[Amendments to CC&Rs; Court Petition] Voter apathy not a required showing in a petition to reduce approval requirements of CC&R amendment.
Parlow Law Office, Daniel M. Parlow; Slovack Baron Empey Murphy & Pickney LLP and Wendy S. Dowse for Objector and Appellant.
Green Bryant & French LLP, Jeffrey A. French; Berding & Weil LLP and Timothy P. Flanagan for Petitioner and Respondent.
OPINION
RAMIREZ, P.J.
Orchard Estate Homes, Inc., is a 93-unit planned residential development, governed by covenants, conditions, and restrictions (CC&R’s), supplemented by rules and regulations prohibiting short term rentals of units for durations of less than 30 days. When Orchard’s homeowners association attempted to enforce this rule against an owner who used a unit for such purpose, a lower court ruled the rule was unenforceable because it was not contained in the CC&R’s. Orchard put the issue to a vote to amend the CC&R’s. After balloting was completed, approximately 62 percent of the owner-members of the homeowners association voted to prohibit short term rentals, but the percentage was less than the super-majority required to accomplish the amendment.
Orchard then filed a petition pursuant to Civil Code section 4275 seeking authorization to reduce the percentage of affirmative votes to adopt the amendment, which was opposed by the Orchard Homeowner Alliance (Alliance), an unincorporated association of owner members, who purchased units for short term rental purposes. The trial court granted the petition and the Alliance appeals, arguing that the trial court erred in ruling that voter apathy was not an element of Civil Code section 4275. We affirm.
BACKGROUND
Orchard Estate Homes, Inc., (Orchard) is a homeowners association established in 2004 to manage a 93-unit development located east of Indio, California. The homeowners association and all member-owned lots are encumbered by CC&R’s, which may be amended by approval of owners representing 67 percent of the total members and 51 percent of eligible first mortgagees of the association.
In 2011, Orchard adopted rules and regulations prohibiting short term rentals, to supplement the CC&R’s. However, a vacation rental provider that owned one unit, successfully defended against enforcement of the rules, by arguing that the rules, adopted by Orchard’s Board of Directors and not by a vote of the owners, were not a valid amendment to the CCRs. Orchard therefore conducted an election to adopt an amendment to the CC&R’s to prohibit short term rentals of less than 30 days.
On November 10, 2016, Orchard sent notices of the election, along with ballots and other materials, to all owner-members of the homeowners association, and on December 13, 2016, when balloting was closed, 85 of the 93 members had cast votes, with the proposed amendment garnering 58 votes in favor, or 62 percent. On February 2, 2017, Orchard filed a petition pursuant to Civil Code section 4275, seeking judicial approval to reduce the percentage of affirmative votes required to amend the CC&R’s. The Alliance, a group of owners who purchased units for short term vacation rentals, opposed the petition, arguing that voter apathy had not been alleged or proven, precluding relief. After a hearing, the trial court granted Orchard’s petition. The Alliance appeals.
DISCUSSION
The Alliance argues that the trial court abused its discretion in granting Orchard’s petition by ruling that voter apathy was not a prerequisite to an order authorizing relief under Civil Code section 4275. We disagree.
Civil Code section 4275 (formerly section 1356) provides in pertinent part: “If in order to amend a declaration, the declaration requires members having more than 50 percent of the votes in the association, [. . .] to vote in favor of the amendment, the association, or any member, may petition the superior court of the county in which the common interest development is located for an order reducing the percentage of the affirmative votes necessary for such an amendment.” (Civ. Code § 4275, subd. (a).) “The purpose of [the statute] is to provide homeowners associations with the `ability to amend [their] governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration. [Citation.] . . .’ [Citation.]” (Mission Shores Assn. v. Pheil (2008) 166 Cal.App.4th 789, 794-795.)
The statute gives the trial court broad discretion in ruling on such a petition. (Mission Shores, supra, 166 Cal.App.4th at p. 795.) Accordingly, we review for abuse of discretion. (Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132, 1139, citing Mission Shores, supra, 166 Cal.App.4th 789; Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 570.) The trial court is not required to make any particular findings when considering such a petition; instead, it is sufficient if the record shows that the court considered the requisite factors in making its ruling. (Quail Lakes Owners Assn., supra, 204 Cal.App.4th at p. 1140.)
The court may grant the petition if it finds all of the following: “`Notice was properly given; the balloting was properly conducted; reasonable efforts were made to permit eligible members to vote; “[o]wners having more than 50 percent of the votes . . . voted in favor of the amendment”; and “[t]he amendment is reasonable.”‘” (Quail Lakes Owners Assn. v. Kozina, supra, 204 Cal.App.4th at p. 1135, quoting Peak Investments v. South Peak Homeowners Assn., Inc. (2006) 140 Cal.App.4th 1363, 1366-1367; see also Civ. Code, § 4275, subd. (c).)
