare time.” “[M]y purpose in getting involved wasn’t to generate a profit and this become a livelihood. This was a hobby. I enjoy gardening …. [T]hat was therapy for me.” The Ketelhuts never determined whether, excluding attorney fees, the vineyard generated a profit. Including attorney fees, it has not generated a profit in any year.
[7] Although the Ketelhuts’ tax returns were not produced, Jeffrey Ketelhut testified that he had filed Internal Revenue Service schedule C (form 1040) for the vineyard. Pursuant to Evidence Code sections 459 and 452, subdivision (h), we take judicial notice that schedule C is entitled “Profit or Loss From Business (Sole Proprietorship).” We also take judicial notice that, since 2009, page 1 of the instructions for schedule C has provided, “Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business.” (Italics added.)
In 2009, the Ketelhuts filed in Ventura County a fictitious business name statement showing that they were doing business at the Property as “Los Robles Hills Winery” and “Puerta del Cielo Vineyards.” They applied for and obtained a “Type 17 and Type 20 license [from the Department of Alcoholic Beverage Control], which [permits] retail and wholesale [sales] over the internet only.” They also obtained “a Thousand Oaks business license.” The licenses showed that the business was located at the Property. But in 2012, the location of the business was changed to a Camarillo address.
The Ketelhuts began selling wine in May 2010. With one exception, they have sold only wine made from grapes grown on the Property. The exception occurred in 2011, when they made wine from sauvignon blanc grapes that they had purchased. In 2015, the Ketelhuts harvested 2,000 pounds of grapes. They invited family, friends, and neighbors to participate in the harvesting. Jeffrey Ketelhut testified, “[I]t took us an hour-and-a-half to pull down all the grapes.”
After the grapes are harvested, they are transported to “Camarillo Custom Crush [in Camarillo], where all the winemaking takes place.” Camarillo Custom Crush puts the wine into bottles that bear the Ketelhuts’ personal label. The Ketelhuts do not store wine on the Property. They have a storage facility in Malibu. They do not ship bottles of wine from the Property.
“In a typical year,” the Ketelhuts are “fortunate” to produce two barrels of wine. “[A] single barrel can hold up to 30 cases.” Each case contains 12 bottles. Thus, the maximum typical annual production is 720 bottles of wine. But in 2009, the Ketelhuts “produced 132 cases,” which is 1,584 bottles of wine.
At the time of trial in November 2015, the wine production was “dwindling” because they had “los[t] vines [due] to drought.” The original 600 [8] plants had been reduced to about 400. Jeffrey Ketelhut estimated that production for 2014 and 2015 would be 50 cases per year. The wine for these years was still being stored in barrels.
The Ketelhuts retain ownership of the bottled wine. They advertise on Facebook, Twitter, their personal website, “and through [their] wholesale accounts.” The logo “Los Robles Hills Winery” and their website address are displayed on the exterior of their truck, which they park in the driveway of the Property. “[T]hey keep the truck covered” while it is on the Property.
The Ketelhuts “sold wine to a number of restaurants and hotels in the local area.” But because of plaintiffs’ lawsuit, they “let those [local sales] lapse.” At the time of trial, they were “still offer[ing] retail sales and wholesale sales,” but were probably giving “at least 60 percent” of their wine to “charity.” For the last two years, their retail sales have been “zero.” Their wines appear on the menu at “a few” restaurants.
Exhibit No. 35 contains copies of pages from the Ketelhuts’ website. The pages are dated May 22, 2014. The wines for sale range in price from $27 to $42 per bottle.
In January 2011, the Ventura County Star published an article about the Ketelhuts’ “winery.” The article said that they “were hosting wine tastings by appointment at [their] home tasting room.” In March 2011, the Department of Alcoholic Beverage Control informed the Ketelhuts that someone had complained about the wine tastings. The Ketelhuts denied hosting wine tastings on the Property.
In its statement of decision, the trial court found: “There was … no retail traffic to the premises or tasting room on the premises at [the Property]. What was accomplished [there] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo.”
Some homeowners complained about the vineyard. In August 2011 counsel for plaintiffs Felipa Eith and Stacy Wasserman wrote a letter to the Ketelhuts “indicating that the commercial vineyard was a violation of the CC&Rs and that [they] should stop that aspect of [their] business.” The letter did not demand that the Ketelhuts stop growing grapes on the Property. It demanded that they “[c]ease operating a commercial vineyard.” The letter also demanded that the Ketelhuts “[r]emove all encroaching plants, irrigation and any other vineyard materials … from the … common area.”
The Board, which consisted of five homeowners, investigated the Ketelhuts’ operation of the vineyard. It interviewed other homeowners. In [9] June 2011, it conducted a meeting that was open to all of the homeowners. The Ketelhuts appeared and answered questions. After the meeting, three of the five board members — defendants Daily, Yen, and Niesner — concluded that the Ketelhuts were not using the Property for a nonresidential purpose in violation of paragraph 1.01 of the CC&Rs. They found that there was no prohibited business or commercial activity on the Property.
Board member Daily considered the vineyard to be “landscaping” rather than a business. He explained: “They were growing grape vines just like I grow fruit trees and Mr. Krupnick [a homeowner] grows avocado trees, and people grow grass in their yard. It was landscape.” “[T]herefore I wasn’t going to, as a board member, try to restrict them from growing grapes. Like I wouldn’t restrict anybody else from growing fruit or whatever.” “Their growing grapes was part of their landscape plan.”
On the other hand, Daily understood that “the growing phase of their winery was part of the business.” “You have to have grapes in order to make wine.” Daily continued: “I believe that aspect to their business [growing grapes] is acceptable because it’s their landscape.” “The growing of grapes is certainly not something prohibited by the CC&R’S and if somebody takes those grapes in a very limited way without impact on the community, then I don’t really care what they do with them. They can make jelly and sell it. That’s fine with me.” “I considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable.”
Daily did not “know how to define the difference between business and commercial” activity. He said: “[W]hen I think of commercial activity, I think of something, you know, in a building, you know, off site. That’s what I think of as commercial activity.”
Board member Yen testified that “commercial activity” within the meaning of the CC&Rs “is something that would cause a stress in the community, whether it be traffic, whether it be individuals, that it’s something that disrupts our quality in our community and impacts your neighbors. That’s commercial activity.” Yen did “not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community.”
Procedural Background
Plaintiffs filed a complaint consisting of nine causes of action. The trial court bifurcated the eighth and ninth causes of action and tried them first. The trial began in July 2015 and ended in November 2015.
[10] The eighth cause of action is against HOA and the Ketelhuts. It seeks declaratory and injunctive relief. It requests “a judicial determination and decree that the CC&Rs and Grant Deed prohibit” the Ketelhuts from (1) operating their “Business” and “commercial enterprise,” including the vineyard, on the Property and the common area, and (2) encroaching on the common area. The eighth cause of action also requests the issuance of a permanent injunction prohibiting the Ketelhuts from operating their business on the Property and encroaching on the common area.
The ninth cause of action is against all defendants. It seeks to quiet title to the common area. It claims that each of the 28 lot owners has an undivided 1/28th ownership interest in the common area and is “entitled to the non-exclusive possession” of that area. The ninth cause of action sought a judicial declaration that HOA has “no estate, right, title or interest” in the common area.
The remaining seven causes of action are for nuisance; trespass; breach of the CC&Rs; breach of HOA’s fiduciary duty; breach of fiduciary duty by Board members; and “willful, wanton misfeasance and gross negligence.” In its statement of decision, the trial court said it had ordered that “[t]he remaining causes of action, for which a jury had been demanded, would be set for trial as may be necessary following determination of the Declaratory Relief and Quiet Title causes of actions.”
Prior to trial on the eighth and ninth causes of action, all plaintiffs except Felipa Eith dismissed the entire action against HOA and Board members.
Statement of Decision
On the eighth cause of action for declaratory and injunctive relief, in its statement of decision, the trial court said that it was “faced with … whether or not to exercise its independent analysis of whether or not what the Ketelhuts were doing is a business or commercial activity, or to determine if the HOA had the discretionary authority to allow the Ketelhuts to do what they did under what is commonly known as the business judgment rule.” The court applied the “deferential business judgment standard adopted by [Lamden, supra, 21 Cal.4th 249].”
The trial court ruled: “The Court finds here that the defendant HOA and its individual directors acted in good faith in addressing the activities of the defendants Ketelhut, and that this decision should not be re-examined within the context of this litigation…. As noted in Beehan v. Lido Isle [Community Assn.] (1977) 70 Cal.App.3d 858 @ 865 [137 Cal.Rptr. 528], `The board of directors may make incorrect decisions, as well as correct ones, so long as it [11] is faithful to the corporation and uses its best judgment.’ … The Court finds that this board of directors used it[s] best judgment and acted in a reasonable manner under the circumstances presented to it. As such, the Court does not grant the relief that plaintiffs seek, but finds in favor of the defendants on the cause of action for declaratory relief.” (Italics added.)
On the ninth cause of action to quiet title to the common area, the trial court found that the area was deeded to HOA in 1966. “[N]o fractional interest in the property was deeded to any homeowners. Since that time, there have been no other documents, recorded or otherwise, that purport[] to grant to the homeowners the 1/28 fractional interest that they are seeking in this action.” Therefore, “title to the 18.5 acre common area is confirmed and quieted to [HOA].”
Judgment
On the eighth and ninth causes of action, the trial court entered judgment in favor of defendants. The judgment does not mention the remaining seven causes of action. In its statement of decision, the trial court said, “The rulings here made moot plaintiffs[‘] remaining causes of action. The case is therefore not set for further trial on those issues.”
Thus, the judgment disposed of all nine causes of action and is appealable under the one final judgment rule of Code of Civil Procedure section 904.1, subdivision (a). “Judgments that leave nothing to be decided between one or more parties and their adversaries … have the finality required by section 904.1, subdivision (a). A judgment that disposes of fewer than all of the causes of action framed by the pleadings, however, is necessarily `interlocutory’ (Code Civ. Proc., § 904.1, subd. (a)), and not yet final, as to any parties between whom another cause of action remains pending.” (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 741 [29 Cal.Rptr.2d 804, 872 P.2d 143].)
PLAINTIFFS’ APPEAL
The Judgment Is Not Void Because of the Trial Judge’s Alleged Disqualification
A. Factual and Procedural Background
The complaint was filed on August 31, 2011. The case was assigned to Judge Henry J. Walsh.
[12] After a contested judicial election, Judge Walsh was reelected in 2012. On February 10, 2016, the Commission on Judicial Performance admonished Judge Walsh for failing to disclose contributions made to his 2012 campaign by attorneys who had appeared before him after the election. The Commission noted, “In 2010, effective January 1, 2011, subdivision (a)(9)(C) was added to Code of Civil Procedure section 170.1 to require judges to disclose campaign contributions of $100 or more.”
On the same day that Judge Walsh was admonished, he signed the judgment in the instant case.[1] The next day, plaintiff Felipa Eith filed a request for a stay of all further action by Judge Walsh pending a hearing on a not yet filed motion to disqualify him.
On March 2, 2016, Felipa Eith filed a motion to disqualify Judge Walsh for cause pursuant to Code of Civil Procedure section 170.1. The ground for the motion was that the judge had received campaign contributions from defendants’ counsel and had not disclosed them to plaintiffs. Eith alleged, “Recent inspection of recorded and filed election documents (Form 460) establishes that during the pendency of the instant action Judge Walsh solicited, accepted and kept secret from Plaintiffs and plaintiffs’ counsel, monetary contributions to his campaign from defense counsel [firm, partners, or staff attorneys] in the amount of $2,600.00 ….” (Original brackets.) A minute order entered nine days later on March 11, 2016, states: “Without conceding the merit of allegations of prejudice made by Ms. Eith, the court recuses itself from the case, and refers it to the supervising civil judge for re-assignment.”
Plaintiffs filed a motion for a new trial. They argued that Judge Walsh’s failure to disclose the campaign contributions denied them their right to a fair trial. Plaintiffs claimed that, if Judge Walsh had made a timely disclosure, they “would certainly have sought his disqualification in 2012 to preclude the possibility that he would preside at trial.”
Judge John Nho Trong Nguyen denied the motion for a new trial. He ruled, “When the facts are viewed as a whole they show that no person aware of them might reasonably entertain a doubt that Judge Walsh would be able to be impartial.”
[13]
B. Analysis
Plaintiffs argue that the judgment is void because Judge Walsh was disqualified years before the trial when he failed to disclose contributions made by defendants’ counsel. If Judge Walsh were so disqualified, the judgment would be void. In Christie v. City of El Centro (2006) 135 Cal.App.4th 767, 776 [37 Cal.Rptr.3d 718], the court “conclude[d] that because [the trial judge] was disqualified at the time he granted the City’s motion for nonsuit, that ruling was null and void and must be vacated regardless of a showing of prejudice.” The court rejected the city’s claim “that the grant of nonsuit need not be overturned because [the judge] was not disqualified until later” when a motion to disqualify him was granted: “[D]isqualification occurs when the facts creating disqualification arise, not when disqualification is established. [Citations.] The acts of a judge subject to disqualification are void or, according to some authorities, voidable. [Citations.] Relief is available to a party who, with due diligence, discovers the grounds for disqualification only after judgment is entered or appeal filed. [Citations.] Although a party has an obligation to act diligently, he or she is not required to launch a search to discover information that a judicial officer should have disclosed. [Citations.]” (Id. at pp. 776-777.)
The relevant statute is Code of Civil Procedure section 170.1, subdivision (a)(9), which provides: “A judge shall be disqualified” if: “(A) The judge has received a contribution in excess of one thousand five hundred dollars ($1500) from a party or lawyer in the proceeding, and either of the following applies: [¶] (i) The contribution was received in support of the judge’s last election, if the last election was within the last six years. [¶] (ii) The contribution was received in anticipation of an upcoming election. [¶] (B) Notwithstanding subparagraph (A), the judge shall be disqualified based on a contribution of a lesser amount if subparagraph (A) of paragraph (6) applies.” (Italics added.) Subparagraph (A) of paragraph (6) of subdivision (a) provides that a judge shall be disqualified if “[f]or any reason: [¶] (i) The judge believes his or her recusal would further the interests of justice. [¶] (ii) The judge believes there is a substantial doubt as to his or her capacity to be impartial. [¶] (iii) A person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial.” (Italics added.)
(1) The California Supreme Court Committee on Judicial Ethics Opinions (CJEO) issued an opinion on mandatory disqualification based on a contribution of more than $1,500: CJEO Formal Opinion 2013-003 (). CJEO concluded, and we agree, that the $1,500 disqualification threshhold “applies to the individual lawyer appearing in the matter.” (Id. at p. 11.) “[T]he Legislature did not intend the $1,500 threshold for disqualification to apply to aggregated contributions from multiple individuals from the [14] same law firm, nor to all individuals practicing law in a contributing law firm. A judge receiving such contributions however, is also required to make a determination as to whether disqualification is called for under section 170.1, subdivision (a)(6)[A](iii) and (9)(B).” (Ibid.) “[M]andatory disqualification for individual attorney contributions over the $1,500 threshold, together with discretionary disqualification for aggregated and law firm contributions, sufficiently ensures the public trust in an impartial and honorable judiciary.” (Ibid.)
In their opening briefs, plaintiffs list the contributions of all of the lawyers who allegedly represented defendants during the five years of litigation. No lawyer contributed more than $1,500 to Judge Walsh’s campaign. Thus, the mandatory disqualification provision is inapplicable. (Code Civ. Proc., § 170.1, subd. (a)(9)(A).)
(2) Plaintiffs have failed to show that Judge Walsh was disqualified because “[a] person aware of the facts might reasonably entertain a doubt that [he] would be able to be impartial.” (Code Civ. Proc., § 170.1, subd. (a)(6)(A)(iii).) Thus, we reject plaintiffs’ claim that Judge Nguyen abused his discretion in denying their motion for a new trial. (See Garcia v. Rehrig Internat., Inc. (2002) 99 Cal.App.4th 869, 874 [121 Cal.Rptr.2d 723] [“`”`The determination of a motion for a new trial rests so completely within the court’s discretion that its action will not be disturbed unless a manifest and unmistakable abuse of discretion clearly appears'”‘”]; Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649-650 [40 Cal.Rptr.3d 501] [“an appealed judgment is presumed correct, and plaintiff bears the burden of overcoming the presumption of correctness”].)
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The Trial Court Properly Applied the Judicial Deference Rule Adopted by Our Supreme Court in Lamden
(3) In its statement of decision, the trial court applied the rule of judicial deference adopted by our Supreme Court in Lamden, supra, 21 Cal.4th 249. The plaintiff homeowner in Lamden complained that a condominium development’s community association had wrongly decided to treat a termite infestation “locally (`spot-treat’).” (Id. at p. 252.) The plaintiff wanted the association to fumigate the building. The Supreme Court stated, “[W]e adopt [15] today for California courts a rule of judicial deference to community association board decisionmaking that applies … when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors. [Citation.]” (Id. at p. 253.) The rule is as follows: “Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Ibid.)
The Supreme Court explained: “The formulation we have articulated affords homeowners, community associations, courts and advocates a clear standard for judicial review of discretionary economic decisions by community association boards, mandating a degree of deference to the latter’s business judgments sufficient to discourage meritless litigation …. [¶] Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations’ discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.)
Some courts have narrowly construed the Lamden rule. In Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 940 [117 Cal.Rptr.3d 481], the court observed: “It is important to note the narrow scope of the Lamden rule. It is a rule of deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance…. The Supreme Court’s precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria. [Citations.]” (See also Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 122 [82 Cal.Rptr.3d 389].)
Most courts have broadly construed the Lamden rule. In Haley v. Casa Del Rey Homeowners Assn. (2007) 153 Cal.App.4th 863, 875 [63 Cal.Rptr.3d 514], the court concluded that Lamden “reasonably stands for the proposition that the Association had discretion to select among means for remedying violations of the CC&R’s without resorting to expensive and time-consuming litigation, and the courts should defer to that discretion.”
[16] In Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 820 [76 Cal.Rptr.3d 41] (Harvey), the CC&Rs allowed the board “to designate storage areas in the common area.” They also gave the board “the exclusive right to manage, operate and control the common areas.” (Ibid.) The court held, “Under the `rule of judicial deference’ adopted by the court in Lamden, we defer to the Board’s authority and presumed expertise regarding its sole and exclusive right to maintain, control and manage the common areas when it granted the fourth floor homeowners the right, under certain conditions, to use up to 120 square feet of inaccessible attic space common area for rough storage.” (Id. at p. 821.)
In Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466, 473 [185 Cal.Rptr.3d 376] (Watts), this court rejected the plaintiffs’ claim “that the rule applying judicial deference to association decisions applies only to ordinary maintenance decisions.” We reasoned: “It is true the facts in Lamden involve the association board’s decision to treat termites locally rather than fumigate. But nothing in Lamden limits judicial deference to maintenance decisions.” (Ibid.) “[T]here is no reason to read Lamden so narrowly.” (Ibid.) “Common interest developments are best operated by the board of directors, not the courts.” (Ibid.) We applied the judicial deference rule to the board’s adoption of rules and imposition of fees relating to short-term rentals of condominium units. We noted that, in Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [97 Cal.Rptr.2d 280] (Dolan-King), “the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.” (Watts, supra, 235 Cal.App.4th at p. 473.)
Based on Lamden, Haley, Harvey, Watts, and Dolan-King, the judicial deference rule applies to an association board’s discretionary decisions concerning the operation of the common interest development, e.g., the board’s maintenance and repair decisions (Lamden), its selection of the appropriate means to remedy a violation of the CC&Rs (Haley), its designation of storage space in a common area (Harvey), its adoption of rules relating to short-term rentals (Watts), or its approval or rejection of a homeowner’s improvement plan (Dolan-King). As we observed in Watts, “Common interest developments are best operated by the board of directors, not the courts.” (Watts, supra, 235 Cal.App.4th at p. 473.)
Here, the Board made a decision concerning the operation of the common interest development. The Board decided whether the Ketelhuts violated the CC&Rs’ prohibition against the use of the Property for business or commercial activity. The Board reasoned that the CC&Rs’ prohibition did not encompass the operation of the vineyard because it did not affect the residential character of the community. Board member Daily testified, “I [17] considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable.” Board member Yen did “not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community.”
(4) We do not defer to the Board’s interpretation of the CC&Rs. The interpretation of CC&R’s is a legal question to be decided by the courts, not the Board. “CC&R’s are interpreted according to the usual rules for the interpretation of contracts generally, with a view toward enforcing the reasonable intent of the parties. [Citations.]” (Harvey, supra, 162 Cal.App.4th at p. 817.) “`”[N]ormally the meaning of contract language … is a legal question.” [Citation.] “Where, as here, no conflicting parol evidence is introduced concerning the interpretation of the document, `construction of the instrument is a question of law, and the appellate court will independently construe the writing.'” [Citation.]'” (Cohen v. Five Brooks Stable (2008) 159 Cal.App.4th 1476, 1483 [72 Cal.Rptr.3d 471]; see also Legendary Investors Group No. 1, LLC v. Niemann (2014) 224 Cal.App.4th 1407, 1413 [169 Cal.Rptr.3d 787] [“contract interpretation is a legal question for the court”].)
(5) In our review of the CC&Rs, we conclude that the Board correctly interpreted the prohibition of business or commercial activity. The prohibition does not encompass activity that has no effect on the community’s residential character. The purpose of the prohibition is to preserve the community’s residential character.
The trial court properly deferred to the Board’s discretionary decision that the Ketelhuts’ operation of the vineyard did not violate the prohibition against business or commercial activity because it did not affect the community’s residential character. The Board made its decision “upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members.” (Lamden, supra, 21 Cal.4th at p. 253.) The Board interviewed homeowners and conducted a public hearing at which the Ketelhuts answered questions. Yen testified that the Board’s decision was “based on our looking at it from the scope of the community: Is it creating any stress for the community, is it impairing the community’s functioning, is it invasive to the community, and have we received any complaints regarding what is happening.” “Our decision and focus of discussion was on the impact o[n] the community.”
“Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments ….” (Lamden, supra, 21 Cal.4th at pp. 270-271.) The Board members lived in the community and had discussed the Ketelhuts’ vineyard with other homeowners. They [18] were in a much better position than the courts to evaluate the vineyard’s effect on the community. We “should defer to the [B]oard’s authority and presumed expertise.” (Id. at p. 265.)
The Board Correctly Decided That the Operation of the Vineyard Is Not Prohibited Business or Commercial Activity
As an alternative holding, we conclude that as a matter of law, the Ketelhuts’ operation of the vineyard is not prohibited business or commercial activity because it does not affect the community’s residential character.
No signs advertising wine sales are posted on the Property. Although the Ketelhuts’ logo “Los Robles Hills Winery” and their website address are displayed on the exterior of their truck, “they keep the truck covered” while it is on the Property. The wine is made and bottled in Camarillo. The bottled wine is stored in Malibu. It is not shipped from the Property. The trial court found that there is “no retail traffic” to the Property, which does not have a wine-tasting room. The court said, “What was accomplished [on the Property] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo.”
Had the Ketelhuts retained the wine for their personal use or given it away to friends or charity, there would have been no basis for finding business or commercial activity. All activities relating to the vineyard would have been permissible. That the Ketelhuts offered the wine for sale over the Internet did not transform their use of the Property into prohibited business or commercial activity. At all times the operation of the vineyard was fully consistent with residential use. No homeowner familiar with the vineyard’s operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public. The business or commercial activity of making and selling the wine did not occur on the Property. Board member Daily testified, “They were growing grape vines just like I grow fruit trees and Mr. Krupnick grows avocado trees, and people grow grass in their yard.” Moreover, instead of being a blight on the community, the vineyard was an aesthetic enhancement. Pranas Raulinaitis, who served on the Committee that approved the Ketelhut’s landscape plan in 2005, testified that the Committee members “viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood.”
We recognize that the growing of grapes on the Property is an integral part of the Ketelhuts’ winemaking business. As Daily testified, “You have to have grapes in order to make wine.” But absurd consequences would flow from construing the CC&Rs as prohibiting any business or commercial activity whatsoever irrespective of its effect on the residential character of the community.
[19] For example, some appellate attorneys work at home, reading records, doing research, and writing briefs, but meet with clients elsewhere. Although these attorneys are engaged in the business of practicing appellate law at their home offices, their business activities do not affect the residential character of their communities.
It would be absurd to construe the CC&Rs as prohibiting such harmless conduct, just as it would be absurd to construe them as prohibiting the Ketelhuts from operating their vineyard. “`In construing a contract the court … should adopt that construction which will make the contract reasonable, fair and just [citation]; … [and] should avoid an interpretation which will make the contract … harsh, unjust or inequitable [citations], or which would result in an absurdity [citations] …'” (Wright v. Coberly-West Co. (1967) 250 Cal.App.2d 31, 35-36 [58 Cal.Rptr. 213].)
There will be instances, of course, where a homeowner’s activity constitutes prohibited business activity even though the business is primarily conducted off the residential premises. For example, if a homeowner conducted a trucking business off the premises except that the trucks were stored on the premises when not in use, the homeowner might be in violation of the business prohibition. The presence of the commercial trucks would detract from the community’s residential character. (See Smart v. Carpenter (2006) 2006-NMCA-056 [139 N.M. 524, 134 P.3d 811].)
[[/]][*]
……………………………………………………………………..
Disposition
The judgment and postjudgment award of attorney fees and costs are affirmed. The parties shall bear their own costs on appeal.
Perren, J., concurred.
PERREN, J., Concurring. —
I concur.
In a vain effort to “define what may be indefinable,” Justice Potter Stewart opined, “I know it when I see it ….”[1] In like manner, the dissent “know[s] unfairness when [it] sees it” — when it sees how the Ketelhuts harvest their [20] grapes and make and sell their wine. (Dis. opn. post, at p. 20.) The majority sees it otherwise. In my opinion this is not a matter for such subjectivity. Rather, we should defer to the good faith exercise of discretion and “`the board’s authority and presumed expertise.'” (Maj. opn. ante, at p. 15, quoting Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 [87 Cal.Rptr.2d 237, 980 P.2d 940].)
Both the majority and the dissent appeal to “`Common sense.'” (Maj. opn. ante, at p. 15; dis. opn. post, at p. 22.) In doing so they quote from Lamden: I join with them and set forth the full closing of that opinion: “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations’ discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments. Beneficial corollaries include enhancement of the incentives for essential voluntary owner participation in common interest development governance and conservation of scarce judicial resources.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn., supra, 21 Cal.4th at pp. 270-271, italics added.)
This dispute and the resulting expense and acrimony are strong testament to the wisdom of such deference.
YEGAN, J., Dissenting. —
I know unfairness when I see it. The judgment should be reversed because plaintiffs are entitled to a ruling from the trial court that Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) were conducting a business in violation of the Covenants, Conditions, and Restrictions running with the land. (CC&Rs.) It does not matter whether the Ketelhuts could win an award for having the most beautiful vineyard in the world. It does not matter whether the wine from the grapes rivals the finest wines of the Napa Viticulture. As I shall explain, the facts unerringly point to the conclusion that the Ketelhuts were conducting a vineyard business on their property (the Property).
There will, of course, be situations in which the conducting of a business at a residence in violation of the CC&Rs will be so trivial to the neighborhood that it will be deemed not to be in violation of the CC&Rs. There is no reason to list them and one is only limited by imagination. As Colonel Stonehill said, “I do not entertain hypotheticals. The world, as it is, is vexing enough.” (True Grit (Paramount Pictures 2010).) So here, we need only decide whether the maintenance of the vineyard as a business is in violation of the CC&Rs.
[21]
Judicial Deference Rule
The judicial deference rule applies where an association board “exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden).) In Lamden our Supreme Court concluded that the courts should defer to the board’s treatment of a termite problem because it was “a matter entrusted to [the board’s] discretion under the [CC&Rs] and [now repealed] Civil Code section 1364 ….” (Id. at pp. 264-265.) Here, there is no statute or provision in the CC&Rs entrusting to the discretion of the Los Robles Hills Estates Homeowners Association Board of Directors (Board) whether a homeowner is engaging in prohibited business or commercial activity within the meaning of the CC&Rs. This is a straightforward legal question to be decided by the courts, not members of the Board who lack legal expertise. (See Smart v. Carpenter (2006) 2006-NMCA-056 [139 N.M. 524, 134 P.3d 811, 814] [it “is a question of law” whether homeowner violated covenant prohibiting “`commercial activity or business’ on any tract in the Subdivision”].)
The inapplicability of the judicial deference rule is supported by Dover Village Assn. v. Jennison (2010) 191 Cal.App.4th 123 [119 Cal.Rptr.3d 175] (Dover Village). There, the issue was whether a sewer pipe was ordinary “common area to be maintained and repaired by the Association” or “`[an] exclusive use common area'” designed to serve a particular homeowner who would be responsible for its maintenance. (Id. at pp. 126, 127.) The association decided that the sewer pipe was the defendant homeowner’s responsibility because it exclusively serviced his condominium. The appellate court concluded that the sewer pipe was not an exclusive use common area. It rejected the association’s argument that, under Lamden, it should defer to the association’s decision: “The argument fails because it confuses a legal issue governed by statutory and contract text with matters that genuinely do lend themselves to board discretion. [¶] … [¶] There is an obvious difference between a legal issue over who precisely has the responsibility for a sewer line [or whether a homeowner is engaged in prohibited business or commercial activity within the meaning of the CC&Rs] and how a board should go about making a repair that is clearly within its responsibility…. [W]e know of no provision in the Davis-St[e]rling Act or the CC&R’s that makes the Association or its board the ultimate judge of legal issues affecting the development.” (Id. at p. 130.)
The court considered Lamden to be “a nice illustration of matters genuinely within a board’s discretion.” (Dover Village, supra, 191 Cal.App.4th at [22] p. 130.) Unlike Lamden, the legal issue here is not genuinely within the Board’s discretion. In Lamden the Supreme Court noted, “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.) In contrast to Lamden, the Board is not equipped to determine whether the Ketelhuts were engaged in business or commercial activity in violation of the CC&Rs.
If the judicial deference rule applied here, there would be few board decisions to which it did not apply. The judicial deference rule “does not create a blanket immunity for all the decisions and actions of a homeowners association.” (Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 940 [117 Cal.Rptr.3d 481].)
The Vineyard Is Business or Commercial Activity Within the Meaning of the CC&Rs
The majority opinion concludes that, as a matter of law, the Ketelhuts’ operation of the vineyard is not a prohibited business or commercial activity because it does not affect the residential character of the community. But paragraph 1.01 of the CC&Rs does not say, “No lot shall be used for any purpose (including any business or commercial activity [that does not affect the residential character of the community]) other than for the residence of one family and its domestic servants ….” (Italics added.) “`”In construing a contract which purports on its face to be a complete expression of the entire agreement, courts will not add thereto another term, about which the agreement is silent. [Citation.]”‘ [Citation.]” (Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, 602 [106 Cal.Rptr.2d 1].) On its face paragraph 1.01 prohibits any business or commercial activity without qualification or exception. Subparagraph 3 of paragraph 2.03 of the CC&Rs provides that “[f]or good cause shown … deviations from the applicable deed restrictions” may be allowed “to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use.” (Italics added.) How can the operation of a commercial vineyard not qualify as commercial use?
There may be cases where business or commercial activity is so de minimis or concealed that it does not violate the CC&Rs, such as the example given in the majority opinion of an appellate attorney with a home office who sees no clients on the premises. But the Ketelhuts’ operation of their commercial vineyard was neither de minimis nor concealed. They filed a fictitious business name statement and were issued both a business license [23] and an alcoholic beverage sales license. The licenses originally indicated that the business was located at the Property. Board member Yen testified: “[A] notice of intent to sell [alcoholic beverages] … was posted on their front where their mailbox was, and it needed to be posted elsewhere because you’re not supposed to be advertising a business in the community. So they were advised not to post it there.” The Ketelhuts advertised on Facebook, Twitter, their personal website, “and through [their] wholesale accounts.” They filed an Internal Revenue Service schedule C (form 1040) to report their business income or loss. The logo “Los Robles Hills Winery” and their website address were displayed on the exterior of their truck. Although the Ketelhuts covered the truck while it was parked on the Property, the logo and website address were openly displayed when they drove the truck to and from the Property.
The Ketelhuts sought and obtained publicity for their winery by giving an interview to the local newspaper, the Ventura County Star. In January 2011 the newspaper published an article about the winery. Until he read the article, plaintiff John Mitchell was not aware that the Ketelhuts were growing grapes for a commercial purpose. Mitchell “knew that they weren’t supposed to be doing an activity like that because of the CC&Rs,” which “exclude any business activity.”
A copy of the newspaper article was marked as exhibit 54, but it was neither offered nor received into evidence. I quote from the article because it was before the trial court, witnesses testified as to its content, Felipa Eith quoted from the article during her examination of Jeffrey Ketelhut, and the article arguably is judicially noticeable not to prove the truth of the facts reported, but to prove the extent to which the commercial nature of the vineyard was publicized. (Evid. Code, §§ 452, subd. (h), 459.)
The article takes up the entire front page of the newspaper’s Sunday “Business” section (“Section E”). It is entitled, “GRAPE expectations[:] T.O. [Thousand Oaks] couple’s home vineyard about to pay off.” The article includes photographs of the vineyard, the Ketelhuts, and bottles of wine produced from grapes grown at the vineyard. The bottles are labeled, “Los Robles Hills.” One of the photographs of the Ketelhuts is captioned, “Jeff and Marcella Ketelhut, owners of the commercial vineyard in the Conejo Valley, enjoy discussing the challenges of wine production.” (Italics added.) The article includes the website address of the Ketelhuts’ winery.
The article states in part: “For Jeff and Marcella Ketelhut, the dream of owning a winery has come to fruition on the slopes near their Thousand Oaks home.” “The Ketelhuts are not yet making a profit but said they are selling their wine, at $35 a bottle, through their website, by word of mouth and by [24] hosting wine tastings by appointment at their home tasting room. [¶] … The couple also has planted a selection of olive trees on the property and hopes to begin producing cured olives and olive oil for sale in the near future. [¶] They said they are exploring ways to expand their commercial enterprise, given the potential they believe exists in the Conejo Valley. [¶] `We wanted to try it for a few years, and initially it was more of a fun thing, but now we’re barely doing any marketing and the stuff is flying off the shelves,’ said Marcella.” The article observes that “the Ketelhuts’ Los Robles Hills Winery [is] on the list of 15 [wineries] that make up the Ventura County Wine Trail.” Jeffrey Ketelhut testified that in 2010 the Ketelhuts had become “members of the Ventura County Wine Trail.”
Through the newspaper article, the Ketelhuts proclaimed to Ventura County residents that they were operating a commercial vineyard on the Property. It is understandable that homeowners, such as John Mitchell, would be alarmed by this development, which appeared to be a blatant violation of the CC&Rs’ prohibition against “any business or commercial activity.” Homeowners could view the article as a public flaunting by the Ketelhuts of their violation.
The majority opinion states, “No homeowner familiar with the vineyard’s operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public.” (Maj. opn., ante at p. 18.) But the newspaper article put the entire community on notice that the Ketelhuts were operating a commercial vineyard.
Moreover, the vineyard was in plain view of the homeowners. Richard Monson testified that, “[w]hen [he] drove past the Ketelhuts’ home,” he “noticed the grapevines on the hillside.” Because the grapevines were visible to everyone, they would be a continual source of aggravation to homeowners who objected to a commercial agricultural operation in their community. The majority opinion says that the vineyard was an “aesthetic enhancement.” (Maj. opn., ante at p. 18.) But to the homeowners who objected to its presence, it was an eyesore.
The Ketelhuts’ commercial vineyard was not permissible because, as Board member Daily testified, “Their growing grapes was part of their landscape plan.” The landscape plan, which was approved in 2005 by the Board’s architectural committee (the Committee), did not indicate that the vineyard would be used to grow grapes to make wine that would be offered for sale to the public. In 2005 the Ketelhuts did not inform the Committee of this future commercial use. Had it been so informed, the Committee probably would not have approved the landscape plan.
Difficulties may arise in applying the majority opinion’s standard of whether business or commercial activity affects the residential character of [25] the community. With such a vague standard, where does one draw the line between activity that affects and activity that does not affect residential character? This is a purely subjective determination.
A New Meaning for CC&Rs
Traditionally, CC&Rs are restrictions and limitations on land use. Now at the whim of the Board, CC&Rs mean “choices, creativity, and recommendations.” A homeowner has a choice and may be creative in the use of property. The traditional CC&Rs have been transformed into recommendations that the Board may elect not to enforce. Rather than having the force of law, the CC&Rs have the backbone of a chocolate éclair. And, of course, the Board’s composition may change and there will be inconsistency in just how much business or commercial activity will be allowed.
CC&Rs play a vital role in protecting the reasonable expectations of parties when they purchase land. This concept is lost in the majority opinion. Future buyers in the development should be expressly advised that business or commercial activity is allowed at the discretion of the Board. This may actually devalue the land.
Finally, to monetarily punish plaintiffs with attorneys’ fees is not only unfair, it is unconscionable. The Ketelhuts were the “first movers.” They created the entire problem by operating a commercial vineyard and publicizing it in the local newspaper. They are at fault and they should pay for it.
[*] Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is certified for partial publication. The portions of this opinion to be deleted from publication are identified as those portions between double brackets, e.g., [[/]].
[1] The Eiths “posit that the 2/10/16 handwritten date appearing adjacent [to] the signature line [on the judgment] is suspect” and “therefore unreliable.” The Eiths contend that the handwritten date “was likely backdated.” (Capitalization & boldface omitted.) We reject the contention because it is based on speculation. There is a “presumption that judicial duty is properly performed.” (People v. Coddington (2000) 23 Cal.4th 529, 644 [97 Cal.Rptr.2d 528, 2 P.3d 1081], overruled on another ground in Price v. Superior Court (2001) 25 Cal.4th 1046, 1069, fn. 13 [108 Cal.Rptr.2d 409, 25 P.3d 618].) The Eiths have not overcome this presumption.
[*] See footnote, ante, page 1.
[*] See footnote, ante, page 1.
[1] Jacobellis v. Ohio (1964) 378 U.S. 184, 197 [12 L.Ed.2d 793, 84 S.Ct. 1676] (conc. opn. of Stewart, J.).
Related Links
Courts Will Defer to the Decisions of Boards Based on Good Faith and Regard for the Best Interests of the Community
– Published on HOA Lawyer Blog (March 2019)
Sands v. Walnut Gardens Condominium Association Inc.
[Maintenance; Board Deference] No independent tort liability for failing to maintain common areas; Rule of Judicial Deference does not protect failure to perform inspections or preventative maintenance.
Law Office of Jeff A. Lesser and Jeff A. Lesser for Plaintiffs and Appellants.
Slaughter, Reagan & Cole, Barry J. Reagan and Gabriele M. Lashly for Defendant and Respondent.
[175]
OPINION
WILEY, J.—
This case is about whether condominium owners can make their homeowners association pay for a water leak. Monique Sands and her parents sued and went to trial against the Walnut Gardens Condominium Association Inc. and its property manager for breach of contract and negligence. The trial court granted a nonsuit. The Sandses settled with the property manager but have appealed against the association. The Sandses argue the trial court erred by granting the nonsuit, by excluding certain evidence, and by denying their motion for a new trial. We reverse and remand the contract nonsuit and affirm the tort nonsuit. We do not reach other issues.
[176] I
We summarize the facts. When reviewing a nonsuit, we view facts in the plaintiff’s favor and disregard conflicting evidence. (O’Neil v. Crane Co. (2012) 53 Cal.4th 335, 347 [135 Cal.Rptr.3d 288, 266 P.3d 987].)
The Sandses owned a unit in the Walnut Gardens development. A pipe on the roof broke and water entered the Sandses’ bedroom. The association’s agent hired people to repair the pipe and roof. The association had responsibility to maintain its common areas, including this piping and roof. The Sandses sued the association for breach of contract and negligence. The trial court selected a jury, heard the Sandses’ two witnesses in their case-in-chief, and granted a nonsuit.
II
We reverse the nonsuit on the breach of contract claim.
(1) Our review of nonsuit judgments is limited. To allow the opposing party to cure defects in proof, we may affirm only on logic stated in the motion for nonsuit, unless the defect would have been impossible to cure. (Lawless v. Calaway (1944) 24 Cal.2d 81, 94 [147 P.2d 604] (Lawless).)
(2) The Sandses claimed a breach of contract. The contract, they say, was the association’s covenants, conditions, and restrictions, one part of which required the association to keep the project in “a first class condition.” The Sandses’ first witness, however, testified the association was performing no preventive maintenance at all, even though preventive maintenance was desirable. The roof and pipes over the Sandses’ unit had not been inspected or maintained in years.
The association’s oral motion for nonsuit was concise to a fault. It first argued there was “a complete absence of evidence” to show a breach of contract. This first argument was incorrect. Reasonable jurors could have concluded a total failure to maintain common areas breached a promise to keep these areas in first class condition.
The association next argued no evidence showed the association was “on notice that it needed to make repairs or do something to the roof or the pipes.” This argument too was incorrect. The property manager testified “[m]aintenance wasn’t happening. It was a very sad situation for the homeowners.” A jury could find buildings need maintenance to remain in first class condition. The association knew “[m]aintenance wasn’t happening.” As a prima facie matter, no more was needed.
[177] In the course of granting the motion, the trial court added oral reasoning beyond the contents of the nonsuit motion. The court said the Sandses’ lack of expert testimony would force the jury to “speculate” about how a pipe broke and the roof leaked. By suggesting expert testimony was essential, this contract analysis erred. A complete lack of preventive maintenance is evidence the association did not keep the roof or pipes in first class condition. The jury would not need experts to grasp this.
(3) Neither the motion nor the court’s rationale challenged the idea that covenants, conditions, and restrictions comprise a contract between the association and individual owners. (See Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 240 [145 Cal.Rptr.3d 514, 282 P.3d 1217].) Nor did the motion or rationale hint at the rule of deference governing owner suits against homeowner associations. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 [87 Cal.Rptr.2d 237, 980 P.2d 940].) The nonsuit argument did not consider these points. Therefore neither do we. Defects unspecified in a nonsuit motion will be considered on appeal only if the plaintiff could not have cured the defects at trial. (See Lawless, supra, 24 Cal.2d at p. 94.)
We reverse and remand the nonsuit judgment about the contract.
III
We affirm the nonsuit tort judgment.
The association argued there was no evidence “as far as negligence [was] concerned” showing the association “was on notice of any condition that required repair.” The trial court rightly decried this effort to “tortify” a creature of private ordering. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 554 [87 Cal.Rptr.2d 886, 981 P.2d 978] [“If every negligent breach of a contract gives rise to tort damages the limitation [that `breach of contract is tortious only when some independent duty arising from tort law is violated’] would be meaningless, as would the statutory distinction between tort and contract remedies.”].)
Outside the covenants, conditions, and restrictions, the association had no independent duty as to the pipes and roof arising from tort law. The Sandses’ trial counsel conceded the evidence for their negligence claim was “pretty much the same, under the same thing as a contract….” The Sandses give us no authority for a cause of action in tort. They state: “As with the Cause of Action for Contract, the duties and obligations for which the HOA, Walnut Gardens, was responsible, are found in the [covenants, conditions, and restrictions]….”
[178] Even had the association omitted this issue in its nonsuit motion, nothing the Sandses could have done at trial would have summoned into existence a tort claim barred by law. (See Lawless, supra, 24 Cal.2d at p. 94.)
DISPOSITION
We affirm the nonsuit of the tort claim and reverse and remand the nonsuit on the contract claim. The parties will bear their own costs.
Bigelow, P. J., and Stratton, J., concurred.
Related Links
Limitation on HOA Tort Liability for Maintenance Failures
– Published on HOA Lawyer Blog (January 2020)
Palm Springs Villas II HOA v. Parth
[Fiduciary Duty; Business Judgment Rule] The Business Judgment Rule does not automatically shield a HOA director from liability that may result from the director’s failure to exercise reasonable diligence or failure to act within the scope of the director’s authority under the HOA’s governing documents.
Epsten Grinnell & Howell, Anne L. Rauch and Joyce J. Kapsal for Cross-complainant and Appellant.
Kulik Gottesman & Siegel, Leonard Siegel, Thomas M. Ware II and Francesca N. Dioguardi for Cross-defendant and Respondent.
OPINION
AARON, J.AARON, J.
I. INTRODUCTION
The Palm Springs Villas II Homeowners Association, Inc. (Association) appeals from a judgment entered in favor of Erna Parth, in connection with actions she took while simultaneously serving as president of the Association and on its Board of Directors (Board). The court granted Parth’s motion for summary judgment as to the Association’s claim for breach of fiduciary duty on the basis of the business judgment rule and an exculpatory provision contained in the Association’s Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The court had previously sustained Parth’s demurrer to the Association’s claim for breach of governing documents without leave to amend, finding that the Association failed to allege a cognizable breach.
On appeal, the Association argues that the trial court erred in its application of the business judgment rule and that there remain material issues of fact in dispute regarding whether Parth exercised reasonable diligence. We agree that the record discloses triable issues of fact that should not have been resolved on summary judgment. We therefore reverse the judgment in favor of Parth. The Association also contends that it stated a claim for breach of the governing documents and that the court erred in sustaining Parth’s demurrer. We conclude that the document cause of action is, at best, duplicative of the fiduciary breach cause and affirm the ruling sustaining the demurrer as to that cause of action without leave to amend.
II. FACTUAL AND PROCEDURAL BACKGROUND[fn. 1]
A. Background on Palm Springs Villas II and its governance
The Association is the governing body for Palm Springs Villas II, a condominium development, and is organized as a nonprofit corporation under California law. The Board, comprised of five homeowners or their agents, governs the Association. The Association’s governing documents include the CC&Rs and its Bylaws. Each homeowner is an Association member and is required to comply with the terms set forth in these documents. [272]
Certain provisions reserve to the Board the authority to take particular actions. Article VI, Section 3, of the CC&Rs provides that the Board “shall have authority to conduct all business affairs of common interest to all Owners.” Article VI, Section 1, of the Bylaws describes the Board’s powers, including to “contract . . . for maintenance, . . . and services” and to “borrow money and incur indebtedness . . . provided, however, that no property of the association shall be encumbered as security for any such debt except under the vote of the majority of the members entitled to vote. . . .”
Other provisions limit the Board’s power and retain authority for the members. Article VI, Section 1, of the Bylaws explains that “[n]otwithstanding the foregoing, the Board shall not, except with the vote or written assent of a majority of the unit owners . . . [e]nter into a contract with a third person wherein the third person will furnish goods or services for the common area or the association for a term longer than one year. . . .” Article XVI, Section 2, of the CC&Rs, provides that “[n]otwithstanding any other provisions of this Declaration or the Bylaws, the prior written approval of at least two-thirds (2/3) of the . . . Owners . . . shall be required” for actions including “the . . . encumbrance, . . . whether by act or omission, of the Common Area. . . .”
The CC&Rs also contain an exculpatory provision. Article VI, Section 16, provides: “No member of the Board . . . shall be personally liable to any Owner, or to any other party, including the Association, for any damage, loss or prejudice of the Association, the Board, the Manager or any other representative or employee of the Association, or any committee, or any officer of the Association, provided that such person has, upon the basis of such information as may be possessed by him, acted in good faith, and without willful or intentional misconduct.”
During the relevant time, Parth was president of the Association, as well as a Board member.
B. Events leading to breach allegations
- Roofing repairs
In 2006, the Board hired AWS Roofing and Waterproofing Consultants (AWS) in connection with roofing repairs, with the intention that AWS would vet the companies submitting bids and perform other tasks related to the repairs. According to Parth, AWS prepared a budget estimate for the repairs, the Board submitted a request to the members for a special assessment to offset these costs, and the members voted against the request. Parth then found and retained a roofing company on her own, without consulting either the Board or AWS. [273]
Parth indicated that she tried to contact the roofing company that had previously worked on the roofs, but it was no longer in business, and that she could not find another roofer due to the Association’s financial condition. She obtained the telephone number for a company called Warren Roofing from a contractor that was working on a unit. The record reflects that the person Parth contacted was Gene Layton. At his deposition, Layton stated that he held a contractor’s license for a company called Bonded Roofing and that he had a relationship with Warren Roofing, which held a roofing license. When asked about that relationship, Layton explained that on a large project, he would be the project manager.
At Parth’s deposition, Association counsel asked Parth if she had investigated whether Warren Roofing had a valid license. She replied, “[h]e does and did and bonded and insured.” Counsel clarified “[t]here’s a Bonded Roofing and Warren Roofing. Who did you hire?” Parth responded “One Roofing. That’s all one company, I think.” Counsel then asked if she had “investigate[d] whether Bonded Roofing was licensed,” and Parth answered, “I did not investigate anything.”
According to a June 2007 Board resolution, the Board hired Bonded Roofing to work on a time and materials basis. Layton said that he never met with the Board in a formal meeting or submitted a bid for the work before he started work on the roof. The Association had no records of a written contract with Bonded Roofing or any other roofer.
Warren Roofing submitted invoices and was ultimately paid more than $1.19 million for the work. Many of the checks were signed by Parth. Layton stated that “Bonded Roofing had nothing to do with the money on this job” and that he was paid by Warren Roofing. Board member Tom Thomas indicated that no invoices from Warren Roofing were included in the packets provided to the Board members each month, and Board member Robert Michael likewise did not recall having seen the invoices. Parth explained that she relied on Board member and treasurer Robert ApRoberts, a retired certified public accountant, to review invoices. Larry Gliko, the Association’s contracting expert, opined that the invoices submitted by Warren Roofing were “not at all characteristic” of those typically used in the building industry or submitted to homeowners’ associations, included amounts that Gliko viewed as unnecessary, and charged the Association “almost double” what the work should have cost. Gliko also opined that “the work performed by Warren Roofing [was] deficient,” “fell far below the standard of care,” and “require[d] significant repairs.” [274]
- Repaving projects and loans
In April 2007, the Board voted to hire a construction company to repair the walkways. The Board asked the membership to vote on a special assessment to fund this and other repairs. The membership voted to approve the special assessment.
In July 2007, Parth signed promissory notes for $900,000 and $325,000, secured by the Association’s assets and property. She stated that at the time the special assessment was approved, the Board was investigating the possibility of obtaining a loan to raise the capital needed to immediately commence work on the walkway project. Thomas indicated that, as an Association member, he was never asked to approve the debt and did not learn about it until this litigation commenced. The Association had no records indicating that the members were ever informed about, or voted on, the debt.
In April 2010, the Board approved a bid from a paving company to perform repaving work. According to Parth, the Board elected to finance this repaving project with a bank loan, the Board reviewed the loan at the April 2010 meeting, and “unanimously approved” that Parth and/or ApRoberts would sign the loan documents. Parth further stated that at a special Board meeting in May 2010, attended by her, ApRoberts, and Board member Elvira Kitt-Kellam, the Board “resolved that the Association had the power to borrow and pledge collateral” and authorized her and ApRoberts to execute loan documents. Thomas stated that he never received notice of this meeting. In May 2010, Parth and ApRoberts signed a promissory note for $550,000, secured by the Association’s accounts receivable and assets. Thomas indicated that he was never asked to vote on this debt and, again, there were no Association records indicating that the members were notified about or voted on it.
In construction and business loan agreements in connection with the 2007 and 2010 notes, Parth and ApRoberts represented that the agreements were “duly authorized by all necessary action by [the Association]” and did not conflict with the Association’s organizational documents or bylaws. Parth testified at her deposition that she had not reviewed the CC&Rs or Bylaws regarding her authority to execute a promissory note and did not know whether she had such authority under the CC&Rs. In her declaration in support of summary judgment, Parth explained that she believed she “had authority to borrow money and execute loan documents on behalf of the Association in [her] capacity as president,” and was “unaware that a vote of the majority of the members was required in order to pledge the Association’s assets as security for the loan.” She also indicated that “no one advised [her] that she did not have authority to sign the loan documents . . . or that a vote of the membership was required.” [275]
- Jesse’s Landscaping
At a December 2010 Board executive meeting attended by Parth, Michael, and Kitt-Kellam, those Board members approved and signed a five-year contract with Jesse’s Landscaping. Thomas indicated that he was not given notice of the meeting. At her deposition, in response to a question regarding whether she had the authority to sign a five-year contract, Parth answered, “I don’t know.” During the same line of questioning, Parth also acknowledged that her “understanding of what [her] authority is under the bylaws” was “[n]one.”
- Termination of Personalized Property Management
During the relevant time period, the Association’s management company was Personalized Property Management (PPM). According to Parth, PPM’s owner advised her in or around June or July 2011 that PPM no longer wanted to provide management services for the Association. At a July 9, 2011 Board meeting regarding termination of PPM, the Board tabled any decision to terminate PPM until bids from other companies were obtained and reviewed. Parth proceeded to hire the Lyttleton Company to serve as the Association’s new management company. Thomas stated that he never received written notice of a Board meeting to vote on the hiring of Lyttleton. Parth noticed an executive meeting for July 16, 2011, to discuss termination of PPM and retention of a new company, at which time the Board voted three to two to terminate PPM. Thomas stated that he objected to the vote at the time, based on the Board’s prior decision to table the matter.
- Desert Protection Security Services contract
Gary Drawert, doing business as Desert Protection Security Services (Desert Protection), had provided security services for Palm Springs Villas II since 2004. The Association executed a written contract with Desert Protection in December 2003 for one year of security services. Thomas stated that after joining the Board, he learned that Desert Protection and other vendors were providing services pursuant to “oral or month-to-month agreements.” In July 2010, the Board authorized Thomas to obtain bids from security companies to provide security services for 2011.
In January 2011, Parth signed a one-year contract with Desert Protection. Her understanding was that “any contract that was not renewed in writing would . . . be automatically renewed until terminated” and that she was [276] “merely updating the contract, as instructed by management.”[fn. 2] She believed that she had the “authority to sign the contract as the Association’s president.” She further explained that, at the time, the Board had not voted to terminate Desert Protection and discussions regarding a new security company had been tabled.
There were no records indicating that Parth submitted the 2011 Desert Protection agreement to the Board for review or that the Board authorized her to execute it. According to Thomas, Parth did not inform the other Board members that she had signed the agreement. Michael likewise indicated that he had not attended any Board meeting at which the agreement was discussed, and he did not recall the Board having voted on it. Kitt-Kellam stated that the Board never authorized the contract.
In February 2011, the Association’s manager sent Parth and others an e-mail recommending that the Board update certain contracts, including the contract with Desert Protection. Thomas presented the security company bids at a March 2011 Board meeting. The Board tabled the discussion at this meeting and at the subsequent April 2011 meeting. At the July 2011 meeting, the Board approved a proposal from Securitas in a three-to-one vote, with Parth abstaining. According to Thomas, Parth did not disclose at any of these meetings that she had signed a one-year contract with Desert Protection in January 2011. Following the July 2011 Board meeting, Desert Protection was sent a 30-day termination letter, based on the Board’s understanding that the company was operating on a month-to-month basis.
In August 2011, Gary Drawert, the principal of Desert Protection, left a voice mail message for Thomas regarding the Desert Protection agreement. Thomas indicated that prior to this voice mail, he was not aware of the agreement. At the September 2011 Board meeting, Parth produced the Desert Protection agreement. The Board did not ratify it.
C. Desert Protection sues and the Association files a cross-complaint
Drawert sued the Association for breach of contract. The Association cross-complained against Desert Protection and Parth. Following an initial demurrer, the Association filed the operative First Amended Cross-Complaint. The Association settled with Drawert.
With respect to Parth, the Association asserted causes of action for breach of fiduciary duty and breach of governing documents. The cause of action for [277] breach of fiduciary duty alleged that Parth had breached her duties to comply with the governing documents and to avoid causing harm to the Association by, among other things, refusing to submit bids or contracts to the Board, “unilaterally terminating” PPM, and signing the contract with Desert Protection. The breach of governing documents cause of action identified CC&R and Bylaw provisions and identified actions taken by Parth in breach of these provisions, including the termination of PPM and entering into the Desert Protection contract.
Parth demurred to the First Amended Cross-Complaint. With respect to the governing documents claim, she contended that the claim failed to state a cause of action and was uncertain. The court sustained the demurrer without leave to amend as to this cause of action. We discuss this ruling in more detail, post.
Parth moved for summary judgment, contending that the claim of breach of fiduciary duty was barred by the business judgment rule and by the exculpatory provision in the CC&Rs. The trial court granted the motion. In doing so, the court described the business judgment rule (including the requirement that directors “act[] on an informed basis”) and observed that courts will not hold directors liable for errors in judgment, as long as the directors were: “(1) disinterested and independent; (2) acting in good faith; and (3) reasonably diligent in informing themselves of the facts.” The court further noted that the plaintiff has the burden of demonstrating, among other things, that “the decision . . . was made in bad faith (e.g., fraudulently) or without the requisite degree of care and diligence.”[fn. 3]
The court found that Parth had set forth sufficient evidence that she was “disinterested,” and that she had “acted in good faith and without willful or intentional misconduct,” and “upon the basis of such information as she possessed.” The burden shifted to the Association to establish a triable issue of material fact and the court found that the Association failed to satisfy this burden. As to bad faith, the court found that there was a triable issue as to whether Parth had violated the governing documents, but that such a violation would be insufficient to overcome the business judgment rule or the exculpatory provision of the CC&Rs. With respect to diligence, the court found no [278] evidence that Parth “did not use reasonable diligence in ascertaining the facts.” According to the court, the “gravamen of the [Association’s] claims is . . . that Parth repeatedly acted outside the scope of her authority,” and that “[t]he problem with this argument is that Parth believed in her authority to act and the need to act, and the [Association] [fails to] offer any evidence to the contrary, except to say that Parth’s actions violated the . . . CC&Rs.”
The trial court also ruled on the Association’s evidentiary objections; the parties do not indicate whether the court ruled on Parth’s objections. The court entered judgment for Parth and the Association timely appealed.
III. DISCUSSION
A. Motion for summary judgment
The Association claims that the trial court erred in granting Parth’s motion for summary judgment.
- Governing law
A defendant moving for summary judgment “bears the burden of persuasion that there is no triable issue of material fact and that [the defendant] is entitled to judgment as a matter of law.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) To meet this burden, the defendant must show that one or more elements of the cause of action cannot be established, or that there is a complete defense to that cause of action. (Ibid.) Once the defendant satisfies its burden, “`the burden shifts to the plaintiff . . . to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto.’” (Id. at p. 849.) “Because a summary judgment denies the adversary party a trial, it should be granted with caution.” (Colores v. Board of Trustees (2003) 105 Cal.App.4th 1293, 1305.)
We review a trial court’s grant of summary judgment de novo. (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.) “[W]e must assume the role of the trial court and redetermine the merits of the motion. In doing so, we must strictly scrutinize the moving party’s papers. [Citation.] The declarations of the party opposing summary judgment, however, are liberally construed to determine the existence of triable issues of fact. All doubts as to whether any material, triable issues of fact [279] exist are to be resolved in favor of the party opposing summary judgment.” (Barber v. Marina Sailing, Inc. (1995) 36 Cal.App.4th 558, 562.)[fn, 4]
- Application
a. Principles governing decisionmaking by a director
“The common law `business judgment rule’ refers to a judicial policy of deference to the business judgment of corporate directors in the exercise of their broad discretion in making corporate decisions. . . . Under this rule, a director is not liable for a mistake in business judgment which is made in good faith and in what he or she believes to be the best interests of the corporation, where no conflict of interest exists.” (Gaillard v. Natomas Co. (1989) 208 Cal.App.3d 1250, 1263 (Gaillard); see Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 123 (Ritter) [business judgment rule “sets up a presumption that directors’ decisions are based on sound business judgment”].)
In California, there is a statutory business judgment rule. Corporations Code section 7231 applies to nonprofit corporations and provides that “[a] director shall perform the duties of a director, . . ., in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” (§ 7231, subd. (a); see Ritter, supra, 166 Cal.App.4th at p. 123.) The statute goes on to state that “[a] person who performs the duties of a director in accordance [with the preceding subdivisions] . . . shall have no liability based upon any alleged failure to discharge the person’s obligations as a director. . . .” (§ 7231, subd. (c); see Ritter, at p. 123; see also § 7231.5, subd. (a) [limiting liability on the same grounds for volunteer directors and officers].)[fn. 5]
“Notwithstanding the deference to a director’s business judgment, the rule does not immunize a director from liability in the case of his or her abdication of corporate responsibilities.” (Gaillard, supra, 208 [280] Cal.App.3d at p. 1263.) “`The question is frequently asked, how does the operation of the so-called `business judgment rule’ tie in with the concept of negligence? There is no conflict between the two. When courts say that they will not interfere in matters of business judgment, it is presupposed that judgment—reasonable diligence—has in fact been exercised. A director cannot close his eyes to what is going on about him in the conduct of the business of the corporation and have it said that he is exercising business judgment.’” (Burt v. Irvine Co. (1965) 237 Cal.App.2d 828, 852-853 (Burt);Gaillard, supra, at pp. 1263-1264 [accord].)
Put differently, whether a director exercised reasonable diligence is one of the “factual prerequisites” to application of the business judgment rule. (Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 941 (Affan); id. at p. 943 [finding a homeowners association “failed to establish the factual prerequisites for applying the rule of judicial deference” at trial, where “there was no evidence the board engaged in `reasonable investigation’ (citation) before choosing to continue its `piecemeal’ approach to sewage backups”]; see §§ 7231, subd. (a), 7231.5, subd. (a); see also Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 (Lamden) [requiring “reasonable investigation” for judicial deference]; Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 432 (Everest) [accord].)
b. The business judgment rule on summary judgment
The business judgment rule “raises various issues of fact,” including whether “a director acted as an ordinarily prudent person under similar circumstances” and “made a reasonable inquiry as indicated by the circumstances.” (Gaillard, supra, 208 Cal.App.3d at p. 1267.) “Such questions generally should be left to a trier of fact,” but can become questions of law “where the evidence establishes there is no controverted material fact.” (Id. at pp. 1267-1268.) “The function of the trial court in ruling on [a] motion[] for summary judgment [is] merely to determine whether such issues of fact exist, and not to decide the merits of the issues themselves. [Citation.] Our function is the same as that of the trial court.” (Id. at p. 1268; see id. at p. 1271 [identifying a triable issue of fact as to whether it was reasonable for the directors on the compensation committee to rely on outside counsel “with no further inquiry,” and observing that “[a] trier of fact could reasonably find that the circumstances warranted a thorough review of the golden parachute agreements”]; id. at pp. 1271-1272 [noting a “triable issue of fact as to whether some further inquiry” was warranted by the other directors regarding [281] the golden parachutes, under the circumstances, notwithstanding that they were entitled to rely on the recommendation of the compensation committee].)[fn. 6] (Cf. Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 822 [affirming summary judgment in dispute over attic space use where undisputed evidence showed the board, upon “reasonable investigation” and in good faith “properly exercised its discretion within the scope of the CC&R’s. . . .”].)
c. The trial court erred in granting summary judgment
The Association raises two challenges to the summary judgment ruling: that the trial court erred by applying the business judgment rule to Parth’s ultra vires acts (or conduct otherwise outside Parth’s authority) and that there are triable issues of material fact as to whether Parth exercised reasonable diligence.
i. Ultra vires conduct
The Association has not established that Parth’s conduct was ultra vires. Ultra vires conduct is conduct that is beyond the power of the corporation, not an individual director. (See McDermott v. Bear Film Co. (1963) 219 Cal.App.2d 607, 610-611 [“In its true sense the phrase ultra vires describes action which is beyond the purpose or power of the corporation.”]; Sammis v. Stafford (1996) 48 Cal.App.4th 1935, 1942 [“If, however, the director’s act was within the corporate powers, but was performed without authority or in an unauthorized manner, the act is not ultra vires.”].) The Association does not distinguish these authorities, nor does it identify conduct by Parth that went beyond the power of the Association.
However, the Association does cite cases suggesting that noncompliance with governing documents may fall outside the scope of the business judgment rule, at least in certain circumstances. (See Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 374 [282] (Nahrstedt) [finding “courts will uphold decisions made by the governing board of an owners association,” where among other things, they “are consistent with the development’s governing documents”]; Lamden, supra,21 Cal.4th at p. 253 [requiring that association board “exercise[] discretion within the scope of its authority under relevant statutes, covenants and restrictions” in order to merit judicial deference]; Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [accord]; Scheenstra v. California Dairies, Inc. (2013) 213 Cal.App.4th 370, 388 [finding a “board’s decision is not scrutinized under the business judgment rule . . . until after the court determines that the action . . . falls with the discretionary range of action authorized by the contract”].) See also Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1123 (“Even if the Board was acting in good faith . . ., its policy . . . was not in accord with the CC&Rs. . . . The Board’s interpretation of the CC&Rs was inconsistent with the plain meaning of the document and thus not entitled to judicial deference.”).
Parth contends that the business judgment rule protects a director who violates governing documents, as long as the director believes that the actions are in the best interests of the corporation. She relies on Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125 (Biren). Biren, which involved a dispute between a company and a former director, held that the “business judgment rule may protect a director who acts in a mistaken but good faith belief on behalf of the corporation without obtaining the requisite shareholder approval.” The Biren court determined that the director in question was protected by the rule, even though she violated the shareholder agreement. (Id. at pp. 131-132.) However, the court did not suggest that such conduct would always be protected. Rather, the court concluded that the violation “did not by itself make the business judgment rule inapplicable,” explaining that the company failed to prove that the director had “intentionally usurped her authority” or that “her actions were anything more than an honest mistake.” (Id. at p. 137.) The court also noted the trial court’s “finding that [the director] `reasonably relied’ on information she believed to be correct,” observing that this was “tantamount to a finding she acted in good faith.” (Id. at p. 136.) In other words, Biren held that the director’s violation of the governing documents did not render the business judgment rule inapplicable under the circumstances; namely, where the remainder of the business judgment rule requirements were satisfied.
Here, the trial court agreed that there was a triable issue of material fact as to whether Parth breached the governing documents, but concluded that even if she had, this was insufficient to overcome the protection of the business judgment rule. However, the case law is clear that conduct contrary to [283] governing documents may fall outside the business judgment rule. (See, e.g., Nahrstedt, supra, 8 Cal.4th at p. 374.) Even if Biren establishes an exception to this principle where the director has satisfied the remaining elements of the business judgment rule, in this case, triable issues of material fact exist as to other elements of the rule and renderBireninapplicable, at least at this stage. The trial court erred in assuming that the business judgment rule would apply to Parth’s actions that violated the governing documents.
ii. Material issues of fact
Although the trial court properly recognized that a director must act on an informed basis, be reasonably diligent, and exercise care in order to rely on the business judgment rule, the court erred in concluding that the Association failed to demonstrate triable issues of fact with respect to these matters. (See Gaillard, supra, 208 Cal.App.3d at pp. 1271-1272, 1274 [reversing summary judgment due to material issues of fact as to whether further inquiry was warranted].) We conclude that material issues of fact exist as to whether Parth exercised reasonable diligence in connection with the actions at issue.
First, with respect to the roofing repairs, Parth explained how she found Warren Roofing and testified at her deposition that Warren Roofing was licensed. However, during the same line of questioning, she displayed ignorance of the relationship between Warren Roofing and Bonded Roofing and admitted that she had not “investigate[d] anything” pertaining to whether Bonded Roofing was licensed. The Association also established that Parth retained a roofing contractor without any formal bid or contract, that the Board retained Bonded Roofing but paid Warren Roofing, that Warren Roofing may have significantly overcharged the Association for the work performed, and that this work was defective and required repair.[7] This evidence is sufficient to raise an issue as to Parth’s diligence in investigating, retaining, and paying the roofers. (See Affan, supra, 189 Cal.App.4th at pp. 941, 943 [business judgment rule did not apply where, among other things, there was no evidence of a reasonable investigation into sewage work].)[fn. 8] Parth’s reliance on ApRoberts to review invoices does not resolve these issues. (See Gaillard, supra,208 Cal.App.3d at p. 1271 [although the directors could rely upon the recommendations of outside counsel and the [284] compensation committee, triable issues existed as to whether further inquiry was still required under the circumstances].)
Second, the 2007 and 2010 promissory notes, secured by Association assets, similarly raise issues as to whether Parth proceeded on an informed basis. She relies on her belief that she had the authority to take out the loans, her lack of awareness that a member vote was required to encumber the assets of the Association, and that no one advised her that she lacked the authority or that membership approval was required. She also states in her declaration that she and two other Board members authorized her and ApRoberts to sign the 2010 note. However, as the Association points out, the governing documents require member approval for such debt and there is no record of such approval. Parth’s deposition testimony also reflects that she did not know whether she had the authority under the governing documents to sign the loans, and that she made no effort to determine whether she had such authority. Whether Parth exercised sufficient diligence to inform herself of the Association’s requirements pertaining to the loans at issue is a question for the trier of fact. (See Gaillard, supra, 208 Cal.App.3d at p. 1267; id. at p. 1271 [noting triable issue as to whether the “circumstances warranted a thorough review of the . . . agreements”].) Parth “cannot close [her] eyes” to matters as basic as the provisions of the CC&Rs and Bylaws of the Association and at the same time claim that she “exercis[ed] business judgment.” (Id. at p. 1263.)
Third, as to Jesse’s Landscaping, Parth indicated that three Board members, including herself, approved a five-year contract in 2010. However, the Association provided evidence that the governing documents require that a contract with a third party exceeding one year be approved by member vote. In addition, Parth acknowledged at her deposition that she did not know whether she had the authority to sign a five-year contract, and that she had no understanding of what her authority was under the Bylaws. This evidence suggests that Parth may not have understood, nor made any effort to understand, whether the Board was permitted to authorize the Jesse’s Landscaping contract without member approval. As with the loans, Parth’s admitted lack of effort to inform herself of the extent of her authority in this regard is sufficient to establish a triable issue. (See Gaillard, supra, 208 Cal.App.3d at pp. 1263, 1267, 1271.)
Fourth, regarding the PPM termination, Parth explained that PPM’s owner did not want PPM to be the management company for the Association any [285] longer and that the Board subsequently voted to terminate PPM on July 16, 2011. However, the Association’s evidence reflects that the Board had tabled the issue of the termination of PPM on July 9 and that Parth met with and hired Lyttleton Company, apparently without calling a Board meeting to vote on the matter. The timeline of these events is somewhat unclear, including whether Parth hired Lyttleton before the Board voted to terminate PPM, but we will not attempt to resolve such factual issues on summary judgment. Regardless of the timing, the evidence presented as to the matter raises questions as to whether Parth proceeded with reasonable diligence. (See Gaillard, supra, 208 Cal.App.3d at pp. 1271-1272; Affan, supra, 189 Cal.App.4th at pp. 941, 943.)
Finally, the Desert Security contract similarly calls into question Parth’s diligence. Parth offered several explanations for her execution of the contract with Desert Security in January 2011, despite the Board’s decision to consider bids from other companies for security services. Some of her explanations were inconsistent,[fn.9]and the Association’s evidence cast doubt on all of them. With respect to Parth’s stated belief that she had the authority to sign the contract, the Association provided evidence in other contexts (e.g., the promissory notes) that Parth failed to understand the scope of her authority; this same evidence suggests that she made no effort to ascertain what authority she did possess to conduct the business of the Association. The business judgment rule would not extend to such willful ignorance. (See Gaillard, supra, 208 Cal.App.3d at p. 1263.) Parth also indicated that at the time she signed the contract, the Board had tabled the security discussion and had not yet terminated Desert Protection. However, the Association provided evidence that Parth failed to bring the new contract to the attention of the Board or alert the Board to its existence, even after the security discussion had been reopened, thus calling into question Parth’s explanations. This conduct raises serious questions as to Parth’s diligence, particularly given the timing of the relevant events. (Id. at p. 1271 [noting the “nature” and “timing” of the agreements at issue].)
Although the trial court declined to address much of the Association’s evidence, it did discuss the Desert Protection situation. The court stated that the Association disputed the basis for Parth’s belief in her authority to sign the Desert Protection contract by citing the Bylaws, and concluded that this evidence did not controvert Parth’s professed belief. While the Bylaws may [286] not undermine Parth’s belief, together with the Association’s other evidence, they do demonstrate the existence of a triable issue of material fact as to whether Parth’s proceeding on such belief—without keeping the Board informed—showed reasonable diligence under the circumstances.
In sum, the Association produced evidence establishing the existence of triable issues of material fact as to whether Parth acted on an informed basis and with reasonable diligence, precluding summary judgment based on the business judgment rule. The trial court’s erroneous conclusion that “there [was] no evidence that Parth did not use reasonable diligence” reflects a misapplication of the business judgment rule, summary judgment standards, or both. To the extent that the court viewed the Association’s evidence regarding Parth’s diligence as irrelevant, in light of her “belief[] in [her] authority to act and the need to act,” the court failed to apply the reasonable diligence requirement in any meaningful way. Permitting directors to remain ignorant and to rely on their uninformed beliefs to obtain summary judgment would gut the reasonable diligence element of the rule and, quite possibly, incentivize directors to remain ignorant. To the extent that the trial court did consider the Association’s evidence, but found it insufficient to establish a lack of diligence, the court improperly stepped into the role of fact finder and decided the merits of the issue.