The Alliance does not complain that the evidence presented to the trial court fails to satisfy the above-described elements of subdivision (c) of Civil Code section 4275, nor does it claim the amendment would be improper for any of the reasons set forth in Civil Code section 4275, subdivision (e). Instead, the Alliance argues that voter apathy is an element of Civil Code section 4275, and that relief is not proper unless voter apathy has been established.
After reviewing the decisions on which Alliance relies for the assertion that voter apathy is an element of a Civil Code section 4275 petition, we conclude Alliance has incorrectly construed statements made in dicta in some authorities regarding the purpose of the statutory procedure. In Blue Lagoon Cmty. Ass’n v. Mitchell, the court stated, “Viewed objectively, the purpose of [former] Civil Code section 1356 [now 4275] is to give a property owners’ association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration.” (Blue Lagoon Cmty. Ass’n v. Mitchell, supra, 55 Cal.App.4th at p. 477; see also, Quail Lakes Owners Assn., supra, 204 Cal.App.4th at pp. 1134-1135.)
Similar statements of legislative purpose are found in Fourth La Costa Condominium Owners Assn. v. Seith and Peak Investments v. South Peak Homeowners Assn., Inc. However, none of the cases hold that voter apathy is an element that must be alleged or proven. It is well settled that an appellate decision is not authority for everything said in the opinion, but only for points actually involved and decided. (People v. Knoller (2007) 41 Cal.4th 139, 154-155; Santisas v. Goodin (1998) 17 Cal.4th 599, 620, citing Childers v. Childers (1946) 74 Cal.App.2d 56, 61.)
The doctrine of precedent, or stare decisis, extends only to the ratio decidendi of a decision, not to supplementary or explanatory comments which might be included in an opinion. (People v. Superior Court (2016) 1 Cal.App.5th 892, 903, citing Gogri v. Jack in the Box, Inc. (2008) 166 Cal.App.4th 255, 272.) Only the ratio decidendi of an appellate opinion has precedential effect. (Trope v. Katz (1995) 11 Cal.4th 274, 287.) The decisions relied upon by the Alliance refer to a supposed legislative purpose, but none of these authorities held that voter apathy is a requisite element of the statutory procedure, nor do any of them require proof of voter apathy as a precondition to relief from the supermajority provisions of the CCRs.
Looking at the statutory language of Civil Code section 4275, we observe five elements required to be established to authorize a reduction in the required voting percentage to amend a provision of the governing CCRs. Those elements require the trial court to find that adequate notice was given; that balloting on the proposed amendment was conducted in accordance with the governing documents as well as the provisions of the Davis-Stirling Common Interest Development Act; a reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment; members having more than 50 percent of the votes voted in favor of the amendment; the amendment is reasonable; and granting the petition is not improper. (Civ. Code, § 4275, subd. (c).) The statute does not include voter apathy among the list of elements that must be established.
Applying the rules of statutory construction, in the absence of an ambiguity, the plain meaning of the statute controls. (Tract 19051 Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1143; Anderson Union High School Dist. v. Shasta Secondary Home School (2016) 4 Cal.App.5th 262, 283.) Orchard was not required to plead and prove voter apathy under the plain language of Civil Code section 4275, and we are not empowered to insert what a legislative body has omitted from its enactments. (Williams v. Superior Court (1993) 5 Cal.4th 337, 357; Wells Fargo Bank v. Superior Court (1991) 53 Cal.3d 1082, 1099.) We therefore decline to imply an element that was not expressed by the Legislature.
The trial court did not abuse its discretion in granting the petition.
Disposition
The judgment is affirmed. Respondent is entitled to costs on appeal.
McKINSTER, J. and FIELDS, J., concurs.
Related Links
Voter Apathy Not a Required Showing in a Petition to Reduce Percentage of Affirmative Votes Required to Amend CC&Rs – Published on HOA Lawyer Blog (04/19)
Healy v. Tuscany Hills Landscape & Recreation Corp.
[Litigation Disclosure; Defamation] Facts alleged in litigation disclosure letter to HOA membership fell under the litigation privilege and could not support a defamation claim.
Neuland, Nordberg, Andrews & Whitney, Daniel A. Nordberg, Cynthia M. Hererra, and Kumar Raja for Cross-defendant and Appellant.
Kahdeman, Nickel & Frost and Richard J. Kahdeman for Cross-complainant and Respondent.
OPINION
MCKINSTER, Acting P. J.-
Plaintiff and cross-defendant Tuscany Hills Landscape & Recreational Corporation appeals from an order denying its special motion to strike a cause of action for defamation asserted by defendant and cross-complainant Gloria Healy. The trial court denied the motion based on its conclusion that Healy had demonstrated a reasonable probability that she would prevail on the defamation cause of action. We conclude that the allegedly defamatory publication comes within the scope of the litigation privilege and that there is therefore no possibility that Healy could prevail on her cause of action.