In addition, the Association contends that courts treat diligence and good faith as intertwined, citing Biren’s description of the trial court’s finding that the director reasonably relied on information she believed to be correct as “tantamount” to a finding of good faith. (See Biren, supra, 102 Cal.App.4th at p. 136.) Our own research reveals that other courts similarly have considered diligence as part of the good faith inquiry. (See, e.g., Affan, supra, 189 Cal.App.4th at p. 943 [“Nor was there evidence the Association acted `in good faith . . ., because no one testified about the board’sdecisionmaking process. . . . [¶] [I]n Lamden, ample evidence demonstrated the association board engaged in the sort of reasoned decisionmaking that merits judicial deference. There is no such showing in the case before us.”]; see also Desaigoudar v. Meyercord (2003) 108 Cal.App.4th 173, 189 [“[T]he court must look into the procedures employed and determine whether they were adequate or whether they were so inadequate as to suggest fraud or bad faith. That is, `[p]roof . . . that the investigation has been so restricted in scope, so shallow in execution, or otherwise so pro forma or halfhearted as to constitute a pretext or sham, consistent with the principles underlying the application of the business judgment doctrine, would raise questions of good faith or conceivably fraud which would never be shielded by that doctrine.’”].) In light of these [287] authorities, we recognize that there may be a triable issue of material fact as to Parth’s good faith, as well.[fn. 10]
iii. Parth’s contentions
As a preliminary matter, Parth contends that “[v]irtually all of the evidence proffered in opposition to the motion for summary judgment was inadmissible,” but cites only her own evidentiary objections, rather than any ruling by the trial court. She also does not offer any argument regarding the evidence itself, other than to state generally that evidence without foundation is inadmissible (and, with one exception not relevant here, does not identify any specific evidence). We conclude that Parth has forfeited these objections. (Stanley, supra, 10 Cal.4th at p. 793; Del Real v. City of Riverside(2002) 95 Cal.App.4th 761, 768 [“[I]t is counsel’s duty to point out portions of the record that support the position taken on appeal. . . .”]; ibid. [“[A]ny point raised that lacks citation may, in this court’s discretion, be deemed waived.”].)
Turning to Parth’s substantive arguments, we first address her contention that she displayed no bad faith. She relies on cases characterizing bad faith as intentional misconduct, encompassing fraud, conflicts of interest, and intent to serve an outside purpose. (See, e.g., Barnes v. State Farm Mut. Auto. Ins. Co. (1993) 16 Cal.App.4th 365, 379.) However, the Association’s appeal focuses on Parth’s failure to exercise reasonable diligence, so establishing an absence of evidence of intentional misconduct unrelated to diligence does not undermine the Association’s arguments.
Next, Parth suggests that the Association’s concerns with respect to her lack of diligence in securing a roofing contractor sound in negligence, contending that “a director’s conduct or decisions are not judged according to a negligence standard.” (Boldface omitted.) However, as the authorities [288] discussed ante make clear, there is “no conflict” between the business judgment rule and negligence, and application of that rule “presuppose[s] that . . . reasonable diligence [] has in fact been exercised.” (Gaillard, supra, 208 Cal.App.3d at pp. 1263-1264, quoting Burt, supra, 237 Cal.App.2d at pp. 852-853; Affan, supra, 189 Cal.App.4th at p. 941.)
Parth’s reliance on the exculpatory clause of the Association’s CC&Rs is similarly unpersuasive. She contends that even if she exceeded her authority, the “only condition for the stated contractual immunity is that the board members perform their duties in `good faith, and without willful or intentional misconduct.’” However, she fails to address the immediately preceding clause, which requires that the director act “upon the basis of such information as may be possessed by [her].” This language is arguably analogous to the business judgment rule’s reasonable diligence requirement. (Gaillard, supra, 208 Cal.App.3d at pp. 1263-1264.) At minimum, even if the exculpatory provision did not obligate Parth to obtain additional information regarding particular undertakings, it surely contemplated that she would familiarize herself with information already in her possession—such as the governing documents of the Association. Further, both the business judgment rule and the exculpatory clause of the CC&Rs require good faith and, as discussed ante, an absence of diligence may reflect a lack of good faith. Given this overlap, we conclude that at least some of the triable issues of material fact that bar summary judgment with respect to the business judgment rule similarly preclude it as to the exculpatory clause.[fn. 11]
Finally, we address Parth’s contention that the Association’s claim is time barred to the extent that it concerns events that occurred prior to May 22, 2008. Parth contends that there is a four-year statute of limitations for a breach of fiduciary duty claim and that admissible evidence is required to support the claim, but does not explain how these principles would permit her to obtain summary judgment as to a portion of a cause of action. We agree with the Association both that Parth’s attempt to apply the statute of limitations to obtain judgment on a part of its breach of fiduciary duty claim is improper and that the existence of material questions of fact preclude resolution of statute of limitations issues at this juncture. (See McCaskey v. California State Automobile Assn. (2010) 189 Cal.App.4th 947, 975 [“there can be no summary adjudication of less than an entire cause of action. . . . If a cause of action is not shown to be barred in its entirety, no order for summary judgment—or adjudication—can be entered.” [289]]; Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112[“resolution of the statute of limitations issue is normally a question of fact”].)
B. Demurrer
The Association contends that the trial court erroneously granted Parth’s demurrer to its cause of action for breach of governing documents, without leave to amend.
- Governing law
We review a ruling sustaining a demurrer de novo, exercising independent judgment as to whether the complaint states a cause of action as a matter of law. (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115.) “We affirm the judgment if it is correct on any ground stated in the demurrer, regardless of the trial court’s stated reasons.” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 111.) Further, “`[i]f another proper ground for sustaining the demurrer exists, this court will still affirm the demurrer[ ]. . . .’” (Jocer Enterprises, Inc. v. Price(2010) 183 Cal.App.4th 559, 566.)
When a demurrer is sustained without leave to amend, “we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff.” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 (Blank).)
- Application
With respect to the Association’s cause of action for breach of governing documents, the trial court ruled: “The HOA has not alleged that Parth breached any covenant. The only sections of the governing documents referred to in the cross-complaint are bylaws that deal with the Boards [sic] transaction of the Associations [sic] business affairs 7-11. These sections describe how the Board acts. It . . . does not appear that they are covenants between the HOA and individual members that the HOA may sue to enforce.”
First, the Association does not cite only the Bylaws; it also cites the CC&R provision reserving authority over the Association’s affairs to the Board. In any event, we see no reason why the governing document provisions would be unenforceable as to Parth, an owner and Association member who was [290] serving as president and was a member of the Board. (See Civ. Code, § 5975, subd. (a) [“The covenants and restrictions in the declaration shall be enforceable equitable servitudes . . . and bind all owners” and generally “may be enforced by . . . the association”], subd. (b) [“A governing document other than the declaration may be enforced by the association against an owner”]; see also, e.g., Biren, supra, 102 Cal.App.4th at p. 141 [affirming judgment against director for breach of shareholder agreement];Briano v. Rubio(1996) 46 Cal.App.4th 1167, 1172, 1180 [affirming judgment against directors for violation of articles of incorporation].)
Regardless, as Parth argues, the cause of action for breach of governing documents appears to be duplicative of the cause of action for breach of fiduciary duty. This court has recognized this as a basis for sustaining a demurrer. (See Rodrigues v. Campbell Industries (1978) 87 Cal.App.3d 494, 501 [finding demurrer was properly sustained without leave to amend as to cause of action that contained allegations of other causes and “thus add[ed] nothing to the complaint by way of fact or theory of recovery”]; see also Award Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128, 1135 [Second Appellate District, Division Four; demurrer should have been sustained as to duplicative causes of action].)[fn. 12] The Association does not address Parth’s argument or explain how its document claim differs from the fiduciary breach claim. We conclude that the trial court properly sustained the demurrer.
Second, the burden is on the Association to articulate how it could amend its pleading to render it sufficient. (Blank, supra, 39 Cal.3d at p. 318; Goodman v. Kennedy(1976) 18 Cal.3d 335, 349 [“Plaintiff must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.”].) The Association offers no argument on this point and we therefore conclude that it has forfeited the issue. (Stanley, supra, 10 Cal.4th at p. 793.)
IV. DISPOSITION
The order granting summary judgment and judgment are reversed. The ruling sustaining the demurrer to the breach of governing documents cause of [291] action without leave to amend is affirmed. The parties shall bear their own costs on appeal.
HUFFMAN, Acting P. J. and PRAGER, J.,[fn. *] concurs.
[FN. 1] We rely on the facts that the parties set forth in their separate statements in the trial court and the evidence cited therein, as well as other evidence submitted with the parties’ papers below. (Sandell v. Taylor-Listug, Inc. (2010) 188 Cal.App.4th 297, 303, fn. 1.) However, we do not rely on evidence to which objections were sustained. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1176.)
[FN. 2] Although Parth’s statement that she believed that she had been instructed by management to enter into the contract with Desert Protection is in the record, the trial court sustained an objection to her declaration statement that she was told that the contract “needed to be updated and was ready to be signed.”
[FN. 3] The trial court also stated that the “business judgment rule standard is one of gross negligence—i.e., failure to exercise even slight care,” citing Katz v. Chevron (1994) 22 Cal.App.4th 1352. The court did not explain how this standard relates to the components of the business judgment rule. The parties likewise cite the concept without such analysis. Given that Katz relies on Delaware law for this standard and the issues before us can be resolved according to the standard of reasonable diligence under California law, we will not focus on gross negligence in our analysis. However, the facts that raise a triable issue as to Parth’s diligence, discussed post, would also raise an issue as to whether she exercised “even slight care.”
[FN. 4] Contrary to Parth’s claim, a summary judgment is not “entitled to a presumption of correctness.” The cases on which she relies simply confirm the general principle that an appellant must establish error on appeal. (See, e.g., Denham v. The Superior Court of Los Angeles County (Marsh & Kidder) (1970) 2 Cal.3d 557, 564 [“[E]rror must be affirmatively shown.”]; Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6 [“Although our review of a summary judgment is de novo, it is limited to issues which have been adequately raised and supported in [appellants’] brief.”].)
[FN. 5] All further statutory references are to the Corporations Code unless otherwise indicated.
[FN. 6] (See Everest, supra, 114 Cal.App.4th at p. 430 [finding that triable issues of fact as to the existence of improper motives and a conflict of interest “preclude[d] summary judgment based on the business judgment rule”]; Will v. Engebretson & Co. (1989) 213 Cal.App.3d 1033, 1044 [“Will submitted evidence that . . . the committee members never reviewed the complaint, the financial records of the corporation, or made any investigation into the matter at all. Company, of course, disputes these allegations. But it is precisely because the issues are disputed that it was error for the trial court to resolve the issues. . . .”].)
[FN. 7] There also was no evidence of a written warranty for the roofing work. Layton testified at deposition that he provided a warranty, but did not indicate that it was written, and Parth contends only that she obtained a verbal warranty.
[FN. 8] The Association contends that both Warren Roofing and Bonded Roofing were unlicensed at the time the roofing work was done, while Parth maintains that Warren Roofing was licensed. We need not address this dispute. Although the existence of facts that the exercise of proper diligence might have disclosed (such as license status) may be relevant to whether Parth exhibited reasonable diligence (see Berg & Berg Enterprises, LLC v. Boyle (2009) 178 Cal.App.4th 1020, 1046), we conclude that her admission that she “did not investigate anything,” in the context of a major repair project, is sufficient to raise a triable issue.
[FN. 9] For example, Parth indicated both that she believed nonwritten contracts would be automatically renewed and that she was “merely updating” the contract, without explaining why a new or updated contract would be necessary if the existing contract would automatically be renewed.
[FN. 10] The Association also appears to challenge several other actions on the part of Parth, but fails to support its challenge with argument and/or specific authority. These actions include Parth’s execution of the Board member Code of Conduct, certain purported violations of the Common Interest Open Meeting Act and Davis-Stirling Common Interest Development Act, and various facts pertaining to bad faith. We deem these matters forfeited. (People v. Stanley (1995) 10 Cal.4th 764, 793 (Stanley) [it is not the reviewing court’s role to “construct a theory” for appellant: “[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. . . .”].) In addition, because we conclude that the Association has established the existence of triable issues of material fact as to both the business judgment rule and the exculpatory provision of the CC&Rs, see discussion post, we need not reach its arguments under section 5047.5 and Civil Code section 5800 or its argument that Parth is estopped from claiming ignorance of the governing documents.
[FN. 11] We reject Parth’s claim that the Association waived the exculpatory clause issue. Although the Association did not address the issue until its reply brief, it takes the position on reply that the exculpatory clause is “a recitation of the business judgment rule.” Parth, meanwhile, relied on the same undisputed facts to support both issues. Under the circumstances, we see no reason to preclude the Association from relying on its business judgment rule arguments and evidence for the exculpatory clause issue.
[FN. 12] But see Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 890(Sixth Appellate District) (finding that duplication is not grounds for demurrer and that a motion to strike is the proper way to address duplicative material).
[FN. *] Judge of the San Diego Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
Related Links
“Business Judgment Rule Does Not Protect the Willfully Ignorant” – Published on HOA Lawyer Blog (08/16)
Alpert v. Villa Romano Homeowners Association
[Maintenance; Duty of Care] HOA’s responsibility with respect to maintenance and repair of sidewalks adjacent to HOA’s property.
Law Offices of Steven M. Klugman and Steven M. Klugman, Los Angeles, for Plaintiff and Appellant.
Early, Maslach, Price & Baukol and James Grafton Randall, Los Angeles, for Defendant and Respondent,
GOODMAN, J.[FN.*]
Ann Alpert (Alpert) appeals from the judgment of nonsuit entered in favor of respondent Villa Romano Homeowners Association (VRHA) at the close of Alpert’s case-in-chief. Alpert’s complaint alleged that she suffered severe injuries when she tripped and fell on the upturned and broken sidewalk adjacent to the condominium complex managed by VRHA.[FN.1] In this appeal [368] Alpert asks that we determine if the owner and possessor of property owes a duty to warn or protect pedestrians from allegedly dangerous conditions known to be present. We conclude that there is such a duty and that the trial court erred in granting the defense motion for nonsuit made at the close of Alpert’s case-in-chief.
FACTUAL AND PROCEDURAL HISTORY
In the late morning of July 27, 1992, Alpert, then 69 and in good health, took her four-year-old dog, BJ, a poodle weighing approximately eight pounds, for a walk near her home in Marina del Rey. She had BJ on a leash. Alpert walked her dog several times a day, but had never fallen before while walking him. This day, on the way home, she passed in front of the VRHA condominium property (the property), which is near the condominium complex in which she resided. The weather was dry and clear; the summer sun was overhead. Alpert’s walk ended when one of her feet came in contact with an upturned, jagged piece of sidewalk, causing her to lose her balance and fall, face first, to the sidewalk. After her fall, she noticed that there was grass growing in this break in the sidewalk.
The fall knocked the wind out of her. In the fall, Alpert fractured her right wrist, fractured and lacerated her left knee, broke her fourth and fifth ribs, and sustained a large hematoma in the area of her right breast. She sought medical attention for her injuries, eventually having surgery to repair her left knee. During her recovery from the fall, she contracted pneumonia. At the time of trial, she was unable to walk more than a block without pain, and was using a wheelchair to go longer distances.
Luz Enriquez (Enriquez) had been the gardener for VRHA for 20 years. He worked at the property three times each week. In addition to performing gardening services in the area of the property between the condominium buildings and the sidewalk, including the lawn, which he routinely mowed, he did similar work in the area between the sidewalk and the curb. He routinely removed leaves and other debris from the sidewalk, including removing such material that accumulated from time to time in the crack at the location of the upturned sidewalk. He also watered the vegetation on both sides of the sidewalk, utilizing the sprinklers which VRHA had installed in both areas. Enriquez was aware of the break in the sidewalk and recalled that it had been there for a few years prior to the date of Alpert’s fall.
Bernardo Segala had been hired by VRHA to trim trees on its property. During the year 1992 and prior to Alpert’s fall, at the request of VRHA he trimmed trees on the lawn between the sidewalk and the condominium property and on the portion of the lawn between the sidewalk and the street.
John Pettijohn, who had expertise in concrete repairs, measured the difference in elevation caused by the break in the sidewalk at the scene of the fall at between three-fourths of an inch and one inch.
Elihu Crane, a resident of VRHA, was a member of its board of directors from 1990 through April 1992, and president of its board of directors for part of that time. During that two-year period there was no [369] person or committee of the board which had responsibility for inspecting the sidewalk in front of the property. VRHA’s view was that the City of Los Angeles (the city) controlled the sidewalks and all VRHA needed to do was to keep the sidewalk clean.
Judith Crane was in charge of the gardening committee of the VRHA. She inspected the property shortly after becoming chairman of that committee in the summer of 1992. She had been aware for some time of the existence of cracks in the sidewalk in the area in which Alpert fell and of other cracks in the sidewalk which ran along the property.
Dr. Stephen Wexler, a licensed civil engineer and licensed general contractor, testified as an expert witness at Alpert’s request. Dr. Wexler had experience in building concrete structures, including sidewalks, and in landscaping for the projects he built. Dr. Wexler also had expertise in determining the cause of sidewalk damage from root structures and root growth and expertise regarding human factors in relation to premises liability. Dr. Wexler inspected the scene of the fall on several occasions. He observed that there was mature vegetation on the property, including pine trees (some of which were 100 feet tall) between the sidewalk and buildings on the property, and bottlebrush trees in the area between the sidewalk and the street curb. In his opinion, the root of a pine tree had caused the sidewalk to be uplifted and to break. This opinion was confirmed by his observation of 15 to 20 sidewalk cracks in the area, of which seven or eight had caused serious distortions in the sidewalk in the form of uplifted panels of concrete or of cracks in panels which had been uplifted. There was a second such root-caused cracking and tilting within 15 feet of the scene of Alpert’s fall. He had observed that roots of pine trees can grow in length to be as much as four times the height of the tree itself. He explained that tree roots seek out the area under the sidewalk because water tends to collect there. He noted that the sprinklers at the property water the sidewalk as well as the lawn and other vegetation.
In Dr. Wexler’s opinion, the sidewalk defect at the location of Alpert’s fall had existed for years prior to the fall and had been caused by the progressive growth of a subterranean tree root under the sidewalk. He noted that the area of greatest angular uplift in the sidewalk was adjacent to the lawn, indicating in his opinion that the root that caused the uplift had come from a tree growing on the lawn as the root sought moisture. He explained that roots taper down in size the farther from the tree they grow. It was also his opinion that the growth of the trees and their root systems had been enhanced by the fertilizing, watering, and trimming of the trees, which VRHA had done on its property. Further, the roots remained near the surface due to the very hard-packed soil in the area, thus increasing the likelihood of cracking the sidewalk.
On cross-examination, Dr. Wexler testified that it was unlikely that the root that had caused the sidewalk at the point of Alpert’s fall to be upturned and to break had come from a tree in the area between the sidewalk and the street as roots of the bottlebrush trees planted in that area were smaller than those of the pine trees. Rather, it was his opinion that the root which had caused the sidewalk defect had come from a tree growing on the main lawn.
At the conclusion of Alpert’s case-in-chief, VRHA made a written motion for nonsuit. During argument on that motion, [370] Alpert’s motion for leave to reopen was denied. The court granted the motion for nonsuit, after which Alpert filed a timely appeal.[FN.2]
CONTENTIONS ON APPEAL
Alpert contends the trial court erred (1) in concluding that VRHA, as owner of the property, owed Alpert no duty of care, (2) in refusing to permit Alpert to reopen to cure any defect that resulted in the nonsuit, (3) in refusing to permit Alpert to make offers of proof of certain evidentiary matters, and (4) by excluding evidence of knowledge of the condition of the sidewalk prior to the fall on the part of the board of directors of VRHA.[FN.3]
DISCUSSION
- Standard of review.
In reviewing a judgment entered upon a grant of a motion for nonsuit after the close of the plaintiffs case-in-chief (Code Civ. Proc, § 581c),[FN.4] the appellate court reviews the entire record of the trial court (Kidron v. Movie Acquisition Corp. (1995) 40 Cal.App.4th 1571, 1581, 47 Cal. Rptr.2d 752) and views the evidence in the light most favorable to appellant. (Freeman v. Lind (1986) 181 Cal.App.3d 791, 799, 226 Cal.Rptr. 515.) We do not weigh the evidence or consider the credibility of the witnesses who have testified; rather we are required to accept as true the evidence most favorable to the plaintiff, disregarding conflicting evidence. (La-Monte v. Sanwa Bank California (1996) 45 Cal.App.4th 509, 517.) “`”The judgment of the trial court cannot be sustained unless interpreting the evidence most favorably to plaintiffs case and most strongly against the defendant and resolving all presumptions, inferences and doubts in favor of the plaintiff a judgment for the defendant is required as a matter of law.”‘”[FN.5] (Freeman v. Lind, supra, 181 Cal.App.3d at p. 799, 226 Cal.Rptr. 515.)
This healthy skepticism of removing factual questions from juries is inextricably bound to the California Constitution, which preserves “inviolate” the right to trial by jury.[FN.6]
[371] 2. The trial court’s ruling.
At the conclusion of Alpert’s case-in-chief, VRHA presented a written motion for nonsuit to the court and counsel.[FN.7] Such a motion has the effect of a demurrer to the evidence: It concedes the truth of the facts proved and contends that those facts are not sufficient as a matter of law to sustain the plaintiffs case. (See Lussier v. San Lorenzo Valley Water Dist. (1988) 206 Cal.App.3d 92, 98, 253 Cal.Rptr. 470.) A judgment of nonsuit is an involuntary dismissal (Costa v. Regents of University of Cal. (1951) 103 Cal.App.2d 491, 494, 103 Cal.App.2d 491) on a motion by a defendant who contends the plaintiff is unable to prove its case at trial (Doria v. International Union (1961) 196 Cal. App.2d 22, 32, 16 Cal.Rptr. 429). In reviewing a judgment of nonsuit, we look at the entire record. (Kidron v. Movie Acquisition Corp., supra, 40 Cal.App.4th at p. 1581, 47 Cal.Rptr.2d 752.) We consider grounds which were both advanced by the moving party and ruled on by the trial court.[FN.8]
[372] The record in this case clearly shows that the trial court weighed the evidence and erred as to the applicable law. Thus, the trial court stated: “Dr. Wexler testified that he was not sure where the roots came from which caused the elevation…. [A]nd the law seems to indicate that the ambit of liability does not include the abutting land owners but includes the city for — the city owing the duty to the third person….”
This selection from the record by the trial court was inapposite. The record reveals substantial testimony by Alpert’s expert witness different from that relied on by the trial court and quoted above; testimony which, when viewed in accordance with principles applicable to motions for nonsuit, provides factual support for Alpert’s legal contentions substantial enough to withstand such a motion. Thus, Dr. Wexler testified that the cause of the uplifted and cracked sidewalk was the root of a tree growing on VRHA’s property. While he would not rule out the possibility that the particular root came from another location as he had not dug up the lawn all the way to the particular suspected, “mature” pine tree, it was his expert opinion that a tree growing on VRHA’s lawn was the source of the destructive root. He also testified that the trees planted in the area between the sidewalk and the street were of a different type and had characteristically smaller roots. Other witnesses testified to the size of the hazard caused by the uplifted piece of sidewalk which the tree root had created and to VRHA’s prior notice of the hazardous condition of the sidewalk. The trial court did not view the evidence adduced by plaintiff in the manner required when analyzing evidence in ruling on a motion for nonsuit made at the conclusion of a plaintiffs case-in-chief. (Freeman v. Lind, supra, 181 Cal.App.3d at p. 799, 226 Cal.Rptr. 515.)
The other aspect of the trial court’s ruling was its conclusion that VRHA did not owe a duty of care to Alpert. As we next discuss, this ruling was also error.
- Whether VRHA owed a duty to pedestrians.
The fundamental legal issue raised by the judgment of nonsuit is whether VRHA as landowner and party in possession and control owed a duty to pedestrians such as Alpert to either warn them of a dangerous condition of the premises or repair it. We will conclude that such a duty was owed under the circumstances present in this case.[FN.9]
a. Authorities prior to Alcaraz v. Vece.
The Legislature and the courts have addressed the responsibilities, if any, of possessors of land abutting sidewalks. We begin our analysis with Civil Code section 1714, subdivision (a), which makes a possessor of land subject to the general negligence standard of that section.
Civil Code section 1714, subdivision (a) provides:
“Every one is responsible, not only for the result of his willful acts, but also for an [373] injury occasioned to another by his want of ordinary care or skill in the management of his property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury on himself.”
It is appropriate to depart from this standard only when there are clear public policy reasons for doing so. In making that determination, a court must weigh the following factors: (1) the foreseeability of harm to the plaintiff, (2) the degree of certainty that the plaintiff suffered injury, (3) the proximity of the connection between the defendant’s conduct and the injury sustained, (4) the moral blame attached to the defendant’s conduct, (5) the policy of preventing future harm, (6) the extent of the burden to the defendant and consequences to the community from imposing a duty to exercise care with resulting liability for breach, and (7) the availability, cost, and prevalence of insurance for the risk involved. (Rowland v. Christian, supra, 69 Cal.2d at pp. 112 — 113, 70 Cal.Rptr. 97, 443 P.2d 561.)
The proper test to be applied to the liability of the possessor of land in accordance with section 1714 of the Civil Code is whether in the management of his property he has acted as a reasonable man in view of the probability of injury to others….” (Rowland v. Christian, supra, 69 Cal.2d at p. 119, 70 Cal.Rptr. 97, 443 P.2d 561.)
In addition to Civil Code section 1714, subdivision (a), the Legislature has enacted Streets and Highways Code section 5610, which provides:
“The owners of lots or portions of lots fronting on any portion of a public street or place when that street or place is improved or if and when the area between the property line of the adjacent property and the street line is maintained as a park or parking strip, shall maintain any sidewalk in such condition that the sidewalk will not endanger persons or property and maintain it in a condition which will not interfere with the public convenience in the use of those works or areas save and except as to those conditions created or maintained in, upon, along, or in connection with such sidewalk by any person other than the owner, under and by virtue of any permit or right granted to him by law or by the city authorities in charge thereof, and such persons shall be under a like duty in relation thereto.”
This statute places on the abutting property owner the duty to maintain the sidewalk.[FN.10] This statutory duty has been held not to impose, by itself, a duty of care upon the abutting landowner for the safety of persons using the sidewalk, but rather a duty owed to the city.
Division Seven of this court discussed the relationship of Streets and Highway Code section 5610 to ordinary negligence principles in the course of its opinion in Jones v. Deeter (1984) 152 Cal. App.3d 798, 199 Cal.Rptr. 825 (Jones). There, plaintiff Jones tripped on a break in a sidewalk, allegedly caused by the roots [374] of a tree growing in a parkway maintained by the owner of the adjacent property. The court affirmed the trial court’s grant of summary judgment to the property owner, holding that Streets and Highways Code section 5610 was not the basis of a duty of care to pedestrians unless the sidewalk defect was the result of the owner’s negligence. (Jones, supra, at p. 803, 199 Cal.Rptr. 825.)[FN.11] Under the facts of Jones, any dangerous condition resulting from the trees was attributable to the city as the city had planted and maintained the trees, and the parkway had been formally dedicated to the city by its owner. The court pointed out that the “Sidewalk Accident Decision” doctrine had been developed to distinguish those cases in which the owner of the adjacent property is not to be held liable in tort to users of the sidewalk unless the owner creates the condition that is a cause of the injury. (Ibid.) In Jones, the owner was not held to have a duty to the pedestrian because the city performed the maintenance of the area of the plaintiffs fall.
The Jones court was careful to distinguish the factual situation there presented — in which the offending trees were owned and maintained by the City on a dedicated parkway — from the facts of Moeller v. Fleming (1982) 136 Cal.App.3d 241, 186 Cal.Rptr. 24 (Moeller), in which that court, in reversing a grant of summary judgment, held that an abutting property owner could be held liable if the dangerous condition in a sidewalk had been caused by the roots of a tree owned by that landowner with his knowledge of that condition. (Id. at p. 245, 186 Cal. Rptr. 24.) In Moeller, the offending roots came from a tree on the defendant’s property. In distinguishing Moeller in Jones, Division Seven of this court stated: “This case turns on this distinction.” (Jones, supra, 152 Cal.App.3d at p. 804, 199 Cal. Rptr. 825.)
In Williams v. Foster (1989) 216 Cal. App.3d 510, 265 Cal.Rptr. 15 (Williams), the Court of Appeal reversed a jury verdict in favor of a pedestrian who had been injured when he fell on a public sidewalk which had an uneven surface caused by the roots of a tree planted in a parkway in front of the property owner’s residence. The defendants had moved for nonsuit, which motion the trial court had denied. In reversing the subsequent verdict and ordering that the trial court enter a judgment of nonsuit, the Williams court held that Streets & Highways Code section 5610 was controlling, viz., that the statutory duty placed on adjacent landowners to maintain and repair sidewalks was owed solely to the city and that that statute does not impose liability for injuries incurred by reason of a defect in the sidewalk. (216 Cal.App.3d at p. 521, 265 Cal. Rptr. 15.)
The Williams court did recognize the holding of Sprecher v. Adamson Companies(1981) 30 Cal.3d 358, 178 Cal.Rptr. 783, 636 P.2d 1121 (Sprecher), that a landowner may be held liable for negligent [375] failure to correct or control a defect[FN.12] which results in injury to neighboring property. In so holding, our Supreme Court repudiated the common law rule of nonliability for natural conditions of land and held that a possessor’s liability would be determined under ordinary negligence principles. (Williams, supra, 216 Cal. App.3d at p. 519, 265 Cal.Rptr. 15.) In the Williams court’s view, the general negligence liability analysis of Sprecher was not appropriate in the circumstances there presented because the abutting owner in Williams did not own or possess an easement over the area in which the offending roots grew (or other cause arose). (Id. at pp. 520, 521, 265 Cal.Rptr. 15.)
Williams sought to distinguish Jones, criticizing it in the following language: “We fail to see any legal foundation for [the approach that a particular abutting owner could be held liable for failing to maintain the public sidewalk or parkway where abutting owners as a class rather than a city historically had performed sidewalk maintenance] if it is applied to an abutting owner who has not undertaken such maintenance in the absence of a statute or ordinance.” (Williams, supra, 216 Cal.App.3d at p. 521, 265 Cal.Rptr. 15.)
The Williams court did recognize, however, that “[a] possessor or owner of premises is under a duty to others by virtue of that possession or ownership to act reasonably to keep the premises safe and prevent persons from being injured thereby. (See Rowland v. Christian (1968) 69 Cal.2d 108, 111-119, 70 Cal.Rptr. 97, 443 P.2d 561.) Thus, where a particular abutter does not possess or own the street easement, and does not undertake maintenance of it, we see no legal basis for imposing liability for failure to properly maintain the sidewalk or planting strip in the absence of statute or ordinance.” (Williams, supra, 216 Cal.App.3d at p. 521, 265 Cal.Rptr. 15.)[FN.13]
Of particular importance to the Williams court was the absence of any evidence that Foster or his predecessor in interest had planted the trees, or that those trees had caused the sidewalk defect (Williams, supra, 216 Cal.App.3d at pp. 522-523, 265 Cal.Rptr. 15.) Thus, there was no factual basis in Williams to consider or apply the duty analysis and the principles of Rowland v. Christian, supra, 69 Cal.2d. at p. 119, 70 Cal.Rptr. 97, 443 P.2d 56
b. Impact of Alcaraz v. Vece.
Prior to trial in the instant case our Supreme Court had occasion to apply the principles of Rowland v. Christian, supra, 69 Cal.2d 108, 70 Cal.Rptr. 97, 443 P.2d 561, in a situation analogous in many respects to the instant case. In Alcaraz v. Vece (1997) 14 Cal.4th 1149, 60 Cal.Rptr.2d 448, 929 P.2d 1239 (Alcaraz), Alcaraz sued his landlord, the owner of the apartment building in which he resided, for injuries sustained when Alcaraz stepped into an open utility meter box located in the city-owned lawn next to the sidewalk in front of that residence. In affirming the Court of Appeal’s reversal of the grant of summary judgment to the property owner, our Supreme Court held that there was a triable [376] issue of fact as to whether the property owner had exercised control over the area in which the utility box was located even though that area was owned by the city. In our Supreme Court’s view, if the property owner did exercise such control, then it had a duty to warn Alcaraz[FN.14] of the danger, or protect him from that danger.
Citing its decision in Rowland v. Christian, the Supreme Court stated: “`The proper test to be applied to the liability of the possessor of land … is whether in the management of his property [the possessor] has acted as a reasonable man in view of the probability of injury to others….’ (Rowland v. Christian (1968) 69 Cal.2d 108, 119 [70 Cal.Rptr. 97, 443 P.2d 561].)” (Alcaraz, supra, 14 Cal.4th at p. 1156, 60 Cal.Rptr.2d 448, 929 P.2d 1239.)
The court further explained: “This duty to maintain land in one’s possession in a reasonably safe condition exists even where the dangerous condition on the land is caused by an instrumentality that the landowner does not own or control.” (Alcaraz, supra, 14 Cal.4th at p. 1156, 60 Cal.Rptr.2d 448, 929 P.2d 1239.)
We distill from our Supreme Court’s holding in Alcaraz supra, that a landowner or possessor of land has a duty to take reasonable measures to protect persons from dangerous conditions on adjoining land when the landowner or possessor exercises possession or control over that adjacent land. The scope of this duty is to be determined under principles enunciated in Rowland v. Christian, supra. “The proper test to be applied to the liability of the possessor of land … is whether in the management of his property he has acted as a reasonable man in view of the probability of injury to others….” (69 Cal.2d at p. 119, 70 Cal.Rptr. 97, 443 P.2d 561.)
c. Indicia of control over the land.
The facts of this case reveal that VRHA had planted and maintained all of the trees and vegetation in the area, on both sides of the sidewalk, had installed sprinklers on both sides of that walkway, and watered and trimmed the trees which grew the roots which caused the sidewalk to be uplifted and crack, presenting the danger which befell Alpert.[FN.15] Further, VRHA had known for approximately two years prior to Alpert’s fall of the condition of the sidewalk at the location of the fall and elsewhere along that path.
Because the area of the injury in Alcaraz was owned by the city and not by the defendant, our Supreme Court was required to consider whether a possessor of land could be held liable under tort principles. Concluding in the affirmative, the court relied on principles enunciated in Rowland v. Christian, supra, 69 Cal.2d at p. 119, 70 Cal.Rptr. 97, 443 P.2d 561: The relevant question is not “mere ownership,” but whether the possessor has maintained the property in a reasonably safe condition. (Accord, Alcaraz, supra, 14 Cal.4th at p. 1156, 60 Cal.Rptr.2d 448, 929 P.2d 1239.)
[377] In the instant case, the party which had done the things just enumerated and which had prior knowledge of the resulting dangerous condition was in possessor and control of the premises, including but not limited to the sidewalk on which Alpert fell.
d. Application of Alcaraz and other cases.
VRHA contends that Jones does not allow for a duty to be placed on an adjacent landowner to repair or warn under the circumstances presented in this case. VRHA’s reliance on Jones is misplaced. As stated in Jones: “In settings where the abutting owners have planted the trees or have habitually trimmed or cared for them, these abutting owners have the duty to maintain the trees in a safe condition toward pedestrians.” (Jones, supra, 152 Cal.App.3d at p. 805, 199 Cal.Rptr. 825.) The facts of the instant case, unlike those of Jones, show the substantial activities — and responsibility — of the abutting landowner.
Similarly, VRHA’s reliance on Contreras v. Anderson (1997) 59 Cal.App.4th 188, 69 Cal.Rptr.2d 69 (Contreras), is misplaced. In Contreras, the plaintiff slipped on an improperly sloped brick path which led from the street curb to the sidewalk in the front of the defendant homeowners’ residence. The area of the fall was owned by the city and separated from the sidewalk by a five-foot high wooden fence. (Id at p. 192,69 Cal.Rptr.2d 69.) In the course of its de novo review of the summary judgment granted to defendants, the court analyzed Alcaraz, noting that while the defendant inAlcaraz exercised control over the parkway in which the fall had occurred, by contrast, the defendants in Contreras did not own, or have legal possession of the area of the fall (Contreras, supra, at p. 197, 69 Cal.Rptr.2d 69). The Contreras court described the difference: “The city-owned strip [in Alcaraz ] … was contiguous with and indistinguishable from the rest of the defendant’s lawn…. [T]he evidence showed the defendants maintained the entire lawn from the defendants’ property line to the sidewalk, including that portion of the lawn located within the city-owned strip of land, and that, subsequent to the plaintiffs alleged injury, defendants constructed a fence that bordered the sidewalk and enclosed the entire lawn in front of their property, including the two-foot-wide strip owned by the city.” In addition, the Alcaraz court found that the defendants had actual notice of the defect. (Contreras, supra, at p. 197, 69 Cal.Rptr.2d 69.)
The Contreras court characterized the holding in Alcaraz as follows: “The Alcarazcourt concluded that such evidence was ‘sufficient to raise a triable issue of fact as to whether defendants exercised control over the strip of land … and thus owed a duty of care to protect or warn plaintiff….’ [¶] Nevertheless, it is clear from Alcarazthat simple maintenance of an adjoining strip of land owned by another does not constitute an exercise of control over that property.” (Contreras, supra, 59 Cal.App.4th at p. 198, 69 Cal.Rptr.2d 69.) The Contreras court focused also on the fact that the defendants in Alcaraz had constructed a fence around the area. This act “went beyond simple neighborly maintenance and, thus, was sufficient to raise a triable issue of fact as to control. [Citation.]” (Id at p. 199, 69 Cal.Rptr.2d 69.)
By contrast, in Contreras, there “is no such `dramatic assertion of a right normally associated with ownership or … possession’ of the land….” (Id at p. 200, 69 Cal.Rptr.2d 69.) Finally, the Contreras [378] court focused on the fact that the fence in that case had been constructed by the city and that there was no evidence the defendants had knowledge of the hazard. (Id. at p. 201, 69 Cal.Rptr.2d 69.)
The facts of the instant case are substantially different from those presented inContreras. In Contreras, the court found that the adjacent owner had neither possession of, nor control over, the land on which the dangerous condition existed. In the instant case, the adjoining land was owned by VRHA which exercised control over the sidewalk and the area between the sidewalk and the curb. VRHA installed sprinklers, and planted and maintained the trees which Alpert’s expert testified caused the dangerous condition in the sidewalk. Further, VRHA had been aware of the condition of the sidewalk for a substantial period of time prior to the fall (and was in the process of discussing repairs when Alpert fell). In short, there was enough evidence to overcome the motion for nonsuit.[FN.16]
- Denial of the request to reopen.
When the trial court indicated it was going to grant the nonsuit, counsel for plaintiff sought leave to reopen. The trial court denied that request.
Alpert’s motion to reopen was timely under the circumstances. Although it was not made the instant the motion for nonsuit was served, it was made in the course of the discussion with the court and the argument of counsel that followed the filing of that motion. In addition, Alpert had previously asked for opportunities to make offers of proof on matters which were relevant to the issues presented in the motion for nonsuit and had been told by the court time would be made available later for such offers. Those requests related to evidence of knowledge by VRHA of the existence of the sidewalk defects at least a month prior to Alpert’s fall. That time never came.
The denial of a request to reopen which is accompanied by an offer of proof of the evidence that will cure the deficiency is reversible error. (Consolidated World Investments, Inc. v. Lido Preferred Ltd. (1992) 9 Cal.App.4th 373, 382, 11 Cal. Rptr.2d 524; Eatwell v. Beck, supra, 41 Cal.2d at pp. 133-134, 257 P.2d 643[plaintiffs, who had mistakenly relied on former law regarding damages, were improperly denied leave to introduce evidence to satisfy the current rule].)
The right to present further evidence is waived unless the plaintiff both requests leave to reopen and makes an offer of proof, describing the evidence and explaining how it would cure the deficiencies. (Consolidated World Investments, Inc., v. Lido Preferred Ltd., supra, 9 Cal. App.4th at p. 382, 11 Cal.Rptr.2d 524.) In the instant case, Alpert complied with the rule to the extent possible.
It is important to recognize, however, that even if Alpert had been granted [379] leave to reopen and introduce all of the evidence we have discussed, the trial court would likely still have granted the nonsuit as its legal analysis would have remained unchanged. There does not appear to have been anything in the evidence referenced in the offers of proof which would have changed the legal theory upon which the trial court granted the judgment of nonsuit. On retrial, it appears that the previously excluded evidence may be probative and relevant to the issues in the case.
- The trivial defect ruling.
One of the bases of VRHA’s written motion for nonsuit was that the defect in the sidewalk was trivial and thus it was not foreseeable that harm would come to anyone. In its reply brief, VRHA asserts that the trial court in fact rejected VRHA’s argument that the defect was trivial. Because VRHA, in effect, has conceded that the trial court rejected this argument, we need not consider it.[FN.17]
- Causation
The final ground for the motion for nonsuit was that Alpert had not established that any defect was caused by a root from VRHA’s property. As we have discussed at length, ante, in reviewing a judgment of nonsuit we view the evidence in the light most favorable to the plaintiff and accept as credible the testimony of the plaintiffs witnesses. (Kidron v. Movie Acquisition Corp., supra, 40 Cal.App.4th at p. 1581, 47 Cal.Rptr.2d 752; LaMonte v. Sanwa Bank California, supra, 45 Cal.App.4th at p. 517, 52 Cal.Rptr.2d 861.) Alpert’s expert clearly stated his opinion that the break in the sidewalk was the result of the growth under the sidewalk of a root of one of the pine trees planted on VRHA’s lawn and nurtured by VRHA. For purpose of ruling on a judgment of nonsuit, there was substantial evidence of causation. VRHA’s causation argument is without merit.
- Exclusion of evidence of prior knowledge of the condition of the sidewalk contained in the minutes of meetings of VRHA’s board of directors.
There is an evidentiary contention of Alpert which is appropriately resolved on this appeal. Alpert contends the trial court erred in refusing to permit questioning of VRHA board of director and committee members about a discussion at VRHA’s November 1997 board of directors’ meeting. The trial court sustained [380] VRHA’s objections to such questions and to Alpert’s attempt to gain admission of the minutes of that meeting of VRHA’s board of directors. The basis for the objection was that admission of such evidence would violate the subsequent act proscription codified in Evidence Code section 1151. We will determine that the evidence should have been admitted.
Alpert sought admission of the November minutes while questioning the former president of VRHA’s board of directors, Ehihu Crane, about that meeting. During that questioning, Alpert sought to inquire concerning a discussion of bids to repair sidewalk “bumps.” Alpert was specifically interested in references in that discussion and in the minutes of that meeting to the fact that there had been a discussion of the condition of the sidewalk and the need to repair it at a board of directors’ meeting in June of the same year, prior to Alpert’s fall.[FN.18] The trial court sustained objections to introduction of this evidence.
Alpert seeks to overturn those rulings, arguing the evidence is probative of the facts that the sidewalk defect was known to VRHA prior to the fall, the defect was not trivial, its repair was feasible, the defect was caused by tree roots, and VRHA was in control of the cause of the defect as well as of its repair. In arguing that the trial court’s ruling was correct, VRHA contended that the evidence would relate to remedial steps taken after the fall, and is not probative on the points argued by Alpert.
In Alcaraz, supra, 14 Cal.4th 1149, 60 Cal.Rptr.2d 448, 929 P.2d 1239, the defendants had objected in the trial court to admission of evidence that they had maintained the area of that fall and that they had built a fence around the parkway where the fall had occurred subsequent to that incident. In making this objection, theAlcaraz defendants argued that the evidence must be excluded under the authority of Evidence Code section 1151 which precludes introduction of evidence of subsequent remedial conduct.[FN.19] In its ruling granting summary judgment to the defense, that trial court had sustained defendants’ objections in this regard.
[381] The Supreme Court expressly rejected these evidentiary rulings, stating, “This evidence [relating to maintenance of the lawn on city-owned property and subsequent construction of a fence in that area] was highly relevant regarding whether defendants exercised control over the strip of land owned by the city.” (Alcaraz, supra, 14 Cal.4th at p. 1166, 60 Cal.Rptr.2d 448, 929 P.2d 1239.)
“[W]hether defendants exercised control over the strip of land owned by the city on which the meter box was located is a `disputed fact that is of consequence to the determination of the action.’ [Citation.] Indeed, if defendants exercised control over this strip of land, it appears clear they owed a duty to protect or warn plaintiff.” (Alcaraz, supra, 14 Cal.4th at p. 1167, 60 Cal.Rptr.2d 448, 929 P.2d 1239.)
In rejecting the argument that admission of evidence that the defendants later constructed a fence around the area of the fall violated Evidence Code section 1151, the court stated: “This statute does not apply, however, because evidence regarding construction of the fence was admitted, not to prove negligence, but to demonstrate that defendants exercised control over the strip of land owned by the city. As we stated in Ault v. International Harvester Co. (1974) 13 Cal.3d 113, 118, 117 Cal.Rptr. 812, 528 P.2d 1148, `Section 1151 by its own terms excludes evidence of subsequent remedial or precautionary measures only when such evidence is offered to prove negligence or culpable conduct’ (Italics added; see also Fed. Rules Evid., rule 407, 28 U.S.C., which employs language nearly identical to Evidence Code section 1151 and then explains: `This rule does not require the exclusion of evidence of subsequent measures when offered for another purpose, such as proving ownership, control, or feasibility of precautionary measures, if controverted, or impeachment.’)” (Alcaraz, supra, 14 Cal.4th at p. 1169, 60 Cal.Rptr.2d 448, 929 P.2d 1239.)
The VRHA minutes were admissible for the purposes sought by Alpert. The proper means to address the concern expressed by VRHA would have been a limiting instruction, advising the jury of the purposes for which they could, and could not, consider the minutes. (See Morehouse v. Taubman Co. (1970) 5 Cal.App.3d 548, 555, 85 Cal.Rptr. 308 [evidence that the defendant contractor’s carpenters installed handrails at the point where the plaintiff had fallen after his injury was not admissible to prove negligence of the defendant under Evid.Code, § 1151, but was properly limited and received by the court, on the issues of control of the premises, and of whose duty it was under the contract to take such safety measures].) Similarly, in Baldwin Contracting Co. v. Winston Steel Works, Inc. (1965) 236 Cal.App.2d 565, 46 Cal. Rptr. 421, the court held that subsequent remedial conduct cannot be considered on the issue of liability, but “is relevant and admissible [on the issues of scope of duty] [citation] and also on the possibility or feasibility of eliminating the cause of the accident. [Citations.]”[FN.20] (Baldwin Contracting, at p. 573, 46 Cal.Rptr. 421.)
In the present case, the minutes of the November board meeting confirm VRHA’s knowledge of the sidewalk defect prior to Alpert’s fall, VRHA’s discussions regarding [382] repair, its control over the area at issue, as well as other facts that were in dispute in the litigation. The trial court erred in refusing to admit the minutes and in sustaining objections to questions of witnesses in the same areas.[FN.21] As our Supreme Court stated in Alcaraz, such evidence “would be admissible to demonstrate that defendants exercised control over the premises. Accordingly, we may consider such evidence in determining whether a triable issue of material fact existed concerning whether defendants exercised control over the strip of land and thus owed a duty of care to plaintiff.” (Alcaraz, supra, 14 Cal.4th at p. 1170, 60 Cal. Rptr.2d 448, 929 P.2d 1239.)
DISPOSITION
The judgment of nonsuit is reversed. The matter is remanded to the trial court for further proceedings consistent with this opinion. Appellant shall recover her costs on appeal.
BOREN, P.J., and NOTT, J., concur.
[FN.*] Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
[FN.1] Alpert had alleged causes of action against the City of Los Angeles and County of Los Angeles as well as VRHA. The claims against the governmental entity defendants were resolved prior to trial. The County of Los Angeles was dismissed; a good faith settlement was entered with the City of Los Angeles.
[FN.2] We construe the dismissal of the jury upon the granting of the motion for nonsuit as a termination of the action as to all defendants. It is proper, therefore, to treat the appeal as an appeal from the judgment which necessarily followed. (See Mikialian v. City of Los Angeles (1978) 79 Cal.App.3d 150, 153, 144 Cal.Rptr. 794; Graski v. Clothier (1969) 273 Cal.App.2d 605, 607, 78 Cal.Rptr. 447.)
[FN.3] Alpert also sought review of the trial court’s refusal to permit a representative of the City of Los Angeles to testify. Resolution of that evidentiary matter is not necessary on this appeal. We make further reference to this matter in footnote 10, post.
[FN.4] At the time of trial in this matter, Code of Civil Procedure section 581c, subdivision (a) provided:
“After the plaintiff has completed his or her opening statement, or the presentation of his or her evidence in a trial by jury, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a judgment of nonsuit.”
The section was amended in 1998 (Stats. 1998, ch. 200, § 1) in a technical manner not relevant to the instant case.
[FN.5] VRHA correctly points out that the doctrine that a scintilla of evidence creates a sufficient evidentiary basis to reverse a judgment of nonsuit has been rejected. (7 Witkin, Cal. Procedure (4th ed. 1997) Trial, § 420, p. 481.) While that is a correct statement of the law, factually Alpert overcame that threshold for reasons we discuss in the text.
[FN.6] California Constitution, article I, section 16 provides, in part:
“Trial by jury is an inviolate right and shall be secured to all….”
This right extends to factual questions only; issues of law are triable by the court. (Evid. Code, § 310, subd. (a); Code Civ. Proc., §§ 589, 591, 592.) The right to trial by jury guarantees that right in actions triable by jury at common law, including claims for damages for injuries to persons. (See generally 7 Witkin, Cal. Procedure (4th ed. 1997) Trial, § 89 et seq.)
[FN.7] In its written motion for judgment of nonsuit, VRHA contended that (1) the defect in the sidewalk was trivial as a matter of law, (2) Alpert had failed to establish that the cause of the sidewalk defect was a root growing from VRHA’s property, and (3) VRHA owed no duty to pedestrians such as Alpert, but only to the City of Los Angeles, under Streets and Highways Code section 5610.
[FN.8] There is a split of authority over whether we may consider grounds argued by the defendant, but not relied upon by the trial court, in granting the motion. Some Courts of Appeal, including this division, have held that appellate review is limited to those grounds relied upon by the trial court, the theory being that we only need examine those grounds which a plaintiff may have been able to correct had they been called to its attention (e.g., DeVaughn Peace, M.D., Inc. v. St. Francis Medical Center (1994) 28 Cal.App.4th> 454, 459, 33 Cal.Rptr.2d 459; Walker v. Porter (1974) 44 Cal.App.3d 174, 177, 118 Cal.Rptr. 468). Other courts have taken the view that a judgment of nonsuit can be sustained on any ground specified in the motion, even if not relied upon by the trial court (e.g.,Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1542, fn. 2, 50 Cal.Rptr.2d 395, and cases there discussed). See also Adkins v. State of California (1996) 50 Cal.App.4th 1802, 1809, fn. 7, 59 Cal.Rptr.2d 59.
The source of this debate is the following language from Lawless v. Calaway (1944) 24 Cal.2d 81, 147 P.2d 604 (Lawless): “The correct rule is that grounds not specified in a motion for nonsuit will be considered by an appellate court only if it is clear that the defect is one which could not have been remedied had it been called to the attention of plaintiff by the motion. This rule is complementary to the requirement that a party specify the grounds upon which his motion for nonsuit is based.” (Id. at p. 94, 147 P.2d 604; accord, Timmsen v. Forest E. Olson, Inc. (1970) 6 Cal.App.3d 860, 868, 86 Cal.Rptr. 359.) The rationale for Lawless is that, on a motion for nonsuit, the plaintiff is to be given the opportunity to cure the defect in its case. To this end, the court is required to hear offers of proof and grant a motion to reopen if timely made. (Eatwell v. Beck (1953) 41 Cal.2d 128, 133, 257 P.2d 643[one of the chief objects of a nonsuit motion is to point out to plaintiff the defects in its case so that they may be remedied and the case decided on its merits].)
The articulation of the Lawless rule has not prevented the split of authorities as discussed above: whether, on review of a judgment of nonsuit, the appellate court looks only at the reason or reasons stated by the trial judge in granting the motion, or at any reason advanced by the moving party in the trial court. In either situation, the appellate court looks also at the problem of legal preclusion — whether, as a matter of law, there is no basis for the plaintiff’s claim. In such a circumstance, affirmance of the judgment of nonsuit is appropriate even if that ground was not advanced below. It is the issue of legal preclusion that was the principal focus of the trial court in reaching its ruling below.
[FN.9] As indicated in this opinion, the existence of a duty of care is a matter of law. (Ann M. v. Pacific Plaza Shopping Center (1993) 6 Cal.4th 666, 678, 25 Cal.Rptr.2d 137, 863 P.2d 207; Isaacs v. Huntington Memorial Hospital (1985) 38 Cal.3d 112, 125, 211 Cal.Rptr. 356, 695 P.2d 653.) The foreseeability of a particular plaintiff’s injury is a question of fact. (Isaacs, at p. 126, 211 Cal.Rptr. 356, 695 P.2d 653.) The standard to be applied to determine if the duty has been met is whether the property owner has acted in management of the property as a reasonable person in view of the probability of injury to others. (Rowland v. Christian (1968) 69 Cal.2d 108, 118-119, 70 Cal.Rptr. 97, 443 P.2d 561.) The answer to that question will be determined on retrial.
[FN.10] Streets and Highways Code section 5610 is one of several statutes codifying responsibilities with respect to maintenance and repair of sidewalks. Section 5611 gives to the superintendent of streets the authority to notify the abutting owner of the need to repair the sidewalk. Section 5615 provides that the superintendent of streets may repair the sidewalk if the abutting owner does not and assess that cost to the abutting owner. That amount may result in a lien against the property. (Sts. & Hy.Code, § 5625 et seq.)
In this case, Alpert’s attempt to introduce evidence regarding the absence of notice to the city concerning defects in the sidewalk was rejected. Alpert did give timely notice of intention to call the witness through whose testimony this and other matters were to be established. Whether the witness was competent to testify to all of the subjects which Alpert indicated in her offer of proof is a matter for consideration by the trial court in the course of proceedings on the retrial.
[FN.11] As we discuss in the text, Streets and Highway Code section 5610 establishes the rule that the owner of the property adjoining the sidewalk has a duty to maintain it. This is a statutory exception to the general rule that the owner of the easement (typically, the local municipality) has the duty to maintain the easement.
While section 5610 places the duty to maintain and repair defects in the sidewalk on the abutting landowner, the “Sidewalk Accident Decision” doctrine provides that that duty is not owed to persons who use the sidewalk unless the abutting landowner somehow causes the dangerous condition of the sidewalk. (Schaefer v. Lenahan (1944) 63 Cal. App.2d 324, 326, 146 P.2d 929; Jones, supra, 152 Cal.App.3d at p. 803, 199 Cal.Rptr. 825.) Our holding today is consistent with this long-established doctrine.
[FN.12] In Sprecher, supra, 30 Cal.3d at p. 358, 178 Cal.Rptr. 783, 636 P.2d 1121, the defect was a landslide.
[FN.13] The Williams court ultimately reversed the judgment and directed the trial court to enter a judgment of nonsuit for the reason that the evidence was insufficient as a matter of law to sustain a verdict for the plaintiff. (Williams, supra, 216 Cal.App.3d at pp. 522-523, 265 Cal.Rptr. 15.) We reach a different conclusion based both on the facts of this case, which the Williams court suggested might be the basis for such a result, and due to the development in the law subsequent to the decision in Williams.
[FN.14] This duty is owed to Alcaraz and to others, viz., to persons who foreseeably may be in the area, not to Alcaraz due to his status as a tenant of the landowner. (Rowland v. Christian, supra, 69 Cal.2d at p. 119, 70 Cal.Rptr. 97, 443 P.2d 561; Alcaraz, supra, 14 Cal.4th at pp. 1162-1163, 60 Cal.Rptr.2d 448, 929 P.2d 1239 [duty is not dependent on commercial benefit to landowner].)
[FN.15] As indicated in the text, ante, Alpert’s expert witness was of the opinion that the offending root came from a pine tree growing between the sidewalk and the buildings.
[FN.16] No evidence was presented below of any applicable local ordinances. Whether that will be a factor on retrial in unknown. We note that in Selger v. Steven Brothers, Inc. (1990) 222 Cal.App.3d 1585, 272 Cal.Rptr. 544, the court construed statutes applicable in the jurisdiction in which the property at issue in this appeal is located. The issue was framed differently, however, as that defendant had no role in creating the hazard which befell that plaintiff. (Id. at p. 1592, 272 Cal. Rptr. 544.) Nor was any evidence presented regarding the statutory presumptions of Civil Code sections 831 and 1112. (See Jones, supra, 152 Cal.App.3d at pp. 801-802, 199 Cal.Rptr. 825.)
[FN17] This court has had previous opportunities to consider the trivial defect defense. In Ursino v. Big Boy Restaurants of America (1987) 192 Cal.App.3d 394, 237 Cal.Rptr. 413, we sustained a summary judgment in which the trial court had determined that the trivial defect defense was established as a matter of law based on the facts there presented. (Id. at pp. 397-398, 237 Cal.Rptr. 413). In Davis v. City of Pasadena (1996) 42 Cal.App.4th 701, 50 Cal.Rptr.2d 8, we upheld a summary judgment in which the trial court had reasoned that “`”reasonable minds [could] come to but one conclusion,”‘” that the design of a staircase at a city convention center posed a minor or trivial risk at most. (Id. at p. 704, 50 Cal.Rptr.2d 8.)
We note that the trial court in the instant case had rejected VRHA’s argument that the trivial risk doctrine applied on the facts presented and that VRHA has conceded this issue in its brief on appeal. Nevertheless, as that defense is fact-specific and there will be a full trial, our opinion should not be construed as other than an indication that the trial court may consider this issue based on the evidence adduced in the new trial of this case. Nor do we infer that the trivial defect defense need not be closely scrutinized in view of the “marked changes in the law” made by Rowland v. Christian, supra, 69 Cal.2d 108, 70 Cal.Rptr. 97, 443 P.2d 561. (Ursino v. Big Boy Restaurants of America, supra, 192 Cal. App.3d at p. 398, 237 Cal.Rptr. 413.)
[FN.18] When Alpert sought to have the minutes in question marked as trial exhibit 29, VRHA’s counsel asked to approach. After the reported sidebar conference, the minutes were never marked. They should have been marked for identification. The parties to this appeal each make reference to those minutes, even though they are not a part of the record on appeal. By their briefs on this appeal, we are advised that the minutes of the VRHA board of directors state in part:
“The meeting was called for the purpose of discussing the bids for cement work to repair the … sidewalk `bumps.’
“Before discussing the bids the question was raised as to whether or not this work is considered an `emergency’ and therefore did not need approval of homeowners (over $5,000). The Board voted 2 to 1 (1 abstention) that is as [sic] not an emergency, since the matter has been pending since last June….
“… In several places the cement levels have change [sic] due to tree root, etc.
Alpert sought introduction of these minutes to establish knowledge of the problem by VRHA at least a month prior to her fall. VRHA objected, contending the evidence was of subsequent repair and inadmissible by statute and common law policy.
Two other attempts were made to introduce the minutes, with the same result, the court sustaining the objection that the minutes were inadmissible as evidence of subsequent repair and citing Evidence Code section 352, which gives the trial court the discretion to exclude evidence on the basis that its probative value is outweighed by its prejudicial impact. Each ruling was incorrect.
[FN.19] Evidence Code section 1151 provides:
“When, after the occurrence of an event, remedial or precautionary measures are taken, which, if taken previously, would have tended to make the event less likely to occur, evidence of such subsequent measures is inadmissible to prove negligence or culpable conduct in connection with the event.”
[FN.20] Pursuant to Evidence Code section 355, the opponent of the evidence (or its propoadvising the jury that the evidence is being admitted for a limited purpose, explaining that purpose. This instruction may be given at the time the evidence is admitted, in closing instructions, or both. (See Evid.Code, § 355; Dincau v. Tamayose (1982) 131 Cal.App.3d 780, 791, 182 Cal.Rptr. 855.)
[FN.21] Because of the manner in which the issue arose, we do not know if other evidentiary objections (e.g., relating to authenticity of the minutes) could be surmounted by Alpert. These are issues to be resolved by the trial judge on retrial.
Watts v. Oak Shores Community Association
[Operating Rules; Rental Activities; Board Deference] Homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.
Burlison Law Group and Robert C. Burlison, Jr., for Plaintiffs, Cross-defendants and Appellants and for Cross-defendant and Appellant.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Michael B. Wilk, Caroline E. Chan, Ryan D. Harvey; Adams Kessler, Adrian J. Adams, Gary S. Kessler, Paul S. Ablon, Aide C. Ontiveros and Tina Chu for Defendant, Cross-complainant and Respondent.
[CERTIFIED FOR PARTIAL PUBLICATION[FN. *]]
OPINION
GILBERT, P. J. —
Here we hold, among other things, that homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.
Two owners of one lot in a common interest development and one of two owners of another lot brought an action challenging regulations and fees adopted by the homeowners association. The association cross-complained against all owners of both lots for fees and declaratory relief. The association [469] prevailed on the complaint and cross-complaint. The trial court also awarded the association statutory attorney fees and costs on the complaint and cross-complaint. As we explain in the unpublished portion of this opinion, the judgment must be clarified so that the attorney fees awarded on the complaint are against plaintiffs only, and not against the cross-defendant who was not a plaintiff. In all other respects, we affirm.
FACTS
Oak Shores is a single-family residential common interest development. It is governed by the Oak Shores Community Association (Association). The Association is governed by a board of directors (Board). All property owners in the development are members of the Association.
The Association’s governing documents include its covenants, conditions and restrictions (CC&R’s) and its bylaws. The Board “may adopt, amend, or repeal Rules for the use, occupancy and maintenance of the Project; for the general health, welfare, comfort, and safety of Members; and to interpret and implement these CC&R’s, and establish penalties for violation of such Rules.” (CC&R’s, art. 6.2.) “In the event the Association undertakes to provide materials or services that benefit a particular Member, such Member in accepting the materials or services agrees to reimburse the Association for the costs incurred by the Association, which shall become a Special Assessment against the Member.” (Id., art. 3.8.)
Oak Shores consists of 851 parcels of land. Six hundred sixty parcels are developed with single-family homes. Only about 20 percent, 125 to 150, of the homes are occupied by full-time residents. Approximately 66 absentee homeowners rent their homes to short-term vacation renters.
Ken and Joyce Watts and Lynda Burlison (collectively Watts) are absentee owners who rent their homes to short-term vacation renters. Watts filed a complaint against Oak Shores challenging fees charged and rules and regulations enacted by the Association. The challenge included a rule stating the minimum rental period is seven days; an annual fee of $325 imposed on owners who rent their homes; a rule limiting the number of automobiles, boats and other watercraft that renters are allowed to bring into Oak Shores; a mandatory garbage collection fee; boat and watercraft fees; building permit fees; and property transfer fees.
[[/]][FN. *]
[470] Short-term Renters
The Association has a rule stating that the minimum rental period is seven days. The Association’s general manager testified that, based on his discussion with Board members, staff and code enforcement officers, as well as his review of gate and patrol logs, short-term renters cause more problems than owners or their guests. The problems include parking, lack of awareness of the rules, noise and use, and abuse of the facilities. Expert James Smith testified that, unlike guests who are typically present with the owners, short-term renters are never present with the owner. Guests tend to be less destructive and less burdensome. Short-term renters require greater supervision and increase administrative expenses.
A $325 fee is charged to all owners who rent their homes. A 2007 study calculated each rental cost the Association $898.59 per year.
Watercraft
All short-term renters and guests who bring watercraft into Oak Shores pay a fee of $25 per day or $125 per week. Short-term renters and guests are limited to one boat or two personal watercraft. Owners and long-term renters do not pay such special fees and are not limited in the number of watercraft they can bring into Oak Shores.
Boats have a negative impact on the Association’s roads. There are also costs of maintaining the docks and parking lot used by the renters and increased costs for code enforcement.
Expert Smith testified that renters comprise only 8 percent of the people entering the gate, but renters bring in 37 percent of the boats.
Parking Restrictions
Association rules restrict parking in the lower marina lot to owners on weekends and holidays during the summer months. A lot not much further away is available to all.
Construction Permits
The Association charges a plan-check fee of $100 and a road impact fee of $1,600 for new construction. Expert Smith testified that heavy equipment used to construct homes places more wear on the roads and results in greater usage. It is appropriate to consider the need for reserves in determining the [471] amount of the fee. The Board president testified that road resurfacing and repair are the basis for the fee.
Trash Collection Fees
The Association contracts with a trash collector. It passes the fees pro rata onto all owners of developed lots. The Association does not distinguish between full-time and part-time residences because it is too difficult to make that determination. It does not charge the owners of undeveloped lots because they do not produce trash.
Civil Code Former Section 1366.1[FN. 1]
Former section 1366.1 (repealed by Stats. 2012, ch. 180, § 1 and reinstated with nonsubstantive changes as § 5600, subd. (b)) provided, “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”
David Levy and Travis Hickey are certified public accountants. Levy testified that the expenses generated by owners who rent short term far exceed the income generated from those owners. He analyzed fees and costs contained in the Association’s financial statements and reserve studies. He concluded the fees charged were reasonable and complied with the law. Levy also consulted with the Association’s former auditors. Levy and Hickey concluded that the fees were reasonable and did not violate former section 1366.1. Levy also testified the fees charged by comparable associations for similar activities were higher or equivalent to fees charged by Oak Shores.
Hickey testified that he is the Association’s former auditor. He studied the fees and consulted with another former auditor. He concluded the fees were fair, reasonable, and in compliance with the law. They do not exceed the costs for which they are levied. No association conducts a formal study to set fees. Nor does any association conduct time and motion studies. In fact, time and motion accounting is not possible.
Homeowners association expert Karen Conlon testified the Association met the standard of care for giving members notice of rule and fee changes. Fee increases can be enacted by adopting a budget for the year.
Swimming Pool
The Association paid a pool contractor $35,000 to repair a swimming pool. The contractor absconded with the money without repairing the pool. A [472] former director testified that a former Board president wrote a check to the contractor without Board approval. Expert Smith testified it is not typical, nor within the standard of care, for an association to purchase a performance bond.
Release and Unclean Hands
[[/]][FN. *]
Ken Watts has never obtained a business license to rent his home, nor has he paid transient occupancy taxes since at least 2000. He owes at least $5,000 in back taxes. Watts has repeatedly mischaracterized his renters as guests in order to avoid applicable rental rules and regulations. Portions of his testimony at trial were “demonstrably false.” Throughout his tenure at Oak Shores, he has adopted a “rancorous, accusatory and obstructionist” style of interaction with Board members and staff. He has occasionally intimidated staff with bizarre and threatening behavior.
Judgment
The trial court found for the Association on the complaint. [[/]][FN. *] The court found that the Association’s rules and regulations are reasonable and comply with the Association’s governing documents and the law, and that the fees charged comply with former section 1366.1.
The trial court also found for the Association on the cross-complaint. It granted the Association an injunction ordering cross-defendants to abide by the rules and regulations. [[/]][FN. *]
DISCUSSION
[[/]][FN. *]
[473] II.
Watts contends that the judgment is based on incorrect legal grounds.
(1) Watts claims that the rule applying judicial deference to association decisions applies only to ordinary maintenance decisions. But in Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 [87 Cal.Rptr.2d 237, 980 P.2d 940], our Supreme Court stated, “`Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with public policy.'” (Id., at p. 264, quoting Nahrstedt v. Lakeside Village Condominium Assn.(1994) 8 Cal.4th 361, 374 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) It is true the facts inLamden involve the association board’s decision to treat termites locally rather than fumigate. But nothing in Lamden limits judicial deference to maintenance decisions. Common interest developments are best operated by the board of directors, not the courts.
Watts’s reliance on Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930 [117 Cal.Rptr.3d 481] is misplaced. There, an owner sued the association for failing to properly maintain the sewer lines. In applying judicial deference, the court stated that the Lamden rule gives “deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance.” (Affan, at p. 940.) But there is no reason to read Lamden so narrowly. In fact, courts have given deference to board decisions that do not concern ordinary maintenance. Thus, for example, in Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [97 Cal.Rptr.2d 280], the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.
(2) Article 3.8 of the CC&R’s gives the Board broad powers to adopt rules for Oak Shores. Nothing in the article or elsewhere prohibits the Board from adopting rules governing short-term rentals, including fees to help defray the costs such rentals impose on all owners. The Board may reasonably decide that all owners should not be required to subsidize Watts’s vacation rental business.
That short-term renters cost the Association more than long-term renters or permanent residents is not only supported by the evidence but experience and common sense places the matter beyond debate. Short-term renters use the common facilities more intensely; they take more staff time in giving directions and information and enforcing the rules; and they are less careful in using the common facilities because they are not concerned with the long-term consequences of abuse.
[474] (3) In arguing the cost of short-term rentals must be borne by all members, Watts cites California Code of Regulations, title 10, section 2792.16, subdivision (a). That regulation provides, “Regular assessments to defray expenses attributable to the ownership, operation and furnishing of common interests by the Association shall ordinarily be levied against each owner according to the ratio of the number of subdivision interests owned by the owner assessed to the total number of interests subject to assessments.” Watts’s reliance on the regulation is misplaced for a number of reasons. First, the regulation applies to subdivision developers. Watts cites no authority that it also applies to continuing operations of a common interest development. Second, the regulation is qualified by the word “ordinarily.” (Ibid.) It clearly does not state an immutable rule. Third, the regulation applies to “[r]egular assessments.” (Ibid.) Watts cites no authority that it applies to the type of use fees at issue here.
Watts’s reliance on the Association’s articles of incorporation, article II, paragraph (d), is also misplaced. The paragraph under the heading “General Purposes” states in part: “To fix and establish the fees, dues and assessments that each member of this corporation shall pay to this corporation for the purpose of providing funds to carry out the community purposes and objects of this corporation, and to receive and collect such fees, dues and assessments.” Nothing in the paragraph provides that each member shall pay the same amount regardless of his or her activities on the premises. It does confirm, however, the power of the Association to impose fees as well as assessments. Thus, it confirms the power of the Association to impose the type of fees at issue here.
Watts’s reliance on Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670, 685 [174 Cal.Rptr. 136] (“Laguna Royale“) is misplaced. There, a common interest development was built on a 99-year ground lease. The defendants purchased a unit in the development. Later, the defendants transferred undivided interests to three other families. No more than one family would use the unit at a time and each of the four families agreed to 13-week periods of exclusive use. The ground lease contained a provision prohibiting transfer of the unit without the development association’s approval. The association refused to approve the transfer on the ground, among others, that use by the four families would place an undue burden on the other owners in their use and enjoyment of their units so as to be inconsistent with their quiet enjoyment and maintenance of security. The trial court invalidated the assignments. The Court of Appeal reversed.
In reversing, the Court of Appeal affirmed that the association had the authority to enact reasonable regulations on the use and alienation of the condominiums. (Laguna Royale, supra, 119 Cal.App.3d at p. 682.) The court [475] also determined that the reason given for refusing consent to the transfer is rationally related to the proper operation of the property and purposes of the association. (Id., at p. 686.) The court concluded, however, there was no evidence that consecutive use of the unit by the four families one at a time would be so disruptive as to interfere substantially with the other owners’ use and enjoyment or the maintenance of security. (Id., at p. 687.) The court pointed out that the association’s bylaws allowed leasing of a unit for 90 days or more, a use more intense than the 13 weeks exclusive use agreed to by each of the four families. (Ibid.)
If anything, Laguna Royale is favorable to the Association. It confirms the authority of the Association to enact reasonable regulations governing transfers so as to preserve the owner’s quiet enjoyment of the premises and the maintenance of security. There was simply no evidence in Laguna Royale that four 13-week periods of occupation by a single family would have a significant impact on the enjoyment of the premises by other owners or on security. Here there is more than ample evidence that short-term rentals have such significant impacts.
[[/]][FN. *]
IV.
Watts contends the trial court erred in adopting the proportionality test in determining the reasonableness of the fees.
(4) Former section 1366.1 prohibits an association from imposing or collecting “an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”
At trial, Watts argued the Association was required to conduct time and motion studies to determine the correct amount of the fees. The trial court rejected Watts’s argument. In its statement of decision, the court stated the issue is whether “rough proportionality” between the fees and costs is sufficient to comply with the statute. The court found that the evidence established a “reasonably close” relationship between each contested fee and the cost it is intended to offset. The court concluded that relationship satisfied former section 1366.1.
(5) Nothing in the language of former section 1366.1 requires the exact correlation between the fee assessed and the costs for which it is levied that [476] Watts appears to demand. In some instances, such an exact correlation may be impossible to obtain. In other instances, the costs of studies necessary to obtain an exact correlation may be prohibitive, requiring the Association to add the costs to the fees. The “golden rule” for statutory interpretation is that where several alternative interpretations exist, the one that appears the most reasonable prevails. (Stewart v. Board of Medical Quality Assurance (1978) 80 Cal.App.3d 172, 179 [143 Cal.Rptr. 641].)
(6) The most reasonable interpretation of former section 1366.1 is that it requires nothing more than a reasonable good faith estimate of the amount of the fee necessary to defray the cost for which it is levied. Whether the court uses the term “roughly proportional” or “reasonably close,” the test has been met here.
In Foothills Townhome Assn. v. Christiansen (1998) 65 Cal.App.4th 688 [76 Cal.Rptr.2d 516], a homeowners association imposed a special assessment of $1,300 against each owner. The assessment was to replenish the association’s reserve fund, which had been depleted paying for storm damage. The reserve fund could be used for purposes other than storm damage. An owner challenged the assessment as violating former section 1366.1. The court upheld the amount of the assessment on the ground that there was no showing that the usual reserve balance was excessive or that the amount of the assessment pushed the fund above its usual balance. (Foothills, at p. 694.) The court did not require a precise correlation between the amount of the assessment and the cost for which it was levied.
Watts argues that the Association should be bound by its admissions made during discovery that no studies to determine costs associated with the fees were conducted. The discovery to which Watts refers was interrogatories answered in February 2007. Trial began in April 2011. At trial, the Association produced evidence of studies that supported the fees. Watts points to no place in the record where the Association’s witnesses were asked to explain the apparent discrepancy between the interrogatory responses and their testimony. Nor does Watts cite any authority in support of the argument requiring the trial court to reject the Association’s evidence at trial. Watts has failed to carry the burden of showing error on appeal. (See In re Marriage of Ananeh-Firempong (1990) 219 Cal.App.3d 272, 278 [268 Cal.Rptr. 83] [judgment presumed correct, error must be affirmatively shown].)
(7) Watts claims that the garbage fees were initiated January 1, 2001, without ever being adopted by the Association as required by former section 1357.100, subdivision (a), repealed by Stats. 2012, ch. 180, § 1, now § 4340. But that statute simply defines “`[o]perating rule.'” (Former § 1357.100, subd. (a).) It does not set forth any particular procedure for adopting any rule. Moreover, it defines operating rule as a “regulation.” (Ibid.) The garbage fee is not a regulation. It is simply a cost the Association passes through to the owners of the developed lots.
[477] Watts claims the Board adopted or increased fees and fines by simply including them in the budget. But Watts cites no authority prohibiting the Board from adopting or increasing fees and fines in that manner.
In any event, Watts’s entire contention is based on a view of the evidence most favorable to themselves. Watts fails to cite the evidence most favorable to the judgment. That evidence includes the testimony of Karen Conlon, an expert on homeowners associations. She testified the Association met the standard of care on notice of rules and fee charges. Board members also testified that Board meetings agenda and minutes were posted on the Association’s Web site. Watts has waived the contention on appeal. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 [92 Cal.Rptr. 162, 479 P.2d 362].)
[[/]][FN. *]
The attorney fee portion of the judgment is ordered modified as discussed in the unpublished portion of the opinion. In all other respects, the judgment is affirmed. Costs on appeal are awarded to respondent and against all appellants.
Yegan, J., and Perren, J., concurred.
[FN. *] Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for partial publication. The portions of this opinion to be deleted from publication are identified as those portions between double brackets, e.g., [[/]].
[FN. *] See footnote, ante, page 466.
[FN. 1] All statutory references are to the Civil Code unless noted otherwise.
[FN. *] See footnote, ante, page 466.
[FN. *] See footnote, ante, page 466.
[FN. *] See footnote, ante, page 466.
Related Links
Expanded Scope of ‘Judicial Deference’ – Authority to Impose Short-term Renter Fees – Published on HOA Lawyer Blog (4/13/15)
Courts Will Defer to the Decisions of Boards Based on Good Faith and Regard for the Best Interests of the Community
– Published on HOA Lawyer Blog (March 2019)
Posey v. Leavitt
[Restrictions; Duty to Enforce] A homeowner has the right to sue the HOA to compel the HOA to uphold its duty to enforce the restrictions.
Iwasaki, Thomas & Sheffield and Bruce T. McIntosh for Plaintiff and Appellant.
Honey Kessler Amado for Defendants and Respondents.
OPINION
HOLLENHORST, J.
Plaintiff Posey, owner of a condominium at Lake Arrowhead, filed this action against Mr. and Mrs. Leavitt, owners of another condominium in the same development. Mr. Posey contended that the Leavitts built a deck extension on the side of their condominium that encroached the common area and obstructed his view. Mr. Posey also sued his condominium association for breach of fiduciary duty.
Certain issues were presented to the jury on special interrogatories, and the trial court entered a judgment in favor of the Leavitts and against Mr. Posey. However, the jury awarded Mr. Posey $30,000 damages against the association.
ISSUES
Mr. Posey appeals, contending that the trial court failed to rule on certain equitable issues and misconceived its duty in ruling on the claims for injunctive relief. Specifically, he contends that the trial court erred in submitting all legal and equitable issues to the jury, in failing to consider that the jury’s decision was only advisory on the equitable issues, in failing to make its own factual determinations, and in failing to issue a statement of decision. Secondly, he argues that the stipulation of the parties that the deck encroached on the common area should have led to findings of trespass and nuisance as a matter of law. He also contends that the Leavitts cannot rely on the board’s ratification of its consent to the deck construction. Mr. Posey also raises issues concerning jury instructions.
THE COMPLAINT
In order to understand Mr. Posey’s contentions, we first review the allegations of the complaint and the manner in which they were presented to [1241] the jury. The first three causes of action are against the Leavitts for wilful trespass, negligent trespass, and nuisance. For relief, plaintiff seeks an order requiring removal of the deck extension and damages.
The fourth cause of action is against the homeowners association for breach of fiduciary duty and breach of the covenant of good faith and fair dealing. In that cause of action, Mr. Posey contended that the association breached its fiduciary duties by approving the deck extension, and in not requiring its removal. He sought damages against the association.
TRIAL COURT PROCEEDINGS
At the beginning of trial, the Leavitts made a motion for judgment on the pleadings and argued that the court should decide whether a nuisance existed before submitting the damages issues to the jury.[FN.1] They urged that there was no nuisance and no trespass. The trial court did not deny the motion at that time, but stated that it felt that the case presented issues that should go to the jury. Subsequently, the trial court denied the motion on grounds that the pleadings stated sufficient causes of action to proceed.
The Leavitts’ counsel also moved at the beginning of the trial to bifurcate the trial so that the issue of nuisance would be first heard by the court. Although the trial court stated that it agreed that it would decide the nuisance issue, it denied the motion.
In his brief, Mr. Posey states that, at the time jury instructions were discussed, the trial court decided that it would not make a preliminary decision on the trespass and nuisance issues, but would submit these issues to the jury. Unfortunately, the court’s reasoning is unknown because this discussion was not reported.
The jury was asked to make 15 special findings. These questions included whether the board of the association had consented and/or ratified the deck improvement, whether the defendants had relied on the statements made to them, and whether the association had violated its fiduciary duties. Mr. Posey specifically objects to the asking of three questions: (1) “8) Was the use of Mr. and Mrs. LEAVITTS [sic] deck extension an interference, substantial and unreasonable, such as would be offensive to a normal person?” (The jury found it was not by a vote of 10-2); (2) “13) Did defendants, DAVID & AILEEN LEAVITT intentionally and willfully trespass on the `Common [1242] Area’?” (The jury found they did not by a vote of 11 to 1); and (3) “14) Did defendants David & Aileen Leavitt negligently trespass on the `Common Area’?” (The jury found they did not by a vote of 9 to 3.) The jury answered these questions as shown and found for the Leavitts generally.
Following the jury’s decision, a hearing was held on December 8, 1987, ostensibly on an equitable indemnity cross-complaint between the Leavitts and the association. At that time, the trial court also ruled on Mr. Posey’s request for injunctive relief, even though his counsel was absent. The court said: “I am prepared to rule on that. And my ruling would be that there is no injunctive relief. Based upon the jury’s finding and the jury’s verdict, there is no justification for any injunctive relief being granted by this court and would deny the plaintiffs’ request in that regard.”
At a subsequent hearing, Mr. Posey’s counsel sought to reargue the request for injunctive relief. The court granted his request, saying “I have to tell you that I’m probably a little bit predisposed in this matter because I had [previously ruled on the matter] and I don’t feel that I was inclined to violate the — or set aside the jury’s verdict as far as their opinion in order to grant any injunctive relief, but I’m willing to listen to your argument.” Mr. Posey’s counsel then requested that “the court try to set aside what it’s previously done and consider the points and authorities I’ve cited. [¶] THE COURT: I intend to do that.” Mr. Posey’s counsel then argued that his understanding was that the court would decide the equitable issues and that the jury would decide the damage claims against the association. Mr. Posey’s counsel argued that it was error for the trial court to submit the equitable issues to the jury, but that “I think that the appropriate thing for the court to do at this time is to consider the evidence that was presented in its own mind and make its own independent determination on the equitable issues involved.” He also argued that the jury was mistaken in the law if it concluded that the Leavitts’ reliance on the association’s alleged consent eliminated the trespass. He urged the court to correct the jury’s alleged mistake of law.
The Leavitts’ counsel responded that the jury was correct if it found that the consent of the association eliminated the trespass.
After further arguments on the merits of the issue, and the cross-complaint for implied indemnity against the association, the trial court said: “It will be under submission. [¶] I would only comment that, if the court really had any equitable power it could use, the best thing it could do would be to put the clock back to the Spring of 1981 and let all these things transpire over again. [¶] If there ever was a classic case of a no-win situation, this is also it.”
[1243] The trial court then issued its ruling on January 21, 1988. Characterizing the motion as a motion for reconsideration of the December 8, 1987, ruling, it denied reconsideration [FN.2] Six days later, the Leavitts filed a request for a statement of decision. Twelve days later, Mr. Posey filed a similar request. (1) (See fn. 3.) The trial court denied the requests as being untimely.[FN.3] Accordingly, we have no record of the reasons for the trial court’s decision other than the comments quoted above.
DISCUSSION
Plaintiff was plainly seeking equitable relief against the Leavitts in the form of an injunction to remove the encroachment. (2) Injunction is a remedy for the torts of trespass and nuisance. (See, generally, Code Civ. Proc., §§ 525, 526, 731; Civ. Code, § 3501; 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 604, 607, pp. 704, 706; 11 Witkin, Summary of Cal. Law (9th ed. 1990) Equity, §§ 82, 121, 126, pp. 760-761, 802-803, 807-808; 5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, §§ 773-774, pp. 217-219.) The Leavitts defended on grounds that the consent of the association eliminated any trespass or nuisance.
(3) “Nuisance is distinguishable from trespass in that the mere intentional entry on land may violate the right of exclusive possession and create a right of action for trespass, while conduct or activity cannot amount to a nuisance unless it substantially interferes with the use and enjoyment of the land.” (11 Witkin, Summary of Cal. Law, supra, Equity, § 125, p. 806.) (4) An action to abate a nuisance is an action in equity. (Meek v. DeLatour (1905) 2 Cal. App. 261, 263 [83 P. 300],disapproved on other grounds in Robinson v. Puls (1946) 28 Cal.2d 664, 666 [171 P.2d 430].)
(5) An encroachment is usually both a trespass and a nuisance. (11 Witkin, Summary of Cal. Law, supra, Equity, § 126, pp. 807-808.) The parties here stipulated that an expert witness would testify that all of the areas outside the buildings themselves, including decks and stairs, encroached [1244] on the common area. The issue of encroachment was therefore removed from the case, and did not need to be decided by the court or jury.
(6) Since the action was an equitable action, there was no right to a jury trial on the consent defense.[FN.4] (Wolford v. Thomas (1987) 190 Cal. App.3d 347, 353-354 [235 Cal. Rptr. 422]; Bank of America v. Greenbach (1950) 98 Cal. App.2d 220, 230 [219 P.2d 814].) (7) “Where a jury trial is not a matter of right, but is nonetheless permitted, the verdict rendered is advisory only. The court may accept or reject it, and, irrespective of the verdict, must make findings to complete the record.” (Estate of Kreher (1951) 107 Cal. App.2d 831, 837 [238 P.2d 150]; Estate of Cazaurang (1946) 75 Cal. App.2d 217, 225 [170 P.2d 694].) If there is no right to a jury trial, a party must file a motion to have any issues tried to the jury, but the jury’s decision is advisory. (Cal. Rules of Court, rules 230, 231.) While our record is incomplete on this issue, it is clear that plaintiff properly pointed out to the trial court that any error in submitting issues to the jury would be cured if the trial court adopted the jury’s findings as its own. (Whiting v. Squeglia (1924) 70 Cal. App. 108, 114 [232 P. 986].) Nevertheless, the trial court did not do so.
Here, the jury decided that the Leavitts did not obtain the required written consent of the board of directors at a meeting on June 25, 1981, but that the board subsequently ratified the deck construction and the chairman of the board led the Leavitts to reasonably believe they had board approval. Somewhat inconsistently, the jury then found that a subsequent letter by a member of the board ratified the prior acts of the board and constituted “a confirmation of `written consent.'”
Assuming that the jury found that consent had been given, and the trial court agreed, the legal question becomes whether the board had the power to consent to a trespass on the common area by a homeowner. The resolution of this question turns on the reconciliation of two different doctrines.
(8a) Mr. Posey contends that, under principles of real estate law, as applied by the condominium documents here, he was a tenant in common [1245] of the common area with the other homeowners, and he therefore had the right to directly enforce the equitable servitudes binding the homeowners. They primarily rely on Civil Code sections 1351 and 1354. Civil Code section 1351, subdivision (f) defines a condominium to consist “of an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit….” Civil Code section 1354 states: “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.”[FN.5]
The Leavitts contend that, under real estate and corporate law principles, the homeowner’s association owned the common area, and that the board of directors therefore had the power to sell, transfer, or, in this case, authorize an encroachment into the common area. The Leavitts point out that the developers deeded the common area (lot 56) directly to the homeowners association, a nonprofit corporation. They argue that the homeowners association was therefore the owner of the common area and it could consent to the encroachment.
The articles of the association empower it to “sell, lease, transfer, dedicate for public use or otherwise dispose of real or personal property in connection with the affairs of the Association.” The Leavitts contend that the power to sell must include the lesser power to consent to an encroachment.
The bylaws of the association give the board of directors the power to “exercise for the Association all powers, duties and authority vested in or delegated to this Association and not reserved to the membership by other provisions of these By-Laws, the Articles of Incorporation, or the Declaration.”
(9) (See fn. 6.) The declaration also contemplates ownership of the common area by the association, with the owners having easements over the common area.[FN.6] It therefore provides: “Every Owner shall have a right and [1246] easement of enjoinment [sic, enjoyment] in and to the Common Area which will be appurtenant to and shall pass title to every Lot….”[FN.7] The declaration also provides that the percentage of ownership of the common area shall not be changed without the consent of all of the owners.
(8b) The parties here focused on a section of the declaration which states: “No Owner shall, without first obtaining written consent of the Board, make or permit to be made any structural alteration or structural improvement in or to his Lot or in or to any other part of the Project. No Owner shall take any action or permit any action to be taken that will impair the structural soundness or integrity or safety or [sic, of] any building or other structure in the Project or impair any easement or right or personal property which is a part of the Project, without the written consent of all Owners.” The Leavitts argued that, having obtained the written consent required by the first sentence, their project met the requirements of the declaration, even though it was not approved by the other homeowners.
We disagree for two reasons. Under the second sentence, an encroachment into the common area impairs the easements of the other owners over the common area, and thus requires the consent of all of the homeowners.[FN.8]
Secondly, although the Leavitts contended that board approval was sufficient because the board owns the common area, it is not necessary that the plaintiff own the property. All plaintiff needed to do was to show a possessory right superior to the right of the trespassers. (5 Witkin, Cal. Procedure, supra, Pleading, §§ 582, 586, pp. 48-49, 51-52.) Plaintiff clearly had such a right here.[FN.9]
(10a) Under well-accepted principles of condominium law, a homeowner can sue the association for damages and an injunction to compel the association to enforce the provisions of the declaration. (Cohen v. Kite Hill Community Assn. (1983) 142 Cal. App.3d 642 [191 Cal. Rptr. 209].) (8c) More importantly here, the homeowner can sue directly to enforce the declaration. “The typical declaration provides that the association or any owner has the right to enforce the declaration by any proceeding at law or in equity…. Ordinarily the declaration would be enforced by the association. However, in the event of that body’s failure or inability to act because of divergence of opinion among the members, any one of the unit/lot owners may take legal action to enforce the restrictions against what he considers to be a violation by one or more other unit/lot owners.” (Hanna, Cal. Condominium Handbook (2d ed. 1986) § 14.58, p. 430.)[FN.10]
(10b) “Any owner who believes that the association is not discharging its duty to enforce the restrictions has an individual cause of action against the association and the person who has violated the restrictions….” (7 Miller & Starr, Cal. Real Estate,supra, § 20:58, pp. 128-131; 4 Witkin, Summary of Cal. Law (9th ed. 1988) § 495, pp. 672-673.)
(8d) We therefore conclude that the trial court should have initially decided at least the trespass cause of action in favor of the plaintiff, and that, since the consent of the board of directors was insufficient authorization for the encroachment, the trial court should not have submitted any issues to the jury. The parties initially viewed the jury as the fact-finder on the damage claims against the association. If it had been limited to this role, the trial would have been substantially shortened and error avoided.
(11) Despite this conclusion, we do not find that Mr. Posey should automatically receive the injunction he seeks. As the Leavitts point out, theirs is a small encroachment and the governing principles were long ago summarized in Christensen v. Tucker (1952) 114 Cal. App.2d 554 [250 P.2d 660]: “It is our view that the better reasoned cases hold that in encroachment cases the trier of fact possesses some discretion in determining whether to grant or to deny the mandatory injunction. In exercising that discretion, and in weighing the relative hardships, the court should consider various factors. It starts with the premise that defendant is a wrongdoer, and that plaintiff’s property has been occupied. Thus, doubtful cases should be decided in favor of the plaintiff. In order to deny the injunction, certain factors must be present: 1. Defendant must be innocent — the encroachment must not be the result of defendant’s willful act, and perhaps not the result [1248] of defendant’s negligence. In this same connection the court should weigh plaintiff’s conduct to ascertain if he is in any way responsible for the situation. 2. If plaintiff will suffer irreparable injury by the encroachment, the injunction should be granted regardless of the injury to defendant, except, perhaps, where the rights of the public will be adversely affected. 3. The hardship to defendant by the granting of the injunction must be greatly disproportionate to the hardship caused plaintiff by the continuance of the encroachment and this fact must clearly appear in the evidence and must be proved by the defendant. But where these factors exist, the injunction should be denied, otherwise, the court would lend itself to what practically amounts to extortion.” (Id., at pp. 562-563; see, generally, 4 Witkin, Summary of Cal. Law, supra,Real Property, § 426, pp. 608-609; 11 Witkin, Summary of Cal. Law, supra, Equity, §§ 153-158, pp. 833-840): “Even the early California cases recognized the defense of balancing conveniences where the nuisance consisted of a slight encroachment of buildings on adjoining property.” (11 Witkin, supra, at p. 835.)
After citing this rule, defendants apply it to the facts of this case and conclude that the trial court properly denied injunctive relief. Thus, they contend that they acted in good faith and in reliance on the consent given them by the board of directors of the association.[FN.11] Secondly, they argue that Mr. Posey will not sustain any irreparable harm if the deck extension is not removed, particularly since he has no enforceable right to a view. Third, they contend that the hardship and cost to them from a removal of the deck extension outweighs the insignificant obstruction of Mr. Posey’s view if the deck extension remains.
The problem with defendants’ argument is that, while the trial court could have made these determinations in their favor, it did not.[FN.12] The trial court’s comments quoted above show that it did not decide the case under its equitable jurisdiction, did not independently evaluate the evidence, did not specifically adopt the jury’s findings, and did not weigh the relative hardships to decide whether to grant or deny the injunction. Even the cases defendants cite to support their position also support the proposition that [1249] the case will be reversed and remanded if the trial court has failed to weigh the relative hardships and make proper findings. (Brown Derby Hollywood Corp. v. Hatton, supra, 61 Cal.2d 855; D’Andrea v. Pringle (1966) 243 Cal. App.2d 689 [52 Cal. Rptr. 606]; Christensen v. Tucker, supra, 114 Cal. App.2d 554.)
(12) Anticipating this problem, defendants rest on the presumption in favor of the validity of a judgment and contend that a correct decision should be upheld even if it is based on the wrong reasons.[FN.13] They argue that the judgment is valid on its face, and, since there was no statement of decision, it will be presumed that the trial court found all facts necessary to support the judgment, citing In re Marriage of Ditto(1988) 206 Cal. App.3d 643 [253 Cal. Rptr. 770].
We reject this argument for two reasons. First, unlike Ditto, we have found that the trial court was properly asked for a statement of decision and failed to give it. Second, the judgment here contains the special findings of the jury quoted above, but no reasons for the denial of equitable relief. Because of the inconsistencies in the findings, we cannot presume that the judgment is regular. Since the trial court’s comments quoted above indicate that the trial court did not exercise its discretion, we cannot presume that it did.
Since the trial court failed to exercise its discretion in this regard, the case must be remanded to allow it to do so. However, for its guidance, we briefly discuss some of the other issues raised by the parties, and their effect on the trial court’s future deliberations. (See, generally, 5 Miller & Starr, Cal. Real Estate, supra, § 14:13, pp. 328-334.)
- Alleged Right to a View.
(13) In applying the Christensen test, the trial court will generally grant the injunction if it finds that the plaintiff will suffer irreparable injury from the encroachment. To decide whether the plaintiff here will suffer irreparable injury, the trial court must decide the threshold question of whether plaintiff had a right to his view.
Generally, there is no such right. Venuto v. Owens-Corning Fiberglas Corp. (1971) 22 Cal. App.3d 116 [99 Cal. Rptr. 350], states the general rule: “Although, in the light of the foregoing principles, it would appear that an interference with the view from land may amount to a nuisance, the courts have held that a building or structure cannot be complained of as a nuisance [1250] merely because it obstructs the view from neighboring property.” (Id., at pp. 126-127.) The jury was correctly, although unnecessarily, instructed here that, under California law, a landowner has no right to an unobstructed view over adjoining property. (See, also, Wolford v. Thomas, supra,190 Cal. App.3d 347; Pacifica Homeowners’ Assn. v. Wesley Palms Retirement Community (1986) 178 Cal. App.3d 1147, 1152 [224 Cal. Rptr. 380]; Katcher v.Home S. & L. Assn. (1966) 245 Cal. App.2d 425 [53 Cal. Rptr. 923].)
“As a general rule, a landowner has no natural right to air, light or an unobstructed view and the law is reluctant to imply such a right. [Citations.] Such a right may be created by private parties through the granting of an easement [citations] or through the adoption of conditions, covenants and restrictions … or by the Legislature [citations].” (Pacifica Homeowners’ Assn. v. Wesley Palms Retirement Community, supra, 178 Cal. App.3d 1147, 1152, italics added.)
The declaration here does not contain a specific provision giving homeowners a right to existing views. It is also true that, as defendants pointed out at oral argument, the courts are reluctant to imply such a right. Nevertheless, the practical effect of enforcing the provisions of the declaration would be to give protection to plaintiff’s existing view.
For example, plaintiff relied on general language in the declaration to support his contention that a right to a view could be found in the declaration. He pointed out that the declaration refers to an easement of “enjoinment,” which is presumably intended to be the right of quiet enjoyment stated in Civil Code section 1463. (See, generally, Petroleum Collections Inc. v. Swords (1975) 48 Cal. App.3d 841 [122 Cal. Rptr. 114].) Such a right is a running covenant, enforceable as an equitable servitude. (Civ. Code, § 1462; Cal. Condominium and Planned Development Practice (Cont.Ed.Bar 1984) §§ 1.9, pp. 15-16, 8.42-8.44, pp. 666-668.) The declaration also requires owners to adhere to the rules of the association. These rules require the common area to remain unobstructed, and the effect of strictly enforcing the right of quiet enjoyment or these rules would be to remove the alleged obstruction to plaintiff’s view.
On the other hand, as defendants point out, the declaration allows any owner to use the common area “in accordance with the purposes for which it is intended, so long as he does not hinder or encroach upon the lawful rights of the other Owners.” (Declaration, par. 6, pp. 7-8.) Defendants argue that, since a view is not generally a “lawful right,” plaintiff’s only right is the right to be free from an unreasonable interference with the use and enjoyment of his property. Although the jury found no such unreasonable [1251] interference here, the trial court could find that the encroachment itself was an unreasonable interference with the intended uses of the common area.
Accordingly, in determining whether plaintiff has suffered irreparable injury, the trial court should not consider deprivation of a view, per se, as an injury. It should, however, consider the total effect of the encroachment and specifically whether it constitutes an unreasonable interference with plaintiff’s rights under the declaration and rules. In interpreting the documents, the trial court should apply a rule of liberal interpretation to facilitate the operation of the development. (Civ. Code, § 1370; 7 Miller & Starr, Cal. Real Estate, supra, § 20:57, pp. 126-128.)
If the trial court finds that the defendants are innocent and that plaintiff will not suffer irreparable injury, the court should then proceed with evaluating the relative hardships under the third prong of the Christensen test. (Christensen v. Tucker, supra, 114 Cal. App.2d 554.) The considerations discussed in this section would also apply in balancing the relative hardships.
- Interference With Use.
(14) In considering irreparable injury and relative hardships, the trial court should not consider the Leavitts’ use of the deck extension.
Defendants contend that there is no nuisance because the jury found that the use of the deck extension by the Leavitts was not “an interference, substantial and unreasonable, such as would be offensive to a normal person.” Thus, they cite cases such as Venuto v. Owens-Corning Fiberglas Corp., supra, 22 Cal. App.3d 116, 126-127, which discuss the noninvasive activities that may constitute a nuisance. Venuto states: “Under the law of nuisances, where personal discomfort is the basis of the complaint the test of liability is the effect of the alleged interference on the comfort of normal persons of ordinary sensibilities in the community.” (Id., at p. 126.) However, these cases are not applicable here because this is not a case of noninvasive activities that constitute a nuisance. The encroachment is an obstruction to the free use of the common area, and is itself the nuisance. (Civ. Code, § 3479; 11 Witkin, Summary of Cal. law, supra, Equity, § 156, pp. 835-837.) The trial court therefore need not consider whether the Leavitts’ use of the deck extension interfered with the Mr. Posey’s use of his deck in applying the balancing test.
- Effect of Prior Award of Money Damages.
(15) The trial court can consider injunctive relief despite the fact that the jury awarded Mr. Posey money damages against the association.
[1252] Defendants contend that the trial court cannot award injunctive relief because Mr. Posey was awarded money damages against the association. They argue that the damages were for the diminishment in value of the Posey property, and that, having been awarded such damages, Mr. Posey cannot obtain injunctive relief.
We disagree. The cause of action against the association was for breach of fiduciary duty. (Cf. Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 513-514 [229 Cal. Rptr. 456, 723 P.2d 573, 59 A.L.R.4th 447].) Although Mr. Posey claimed a diminishment in value of approximately $50,000, it is not clear that damages were awarded for that diminishment. The jury may well have awarded the $30,000 to Mr. Posey, payable by the association, to compensate him for the costs of bringing an action that the association should have brought. Damages were the legal remedy for the breach of fiduciary duty, while injunctive relief was the equitable remedy sought for the trespass and nuisance. (Rest.2d, Torts, § 822, com. d.) Defendants’ argument also fails because Code of Civil Procedure section 731 allows a plaintiff to both enjoin or abate a nuisance and also recover damages. The trial court remains free, on remand, to issue the requested injunction, to award damages in lieu of an injunction, or to find for defendants.
DISPOSITION
The judgment is reversed and the case is remanded with instructions to the trial court to exercise its discretion to decide whether or not to issue an injunction by applying the tests stated in Christensen v. Tucker, supra, 114 Cal. App.2d 554. In making this determination, the trial court should consider whether or not the encroachment by the Leavitts was innocently made, whether Mr. Posey will suffer irreparable injury if the injunction is not issued, and the relative hardships to the parties caused by granting or denying the injunction. The trial court should also make and enter a statement of decision in accordance with Code of Civil Procedure section 632. Plaintiff is to recover costs on appeal.
Dabney, Acting P.J., and McKinster, J., concurred.
[FN. 1] The record is not complete because the trial briefs and written motions were not included in the record. The transcript indicates that the parties and the court generally accepted the principle that the trial court would decide the trespass and nuisance issues, and the jury would determine monetary damages.
[FN. 2] Defendants correctly note that plaintiff then filed an improper notice of appeal dated March 18, 1988, from the minute order instead of the judgment. Defendants properly moved to augment the record to include the judgment filed July 25, 1988, and suggest that we must treat the appeal as timely filed pursuant to California Rules of Court, rule 2(c). While such treatment is discretionary, not mandatory, we agree with defendants that we should consider the appeal on its merits. We note, however, that the perfection of the appeal, including obtaining the judgment and including it in the record on appeal, is properly the burden of the appellant, not the respondent.
[FN. 3] The trial court apparently counted the time from its earlier decision in December, despite its statement that it would set aside its previous decision and consider the matter over again. While there is some question as to the timeliness of the plaintiff’s request in February, the Leavitts’ request was clearly filed in time. The trial court therefore erred in denying the request for a statement of decision. (Code Civ. Proc., § 632.)
[FN. 4] The action could also be construed as an action for the recovery of real property, i.e., an ejectment action. If so, factual issues raised by the consent defense would be properly triable by the jury: “In actions for the recovery of … real … property, with or without damages, … an issue of fact must be tried by a jury, unless a jury trial is waived, or a reference is ordered, as provided in this Code. Where in these cases there are issues both of law and fact, the issue of law must be first disposed of.” (Code Civ. Proc., § 592.) In our view, the action was essentially a trespass action, and the third sentence of section 592 applies: “In other cases, issues of fact must be tried by the Court, subject to its power to order any such issue to be tried by a jury….” Since the action against the Leavitts was essentially equitable, the jury’s findings were only advisory.
[FN. 5] The declaration here was recorded in 1973. At that time, similar language was contained in former Civil Code section 1355. In 1985, the statutes were reorganized by the Davis-Stirling Common Interest Development Act (Stats. 1985, ch. 874) and the quoted language was adopted.
[FN. 6] It also inconsistently provides that “Each Owner shall own an undivided interest in the Common Area, including Limited Common Area. No such percentage shall be altered without the consent of all Owners….” Plaintiff, as a member of the association, either owned the common area as a tenant in common with the other homeowners or owned the easement interest discussed in the text. (Civ. Code, § 1351, subd. (l); former Civ. Code, § 1353, subd. (b).) Either interest is sufficient to support his trespass action. (See, generally, 7 Miller & Starr, Cal. Real Estate (2d ed. 1990) § 20:51, p. 117; 5 Miller & Starr, Cal. Real Estate, supra, § 14.10, pp. 323-325.)
[FN. 7] Interestingly enough, this section also provides that the easement is subject to the right of the association to convey the common area to a public agency but that such a conveyance requires a 2/3 vote of the owners. The declaration fails to mention the general right to transfer real property which is contained in the articles of incorporation, and which is unrestricted.
[FN. 8] The declaration also provides that “each Owner may use the Common Area, excepting Limited Common Area, in accordance with the purposes for which it is intended, so long as he does not hinder or encroach upon the lawful rights of the other Owners.” Obviously, as the parties agreed, there was an encroachment here.
[FN. 9] An analogous situation would be where a landlord consents to a third person’s activities on the property that interfere with a tenant’s interests. The tenant can still sue the third person for trespass on the tenant’s estate. (Brown Derby Hollywood Corp. v. Hatton (1964) 61 Cal.2d 855, 858; 5 Miller & Starr, Cal. Real Estate, supra, § 14.10, pp. 323-325.)
[FN. 10] The declaration here provides that: “Each Owner shall comply strictly with the provisions of this Declaration, and the Rules as the same may be lawfully amended from time to time, and with decisions adopted pursuant to said Declaration and Rules, and failure to comply shall be grounds for an action to recover reasonable sums due for damages or for injunctive relief, or both, maintainable by the Board or Manager in behalf of the Owners, or in a proper case, by an aggrieved Owner. …” (Italics added.)
[FN. 11] At oral argument, defendants also argued that there was a past practice of the board approving deck extensions, and that this history was relevant in interpreting the contract created by the recorded declaration. However, the defendants failed to point out that the declaration contains a waiver clause which essentially provides that the failure to insist on strict performance of a provision of the declaration is not a waiver of that provision. (Declaration, par. 15, pp. 18-19.)
[FN. 12] Defendants also rely on the familiar rule that the exercise of the trial court’s discretion will be reversed only upon a showing of abuse of discretion. Again, the problem for defendants is that the record does not show that the trial court did exercise its discretion or did adopt the findings of the jury as its own. (Cf. Lippold v. Hart (1969) 274 Cal. App.2d 24 [78 Cal. Rptr. 833].)
[FN. 13] The most recent case relied on by defendants, Novicke v. Vons Grocery Store (Cal. App.) has been ordered depublished by the Supreme Court.
Harvey v. The Landing Homeowners Association
[Conflicts of Interest; Burden of Proof] The burden of proof transfers onto the person challenging the interested transaction when the interested Director makes full disclosure of all material facts and recused himself from the board’s discussion and vote.
Butz Dunn DeSantis & Bingham, and Luke R. Corbett for Plaintiff and Appellant.
Murchison & Cumming, Kenneth H. Moreno and Scott J. Loeding for Defendants and Respondents.
OPINION
BENKE, J.
Plaintiff E. Miles Harvey appeals the judgment under Code of Civil Procedure section 437c for defendants (1) The Landing Homeowners Association, a California nonprofit mutual benefit corporation (LHA), (2) certain members of the board of directors (Board) of LHA, and (3) various residents of The Landing residing on the fourth floor of the condominium development (collectively defendants). Harvey contends the trial court erred when it granted summary judgment for defendants because: (a) the Board acted outside the scope of its authority when it determined fourth floor homeowners could exclusively use up to 120 square feet of inaccessible common area attic space, appurtenant to their units, for rough storage; (b) the Board lacked the power to make a material change in the restated declaration of restrictions (CC&R’s) for The Landing by allowing fourth floor homeowners to use the attic space common area for storage; and (c) the various resolutions passed by the Board, permitting use of that space for storage, were invalid because the Board vote lacked a disinterested majority.
We conclude the Board acted within its authority under the CC&R’s, and the undisputed evidence shows it properly exercised its discretion when it determined fourth floor homeowners could use up to 120 square feet of inaccessible attic space common area for storage. We further conclude the actions of the Board were not invalid because directors who owned units on the fourth floor of the project voted in favor of allowing limited exclusive use of the attic space common area. We therefore affirm the judgment. [813]
FACTUAL AND PROCEDURAL BACKGROUND
The Landing is a four-story, 92-unit condominium complex located in Coronado, California. On the fourth floor of The Landing, each of the 23 units has attic space adjacent to the units designated on the condominium plan as common area. The attic space common area is accessible only to the unit adjacent to it.
For many years, several fourth floor homeowners used the vacant attic space for storage. In mid-2002, a homeowner complained to the Board about that use, which prompted the Board to inspect the fourth floor units. Of the 23 units on the fourth floor, the Board discovered 18 of the homeowners were using between 50 and 288 square feet of the common area attic space for storage, with 10 homeowners using in excess of 120 square feet of that space as storage. In addition, one other fourth floor owner had converted a portion of the common area attic space into habitable living space.
After the inspections were completed, Harvey, who was then president of the Board, and two members of The Landing Architectural Review Committee (ARC) prepared a memorandum to the Board with the results of the inspection. The ARC memorandum recognized fourth floor homeowners had been using the attic space common area for at least 15 years, with many of these homeowners improving the space by adding features such as wallboard, lights, flooring, carpeting, closets, shelves and doors. The memorandum also recognized the homeowners’ use of the attic space was governed by Article IV, Section 12 of the CC&R’s, which provides:
“The Board shall have the right to allow an Owner to exclusively use portions of the otherwise nonexclusive Common Area, provided that such portions of the Common Area are nominal in area and adjacent to the Owner’s Exclusive Use Area(s) or Living Unit, and, provided further, that such use does not unreasonably interfere with any other Owner’s use or enjoyment of the Project.”
The ARC memorandum found the use of the attic space common area as storage by the fourth floor homeowners did not interfere with any other owner’s use or enjoyment of the project, and with one exception, the memorandum concluded the homeowners’ use of that space was “nominal” within the meaning of Section 12 of the CC & R’s. The ARC memorandum concluded by making several recommendations, including having the LHA enter into a license agreement with each of the fourth floor homeowners using the attic space common area.
The memorandum outlined the proposed terms of the license agreement, including, among other things, requiring the fourth floor homeowners to obtain insurance to cover their use of the attic space, preventing additional [814] modifications or improvements to the space without written approval from the Board and imposing a one-time assessment of $350 to cover the costs and fees associated with the drafting and recording of the license agreement.
Harvey decided to meet with legal counsel regarding the fourth floor homeowners’ use of the attic space common area. Among other things, legal counsel opined the LHA lacked authority to “grant the encroaching owners the ‘right’ to continue their use of the common area” because “using an attic for storage is not a nominal use.” Based on legal counsel’s report, at the next Board meeting Harvey requested the Board issue notices of violation under the CC&R’s to the 18 fourth floor homeowners using the attic space common area. When the Board refused, Harvey immediately resigned as president of the LHA, although he remained a director on the Board.
The City of Coronado (City) became involved in the matter when, in response to a complaint by a disgruntled homeowner regarding the continued use of the attic space common area, it issued to the Board a notice of violation under the California Building Code. Several Board members, including Harvey, met with two building inspectors for the City. The inspectors advised the Board the attic space could be used for storage, but not living space. The Board agreed to provide monthly updates to the City regarding the Board’s progress in mitigating all aspects of the notice of violation.
At its next meeting, the Board voted four to one in support of a motion finding a violation of the CC & R’s and the building codes by the fourth floor homeowners using the attic space common area. During the meeting, the Board recognized its authority under the CC&R’s to permit a “homeowner to use a `nominal area’ of the common area provided it is adjacent to [the owner’s] unit and such use would not interfere with any one else’s use.” By the same vote in a renewed motion, the Board purportedly decided: (1) 120 square feet or less of the attic space common area could be used for “rough storage (example: boxes, Christmas decorations, luggage, etc.)”; (2) the homeowners would have to ask the Board for “permission” to use the 120 square feet for storage; and (3) this “resolution would also apply to storage space in the pillars that are located in the entrance to front patios.” The Board also agreed to hold a workshop for homeowners to “discuss ideas to organize the restoration of the units that have violations.”
As it turns out, the average size of the fourth floor living units is about 2,250 square feet. The Landing has approximately 265,479 square feet, which includes approximately 80,000 square feet of common area. The total area approved for attic storage for all fourth floor units combined is 2,760 square feet (e.g., 23 units x 120 square feet), or a little more than 1 percent of the total building area, or approximately 3.5 percent of the total common area. [815]
The Board issued notices of violation to the fourth floor homeowners, telling them their use of the attic common area violated the CC & R’s and the California Building Code, directed them to restore the attic space to its original condition and advised them they could make a formal request to the Board for permission to use up to 120 square feet of common area for rough storage under certain conditions. In response to the notices of violation, several homeowners retained legal counsel who claimed those owners had obtained irrevocable rights to use the attic space that could not be disturbed by the Board.
To effectuate the Board’s resolution regarding the attic space common area, and to avoid litigation with the fourth floor homeowners, the Board prepared a standard “permission form” to be signed by those homeowners. Among other provisions, the form provided that the homeowner could use no more than 120 square feet of common area for rough storage only, that use of that space was subject to all provisions of The Landing Bylaws, the CC&R’s and governmental laws, rules and regulations, and that the Board reserved the right to terminate its approval of such use “for cause.” In 2003 the Board unanimously approved the “permission form,” after myriad revisions, which included three votes by homeowners who did not live on the fourth floor.
The Board also took steps to ensure the LHA’s insurance coverage would not be affected by the fourth floor homeowners’ use of the attic space common area. The Board consulted the LHA’s insurance broker, who determined the “use of the fourth-floor common area attic space in The Landing for storage purposes has not impacted The Landing insurance coverage … and has not jeopardized the insurability of The Landing premises.” The Board also required each fourth floor homeowner seeking to use the attic space to obtain liability insurance coverage of $1 million.
The City continued to conduct periodic inspections of the fourth floor units to ensure full compliance with applicable laws and regulations. After an inspection in mid-2004, the City found no unit with storage exceeding 120 square feet, and further concluded the units in question were “in compliance with the Building and Fire Codes.” The City conducted another inspection of the subject units in late 2005 to ensure Fire Code compliance. The City’s report stated “[a]ll units that had storage were within the maximum allowance] of 120 square feet.” The report did note, however, some minor noncompliance items, and asked the LHA to contact the City when they were corrected.
Harvey requested the Board call a special meeting of the members of the LHA after the Board in mid-2005 amended the rules and regulations of the LHA to set forth the common areas determined by the Board to be appropriate for storage use. Under the rule change, residents of The Landing could not [816] store property in the common area other than “in the garage storage lockers, or in cabinets installed in the pillars of entry patios, or in the attics of fourth-floor living units to the extent permitted by the Board….” The homeowners approved the rule change by a 56-to-7 vote.
The Board passed a resolution in 2006 transferring to the fourth floor owners the “exclusive right to use the common area attic space in that owner’s unit,” as allowed under newly-enacted Civil Code section 1363.07(a)(3)(E). The Board’s resolution provided:
“(a) all fourth floor common area attic space is accessible only from the inside of a condominium;
“(b) all fourth floor common area attic space is freely accessible only by the owner of the unit in which … it is located;
“(c) all fourth floor common area attic space is inaccessible to owners other than the owner of the unit in which it is located;
“(d) all fourth floor common area attic space is of no general use to the membership at large, but only to the owner of the unit in which it is located; and
“(e) the maintenance and management of fourth floor common area attic space is a burden to the [LHA] because such space is located inside of the condominium, is generally inaccessible to the membership, and is of little use or benefit to the [LHA].”
Harvey filed a lawsuit against defendants alleging causes of action for trespass, breach of fiduciary duty and injunctive relief. Defendants moved for summary judgment. The trial court granted the motion, finding the language of the CC&R’s, “grants the Board broad authority and discretion to determine whether to allow an owner to exclusively use portions of the common area and this necessarily includes determining what portions are `nominal in area.'” The court found the Board acted within the scope of authority given to it under Article II, Section 2 of the CC&R’s “when it exercised its discretion in interpreting … [Section] 12 of the CC & R’s and its application to requests from homeowners to use their attic space.” The court deferred to the Board’s presumed expertise on the use of the attic space common area, based on undisputed evidence showing the “Board conducted a reasonable investigation, in good faith and with regards for the best interests of the community association and its members and exercised discretion within the scope of its authority.” The court also ruled directors who voted in favor of allowing limited use of the attic space common area had no conflict of [817] interest with the LHA merely because they owned units on the fourth floor of the project, and, in any event, the vote of all the homeowners overcame any such potential conflict.
Finally, the court concluded Harvey’s trespass claim failed because the attic space common area was being used by the fourth floor homeowners with the Board’s express permission. Because no causes of action remained against defendants, the court concluded Harvey was not entitled to injunctive relief. In a separate hearing, the court awarded defendants costs of suit in the amount of $10,220.46, and attorney fees in the amount of $116,794.30.[[FN. 1]]
I. DISCUSSION
A. Applicable Law and Standard of Review
CC&R’s are interpreted according to the usual rules for the interpretation of contracts generally, with a view toward enforcing the reasonable intent of the parties. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 380-381) (Nahrstedt); 14859 Moorpark Homeowner’s Assn. v. VRT Corporation (1998) 63 Cal.App.4th 1396, 1410.) Where, as here, the trial court’s interpretation of the CC&R’s does not turn on the credibility of extrinsic evidence, we independently interpret the meaning of the written instrument. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866.)
The language of the CC&R’s governs if it is clear and explicit, and we interpret the words in their ordinary and popular sense unless a contrary intent is shown. (Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 829; see also Civ.Code, § 1644.)[[FN. 2]] The parties’ intent is to be ascertained from the writing alone if possible. (WYDA Associates v. Merner (1996) 42 Cal.App.4th 1702, 1709.) If an instrument is capable of two different reasonable interpretations, the instrument is ambiguous. (Badie v. Bank of America (1998) 67 Cal. App.4th 779, 798.) In that instance, we interpret the CC&R’s to make them lawful, operative, definite, reasonable and capable [818] of being carried into effect, and must avoid an interpretation that would make them harsh, unjust or inequitable. (Civ.Code, § 1643;[[FN. 3]] see also Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 961.)
B. The CC&R’s
The issue here concerns the interpretation of the LHA CC&R’s, including the language “nominal in area” in Article IV, Section 12 in connection with an owner’s exclusive use of the attic space common area.
Article II, Section 2 of the CC&R’s provides in part:
“[T]he activities and affairs of the [LHA] shall be managed and all corporate powers shall be exercised by and under the ultimate direction of the Board. [¶] Except as may be otherwise provided herein, the [LHA] acting through the Board and officers shall have the sole and exclusive right and duty to manage, operate, control, repair, replace or restore all of the Common Area or any portion thereof, together with the improvements….”
Article II, Section 3 provides in part:
“The Board shall have the right to adopt reasonable rules and regulations not inconsistent with the provisions contained in [these CC & R’s], and to amend the same from time to time relating to the use of the Common Area and the recreational and other facilities situated thereon by Owners and by their lessees or invitees….”
Article IV, Section 11 of the CC&R’s provides in part:
“No part of the Common Area shall be obstructed so as to interfere with its use for the purposes herein above permitted, nor shall any part of the Common Area be used for storage purposes (except as incidental to one of such permitted uses, or for storage of maintenance equipment used exclusively to maintain the Common Area or in storage areas designated by the Board).” (Emphasis added.)
As noted above, Article IV, Section 12 of the CC&R’s gives the Board authority to allow an owner to use exclusively common area provided such use is “nominal in area” and adjacent to the owner’s exclusive use area or living unit, and “provided further, that such use does not unreasonably interfere with any other Owner’s use or enjoyment of the Project.”
The CC&R’s make clear the Board has the “sole and exclusive” right to “manage” the common area (Art. II, § 2); to “adopt reasonable rules and [819] regulations not inconsistent with the provisions contained in [the CC&R’s]” relating to that use (Art. II, § 3); to designate portions of the common area as “storage areas” (Art. IV, § 11); and to authorize it to allow an owner to use exclusively portions of the common area “nominal in area” adjacent to the owner’s unit, provided such use “does not unreasonably interfere with any other owner’s use or enjoyment of the project.”[[FN. 4]] (Art. IV, § 12.)
C. The Rule of Judicial Deference Applies to the Board’s Decision Allowing Fourth Floor Homeowners to Use up to 120 Square Feet of Inaccessible Attic Space Common Area for Rough Storage
Harvey contends the grant of summary judgment was improper because the Board “had no discretion to overrule or modify the mandate of Art. IV, § 11 that the common area shall not be used for storage.” Harvey relies on Nahrstedt, supra, 8 Cal.4th 361 to support his position.
In Nahrstedt, the Supreme Court addressed the validity of a pet restriction under Civil Code section 1354, subdivision (a) contained in the CC&R’s prohibiting residents from keeping all animals (including cats and dogs) in their units except “domestic fish and birds.” (Nahrstedt, supra, 8 Cal.4th at p. 369, fn. 3.) Under Civil Code section 1354, subdivision (a), use restrictions in CC&R’s are “enforceable equitable servitudes, unless unreasonable….” The Nahrstedt court concluded section 1354’s presumption of reasonableness could only be overcome if the party challenging the restriction could prove the restriction: (1) “violates public policy”; (2) “bears no [reasonable] relationship to the protection, preservation, operation or purpose of the affected land”; or (3) “otherwise imposes burdens on the affected land that are so disproportionate to the restriction’s beneficial effects that the restriction should not be enforced.” (Nahrstedt, supra, 8 Cal.4th at pp. 380-382.) Applying that standard to the facts before it, the court in Nahrstedt held a complete ban on animals was not unreasonable and was therefore enforceable under Civil Code section 1354. (Nahrstedt, supra, 8 Cal.4th at p. 386.)
Harvey further argues the trial court erred when it relied on the other “leading Supreme Court case[ ] concerning condominium homeowner associations,” Lamden v. La Jolla Shores Clubdominium Homeowners Ass’n (1999) 21 Cal.4th 249 (Lamden). There, an owner sued the condominium community association for injunctive and declaratory relief, claiming the board of directors of the community association caused her unit to decrease in value because of the board’s decision to spot-treat [820] rather than fumigate plaintiffs unit for termite infestation. (Id. at p. 253.) In affirming the board’s action, the court concluded, “[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 statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Ibid.)
The Lamden court thus adopted a “rule of judicial deference to community association board decision making,” which “affords homeowners, community associations, courts and advocates a clear standard for judicial review of discretionary economic decisions by community association boards, mandating a degree of deference to the latter’s business judgments sufficient to discourage meritless litigation, yet at the same time without either eviscerating the long-established duty to guard against unreasonable risks to residents’ personal safety owed by associations that `function as a landlord in maintaining the common areas’ [citation] or modifying the enforceability of a common interest development’s CC&R’s [citations].” (Lamden, supra, 21 Cal.4th at pp. 253, 270.)
Harvey contends the trial court here erred when it relied on Lamden, and not Nahrstedt, asserting Lamden is distinguishable from the present case because the issue in Lamden involved the court’s review of a discretionary matter—maintenance and repair of a common area in connection with termite, control, whereas the issue here involves the “enforcement of the plain language of the governing documents.” Harvey thus argues “Lamden does not provide defendants support for their contention that the board of directors [of the LHA] had authority and discretion to override the prohibition in the CC&R’s against using common area for storage…. Lacking that discretion, defendants’ evidence regarding the reasonableness of their investigation, and the fairness of their decision to authorize the use of up to 120 square feet of the common area for storage, is beside the point.”
The CC&R’s do not, however, provide a blanket prohibition against the use of common area for storage, as Harvey suggests. Section 11 of Article IV expressly allows the Board to designate storage areas in the common area. Section 12 of Article IV further gives, the Board the authority and discretion to allow an owner to use exclusively the common area provided certain conditions are met, including the conditions the use be “nominal” and the use not “unreasonably interfere with any other Owner’s use or enjoyment of the Project.” The CC&R’s further grant the Board the exclusive right to manage, operate and control the common areas of the condominium development, providing additional support for the Board’s decision to interpret the CC&R’s to [821] allow up to 120 square feet of attic space common area to be used as storage area. (See Art. II, §§ 2 and 3.)
Unlike the situation in Nahrstedt where the challenged provision in the CC&R’s did not afford the board of the community association with any discretion (e.g., prohibiting all animals except “domestic fish and birds”), here the challenged provisions (Art. IV, §§ 11 and 12) provide the Board with the authority and discretion to allow fourth floor homeowners to use, under certain conditions, portions of the common area for rough storage. We thus conclude Lamden, and not Nahrstedt, governs here.[[FN. 5]]
Under the “rule of judicial deference” adopted by the court in Lamden, we defer to the Board’s authority and presumed expertise regarding its sole and exclusive right to maintain, control and manage the common areas when it granted the fourth floor homeowners the right, under certain conditions, to use up to 120 square feet of inaccessible attic space common area for rough storage.[[FN. 6]] The undisputed evidence in the record shows the Board conducted an investigation in 2002 regarding homeowners’ use of the fourth floor attic space, which had been ongoing for approximately 15 years; met with officials from the City to ensure the use of the attic space complied with building codes; consulted its insurance broker, who determined the “use of the fourth floor common area attic space in The Landing for storage purposes has not impacted The Landing insurance coverage, has not increased the premiums for The Landing condominium policy, and has not jeopardized the insurability [822] of The Landing premises”; agreed to conduct a “workshop” for homeowners to “discuss ideas to organize the restoration of the units that have violations”; prepared and revised a standard “permission form” signed by each fourth floor homeowner to ensure compliance with all provisions of The Landing Bylaws, the CC & R’s and governmental laws, rules and regulations; required each fourth floor homeowner seeking to use the attic space to obtain liability insurance coverage of $1 million; took steps to correct some minor noncompliance items discovered by the City in 2005 during the City’s annual inspection of the subject units to ensure Fire Code compliance; called a special election of all owners of The Landing to determine whether the Board should permit homeowners to use the fourth floor attic space common area for rough storage; and passed a resolution in 2006 transferring to the fourth floor owners the “exclusive right to use the common area attic space in that owner’s unit,” as purportedly allowed under newly-enacted Civil Code section 1363.07(a)(3)(E).
This undisputed evidence shows the Board, “upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members,” properly exercised its discretion within the scope of the CC & R’s when it determined the fourth floor homeowners could use exclusively up to 120 square feet of inaccessible attic space common area as rough storage.[[FN. 7]]
D. Summary Judgment Was Properly Granted on Harvey’s Fourth Cause of Action for Breach of Fiduciary Duty Against the Fourth Floor Directors
Breach of duty is usually a fact issue for the jury. (Lysick v. Walcom (1968) 258 Cal.App.2d 136, 150.) Breach may be resolved as a matter of law, however, if the circumstances do not permit a reasonable doubt as to whether the defendant’s conduct violates the degree of care exacted of him or her. (Ibid.)
Harvey contends summary judgment was improper as to his fourth cause of action for breach of fiduciary duty against certain interested directors [823] because a triable issue of fact exists regarding whether those directors breached that duty to the LHA. Harvey argues the resolutions passed by the Board in 2002, 2003, 2004, 2005 and 2006, authorizing the limited or “nominal” use for storage of inaccessible fourth floor attic space in the common area, were invalid under Corporations Code section 7233 because “[i]n each instance the resolution failed to get the required three votes for adoption unless the votes of directors owning a unit on the fourth floor were counted.” To support this contention, Harvey asserts a trier of fact “could easily find defendants’ actions in authorizing the use of the attic space for storage were a thinly veiled maneuver to get themselves a valuable asset.”
However, under Corporations Code section 7233, subdivision (a)(3), a director of a nonprofit mutual benefit corporation may enter into a contract or transaction with the corporation if “the person asserting the validity of the contract or transaction sustains the burden of proving that the contract or transaction was just and reasonable as to the corporation at the time it was authorized, approved or ratified.”[[FN. 8]] Courts have interpreted the phrase “authorized, approved or ratified” in the nearly identical provision applicable to general corporation law (Corp.Code, § 310, subd. (a)(3))[[FN. 9]] to address the situation where board approval was based on a vote by an interested director (e.g., here, directors who voted in favor of allowing the attic space to be used for rough storage). (Sammis v. Stafford (1996) 48 Cal.App.4th 1935, 1943 (Sammis).) “If [the] phrase ‘authorized, approved or ratified’ was construed to mean only those approvals made without the interested director’s vote, then [Corporations Code section 7233, subdivision (a)(3)] [824] would be unnecessary. Section [7233(a)(2)] and section [7233(a)(3)] both permit interested director transactions where the board of directors approves the transaction. The sections differ, however, depending on whether the approval was obtained with or without the interested director’s vote and whether there was full disclosure. Where a disinterested majority approves the transactions and there was full disclosure, section [7233(a)(2)] applies, and the burden of proof is on the person challenging the transaction. [Citation.] Where, however, the approval was not obtained from a disinterested board vote, section [7233(a)(3)] applies and requires the person seeking to uphold the transaction to prove it was `just and reasonable’ to the corporation.” (Ibid.)
We conclude no conflict of interest existed here. As a threshold matter, there is no evidence in the record to support Harvey’s argument the fourth floor directors obtained a “material financial interest,” as required under Corporations Code section 7233, subdivision (a), when they voted in favor of allowing the attic space common area to be used for storage.[[FN. 10]] (See In re Hochberg (1970) 2 Cal.3d 870, 875 [“‘It is elementary that the function of an appellate court, in reviewing a trial court judgment on direct appeal, is limited to a consideration of matters contained in the record of trial proceedings, and that “[m]atters not presented by the record cannot be considered on the suggestion of counsel in the briefs”’”].)
Moreover, aside from whether the fourth floor directors obtained a “material financial benefit” under Corporations Code section 7233, subdivision (a), we nonetheless conclude subdivision (a)(2) and (a)(3) apply to validate the Board resolutions challenged by Harvey approving the use of the fourth floor attic space common area. Under subdivision (a)(2) of Corporations Code section 7233, where a disinterested majority approves the contract or transaction and there is full disclosure, the action of the board of the mutual benefit corporation is valid. Here, the evidence is undisputed in May 2003 the Board voted five to zero, which included three votes by directors who did not own a unit on the fourth floor, to approve the “permission form” adopted by [825] the Board setting forth the terms and conditions of the fourth floor homeowners’ use of the fourth floor attic space common area for storage. The permission form expressly stated the homeowners could use up to 120 square feet of that space. [[FN. 11]]
In light of the undisputed evidence in the record, and our deference to the Board’s exercise of discretion in determining the use of up to 120 square feet of fourth floor attic space for storage constitutes a “nominal” use, we have little difficulty concluding the material facts of the transaction were fully disclosed and/or known to the Board at the May 2003 meeting, when it approved the “permission form” allowing the use of that inaccessible common area. We further conclude this same undisputed evidence shows the transaction to be “just and reasonable” to the LHA, and Harvey has not met his burden to show otherwise.
Finally, we conclude the actions of the Board in connection with this storage issue were also valid under subdivision (a)(3) of Corporations Code section 7233, which applies to a vote of interested directors. (Sammis, supra, 48 Cal.App.4th at p.1943 [subdivision (a)(3) governs when approval was not obtained from a disinterested board vote].) According to Harvey, when the Board voted at meetings on December 17, 2002, April 16, 2003, July 15, 2003, April 21, 2004, July 20, 2005, and January 1, 2006, to authorize the “nominal” use of the fourth floor attic space common area for rough storage, it lacked a disinterested majority. The burden then shifted to the person seeking to uphold the validity of the transaction to prove it was “just and reasonable as to the corporation” at the time it was “authorized, approved or ratified.” (Corp. Code, § 7233, subd. (a)(3); Sammis, supra, 48 Cal.App.4th at p.1943.) Based on the undisputed evidence, we conclude defendants met their burden to show the “transaction” between the interested directors and the LHA was “just and reasonable” to the LHA when the Board voted at the various meetings to approve the “nominal” use of the fourth floor attic space for rough storage, and Harvey has adduced no evidence to show otherwise. [826]
DISPOSITION
The judgment is affirmed. Defendants are entitled to their costs on appeal.
McConnell, P. J., and McIntyre, J., concurred.
[FN. 1] Harvey has not appealed the award of costs and attorney fees in favor of defendants.
[FN. 2] Civil Code section 1644 provides: “The words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning; unless used by the parties in a technical sense, or unless a special meaning is given to them by usage, in which case the latter must be followed.”
[FN. 3] Civil Code section 1643 provides: “A contract must receive such [an] interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties.”
[FN. 4] Because it is undisputed the attic space common area is accessible only to the unit adjacent to that area, there is no dispute here that the fourth floor homeowners’ use of the attic space common area “unreasonably interfere[s] with any other owner’s use or enjoyment of the Project.”
[FN. 5] In Haley v. Casa Del Rey Homeowners Assn. (2007) 153 Cal.App.4th 863, 875, this court applied Lamden’s rule of judicial deference to community board decision-making not involving “ordinary maintenance decisions,” observing Lamden “also reasonably stands for the proposition that the [community association] had discretion to select among means for remedying violations of the CC & R’s without resorting to expensive and time-consuming litigation….” Although the instant case, like Haley, also does not involve a per se maintenance decision, we nonetheless conclude the reasoning of Lamden applies here as well, where the evidence shows the Board, after undertaking a reasonable investigation and acting in the best interests of the LHA, made a “detailed and peculiar economic decision[ ]” allowing fourth floor homeowners to use up to 120 square feet of inaccessible attic space common area for rough storage. (Lamden, supra, 21 Cal.4th at p. 271; see also Nahrstedt, supra, 8 Cal.4th at p. 374 [“[g]enerally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with public policy”].)
[FN. 6] Although, under Lamden, we defer to the Board’s authority and expertise regarding the “nominal” use of the common area for storage, we note the total area approved for attic storage for all fourth floor units combined is 2,760 square feet (e.g., 23 units × 120 square feet), or a little more than 1 percent of the 265,479 total building area, or approximately 3.5 percent of the approximately 80,000 total square feet common area. As a matter of contract interpretation under our independent standard of review, we have little difficulty concluding the use for storage of up to 120 square feet of inaccessible attic space constitutes a “nominal” use of the common area within the meaning of Article IV, Section 12.
[FN. 7] Because we conclude the Board acted within its authority under the CC&R’s and defer, based on the undisputed evidence in the record, to the Board’s economic decision to allow the homeowners to make limited or “nominal” use of the inaccessible fourth floor attic space, we further conclude summary judgment was properly granted on Harvey’s first cause of action for trespass against the defendant homeowners. (See Civic Western Corp. v. Zila Industries, Inc. (1977) 66 Cal. App.3d 1, 16-17 [“Where there is a consensual entry [on the property of another], there is no [trespass], because lack of consent is an element of the wrong”].) For similar reasons, Harvey’s fifth cause of action for injunctive relief, which seeks to enjoin the fourth floor homeowners from using the attic space common area, was also properly disposed of on summary judgment.
[FN. 8] Section 7233 provides: “(a) No contract or other transaction between a corporation and one or more of its directors, or between a corporation and any domestic or foreign corporation, firm or association in which one or more of its directors has a material financial interest, is either void or voidable because such director or directors or such other corporation, business corporation, firm or association are parties or because such director or directors are present at the meeting of the board or a committee thereof which authorizes, approves or ratifies the contract or transaction, if: (1) The material facts as to the transaction and as to such director’s interest are fully disclosed or known to the members and such contract or transaction is approved by the members (Section 5034) in good faith, with any membership owned by the interested director not being entitled to vote thereon; (2) The material facts as to the transaction and as to such director’s interest are fully disclosed or known to the board or committee, and the board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient without counting the vote of the interested director or directors and the contract or transaction is just and reasonable as to the corporation at the time it is authorized, approved or ratified; or (3) As to contracts or transactions not approved as provided in paragraph (1) or (2) of this subdivision, the person asserting the validity of the contract or transaction sustains the burden of proving that the contract or transaction was just and reasonable as to the corporation at the time it was authorized, approved or ratified.”
[FN. 9] Indeed, the general corporation law is the source of the nonprofit corporation law. (See Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 525.)
[FN. 10] The term “material financial interest” is not defined in the code. However, courts generally find such an interest when a person has an expectation of pecuniary gain. (See, e.g., Michael v. Aetna Life & Casualty Ins. Co. (2001) 88 Cal.App.4th 925, 942-943.) Harvey claims use of the attic space common area for storage is a “valuable asset,” but this is not the test under Corporations Code section 7233, subdivision (a). Moreover, several of the directors of the LHA who reside on the fourth floor may question whether their use of the common area attic space is a “valuable asset,” particularly after being named by Harvey as defendants in this lawsuit.
[FN. 11] It is not entirely clear from the record which of the various drafts, if any, of the permission form included in the record ultimately became the “final” form approved and used by the Board. (See, e.g., Exhibits R, S, T, U and V.) For present purposes, however, it matters little, inasmuch as in each of the drafts the Board specifically noted the homeowners could use as rough storage up to 120 square feet of the fourth floor attic space appurtenant to their units.
Ritter & Ritter v. Churchill Condominium Association
[Maintenance; Board Deference] The deference afforded to HOA boards covers only “ordinary” maintenance; the “Lamden Rule” only insulates directors from liability, not the HOA.
Minton Ritter; Feldsott & Lee, Stanley Feldsott and Martin L. Lee for Plaintiffs and Respondents.
Hillel Chodos; Michael A. Chodos and Rehema Rhodes Defendants and Appellants.
OPINION
COOPER, P. J.-
INTRODUCTORY INFORMATION
BACKGROUND INFORMATION
The Parties
The Churchill is a 110-unit, 13-story condominium building in the “Wilshire Corridor” in the Westwood area of Los Angeles California. Defendant and appellant (The Churchill) is a California Non-Profit Mutual Benefit Corporation. The individual defendant and appellant directors of The Churchill are Tibor Breier, Martha Brown, Theodore Nittler, Ruth Hochberg and Basil Anderman [109] (“the Board”). [FN. 1] Each of the individual directors is also an owner in the building and receives no compensation for their services as director. Minton and Roberta Ritter, are brother and sister. The Ritter & Ritter, Inc., Pension and Profit Plan, and Ritter and Ritter Family Investment Trust, purchased adjoining units [3H in 1995 and 3J in 1998] in The Churchill. Roberta Ritter is the trustee of both trust entities and a plaintiff in this litigation. [FN. 2]
The Churchill Condominium
The Churchill was built in 1960; with construction completion in 1962. Built originally as an apartment complex, it was converted into a condominium association in 1976, at which time its Declaration of Establishment of Covenants, etc. (hereinafter “CC&R’s”) was recorded. The CC&R’S were followed with House Rules documents. Together these documents form the governing documents for the organization.
The Churchill is constructed of a series of horizontal concrete slabs attached to and supported by a rectangular structure of steel girders and beams. The ceiling of each unit is actually a “drop ceiling” below the next concrete slab. Above the “drop ceiling” and between it and the concrete slab above is an area referred to as the “plenum.”
The various pipes, conduits and ducts needed to serve each unit run up and down central shafts in the building, then branch out sideways through this “plenum” area, and then go up into each unit through slab penetrations (i.e. hole) made in the concrete slab during the building’s original construction.
The slab penetrations are holes in the concrete that range in size from six inches in diameter to twelve by twelve inch holes. These “slab penetrations” were created at the time of the initial construction of the building. The purpose of the slab penetrations was to allow space for passage by the vertical plumbing and piping which runs throughout the structure. The original architectural construction plans and the city permit requirement at the time called for these slab penetrations to be “fire proofed.” However, this did not occur and the Churchill’s original construction (including these slab penetrations) passed all applicable building inspections and The Churchill duly received its Certificate of Occupancy in 1962. The Churchill has never received any order to change or upgrade these slab penetrations. Existing Los Angeles building codes allow unfilled floor penetrations to remain as an existing, non-conforming condition. [110]
The dispute in this case arose over the existence of these slab penetrations and the duty, if any, of The Churchill to repair the condition that the penetrations were not properly finished during the initial construction of the building.
STATEMENT OF THE CASE
In 1998, the Ritters complained to appellants about smoke odors in Unit 3H; a unit which the Ritters never remodeled. In 1999, the Ritters purchased a second unit, 3J and discovered that this unit had similar odor problems. After bringing this issue to the attention of The Churchill both before and after unit 3J was remodeled, the manager, Bill Brick, told the Ritters that the odor problems originated in their air conditioning unit and that their air conditioning unit had to be replaced. The Ritters replaced the air conditioning unit, but the new unit provided no relief from the odors. The Churchill’s management responded to the Ritters’ continued complaints by stating that there was no more that could be done and that no other homeowners complained of similar problems. [FN. 3]
In late 2003, a new tenant in the Ritter’s unit 3J complained about cigarette odors in the unit. The Ritters demanded that The Churchill identify the source of the odors and abate it. This demand triggered a series of investigations by the parties and the Board decision which is the subject of this lawsuit. Extensive investigation and communication between the parties ensued.
The Ritters hired their own expert engineer who conducted his own investigation. He reported that the source of the odors was the slab penetrations and offered his opinion that these holes constituted a fire hazard and should be filled or fire stopped.
The Board hired a professional engineer and a ventilation system expert to investigate the source of the problem. Their expert reported that the problem was caused, in part, by the slab penetrations in the Ritter’s unit 3J’s floor. According to the expert, these holes allowed odors to travel between the 2J unit below, and the Ritter’s unit 3J. The Churchill’s engineer also indicated slab penetrations posed a significant fire safety risk. [FN. 4]
After receiving its expert’s report and conducting its investigation and communication with the Ritters, the Board concluded based on the 1999 Building Code the Ritters should have filled any floor penetrations exposed [111] during their remodel, and that doing so now would abate the odor problem. The Board believed that the Ritters were responsible for making the holes in the slabs and therefore they were also responsible for fixing them and would be expected to enter the 2J unit below, pay for the homeowner to stay in a hotel during the repairs and make all necessary repairs within 30 days.
The Ritters demanded a hearing before the Board. They also demanded that Board and Association do the work to fill the slab penetrations adjacent to their own unit and additionally repair all penetrations throughout the entire building.
The Board agreed to the Ritters’ request and on March 9, 2004 held a formal adjudicative hearing of the Ritters’ protest and demands. At the hearing, the Ritters were represented by counsel and submitted evidence and witness testimony. After considering all such materials as well as the report of their own expert and the advice of their counsel, the Board concluded: 1) that the Ritters’ remodel in 1999 “triggered” the obligation to fill the floor penetrations adjacent to their units, which obligation came to light only when their tenant complained of odors in 2003; 2) The Churchill did not have a legal obligation to fill such holes because they were “existing, non-conforming” conditions; 3) The Churchill would not at this time choose to undertake the expense of making the corrections; and 4) the Ritters were required by law and by the CC&R’s to fill the penetrations adjacent to their own units and would be ordered to do so. [FN. 5]
The Board also imposed daily fines of $200 per day on the Ritters for failure to fill the holes adjacent to their own units, but expressly indicated that all such fines would be waived if the Ritters filled the holes within 30 days after the order. The Churchill’s Board notified the Ritters of their decision in writing. It attached a bid from a contractor offering to complete the work adjacent to their units for approximately $2,700 per unit. The Ritters declined the Board’s offer.
The Current Litigation
On May 17, 2004, the Ritters sued the Churchill and each of its then-Directors individually. The Ritters’ First Amended Complaint set forth causes of [112] action for Nuisance, Negligence, Breach of Fiduciary Duty, Breach of the CC&R’s, Breach of the Covenant of Good Faith and Fair Dealing, Permanent Injunctions and Declaratory Relief. They sought financial damages due to odor intrusion into their unit. They also sought an injunction requiring the Churchill to fill all slab penetrations throughout the building, at association expense. They sought damages of at least $200,000 for diminution in value to their units as a result of the unfilled slab penetrations.
The Churchill cross-complained to require the Ritters to fill the penetrations adjacent to their units and for recovery of the $200 daily fines imposed for their failure to do so. By the time of trial, these daily fines had amounted to $77,000.
The matter went to trial on May 2, 2005 and concluded on May 19, 2005. [FN. 6] The legal causes of action were presented to a jury and the equitable causes of action were presented to the trial judge. The legal causes of action presented to the jury included: claims that the Churchill has breached the CC&R’s, acted negligently and breached their fiduciary duty against the Ritters. General Verdicts and Special Interrogatories were submitted to the jury. The jury was instructed and began their deliberations. The jury returned their verdict on May 20, 2005.
The jury returned a General Verdict that stated:
“On the Ritter plaintiffs’ claim for breach of the CC&Rs
“We find in favor of the Ritter plaintiffs and against The Churchill defendants . . .
“On the Ritter plaintiffs’ claim for breach of fiduciary duty
“We find in favor of the Ritter plaintiffs and against The Churchill defendants . . .
“On the Ritter plaintiffs’ claim for negligence
“We find in favor of the Ritter plaintiffs and against The Churchill defendants.
“On The Churchill Cross-Complaint . . .[113]
“We find in favor of cross-defendants the Ritters and against cross-complainant The Churchill.”
Special Interrogatories were submitted to the jury and the jury returned the forms with the following responses: [FN. 7]
“We answer the questions submitted to us as follows:
“1. Did The Churchill defendants breach any provisions of the CC&R’s?
“The Churchill Yes
“Basil Anderman No
“Tibor Breier No
“Martha Brown No
“Ruth Hochberg No
“Edwin Nittler No
“2. If so, what provisions?
“5.1(3) – 5 and 5.1(6)
“3. If the answer to Number l is “Yes,” were the Ritter plaintiffs harmed by the Churchill defendants?
“Yes
“4. What are the Ritter plaintiffs’ damages?
“Economic loss:$4,620
“5. Were The Churchill defendants negligent?
“The Churchill Yes
“Basil Anderman No
“Tibor Breier No
“Martha Brown No
“Ruth Hochberg No
“6. If the answer to Number 5 is yes, was The Churchill defendant’s negligence a substantial factor in causing harm to plaintiffs? [114]
“Yes
“7. Were the Ritter plaintiffs negligent?
“Yes
“8. Was the Ritter plaintiffs’ negligence a substantial factor in causing “harm?
“Yes
“9. What percentage of responsibility for the Ritter plaintiffs’ harm do “you assign to the following?
“The Ritter Plaintiffs 25%
“The Churchill 75%
[¶] . . . [¶]
“Total 100%
“10. What amount of fines do you award against the Ritter cross-defendants, if any?
“$0.”
The court tried the equitable causes of action and on October 3, 2005, the court issued its final judgment. The verdict form stated:
“VERDICT FORM”
“1. Plaintiffs Ritter & Ritter, Inc. Pension and Profit Plan, Roberta Ritter Trustee, Roberta Ritter Trustee of the Ritter Family Investment Trust dated January 13, 1986, and cross-complainants/cross-defendants Ritter & Ritter, Inc. Pension and Profit Plan, Roberta Ritter Trustee, Roberta Ritter Trustee of the Ritter Family Investment Trust dated January 13, 1986, and Roberta Ritter, individually, shall recover from the defendants the sum of $____ as and for their attorney fees, and the sum of $____ as and for their costs.
“2. The individually named directors did not breach their fiduciary duty.
“3. Pursuant to Code of Civil Procedure § 1060, the court will and does retain ongoing jurisdiction to enforce the above recited equitable and/or injunctive decrees (to wit, Paragraph 2 above).” [115]
Post Trial Proceedings
After trial, but prior to the court’s issuance of the judgment herein, the following motions were heard by the trial court: l) The Churchill Defendants Motion for a Minute Order Entering Dismissal of Ritters’ First, Second and Sixth Causes of Action; 2) Churchill Defendant’s Motion for Judgment Notwithstanding the Verdicts; 3) Ritter’s Motion for Reconsideration and Revocation of order made July 15, 2005 that Ritters are to Pay for Firestopping on Common Area Adjacent to Units 3H and 3J and/or Request for Court on its Own Motion to Reconsider Same. On August 24, 2005 the court granted Ritter’s motion for reconsideration and clarified it order to provide that defendant, The Churchill, is to pay at its sole cost and expense for the cost of fire stopping the slab penetrations adjacent to the Ritter plaintiff’s units 3H and 3J.
On July 15, 2005, the court issued an order following arguments on Churchill defendants’ Motion For Judgment Notwithstanding the Verdicts, as follows: “The motion — so to the extent that you’re requesting judgment notwithstanding the verdict, that’s denied as to the general verdict. [¶] I will, however, grant your motion to the extent that it finds each one of the individual named persons, directors, that — the judgment will be they did not breach a fiduciary duty.”
The trial court filed its written judgment on October 3, 2005, which stated:
“On July 13, 2005, the Court ruled thereon in favor of the plaintiffs and against defendants, and each of them as follows: [¶] 1) Within thirty days after entry of the judgment, The Churchill Condominium Association and its Board of Directors shall give written notice to all of the members of the Churchill Condominium Association . . . . [¶] 2) The Association is ordered to fire stop and seal all of the slab open penetrations adjacent to plaintiffs’ units, to wit: 3H and 3J, and the Association’s sole cost and expense, within sixty days of entry of the judgment. [¶] 3) All fire stopping is to be done with appropriate fire stopping material with a two hour fire rating. [¶] 4) The Board of Directors is ordered to call a special meeting of the members with suitable experts in attendance to explain to the membership the nature and extent of these slab penetrations, the fire and safety hazard posed by lack of fire stopping, and the fact that the ceiling and fire stopping of the slab penetrations is an Association responsibility pursuant to the provisions of the Declarations of Covenants, Conditions and Restrictions.”
The trial court denied the Ritters’ request for a mandatory injunction requiring The Churchill and the Board to fill all the slab penetrations throughout the building; instead ordered them to fill the penetrations adjacent to the Ritters’ two units. The trial court ordered The Churchill and the Board give all the members [116] notice of the existence of the slab penetrations and of the fact that they represent a fire hazard; and call a General Meeting of the Homeowners Association, with experts in attendance, to explain the situation to the members and to obtain their input.
The Board promptly complied with the injunctive order. The penetrations next to the Ritters’ units were filled and a General Meeting was held. At the meeting, the members voted overwhelmingly not to incur the cost to fill the building’s slab penetrations. The vote was 78 against to 3 in favor. [FN. 8]
The Churchill and the Directors timely filed their Notice of Appeal and Notice of Election on November 29, 2005 and December 9, 2005, respectively.
CONTENTIONS ON APPEAL [FN. 9] and STANDARD OF REVIEW
We elect to restate appellant’s statement of contentions as presenting the following issues: 1) the general verdict and special findings are inconsistent and irreconcilable and the special findings control; 2) the CC&R’s alone determine the rights and obligations between the parties; 3) the trial court erred in the application of the rules set forth in Lamden v. LaJolla Shores Clubdominium Homeowner’s Assn. (1992) 21 Cal.4th 249; the trial court erred in instructions submitted to jury; 5) the trial court erred in ordering the injunction; and 6) the trial court erred in determining the Ritters were the prevailing parties. [FN. 10] [117]
In reviewing the evidence on appeal, all conflicts must be resolved in favor of the judgment, and all legitimate and reasonable inferences indulged in to uphold the judgment if possible. When a judgment is attacked as being unsupported, the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the judgment. When two or more inferences can be reasonably deduced from the facts, the reviewing court is without power to substitute its deductions for those of the trial court. (Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 571;Crawford v. Southern PacificCo. (1935) 3 Cal.2d 427, 429.)
To the extent that the contentions on appeal raise the need to review the sufficiency of the evidence to support a jury verdict and the associated judgment, the court of appeal is ordinarily limited to review of whether the judgment is supported by substantial evidence. (Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 632.) “When considering a claim of insufficient evidence on appeal, we do not reweigh the evidence, but rather determine whether, after resolving all conflicts favorably to the prevailing party, and according the prevailing party the benefit of all reasonable inferences, there is substantial evidence to support the judgment.” (Scott v. Pacific Gas&Electric Co. (1995) 11 Cal.4th 454, 465, disapproved on another ground in Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 352, [FN. 17].) We review all legal issues de novo. The existence of duty is a question of law to be decided by the court. (Sharon P. v. Arman, Ltd. (1999) 21 Cal.4th 1181, 1188.)
DISCUSSION
General Principals Relating to Condominium Associations [FN. 11]
To provide context for the following discussion, we begin with some basic legal principles. First among these is an understanding of the general nature [118] of a non-profit homeowners association; next is the nature of the liability of such an association and its directors.
[1] Under California law, a “condominium project” is a form of common interest development. A “condominium” is “an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit . . . .” (§ 1351, subd. (f).) Unless the governing documents provide otherwise, the common area of a condominium project is owned by the owners of the separate interests as tenants in common. In addition to the combined ownership of the two estates enumerated above, the major characteristics of a condominium include an agreement among the unit owners regulating the administration and maintenance of the property. The agreement is reflected in the governing documents of the association; which includes the declaration and any other documents, such as bylaws, operating rules of the association, articles of incorporation which govern the operation of the common interest development. (§1351, subd. (j).) The development’s restrictions should be contained in its recorded declaration, but may also be contained in an association’s internal rules or bylaws. [FN. 12] (§§ 1353, 1354.) The CC&R’s bind all owners of separate interests in the development. [FN. 13]
[2] After its creation, a common interest development is managed by an association [aka homeowner’s association.] (Civ. Code § 1363.) Associations are responsible for the maintenance of the development’s common areas. An association can be unincorporated or incorporated. (Civ. Code § 1363, subd. (a).) Most associations are incorporated under the Nonprofit Mutual Benefit Corporation Law. (Corp. Code §§ 7110-8910.) Unless the governing documents provide otherwise, an incorporated or unincorporated association may exercise the powers granted to a nonprofit mutual benefit corporation. (Civ. Code § 1363, subd. (c).) The association is governed by a board of directors and the powers of the directors are enumerated in the development’s governing documents. State and federal statutes as well as common law impose obligations on the directors.[119]
The Association’s Duty of Care
[3] The existence of a duty “is not an immutable fact, but rather an expression of policy considerations leading to the legal conclusion that a plaintiff is entitled to a defendant’s protection.” (Ludwig v. City of San Diego (1998) 65 Cal.App.4th 1105, 1110.) Courts have repeatedly declared the existence of a duty by landowners to maintain property in their possession and control in a reasonably safe condition. (Rowland v. Christian 69 Cal.2d 108,119; Vasquez v. Residential Investments, Inc. (2004) 118 Cal.App.4th 269.) The duty is described as follows: “a landlord must act toward his tenant as a reasonable person under all of the circumstances, including the likelihood of injury, the probable seriousness of such injury, the burden of reducing or avoiding the risk, and his degree of control over the risk-creating defect,” (Brennan v. Cockrell Investments, Inc. (1973) 35 Cal.App.3d 796, 800-801; Golden v. Conway (1976) 55 Cal.App.3d 948, 955.)(1968)
In addition to this potential basis for liability, a homeowners association is also potentially liable for any violation of statute, administrative code regulation, or building code provision relating to the condition of the property. In such situations, failure to comply with the statutory standard may give rise to a presumption of negligence on his part. (Gallup v. Sparks-Mundo Engineering Co. (1954) 43 Cal.2d 1, 9; Tossman v. Newman 37 Cal.2d 522, 525; Williams v. Lambert (1962) 201 Cal.App.2d 115, 119; Alarid v. Vanier (1958) 50 Cal.2d 617, 621.) Such presumption of negligence may arise whether the law violated is a state statute, a safety order, an administrative regulation, or a local building code provision. [FN. 14] (1951)
[4] Traditional tort principles impose on landlords, including homeowner associations, that function as a landlord in maintaining the common areas of a large condominium complex, a duty to exercise due care for the residents’ safety in those areas under their control. (See, e.g., Kwaitkowski v. Superior Trading Co. (1981) 123 Cal.App.3d 324, 328; O’Hara v. Western Seven Trees Corp. (1977) [120] 75 Cal.App.3d 798, 802-803; Kline v. 1500 Massachusetts Avenue Apartment Corp. (D.C. Cir.1970) 439 F.2d 477, 480-481; Scott v. Watson (1976) 359 A.2d 548, 552; Sevigny v. Dibble Hollow Condominium Assn., Inc. (2003) 76 Conn.App. 306.) California cases hold that a homeowners association is liable to a member who suffers injury or damages as a result of alleged negligence of the association in failing to maintain a common area adequately. In the leading case of White v. Cox (1971) 17 Cal.App.3d 824, the court of appeal held that a condominium owner could sue the unincorporated association for negligently maintaining a sprinkler in a common area of the complex. In so holding, the court recognized that the plaintiff, a member of the unincorporated association, had no “effective control over the operation of the common areas . . . for in fact he had no more control over operations than he would have had as a stockholder in a corporation which owned and operated the project.” (Id. at p. 830.) Since the condominium association was a management body over which the individual owner had no effective control, the court held that the association could be sued for negligence by an individual member. An assessment of the individual arrangements for each condominium association would be required in order to asses the issue of liability. The Supreme Court concluded “that a condominium possesses sufficient aspects of an unincorporated association to make it liable in tort to its members.” (Ibid.) The Whit ecase was reaffirmed and cited with approval by the Supreme Court in Frances T. v. Village Green Owners Assn. (1986) 42 Cal 3d 490.)
[5] There may be other possible theories for liability in addition to the association’s negligence. One possibility is the association’s fraudulent misrepresentation with regard to the safety of its common areas. Another possibility is breach of contract when the plaintiff was a member of the association and the association failed to comply with maintenance of safety provision in the development’s declaration or bylaws. (See e.g., Murphy v. Yacht Cove Homeowners Ass’n (S.C. 1986) 345 S.E.2d 709.)
The Individual Director’s Duty of Care
[6] A corporate officer or director, like any other person, owes a duty to refrain from injuring others. (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at p. 505;PMC, Inc. v. Kadisha (2000) 78 Cal.App.4th 1368, 1381.) Consequently, directors are jointly liable with the corporation and may be joined as defendants if they personally directed or participated in the tortious conduct. (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 595; [121] Dwyer v. Lanan & Snow Lbr. Co., (1956) 141 Cal.App.2d 838, 841.) [7] However, California has adopted the rule that while a condominium association may be liable for its negligence, a greater degree of fault is necessary to hold unpaid individual condominium board members liable for their actions on behalf of condominium associations.
The Lamden “Judicial Deference” Rule [FN. 15]
The California Supreme Court has adopted a “judicial deference rule” toward the decision making of directors which is expressed in Lamden v. LaJolla Shores Clubdominium Homeowner’s Assn., supra, 21 Cal.4th 249 (Lamden); one of the leading cases in this area. In Lamden, the plaintiff was a nonresident owner of a residential unit in a condominium project that suffered from termite infestation. After extensive investigation, including consultations with contractors and pest control experts, the association’s board of directors decided to respond to the termite problem with spot treatment of known infested areas, rather than tenting and fumigating the buildings, which would have required the temporary relocation of all residents. Plaintiff challenged the board’s decision, claiming that the termite eradication program adopted by the board diminished the value of her unit by failing to adequately repair the damage. The trial court determined that the directors of the defendant association had acted on reasonable investigation, in good faith, and in a manner the board believed to be in the best interests of the association and its members as a whole.
The Court of Appeal reversed and ruled that managerial decisions of association board were subject to judicial review to determine whether the board had satisfied an objective duty of reasonable care in repairing and maintaining the development’s common areas. The association appealed to the Supreme Court, arguing that the trial courts should be entitled to intervene only in matters involving the exercise of discretion by governing [122] boards when it can be demonstrated that the board has acted irrationally, in bad faith, or in an otherwise arbitrary or capricious manner.
[8] However, the Supreme Court adopted a ruled it termed as analogous to the business judgment rule: “where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Lamden, supra, 21 Cal.4th at p. 265.) The Supreme Court adopted the association’s position, at least as far as ordinary managerial decisions are concerned: “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Id., at pp. 270- 71.)
The Lamden decision was restricted to “ordinary” decisions involving repair and maintenance actions that were clearly “within the board’s discretion under the development’s governing instruments. The case gives no direction as to what standards courts should apply when faced with a challenge to a board action involving an extraordinary situation (e.g., major damage from an earthquake) or one not pertaining to repair and maintenance actions, e.g., a decision to deny approval to an improvement project desired by an owner.” (Sproul & Rosenberry, Advising California Condominium and Homeowners Associations (Cont.Ed.Bar May 2002 Update) §2:16, pg. 23.) The Lamden court also noted that the rule of judicial deference to board decision-making can be limited in certain circumstances; (e.g. by the association’s governing documents, when the association has failed to enforce the provisions of the CC&R’s.) (See also, Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361; Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965; DeBaun v. First W. Bank & Trust Co. (1975) 46 Cal.App.3d 686.)
California Statutory Business Judgment Rule
[9] California also has a statutory business judgment rule. Corporation Code Section 7231, subdivision (a) provides, in relevant part, ” [a] director shall perform the duties of a director . . . in good faith, in a manner such director believes to be in the best interests of the corporation and with such care . . . as an ordinarily, prudent person in a like position would use under [123] similar circumstances.” Subdivision (b) provides that the director is entitled to rely on information, opinions, and reports presented by certain specified persons. Finally, subdivision (c) provides, in relevant part, “[a] person who performs the duties of a director in accordance with subdivisions (a) and (b) shall have no liability based upon any alleged failure to discharge the person’s obligations as a director. . . .” (Italics added.) The rule provides further: “no cause of action for damages shall arise against, any volunteer director . . . based upon any alleged failure to discharge the person’s duties as a director” of a nonprofit organization if that person: (1) performs the duties of office in good faith; (2) performs the duties of office in a manner believed to be in the best interests of the corporation; and (3) performs the duties of office with such care, including reasonable inquiry, as an ordinary prudent person in a like position would use under similar circumstances.” (Corp. Code § 7231.5, subd. (a).) The business judgment rule “sets up a presumption that directors’ decisions are based on sound business judgment. This presumption can be rebutted only by a factual showing of fraud, bad faith or gross overreaching.” (Eldridge v. Tymshare, Inc. (1986) 186 Cal.App.3d 767, 776.) The business judgment rules does not create a presumption which applies when a court is evaluating the independence of the committee or whether the committee acted in good faith in the first instance. (Will v. Engebreton & Co. (1989) 213 Cal.App.3d 1033, 1043, citing Rosenthal v. Rosenthal (Me. 1988) 543 A.2d 348, 353.)
Application of Principles to Current Dispute
In this case, appellant’s contentions regarding liability arise principally from the fact that the jury in its responses to the special interrogatories found no liability on the part of the individual directors. However, as described above, the same jury also found the Churchill entity to be liable. Because of this alleged discrepancy, appellant posits, that the jury’s special findings are inconsistent and irreconcilable with the general verdict and as a result the trial court should have harmonized these results by directing a verdict for the Churchill. We disagree. Appellant’s initial proposition reflects a fundamental misunderstanding of the general principles presented above.
[10] We find no inconsistency between the special findings and the verdict. The liability of the Churchill is separate and distinct from the personal liability of the directors. It is legally possible to have one without the other. First, the association as an entity can be separately liable for its actions. As a separate entity, an unincorporated association owes a duty of care to its members as long as the membership itself is not responsible for the existence of the dangerous condition. Therefore, a member of the association can recover damages from the association which result from a dangerous [124] condition negligently maintained by the association in the common area. The fact that the actual management decisions are made and carried out by the board of directors does not alter this fact. In the same manner, the association may also be liable for property damages caused by its negligent maintenance of the common area. Further, under well accepted principles of condominium law, a homeowner can sue the association for damages and for an injunction to compel the association to enforce the provisions of the declaration and can sue directly to enforce the declaration.
Appellants contend that the trial court was required to defer to the Board’s good faith decision “whether to undertake building improvement projects.” We are unable to locate any authority to support this broad assertion and regard it as a suggested, but unwarranted expansion of appellant’s reliance on the “judicial deference” theory — designed to protect board directors from personal liability for their decisions, made in good faith, but ultimately incorrect.
[11] In a related contention, appellants assert that the trial court’s “injunctive order is manifestly erroneous and unsupported by any findings of wrongdoing.” This assertion compounds the misunderstanding reflected above. This argument is that the trial court, as finder of fact in the court trial on the injunction and declaratory relief counts, is somehow bound by the special findings of the jury as to the personal liability of the board of directors of the Churchill on the legal causes of action. This does not follow. Our inquiry on appeal regarding the injunctive relief is whether there was substantial evidence to support the implied findings made by the trial judge in his ruling on those issues. The evidence from the record is: the slab penetrations constitute a deviation from the original architectural plans for the construction of the building; the penetrations exist in violation of current building requirements; and, the presence of these slab penetrations constitutes a fire hazard — particularly in a high rise structure such as the Churchill. This provided substantial evidence for the trial court to consider and injunctive relief was appropriate. The fact that the directors were named individually in the judgment on the injunctive relief is not a reflection of their individual liability on the negligence or other counts; rather, it reflects the simple reality that an entity acts through its board and/or agents and in order to secure compliance with the judgment, those individuals are properly included within its scope and directions.
We do not agree with appellants’ assertion that the trial court’s actions interfere with the rights, duties and discretion of the Churchill Board. The trial court is simply performing its obligation to resolve legal disputes between parties with legitimate grievances over which the court has jurisdiction. If appellants’ position were correct, cases of this variety would end in [125] every instance prior to trial, because the court would be constrained from acting whenever the evidence indicated that the dispute arose in the context of a disagreement over the board’s proper fulfillment of its responsibilities. We also find the trial court did not misunderstand the situation and, as described above, did not submit conflicting legal theories to the jury or to properly instruct them on the rights and duties of the Churchill and its directors.
[12] The rule of judicial deference set forth in the Lamden case provides protection from personal liability for the individual directors of a non-profit homeowners association. It does not follow and is not true that the same rule of judicial deference will also automatically provide cover to the entity itself. There is a difference between the standard of care, which is a reflection of the duty expected of decision makers, and the judicial deference rule, which is a modified standard of review for determining whether the actual decisions-makers will be held liable for their poor decisions. Standards of care continue to have value in remedial context, such as injunction and rescission cases, as opposed to actions for monetary damages against directors as individuals. Consequently, we also hold that the trial court did not err in its instructions to the jury and the jury did not err in its results.
ATTORNEY FEES [FN. 16]
Prevailing Party Determination
Ruling on the post-trial attorney fee motions, the trial court found that the Ritters were the “prevailing parties” and awarded them $531,159, including essentially 100% of all the attorney fees, expert witness fees and costs of suit incurred by the Ritters throughout the proceedings. It denied and rejected the Churchill’s and the Directors’ request for their approximately $775,000 in defense fees and costs. It denied the individual Directors’ request for their fees and costs because, even though they had been found not personally liable by the jury, the trial court included them in its limited injunction. In their final contention, appellants argue that the trial court’s conclusion that the Ritters were the “prevailing parties” entitled to recover their entire $531,159 in attorney fees and costs was erroneous and must be reversed. Appellants contend that the Ritters were not the prevailing parties because they lost in their effort to force the Churchill to fill all the slab [126] penetrations throughout the building, which was the main reason the litigation become so intense and the Churchill’s main objective in defending it.
[13] The parties here apparently that agree that the Churchill CC&R’s allowed for attorney fees and costs in disputes brought to “enforce the terms, covenants, conditions and/or restrictions of the Declaration . . . .” A condominium owner who successfully sued homeowners association for breach of contract for failure to maintain common areas was the prevailing party entitled to recover attorney fees under attorney fee provision contained in the covenants, conditions and restrictions. (Arias v. Katella Townhouse Homeowners Assn. Inc. (2005) 127 Cal.App.4th 847.) “[I]n deciding whether there is a ‘party prevailing on the contract,’ the trial court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by ‘a comparison of the extent to which each party ha[s] succeeded or failed to succeed in its contentions.’ [Citation.] [¶]. . . [¶] We agree that in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by ‘equitable considerations.’ For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective. [Citations.]” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876-877, original italics.)
The trial court’s determination of the prevailing party for purposes of awarding attorney fees is an exercise of discretion which should not be disturbed on appeal absent a clear showing of abuse of discretion. (Jackson v. Homeowners Assn. (2001) 93 Cal.App.4th 773, quoting Reveles v. Toyota by the Bay (1997) 57 Cal.App.4th 1139,1153, disapproved of on another point in Snukal v. Flightways Manufacturing, Inc. (2000) 23 Cal.4th 754, 775, fn. 6.) The trial court in this case made such a discretionary determination. We only disturb such a determination when there is a clear showing of abuse of discretion. (McLarand, Vasquez&Partners, Inc.v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456.)
Appellants contend the trial court abused its discretion finding the Ritters were the prevailing parties below because appellants “prevailed on the issues of greatest importance in the case.” The jury found the failure of the Churchill to fire stop the slab penetrations in the common areas adjacent to the Ritters’ units was a breach of the CC&Rs. The failure to take any [127] remedial action was negligence, a breach of the CC&R’s and a breach of fiduciary duty. Therefore, the Ritters prevailed on their legal causes of action and was awarded monetary damages by the jury. Although the monetary damages were not substantial, the win also avoided the cross-complaint’s $80,000 plus in accumulated fees the Board attempted to assess against the Ritters for failing to correct the slap protrusions in their units.
The Ritters also prevailed on their equitable counts. There was substantial evidence that the slab protrusions constituted a fire hazard and the Ritters were well within their rights to seek injunctive relief to correct the ongoing nature of the Churchill’s violation. The Ritters prevailed on their requested injunctive relief. The Churchill was ordered to bring the issue of the slab penetrations to the attention of the full membership and obtain their vote on the issues of a special assessment to fire stop all slab penetrations. This result accomplished a main litigation objective. Appellants contend that the Ritters did not accomplish their litigation objective because they lost their effort to force the Churchill to fill all the slab penetrations throughout the building. While correction of the entire structure might have been a litigation “dream,” it cannot be considered the main litigation objective. First and foremost, the building codes do not mandate that these defects be remediated immediately. If this was a code requirement, this lawsuit would have never occurred. Absent a code requirement, there is no mechanism to force the modifications to be carried out. The only available remedy was to take this extraordinary maintenance request to the full membership for their consideration. This happened. The fact that the membership did not vote to correct this defect in the building does not mean that the Ritters failed on their main litigation objective.
The Individual Directors
Appellants contend that “the Directors prevailed against the Ritters, period” and it was “error for the trial court to deny them their fees and costs which they duly and timely claimed in appropriate post-trial filings . . . .” We disagree with this contention. The jury found the Churchill liable on the negligence, breach of fiduciary duty and breach of the CC&R’s. The Churchill is an entity which can only act through the efforts of its Directors and agents. As a result of the “business judgment rule” and Corporations Code section 7231, the Directors were shielded from personal liability for the consequences of their decision making; but the Churchill was not. As between the Ritters and the individual Directors, the trial court did not abuse its discretion finding that the Directors were not the prevailing parties. The Ritters prevailed below, the Directors merely avoided liability. [128]
Section 998 — Post Offer Costs.
[14] Under Code of Civil Procedure section 998, a defendant whose pretrial offer is greater than the judgment received by the plaintiff is treated for purposes of post-offer costs as if it were the prevailing party. Appellant contends that the trial court erred in awarding costs to the Ritters in this case because four Code of Civil Procedure section 998 offers were made and the trial court did not analyze or address any of the issues or make any findings as required by section 998. [FN. 17] The Ritters state they submitted a “detailed analyses” to assist the court in assessing the appropriateness of an award of Code of Civil Procedure section 998 costs.
We find no error. “Whether a [Code of Civil Procedure] section 998 offer was reasonable and made in good faith is left to the sound discretion of the trial court.” (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 134.) “In reviewing an award of costs and fees under Code of Civil Procedure section 998, the appellate court will examine the circumstances of the case to determine if the trial court abused its discretion in evaluating the reasonableness of the offer or its refusal.” (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 152.) “‘The burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown and unless there has been a miscarriage of justice a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power.” [Citations.]’ [Citation.] ‘”A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown. . . .” [Citations.]’ [Citation.]” (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 136, see also (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Allocation of Fee Award
In appellants’ reply brief, they make the statement that “[i]n view of the actual outcome at trial, the trial court’s fee award cannot be upheld as it failed to include any effort to distinguish the ‘wins’ and ‘losses’ on the Ritters’ various claims and to make a reasoned allocation among them. See also Hilltop [Investment Associates]v. Leon(1994) [129] 28 Cal.App.4th 462, 466 . . . .” The fact that a trial judge deciding attorney fees may appropriately “allocate” or “apportion” fees is well known. The issue of allocation of fees was not raised in appellant’s opening brief. To the extent that this statement is an effort to interject the failure to allocate as an additional reason to object to the award of attorney fees, we decline to reach the point. We do not consider matters raised by appellants for the first time in their reply briefs. Because appellants did not address this factor in their opening brief, they have waived the right to assert this issue on appeal. (Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, fn. 4; Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc.78 Cal.App.4th 847, 894, fn. 10.)(2000)
DISPOSITION
The judgment of the trial court is affirmed.
Flier, J., concurred.
RUBIN, J., Concurring and Dissenting:
I concur in the portions of the majority’s decision affirming both the liability of The Churchill and the order for injunctive relief, but I dissent from those portions of the decision: (1) denying the Churchill directors their reasonable attorney’s fees; and (2) awarding the Ritters virtually the full amount of their requested attorney’s fees.
1. The Directors Were the Prevailing Parties
As the directors of a nonprofit mutual benefit corporation, the five Churchill directors had no liability to the Ritters if they acted in good faith in what they reasonably believed were the best interests of the corporation. (Corp. Code, § 7231, subds. (a)-(c) (section 7231);Finley v. Superior Court(2000) 80 Cal.App.4th 1152, 1157.) The jury in this case apparently made such a finding by exonerating the Churchill directors from liability on each cause of action. The majority believes a fee award was proper against these individuals because The Churchill could act through only its directors, and the directors “merely avoided liability” by virtue of section 7231. Implicit in this is the notion that section 7231 is a mere technicality that allows corporate directors to avoid personal liability for their wrongful acts. I disagree.[FN. 1] [130]
Section 7231 establishes a statutory standard of care for the directors of nonprofit mutual benefit corporations. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn.(1999) 21 Cal.4th 249, 258;Frances T. v. Village Green Owners Assn.(1986) 42 Cal.3d 490, 506, fn. 13, 513-514.) The standard of care is an essential element of any plaintiff’s cause of action. (Miller v. Los Angeles County Flood Control Dist.(1973) 8 Cal.3d 689, 703; accord Stonegate Homeowners Assn. v. Staben (2006) 144 Cal.App.4th 740, 748-749 [excluding plaintiff’s evidence on standard of care was error because such evidence would have allowed plaintiff to overcome nonsuit motion].) In short, if the directors did not violate the applicable standard of care, they did not commit a wrongful act. Because the Churchill directors were found not liable on every cause of action, they were the prevailing parties. (Hsu v. Abarra (1995) 9 Cal.4th 863, 876-877 [where party obtains a simple, unqualified victory on contract claims, they are prevailing party as matter of law].) A plaintiff who sues individual members of a governing board when its claim is legally against only the board itself should not be rewarded by denying the successful members the attorney’s fees to which they are otherwise entitled.
The only other possible basis for denying the Churchill directors their attorney’s fees is the injunction that ordered them and The Churchill to hold an informational meeting for the homeowners and then have the owners vote whether to have The Churchill pay to repair the slab penetrations in each unit. Although an injunction against the directors might have been proper, because an injunction against a corporation is sufficient by itself to bind the directors (Signal Oil & Gas Co. v. Ashland Oil & Refining Co.(1958) 49 Cal.2d 764, 779-780), it was unnecessary. As the majority itself notes when concluding that injunctive relief was proper despite the jury’s exoneration of the directors, “[t]he fact that the directors were named individually in the judgment on the injunctive relief is not a reflection of their individual liability on the negligence or other counts; rather, it reflects the simple reality that an entity acts through its board and/or agents . . . .” (Maj. opn., ante, at p. 124.) To hold that innocent corporate directors are liable for attorney’s fees (or are to be denied otherwise authorized attorney’s fees) whenever they and their corporate entity are both enjoined to remedy some corporate breach of contract undermines both the spirit and the intent of section 7231. [131]
Therefore, I would reverse the order denying the Churchill directors their attorney’s fees and remand the matter to the trial court with directions to determine the directors’ reasonable attorney’s fees for establishing their section 7231 defense.
2. The Fee Award Against the Churchill Should Be Reversed
The Ritters asked for much at trial, but obtained little. They sued both The Churchill and the directors, alleging damages of $200,000 for the diminished value of their units while seeking an injunction requiring the defendants to spend potentially hundreds of thousands more to repair the slab penetrations in not just their unit but in every condominium in the complex. All they got was their own unit repaired at a cost of a few thousand dollars, a vote of the other unit owners refusing to fund the repairs of the other units, and relief from the fines imposed by the Churchill for failing to make their own repairs. All five directors were exonerated of liability while the Ritters were found to be 25 percent at fault for the events leading to this action. Despite this, the Ritters were found to be the prevailing parties and were awarded virtually all of their requested attorney’s fees, totaling more than $531,000. [FN. 2]
Given these obviously mixed results, I believe the trial court abused its discretion and should have determined there were no prevailing parties on the Ritters’ complaint. (See Deane Gardenhome Assn. v. Denktas (1993) 13 Cal.App.4th 1394, 1398 [determination of no prevailing party typically results when the ostensibly prevailing party receives only part of the relief sought].) Alternatively, I would reverse the fee award because the Ritters’ limited victory made an award of the full [132] amount unreasonably high. (PLCM Group, Inc. v. Drexler(2000) 22 Cal.4th 1084, 1095-1096 [lodestar determination of attorney’s fees may be reduced for several factors, including the success or failure of the prevailing party’s case];In re Gorina (Bankr. C.D.Cal. 2002) 296 B.R. 23, 32-33 [awarding prevailing party full amount unreasonable under California law when losing party defeated six of seven causes of action].) The amount of attorney’s fees spent on this matter was appalling. Awarding the full amount of attorney’s fees rewards the recklessness of the attorneys’ unbridled advocacy. What should have been a manageable dispute to be resolved, perhaps, by a one or two day arbitration without significant discovery turned into a brakeless locomotive that crashed and destroyed most, if not all, the benefits achieved in this unfortunate litigation.
FN 1. The individual directors comprised the Churchill’s entire five-member board of directors throughout all the events in question and through the trial. The several of the directors have since retired and have been replaced on the board.
FN 2. Plaintiffs and respondents will be referred to collectively as “the Ritters.”
FN 3. The Ritters’ investigation of previous board hearing minutes demonstrated numerous incidents where other homeowners complained of odor problems.
FN 4. Ron Mark’ s January 6, 2004 report was discussed extensively at trial and admitted at trial as Exhibit 158.
FN 5. The Board also adopted a new policy that in all subsequent remodels at The Churchill, one of the requirements for approval would be that the owner fills the slab penetrations adjacent to his or her unit. This was based on its advice that current codes require these penetrations to be filled when a remodel is done; so this policy was simply part of The Churchill’s general requirement in the House Rules that all remodels must comply with all applicable Building Codes. The Churchill has since implemented that policy on several occasions without controversy.
FN 6. The Ritters settled their cross-complaint against cross-defendants HarBro, Inc. and L.K. Plumbing & Heating, Inc. at trial and dismissed same with prejudice. The cross-complaining actions against cross-defendant The Churchill Condominium Association became moot based on the jury’s verdict.
FN 7. We reproduce only those portions of the General Verdict reflecting the jurors entries. All italicized information shown above was added to form by the jury.
FN 8. Two of the “yes” votes were from the Ritters.
FN 9. Appellants’ Opening Brief lists the following as their contentions on appeal.
1. The jury’s special findings are inconsistent and irreconcilable with the general verdicts.
2. The jury’s special findings exonerating the individual directors cannot be harmonized with the general verdicts, so the special findings must control and judgment directed for appellants.
3. The trial court failed to give effect to the governance, approval and cost allocation provisions of the Churchill’s CC&R’s or to accord the required deference to the good faith and fully informed decisions of the Churchill’s board.
a) The Churchill CC&R’s and House Rules govern the rights, duties and discretion of the Churchill’s Board, and consign to the Board the decision whether to undertake building improvement projects.
b) The trial court was required to defer to the Board’s good faith decision on a fundamental cost-benefit issue consigned to the CC&R’s to the Board’s discretion.
4. The trial court submitted conflicting legal theories to the jury and failed to properly instruct them on the rights and duties of the Churchill and its directors.
5. The trial court’s injunctive order is manifestly erroneous and unsupported by any findings of wrongdoing.
6. The trial court’s conclusion that the Ritters were the “prevailing parties” entitled to recover their entire $531,150.00 in attorneys’ fees and costs was erroneous and must be revised.
FN 10. There are contentions of error scattered throughout appellant’s briefs. Not all of these contentions are mentioned in appellants’ summary of contentions. (Seeante, fn. 9.) For example, appellants argue that the trial court erred by granting the Ritters’ “Motion for Reconsideration and Revocation of order made July 15, 2005 that Ritters are to Pay for Firestopping on Common Area Adjacent to Units 3H and 3J and/or Request for Court on its Own Motion to Reconsider Same.” The trial court granted the motion and corrected its prior order that the Ritters pay for the firestopping of the slab protrusions adjacent to their units and instead ordered the Churchill to pay this cost. We find no error in the trial court’s order. The order for the Ritters to pay for the repair was itself inconsistent with both the jury verdict and the trial judge’s own rulings.
FN 11. Since 1986, much of the statutory law governing the formation, operation and management of common interest developments has been consolidated and is contained in the Davis-Sterling Common Interest Development Act. (Civ. Code §§1350 et. seq.) All further undesignated statutory references are to the Civil Code.
FN 12. The enforceable provisions of an association’s governing documents are often referred to as “covenants,” “servitudes” or “CC&Rs.”
FN 13. Section 1354 provides: “(a) 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. [¶] (b) A governing document other than the declaration may be enforced by the association against an owner of a separate interest or by an owner of a separate interest against the association. [¶] (c) In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.”
FN 14. (Safety orders and administrative regulations: Wiese v. Rainville173 Cal.App.2d 496, 510; Longway v. McCall (1960) 181 Cal.App.2d 723, 727; Hyde v. Russell & Russell Inc. (1959) 176 Cal.App.2d 578, 583;BiMuro v. Masterson Tru Safe Steel Scaffold Co. (1961) 193 Cal.App.2d 784, 791; city and county building codes: Finnegan v. Royal Realty(1950) 35 Cal.2d 409, 416;Merion v. Schnitzlein (1933) 129 Cal.App. 721, 723; Block v. Snyder(1951) 105 Cal.App.2d 783, 786-789.)(1950)
FN 15. The legislative comments indicate that Corporations Code section 7231, the standard of fiduciary responsibility for nonprofit directors, incorporates the standard of care defined in Corporations Code section 309. (See legis. Committee com., Deering’s Ann. Corp. Code (1994) § 7231, p. 245.) Corporations Code section 309 defines the standard for determining the personal liability of a director for breach of his fiduciary duty to a profit corporation. (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at p. 506.)
Corporations Code section sections 7231 and 309 provide, in relevant part: “A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.” (Corp. Code § 7231, subd. (a).) In addition, a director is entitled to rely on information, opinions and reports provided by the persons specified in the statute. (Corp. Code § 7231, subd. (b); § 309, subd. (b).)
FN 16. The Churchill CC&R’s provide:
“XXII ATTORNEY FEES
In the event the Association, the Board or any owner(s) shall bring legal action against any owner to enforce the terms, covenants, conditions and/or restrictions of this Declaration, and they shall be the prevailing party in said lawsuit, the court shall award reasonable attorney’s fees and court costs.”
FN 17. Appellants cite Biren v. Equality Emergency Medical Group, Inc.102 Cal.App.4th 125 and Scott Co. v. Blount, Inc.(1999) 20 Cal.4th 1103, as authority for the proposition that the trial court was required to make certain findings prior to awarding section 998 fees. We are unable to locate in the express language of these cases, or any inferences to be drawn there from, any requirement for a detailed analysis on the record.(2002)
_________
FN 1. Attorney’s fees have been awarded to parties whose litigation victories were far more “technical” than what transpired here. For example in Elms v. Builders Disbursements, Inc.(1991) 232 Cal.App.3d 671, 673, 675, the trial court dismissed a breach of contract complaint for failure to prosecute but denied the successful defendant its attorney’s fees. The Court of Appeal reversed the attorney’s fees denial, concluding defendant was the prevailing party. (See also M & R Properties v. Thompson(1992) 11 Cal.App.4th 899, 901.)
FN 2. According to the Ritters’ appellate brief, they have agreed not to enforce their fee award against the directors. I find the directors’ liability for contractual attorney’s fees puzzling because, absent allegations that the directors entered a contract with the Ritters on their own behalf or purported to bind themselves personally for breach of the CC&Rs, the directors cannot be held liable for breach of contract. (Frances T. v. Village Green Owners Assn., supra,42 Cal.3d at p. 512, fn. 20.) However, that issue does not appear to have been raised either below or on appeal.
Affan v. Portofino Cove Homeowners Association
[Maintenance; Board Deference] The deference afforded to HOA Boards may not extend to situations where the Board fails to act or to investigate the scope of required maintenance or repairs.
[Opinion certified for partial publication. FN. * ]
Allen B. Weiss & Associates, Allen B. Weiss, Allen L. Thomas, and Sivi G. Pederson for Plaintiffs and Appellants.
Jerome M. Jackson and Doran B. Richart for Defendant and Appellant.
Jay D. Fullman for Defendant and Respondent.
OPINION
ARONSON, J.-
Plaintiffs Akil and Cenan Affan, husband and wife homeowners in a condominium complex, sued their homeowners association and its managing agent for damages after their unit was flooded with sewage. The Affans’ complaint alleged that defendants breached their duty to maintain and repair the common area plumbing, which resulted in a sewage blockage that caused the flooding. According to the complaint, not only did defendants fail to prevent the sewage eruption through proper maintenance of the common area plumbing, but they also failed to repair and remediate the resulting damage and contamination within the Affans’ unit.
Based on the “judicial deference” standard applicable to the ordinary maintenance decisions of homeowners associations (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 (Lamden)), the trial court entered judgment against the plaintiffs on all but one cause of action. The court found the [933] homeowners association liable for breaching an equitable servitude and awarded the Affans their remediation costs of $33,800 as damages. The court denied all parties’ requests for attorney fees and costs. Both the Affans and the homeowners association appealed.
We conclude the trial court erred in applying the Lamden rule of deference. The homeowners association failed to establish the factual prerequisites for applying the judicial deference rule. Additionally, the managing agent of the homeowners association has no claim to judicial deference under Lamden. Consequently, we reverse the judgment in part and remand for further proceedings in accord with the views expressed in this opinion. In the unpublished portion of this opinion, we affirm the damage award for plaintiffs on the equitable servitude claim.
I. BACKGROUND FACTS AND PROCEDURE
Recurrent Plumbing Problems
In 1986, Akil and Cenan Affan bought unit 107 in the Portofino Cove Condominiums as a vacation home. [FN. 1] They usually spent a few weeks a year vacationing in their condo. Since 1999, the Affans experienced a series of plumbing backups in their unit. From 1999 to 2005, every time they arrived at their condo, they found sewage residue in their kitchen sink or in the sink and tub in their master bathroom. This happened nine times in that six-year span.
Upon discovering each sewage backup, the Affans reported the problem to the property manager for the complex. They also consistently reported each plumbing incident to at least one member of the board of directors of defendant Portofino Cove Condominium Association (the Association), the common interest association for the complex. After each reported backup, the Association manager hired a plumber to snake the Affans’ drain line.
The Affans’ unit is on the first floor of a three-story building with an underground parking garage. Each ground floor unit shares vertical drain pipes with the units stacked above. The vertical drain pipes run through the shared common area walls and connect to lateral drain pipes running below the units [189 934] and along the ceiling of the underground garage. Two of the Affans’ first floor neighbors are members of the board of directors and also experienced similar sewage problems.
After finding a sewage backup in April 2003, Cenan wrote a letter to the Association’s board of directors. In the letter, she complained of the persistent problem and reported that the plumber who responded to the latest call had recommended annual maintenance of the drain lines serving the building.
When the kitchen sink backed up on April 21, 2005, Akil telephoned the onsite property manager, Kevin Brown, to report the problem. Akil told Brown, an employee of defendant Huntington West Properties (Huntington West), that sewage backup into his unit was “a very chronic situation,” and that he and his wife had complained in a letter to the Association, but had received “no answer.” He requested that management send a “master plumber” to investigate the cause of the backups.
Huntington West had become the Association’s managing agent in early 2004. Brown testified that in January or February of 2005, the Association began to consider whether it might save money by hiring a plumber to regularly maintain the main drain lines, rather than continually responding in a “piecemeal” fashion to backup problems. The board directed Brown to develop a “scope of work” for a regular maintenance contract for the complex, and to collect bids. The board asked him “to figure out what direction they should go in.”
There is some documentary evidence suggesting the Association earlier considered arranging for maintenance of a main plumbing line. Minutes from an Association board meeting in 2001 stated, “The board would like to see a bid on a year contract” to “hydro[-]jet” a main line, which meant blasting the lines with a high-pressure stream of water. But no evidence showed the board ever contracted for that maintenance work, or took any action to maintain the drain lines before May 2005.
When Akil reported the April 21, 2005, sewage backup to Brown, the property manager suggested that Akil attend the Association board meeting the next day to discuss the issue, which he did. After listening to Akil’s complaint, the board told him it had “signed off on a maintenance agreement” for the main plumbing lines at the complex. According to trial testimony, the Association entered into a five-year contract with Rescue Rooter, a plumbing contractor, to perform annual, “routine” maintenance on the main plumbing lines. [935]
The May 14, 2005 Sewage Damage
On May 3, 2005, Rescue Rooter conducted a hydro-jet cleaning of the main lines. Less than two weeks later, on May 14, a major sewage backup damaged the Affans’ condo. Kitchen sink debris and grease from the upstairs units erupted in the Affans’ master bathroom sink, tub, and vanity closet. The sewage also overflowed onto the floors of the master bathroom and adjoining bedroom.
In response, Huntington West hired Rescue Rooter to snake the bathroom drain and retained Emergency Service Restoration, Inc., to clean up the spill. The emergency clean up company extracted waste water, removed and disposed of the carpet, carpet pad, damaged baseboard and drywall, and steam cleaned and sanitized surfaces, and placed air scrubbers, dryers, and dehumidifiers throughout the unit.
In the immediate aftermath of the damage to the Affans’ condominium, Association board members assured them the Association would “take care” of the situation. Brown met with the Association’s casualty insurance adjuster to find out “what needed to be done,” but apparently the Association encountered a “snag” with its insurer over coverage issues. Specifically, because the Affans had begun experiencing plumbing backup problems in 1999, and the Association switched to a new insurer in 2000, a dispute arose concerning which of the two insurers would cover the damage resulting from the 2005 eruption.
When the Affans filed their complaint against the Association and Huntington West on October 12, 2005, the defendants had not done any additional repair or remediation work beyond the emergency clean up of the unit. The parties agree the unit was uninhabitable.
The Affans’ complaint stated five causes of action against the Association: breach of the CC&R’s (the covenants, conditions, and restrictions governing the Association and its members), enforcement of equitable servitude, negligence per se, negligence, and private nuisance. The essence of their claims was that the Association had a duty under the CC&R’s, the common law, and the Civil Code, [FN. 2] to maintain and repair the condominiums’ common areas, including the sewer pipes, and the Association’s failure to do this resulted in the sewage eruption that damaged the Affans’ unit. The plaintiffs further claimed the Association breached its duty to promptly repair and remediate that [936] damage. Finally, they alleged the sewage eruption created a private nuisance that the Association failed to abate. The Affans sued Huntington West only for negligence and private nuisance based on its failure both to prevent and to clean up the sewage eruption.
Over the next few months, the Affans received various bids for the remediation and restoration work needed in the unit. But they did not hire anyone to make the necessary repairs because the Association had not yet investigated the cause of the repeated backups nor taken any steps to prevent a recurrence.
The Plumbing Expert’s Opinion
In April 2007, there was another sewage backup into the Affans’ sink. At that point, the Association hired Thomas Hoffman, a forensic plumber, to investigate the cause of the numerous drain backups into the Affans’ unit. Hoffman testified as a plumbing expert at trial. [FN. 3]
Hoffman testified a blockage of one of the main sewer lines serving the Affans’ unit and the two units stacked above it caused the repeated sewage backups. The blockage occurred in a lateral drain line running through the parking garage beneath the stacked units. This was a common area that the CC&R’s obligated the Association to maintain. [FN. 4] Hoffman diagnosed this blockage by using a camera to conduct a “video inspection” of the main lines; he also cut a cross section of one of the pipes.
Hoffman determined that debris, accumulated over a 10-year period, blocked the main lines. He concluded that Rescue Rooter did not clean the pipes properly on May 3, 2005, and that these pipes never had been cleaned properly. In Hoffman’s opinion, Rescue Rooter used the wrong equipment to clear the main lines: Rescue Rooter should have used a “scour jet” with a motorized spinning head for mechanical boring, rather than simply trying to hydro-jet the lines. According to Hoffman, had Rescue Rooter properly cleaned the pipes on May 3, 2005, the May 14 sewage backup into the Affans’ unit would not have occurred.
Hoffman testified about what should have been done at the condo complex to address the repeated first floor backups. He explained that “if there was [937] more than one backup [into a ground floor unit in a stacked-unit complex] in a year, there was some kind of problem in the pipes.” He testified that the “accepted general practice” for assuring that pipes are “operating and functioning safely” after repeated backups into a ground floor unit from a shared sewer line is to “get a video inspection or . . . do a regular maintenance on the lines.”
The Association eventually hired Hoffman to clean the main lines in May 2008. He cleared the lines using a motorized, spinning scour jet. At that point, the Affans hired a remediation company to repair and restore their condo at a cost of approximately $34,000.
The Trial and Judgment
The parties agreed to a bench trial. During the trial, the Association stipulated that Rescue Rooter negligently performed the maintenance on the main lines. At the conclusion of the Affans’ case, the Association moved for judgment in its favor. The trial court made tentative findings in favor of both defendants on four of the five causes of action. The court announced it found for plaintiffs on only their nuisance claim and proceeded to hear argument on damages. The court then invited the parties into chambers for an off the record discussion. Upon returning to the courtroom, the court announced: “The record will reflect the defense rests. [¶] Both defendants rest . . . subject to a briefing schedule with respect to closing arguments relative to damages resulting from nuisance.”
With the presentation of evidence concluded, the parties submitted briefs arguing both liability and damage issues. The court subsequently entered judgment against the Affans on all causes of action save one: The trial court held the Association liable to the Affans for breach of an equitable servitude, and awarded the Affans $33,800 in damages. The court further determined that all parties should bear their own attorney fees.
In its statement of decision, the trial court explained it applied the rule of judicial deference to the maintenance decisions of homeowner associations recognized in Lamden, supra, 21 Cal.4th 249. The court stated, “Based upon Lamden, defendants were not negligent nor have they breached the CC&R[‘]s in connection with their duty to maintain the common areas of the project.” Further, the court ruled the nuisance claim was untenable because it “depends upon the establishment of negligence or a breach of the CC&R[‘]s with respect to the contractual obligation to maintain the premises.”
While the statement of decision rejected any negligence liability on the defendants’ part for failing to maintain the common areas, the trial court did [938] find the Association contractually liable for breaching an equitable servitude, created by the CC&R’s, “to promptly indemnify plaintiffs as a result of a casualty loss originating in a common area.”[FN. 5]
As damages for this breach, the trial court awarded the Affans only the cost of remediation and restoration of the unit — $33,800. The court denied their claim for loss of use and emotional distress because the CC&R’s limited the Association’s liability to “restor[ing] the premises per [s]ection 10.01, to its ‘former condition[.]'”
The trial court denied the Affans’ and the Association’s requests for attorney fees, available to the prevailing party under the CC&R’s and § 1354, subd. (c), finding “neither party has prevailed in this matter.” The court explained that although the Affans prevailed on the equitable servitude cause of action, they received far less in damages than they sought.
Both the Affans and the Association appealed from the judgment [FN. 6] and from an order after judgment denying their attorney fees requests.
II. DISCUSSION
The primary issue in this appeal is whether the trial court erred in applying the judicial deference rule to shield both the Association and Huntington West from liability for the Affans’ damages. Because this issue effectively dictates the handling of most other issues, we begin with an examination of the judicial deference rule established in Lamden, supra, 21 Cal.4th 249.
A. The Rule of Judicial Deference
In Lamden, a condominium development experienced a persistent problem with termites. At various points, the homeowners association consulted with contractors and pest control experts and “[o]ver some years . . . elected to spot treat . . . rather than fumigate . . . for termites[.]” (Lamden, supra, [939] 21 Cal.4th at p. 253.) The plaintiff, an owner of a condominium in the development, disagreed with that choice and sued for damages, an injunction, and declaratory relief. She alleged that in opting only to spot treat the infestation, the Association failed to maintain and repair the development’s common areas as required by the CC&R’s and the Civil Code. (Id. at pp. 254-255.) At trial, she waived damages and sought only an injunction and declaratory relief.
The trial court applied a “‘business judgment test'” in evaluating the Association’s decision to spot treat rather than fumigate. (Lamden, supra, 21 Cal.4th at p. 256.) The trial court found the Association, after ordering extensive remedial and investigative work, weighed the costs and benefits of both treatment methods, including the “possible problems entailed by fumigation,” such as “relocation costs, lost rent, concerns about pets and plants, human health issues and eventual termite reinfestation.” (Lamden, supra, at p. 255.) The trial court concluded the board’s deliberative process provided it with “‘a rational basis for their decision to reject fumigation and do . . . what they did,'” and entered judgment for the Association. (Id. at p. 256.)
The Court of Appeal reversed, holding that the trial court should have analyzed the Association’s actions using “an objective standard of reasonableness” rather than the more easily-met business judgment test. (Lamden, supra, 21 Cal.4th at p. 256.) The California Supreme Court granted review to answer the following question: “In adjudicating [the homeowner’s] claims, under what standard should a court evaluate the board’s decision?” (Id. at p. 253.)
[1] In answering that question, the Supreme Court rejected the approaches of both lower courts and announced a new rule of “judicial deference” to the ordinary maintenance decisions of homeowners associations. The Lamden opinion made clear, however, that the rule applies only in limited circumstances. The court described those specific circumstances as follows: “Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Lamden, supra, 21 Cal.4th at p. 253.) As justification for this deference, the court noted “the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.)[940]
It is important to note the narrow scope of the Lamden rule. It is a rule of deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance. It does not create a blanket immunity for all the decisions and actions of a homeowners association. The Supreme Court’s precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria. (See Lamden, supra, 21 Cal.4th at p. 269 [rejecting assertion that judicial deference rule will “insulate . . . boards’ decisions from judicial review,” citing Fountain Valley Chateau Blanc Homeowner’s Assn. v. Department of Veterans Affairs(1998) 67 Cal.App.4th 743, 754-755, as example of where association’s decision is not entitled to judicial deference because association acted in the “absence of . . . good faith”]; see also Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1123 (Ekstrom) [judicial deference rule does not apply where board decision was inconsistent with CC&R’s and thus beyond board’s authority]; see also Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn.(2008) 166 Cal.App.4th 103, 122 [Lamden applies only “to ‘ordinary’ decisions involving repair and maintenance actions”; Lamden “‘gives no direction'” where lawsuit challenges “‘a board action involving an extraordinary situation (e.g., major damage from an earthquake) or one not pertaining to repair and maintenance actions'”].)
As for the facts in Lamden, the Supreme Court concluded “the trial court was correct to defer to the Board’s decision” to spot treat rather than fumigate because the prerequisites for judicial deference were met: “Here, the Board exercised discretion clearly within the scope of its authority,” and “[t]he trial court found that the Board acted upon reasonable investigation, in good faith, and in a manner the Board believed was in the best interests of the Association and its members. [Citations.]” (Lamden, supra, 21 Cal.4th at p. 265.)
B. The Trial Court Erred in Applying the Judicial Deference Rule
[2] Turning to whether the trial court properly applied the rule of judicial deference in the case before us, we begin by noting the judicial deference rule is an affirmative defense. (Ekstrom, supra, 168 Cal.App.4th at pp. 1122-1123 [“Just as the corporate business judgment rule” is a defense, “so to[o] is the rule of judicial deference to decisions of homeowner association boards articulated in Lamden“].) Thus, the defendant has the burden of establishing [941] the requisite elements for applying the rule. (Seltzer v. Barnes(2010) 182 Cal.App.4th 953, 969 [defendant bears burden of proof on affirmative defense].) [FN. 7]
Here, the trial court did not require any particular showing to invoke the judicial deference doctrine, either by way of pretrial motion or at trial. The statement of decision contains no explicit findings concerning the judicial deference rule and instead simply states, “Based upon Lamden, defendants were not negligent nor have they breached the CC&R[‘s.]” From this, we infer the trial court found the defendants met their burden of proving the Lamden judicial deference rule applies. We limit our review of that finding to the question of whether substantial evidence supports it. (Winograd v. American Broadcasting Co.(1998) 68 Cal.App.4th 624, 632 (Winograd).)
1. Huntington West Has No Claim to Judicial Deference Under Lamden
The trial court mistakenly assumed the Lamden rule of judicial deference applies equally to both defendants. It does not, because the two defendants are not similarly situated.
The Supreme Court’s careful articulation of the rule makes clear that judicial deference is due only to the ordinary maintenance decisions of homeowners associations. (See Lamden, supra, 21 Cal.4th at p. 253.) Huntington West is not a homeowners association. In a tacit admission that it has no claim to judicial deference, Huntington West does not mention Lamden in its brief, but instead relies solely on the substantial evidence rule to support the judgment. (See Winograd, supra, 68 Cal.App.4th at p. 632.) Because Huntington West is merely the managing agent of a homeowners association, the trial court erred in concluding the Lamden rule of deference applied to shield it from liability.
2. The Association Failed to Establish the Factual Prerequisites for Applying the Judicial Deference Rule
At trial, the Association failed to establish the factual prerequisites for applying the rule of judicial deference. In fact, the Association did not prove the most fundamental element of this defense: that the Affans’ lawsuit concerns a maintenance decision made by the Association. (See Lamden, [ 942] supra, 21 Cal.4th at p. 253 [rule of judicial deference applies “when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards”].) Where Lamden involved the propriety of an association board’s choice between alternative methods of dealing with a persistent termite infestation, the Affans sued the Association for its 10-year failure to undertake any maintenance of the condominium complex’s main plumbing lines, despite knowledge of a recurring plumbing problem in first-floor units.
Though the Association considered hydro-jetting a main line in 2001, and then four years later, in early 2005, discussed whether annual maintenance of the main lines might be a more cost-effective way to deal with the recurring first-floor sewage backups, the Association took no action to maintain the lines until April 2005. To put the Association’s inaction into perspective, it would be as if the association board in Lamden did nothing for years to address the condominium development’s termite infestation and simply allowed the pest problem to fester, heedless of the risk posed to individual units.
[3] The judicial deference doctrine does not shield an association from liability for ignoring problems; instead, it protects the Association’s good faith decisions to maintain and repair common areas. In Lamden, the Supreme Court recognized the essence of an association’s duty to maintain and repair is a duty to act based on reasoned decisionmaking The court observed, “[T]he Declaration [of CC&R’s] here, in assigning the Association a duty to maintain and repair the common areas, does not specify how the Association is to act, just that it should.” (Lamden, supra, 21 Cal.4th at p. 270, original italics.)
There may be some rare situations in which an association’s decision to do nothing to address a common area maintenance issue deserves judicial deference. For example, we can envision a scenario in which an association faces two extreme choices: doing nothing or adopting a prohibitively expensive course of action. A court may decide to extend judicial deference to an association’s choice of inaction in that narrow context, if the choice stemmed from deliberations that carefully weighed the alternatives and gave primacy to the best interests of the association and its members. The present case, however, does not present that scenario. As already noted, the Association’s inaction was not the result of any deliberative process.
A question arises concerning the significance of the Association’s April 2005 decision to begin annual maintenance. Does that decision trigger application of the judicial deference doctrine? It does not. As events unfolded, the Association’s decision to hire Rescue Rooter to clean the main [943] lines was inconsequential because Rescue Rooter’s ineffectual hydro-jetting on May 3, 2005, had no discernable effect on the main lines: The hydro-jetting left the main lines choked with the same debris that had been accumulating for a decade. [FN. 8] Plaintiffs’ lawsuit looked past that futile, last-minute cleaning effort and sought to hold the Association liable for its 10-year failure to address the maintenance needs of the common area plumbing lines. Put simply, the clogged drain lines and resulting sewage eruption do not implicate any decision by the Association, but rather reflect the Association’s abiding indecision and inattention to plumbing maintenance issues.
Even if we could view the Association’s failure to implement any maintenance of the drain lines as a “decision”, other key prerequisites for application of the Lamden rule of deference are unmet here. For example, there was no evidence the board engaged in “reasonable investigation” (Lamden, 21 Cal.4th at p. 253) before choosing to continue its “piecemeal” approach to sewage backups (i.e., sending plumbers to snake both drains in individual units), rather than servicing the main drain lines for the building. Instead, there was evidence the Association never sought to investigate the cause of the repeated backups until it hired Hoffman to do so in 2008.
Nor was there evidence the Association acted “in good faith and with regard for the best interests of the community association and its members” (Lamden, supra, 21 Cal.4th at p. 253), because no one testified about the board’s decisionmaking process. The Association failed to present evidence the board weighed the costs and benefits of a particular course of action, or considered any other factors in choosing to snake drains in individual units rather than clear main drain lines. Finally, the Association did not meet its burden of proving its “decision” not to engage in maintenance was an exercise of its “discretion . . . to select among means for discharging an obligation to maintain and repair” common areas. (Ibid.) The record contains no evidence the board selected “among means” when it responded to each of the Affans’ nine sewage eruptions by simply hiring a plumber to snake their drain.
This dearth of evidence on the nature of the Association’s decisionmaking stands in stark contrast to the evidence presented in Lamden. There, the homeowners association consulted with contractors and pest control experts for several years in attempting to control termites in the plaintiff’s building. (Lamden, supra, 21 Cal.4th at pp. 253-254.) The board ordered a significant [944] amount of “[r]emedial and investigative work,” and “‘seriously consider[ed]'” fumigation, a treatment method for which it obtained a bid. (Id. at p. 255.) The board ultimately chose spot treatment over fumigation because of concerns about “possible problems entailed by fumigation, including relocation costs, lost rent, concerns about pets and plants, human health issues and eventual termite reinfestation.” (Ibid.) Thus, in Lamden, ample evidence demonstrated the association board engaged in the sort of reasoned decisionmaking that merits judicial deference. There is no such showing in the case before us.
[4] In conclusion, the record contains no evidence showing the Association’s nonmaintenance of the main plumbing lines was the result of a good faith decision, based upon reasonable investigation. Accordingly, the trial court erred in allowing the Association to invoke Lamden’s judicial deference rule.
C. Applying the Judicial Deference Rule Constituted Prejudicial Error
The trial court’s erroneous application of the judicial deference rule had dire consequences for plaintiffs’ case. The trial court never decided, based on theevidence, whether the defendants’ failure to investigate the cause of the repeated first floor sewage eruptions, or to undertake any effective maintenance program for the main plumbing lines, constituted negligence or a breach of the CC&R’s. Instead, the court simply concluded as a matter of law, “[b]ased upon Lamden,” that defendants were not liable for negligence, negligence per se, breach of the CC&R’s, or a private nuisance. Consequently, plaintiffs suffered prejudice when the trial court erroneously applied the judicial deference rule. It follows that we must reverse that part of the judgment entered in favor of defendants. (Red Mountain, LLC. v. Fallbrook Public Utility Dis.(2006) 143 Cal.App.4th 333, 347-348 [prejudicial error requires reversal]; Cal. Const. art. VI, § 13; Code Civ. Proc., § 475.)
Ordinarily, when the trial court gives an incorrect legal reason for its ruling, we look for any correct legal basis on which to sustain the judgment. (Kemp Bros. Const., Inc. v. Titan Elec. Corp. (2007) 146 Cal.App.4th 1474, 1477 (Kemp).) To that end, Huntington West urges us to affirm the judgment because substantial evidence supports the trial court’s implied finding that it acted with reasonable care in responding as manager to the plumbing problems in the complex. The substantial evidence rule, however, is unavailing as an alternative ground for affirming the judgment for either defendant.
As the court explained in Kemp, supra, 146 Cal.App.4th 1474, “[W]here . . . a respondent argues for affirmance based on substantial [945] evidence, the record must show the court actually performed the factfinding function. Where the record demonstrates the trial judge did not weigh the evidence, the presumption of correctness is overcome. [Citation.] . . . ‘The [substantial evidence] rule thus operates only where it can be presumed that the court has performed its function of weighing the evidence. If analysis of the record suggests the contrary, the rule should not be invoked.'” (Id. at pp. 1477-1478, original italics.) Here, the trial court did not weigh the evidence, but instead ruled the defendants had no liability based on the rule of judicial deference. Because that conclusion was erroneous, we must reverse the judgment for defendants.
The Affans urge this court to order entry of judgment in their favor on the negligence cause of action because the Association had a nondelegable duty to maintain the common areas, making it vicariously liable for the stipulated negligence of Rescue Rooter. (See Srithong v. Total Investment Co. (1994) 23 Cal.App.4th 721, 726 [landlord held liable for injuries to tenant caused by contractor’s negligent roof repair]; Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 499 [condominium association held to landlord’s standard of care regarding common areas]; White v. Cox (1971) 17 Cal.App.3d 824, 830 [condominium owner may sue association for personal injuries caused by association’s negligent maintenance of common area].)
The doctrine of nondelegable duty does not support entry of judgment in Affans’ favor as a matter of law. Negligence liability depends on more than breach of duty. Causation and damages, for instance, are issues of fact that remain to be determined. On remand, the trial court must determine whether the plumber’s negligence on May 3 constituted a substantial factor in causing the sewage eruption on May 14. If so, then the Association will be liable for the ensuing damage under the doctrine of nondelegable duty, assuming that Rescue Rooter’s negligence is established by stipulation or competent evidence.
D. Substantial Evidence Supports the Judgment for Plaintiffs on the Breach of Equitable Servitude Claim [ FN. *]
…………………………………………………………………………………………………………………….
E. Denial of Attorney Fees
Both the appeal and cross-appeal challenge the trial court’s decision not to award attorney fees to either party. That part of the judgment is reversed. [946]
III. DISPOSITION
The judgment is reversed in all respects except as to the finding that the Association is liable to the Affans for damages of $33,800 for breach of an equitable servitude. The case is remanded for further proceedings in accord with the views expressed in this opinion. The Affans are entitled to costs on appeal.
Rylaarsdam, Acting P. J., and Fybel, J., concurred.
FN *. Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of part II.D.
FN †. Retired judge of the Orange Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.
FN 1. When referring to the spouses individually, we use their first names. We intend no disrespect but simply aim for clarity and convenience. (In re Marriage of Smith (1990) 225 Cal.App.3d 469, fn. 1.)
FN 2. Civil Code section 1364, subdivision (a), provides, in pertinent part: “Unless otherwise provided in the declaration of a common interest development, the association is responsible for repairing, replacing, or maintaining the common areas . . . .” (All further statutory references are to the Civil Code unless otherwise noted.)
FN 3. In an unusual move, both sides designated Hoffman as an expert witness.
FN 4. Section 2.07 of the CC&R’s sets forth the Association’s duty as to “Repair and Maintenance” of the common areas: “[T]he Association shall . . . maintain, repair and replace the Common Property . . . to assure maintenance of the Common Property . . . in a clean, sanitary and attractive condition[.]” Section 1.13 defines the “Common Property” or common areas as including “all gas, water and waste pipes, all sewers, . . . of the Project Improvements wherever located[.]”
FN 5. The trial court’s equitable servitude analysis is explained in part II.D. of this opinion.
FN 6. The trial court entered judgment on October 22, 2008, but a week later entered an amended judgment to correct a clerical error: The original judgment was entered against both defendants on the equitable servitude cause of action though Huntington West was not named as a defendant on that claim. A month later, on November 24, the trial court entered a second amended judgment that corrected another clerical error. The second amended judgment clarified that Huntington West prevailed against the Affans not on all claims, but only on the negligence and nuisance causes of action — the only ones in which it was named. In an abundance of caution, the parties appealed from all three judgments.
FN 7. The Association unsuccessfully tries to turn this burden of proof on its head, arguing the Affans failed to prove the Association did not meet the prerequisites for judicial deference. The contention lacks merit. The Association cannot dodge its burden of proving the facts needed to support this affirmative defense.
FN 8. In this, the Association was unlucky. According to plumbing expert Hoffman, had Rescue Rooter used the proper “scour jet” method to clean the lines, the May 14 sewage eruption would not have occurred. But, of course, the Association’s failure to maintain and repair the drain lines for so many years courted just such a disaster.
FN *. See footnote, ante, page 930
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Dover Village Association v. Jennison
[Maintenance; Board Deference] The deference afforded to HOA Boards for maintenance decisions does not extend to the Board’s interpretation as to the scope of the HOA’s maintenance responsibilities under its CC&Rs.
Feldsott & Lee, Martin L. Lee and Erika M. Hsu for Plaintiff and Appellant.
Michael Maguire & Associates, Paul Kevin Wood and Brian Y. Fujita for Defendants and Respondents
OPINION
RYLAARSDAM, Acting P. J.-
Patrick Jennison had a leaky sewer pipe two feet beneath the concrete slab underlying his Newport Beach condo. The homeowner association said he was responsible for the repair bill on the theory that the sewer pipe was “exclusive use common area” for which he was responsible. On cross-motions for summary judgment, the trial court disagreed, and entered a judgment declaring that the association should bear the expense of the repair cost. The court later awarded Jennison about $17,000 in attorney fees and court costs. The association has appealed from the ensuing judgment.
We affirm. Under a natural reading of the CC&R’s, the sewer pipe was a genuine common area to be maintained and repaired by the association, as distinct from “an exclusive use common area appurtenant” to an individual owner’s separate interest.
FACTS
A. Brief Overview
The Dover Village Association (Association) is a 38-unit condominium complex in Newport Beach. For some time before the summer of 2007, a deteriorated four-inch cast iron sewage pipe beneath Patrick Jennison’s condo had been venting sewage. Finally, in late July 2007 the leak seeped up into [126] the floors and carpet of Jennison’s unit and the unit of another. Jennison’s tenant reported the leak to the Association’s president, who called property management, who then sent a plumber to make repairs.
The repairs were extensive, costing about $15,000. It was necessary to cut through Jennison’s floor, jack hammer the concrete slab underneath, and trench out and replace the 50 feet or so of sewer pipe that connected Jennison’s condo with the main service line. A dispute soon arose as to who was responsible. In October the Association sent Jennison a letter asserting that because the sewer pipe exclusively serviced Jennison’s condo, it was his responsibility “to maintain and repair” the sewer pipe. The letter directed Jennison to pay the $15,000 plus repair cost. Jennison did not send a check. The Association filed this action.
The parties agreed to have the issue decided on cross-motions for summary judgment. The trial court ruled that, as a matter of law under both the Davis-Stirling Common Interest Development Act (the Davis-Stirling Act), codified as sections 1350 et seq. of the Civil Code, and the CC&R’s, the sewer pipe is common area to be maintained and repaired by the Association. (All statutory references will be to the Civil Code.
B. Governing Texts
This case involves the interaction between the two sets of texts. First, the Davis-Stirling Act set forth in sections 1350 et seq. of the Civil Code provides general rules for the governance of condominium associations. Second, there are the particular rules set forth the Association’s own CC&R’s. We examine each in turn
1. The Act
[1]The way the Davis-Stirling Act is structured, a homeowner’s association is normally responsible for repairs to “common areas,” but the individual unit owner is responsible for repairs to “any exclusive use common area appurtenant to the separate interest.” Section 1364, subdivision (a) provides both the general rule and the exception for exclusive use common areas: “(a) 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 [127] owner of each separate interest is responsible for maintaining that separate interest and any exclusive use common area appurtenant to the separate interest.”
The definitions section of the Davis-Stirling Act is set out in section 1351. Subdivision (i) defines “exclusive use common area.” The definition is: “‘Exclusive use common area’ means a portion of the common areas designated by the declaration for the exclusive use of one or more, but fewer than all, of the owners of the separate interests and which is or will be appurtenant to the separate interest or interests. (1)Unless the declaration otherwise provides, any shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patio, exterior doors, doorframes, and hardware incident thereto, screens and windows or other fixtures designed to serve a single separate interest, but located outside the boundaries of the separate interest, are exclusive use common areas allocated exclusively to that separate interest.” (Italics added.)
2. The CC&R’s
There is no question under the CC&R’s that sewer pipes are not within any individual owner’s separate interest. Article I, section 6 of the CC&Rs for Dover Village says: “The following are not a part of the Unit: roofs, foundations, below finished pad elevation, pipes, ducts, flues, chutes, conduits, wires and other utility installations wherever located, except the portions thereof located within the physical boundaries of the Unit.” (Italics added.)The question is whether a given pipe that can be said to exclusively service a unit is a “exclusive use common area appurtenant” for purposes of section 1364.
Two exclusive use common areas are expressly mentioned in the CC&R’s: Patio and garage areas. Article XIX expressly designates patio and garage areas for the exclusive use and enjoyment of a single unit: Unit owners “shall . . . be entitled to the exclusive use and possession of the patio area and garage area designated for the use of said unit. . . . It shall be the duty of the unit owner . . .to maintain the interior of said patio and garage.”
Finally, the CC&R’s give the Association power to make repairs and structural alterations to particular units, and then assess the costs to the individual owner. Article V is generally devoted to the Association board’s powers. Section 5 of Article V, subdivision (l), provides that the board shall [128] have power “To acquire and pay for any other materials, supplies, furniture, labor, services, maintenance, repairs, structural alterations, insurance, taxes or assessments which the Board is required to secure or pay for pursuant to the terms of these restrictions or by law, or which in its opinion shall be necessary or proper for the operation of the common area or for the enforcement of these restrictions, provided that if any such materials, supplies, furniture, labor, services, maintenance, repairs, structural alterations, insurance, taxes or assessments are provided for particular units, the costs thereof shall be specifically addressed to the owners of such units.” (Italics added.)
DISCUSSION
As shown above, under the Association’s by-laws, garage and patio areas are expressly classified as “exclusive use common areas appurtenant.” Such a conclusion, of course, makes sense: Ordinary condominium buyers might expect a secure place to park and exclusive use of the patio immediately adjacent to their units. The question is whether sewer lines also come within the same category.
[2]Under the rule of “expressio unius est exclusio alterius” — say one thing and impliedly exclude the other — the most natural reading of the CC&R’s is that sewer lines are not “exclusive use common areas appurtenant.” By expressly saying patio and garage areas come within the category, the CC&R’s impliedly say that sewer lines do not.(Cf. People v. Palacios(2007) 41 Cal.4th 720, 732 [as applied to statutory construction, expressio unius maxim means that “‘if exemptions are specified in a statute, we may not imply additional exemptions unless there is a clear legislative intent to the contrary'”].)
The Association asserts two counterarguments, one based on language in the CC&R’s and the other on language in the Davis-Stirling Act.
A. The Structural Alteration Clause
The argument from the CC&R’s is based on Article V’s structural alteration clause. The Association reasons that because unit owners can be individually charged for structural alterations, they can similarly be charged for sewer pipes outside their units.
The argument fails because it is circular; that is, it proves nothing. If one begins with the premise that sewer pipes servicing a particular unit already fall into the category of “exclusive use common area appurtenant,” then one can say that repairs to such pipes are indeed “for particular units.” But one [129] must first establish that a sewer pipe is such an “exclusive use common area appurtenant,” and, as we have seen, the only explicit mention of such exclusive use areas in the CC&R’s are the patio and garage areas.
B. The Fixture Statute
[3] The argument based on the Davis-Stirling Act is rooted in section 1351, subdivision (i)’s inclusion of fixtures as “exclusive use common areas.” This argument fails for two reasons. First and most fundamentally,interconnected sewer pipes cannot really be said to be the “fixtures” of any particular unit. A sewer system is a series of interconnected pipes which ultimately feed into one common line. Differentiating parts of that interconnected system is unreasonable. The portion of piping coming from one unit is no more affixed to that unit than it is to the sewer system and other pipes or piping within that system.
[4] In this regard, another fancy Latin phrase, ejusdem generis, operates. (See In re Tobacco Cases I (2010) 186 Cal.App.4th 42, 48 [“‘the general term or category is “restricted to those things that are similar to those which are enumerated specifically”‘”].) Under the canon of ejusdem generis, one determines whether a given thing comes within a more general category — here, “other fixtures designed to serve a single separate interest” — by comparing it to other things specifically mentioned in that category.
In section 1351, subdivision (i), here are the things specifically mentioned as being exclusive use common areas: “shutters, awnings, window boxes, doorsteps, stoops, porches, balconies, patio, exterior doors, doorframes, and hardware incident thereto, screens and windows.”
Some pipes — for example, drain pipes exclusively servicing one unit and not connected to any other system of piping — might indeed come within the category, because they can be said to be, like shutters and window boxes, “designed to serve a single separate interest.” But a piece of a system of interconnected sewer piping does not fit: It is, literally, physically connected to every other piece of the system. Every unit’s sewer pipes are a “fixture” of every other unit’s sewer pipes.
The second reason the argument fails is the clause in section 1351, subdivision (i) that allows for a different result if the CC&R’s so provide. As shown above, the most natural reading of these CC&R’s is that sewer pipes, as distinct from patio and garages, are not contemplated as exclusive use common areas. [130]
C. Confirmation in Other Sections of the CC&R’s
Our conclusion, that the portion of piping connecting Jennison’s condo with the sewer system is not an exclusive use common area, is confirmed by language in Article VIII of the CC&R’s that indicate that common areas — including exclusive use common areas — are areas to which owners generally have access. Section 2 of Article VIII precludes individual owners from any “obstruction of the common area without prior consent of the Board.” Section 6 of Article VIII precludes any “noxious or offensive activity” in any common area. And significantly, section 7 provides: “Nothing shall be altered or constructed in or removed from the common area, except upon the written consent of the Board.” Such language is perfectly consistent with normal patio and garage use. It is not consistent with the idea that individual unit owners somehow control the sewer lines beyond the boundaries of their unit.
D. The Argument from Deference
Finally, the Association makes what we might call a “deference argument,” i.e., it asserts that its determination of whether a portion of sewer line was exclusive use common area is a matter committed to its discretion, to which the courts should accord it deference. The argument fails because it confuses a legal issue governed by statutory and contract text with matters that genuinely do lend themselves to board discretion.
The case primarily relied on by the Association for its discretion argument is, in fact, a nice illustration of matters genuinely within a board’s discretion. In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, a unit owner disputed the homeowner association’s preferred method of treating termite infestation. The owner, supported by inspection reports, wanted fumigation. The board decided on “spot-treatment.” (Id. at pp. 253-254.) The board’s decision was ultimately upheld by the Supreme Court because it was a matter “entrusted” to the board’s “discretion.” (Id. at p. 265.)
There is an obvious difference between a legal issue over who precisely has the responsibility for a sewer line and how a board should go about making a repair that is clearly within its responsibility. But we know of no provision in the Davis-Stirling Act or the CC&R’s that makes the Association or its board the ultimate judge of legal issues affecting the development.
CONCLUSION
Because our decision today is solely a matter of the applicable texts, we need not deal with issues raised by the Association as to issues of parol evidence or estoppel. By the same token, there are no issues involving the [131] reasonableness of the attorney fee and cost award assuming a judgment in Jennison’s favor. The judgment and fee and cost awards are affirmed. Respondent Jennison shall recover his appellate fees and costs.
Moore, J., and Fybel, J., concurred.