Following an unsuccessful motion to strike the first amended complaint, Healy filed a general denial and a cross-complaint. Her cross-complaint [4] alleged, as its first cause of action, that the association defamed her when its attorneys sent a letter to residents of Tuscany Hills referring to the access issue. As pertinent, the letter stated as follows: “Dear Affected Tuscany Hills Member: [¶] Please be advised that the law firm of Peters & Freedman, L.L.P., represents [Tuscany Hills] . . . in the above referenced matter, which involves a lawsuit. A copy of the disclosure letter is enclosed for your reference. [¶] The purpose of this letter is to inform you that the Association’s landscapers, Stay Green, will be performing city and county mandated weed abatement . . . . [¶] The Association is performing this weed abatement at an additional cost to the Association, primarily because of ingress and egress through the gate at the end of Villa Scencero is being prohibited by the owner of 6 Villa Scencero. Please note, normal weed abatement is a standard part of the landscape maintenance contract expense. However, where ingress and egress is changed and more difficult, a cost is charged. This cost has a direct impact on operating expenses and assessments.”
Healy alleged that the letter is false insofar as it states that her prohibition of ingress and egress through the gate at the end of Villa Scencero resulted in increased cost to the members of the association for weed abatement because it gave the false impression that there were no other areas where ingress and egress for weed abatement purposes exist or, that if they do exist, they provide more difficult and therefore more costly access. She alleged that the statements were understood by the recipients to mean that additional costs were being imposed as a result of her decision to prohibit ingress and egress through the gate at the end of Villa Scencero. She alleged that she suffered loss of reputation, shame, mortification and hurt feelings, to her general damage in the amount of $250,000. She also sought punitive damages.
Tuscany Hills filed a special motion to strike the defamation cause of action. It asserted, among other things, that the litigation privilege stated in Civil Code section 47, subdivision (b), afforded it a complete defense to the defamation cause of action because the letter sent by its attorney was in connection with the lawsuit it had filed against Healy.
The court denied the motion, finding a reasonable probability that Healy would prevail on the defamation cause of action. Tuscany Hills filed a timely notice of appeal.
Section 425.16 applies when the challenged cause of action arises from “any act . . . in furtherance of the person’s right of petition or free speech under the United States or California Constitution in connection with a public issue . . . .” (§ 425.16, subd. (b)(1).) The statute defines acts in furtherance of the constitutional right to petition to include “any written or oral statement or writing made in connection with an issue under consideration or review by a . . . judicial body . . . .” (§ 425.16, subd. (e)(2).) This includes statements or writings made in connection with litigation in the civil courts. (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115 (Briggs).) The statute does not require any showing that the matter being litigated concerns a matter of public interest. (Id. at pp. 1117-1118, 1123.) Thus, an action for defamation falls within the anti-SLAPP statute if the allegedly defamatory statement was made in connection with litigation. (Id. at pp. 1109, 1123.) In addition, statements which come within the protection of the litigation privilege of Civil Code section 47, subdivision (b), are equally entitled to the benefits of section 425.16. (Briggs, at p. 1115.) Civil Code section 47, subdivision (b), provides that a publication is privileged if it is made “in” any judicial proceeding. (Civ. Code, § 47, subd. (b)(2).)
Both section 425.16 and Civil Code section 47 are construed broadly, to protect the right of litigants to “the utmost freedom of access to the courts without the fear of being harassed subsequently by derivative tort actions.” (Rubin v. Green (1993) 4 Cal.4th 1187, 1193; see § 425.16, subd. (a); Briggs, supra, 19 Cal.4th at p. 1119.) Thus, it has been established for well over a century that a communication is absolutely immune from any tort liability if it has “‘some relation'” to judicial proceedings. (Rubin v. Green, supra, 4 Cal.4th at p. 1193.)
[2] The allegedly defamatory statements in the letter unquestionably come within the litigation privilege. The letter expressly refers to the litigation arising from Healy’s prohibition on ingress and egress for weed abatement purposes and refers to an enclosed disclosure letter. (The record on appeal does not include the disclosure letter.) Because one purpose of the [6] letter was to inform members of the association of pending litigation involving the association, the letter is unquestionably “in connection with” judicial proceedings (§ 425.16, subd. (e)(2)) and bears “‘some relation'” to judicial proceedings. (Rubin v. Green, supra, 4 Cal.4th at p. 1193; see Civ. Code, § 47, subd. (b)(2).)
Because Tuscany Hills met its burden of making a prima facie showing that the letter came within the litigation privilege, the burden shifted to Healy to demonstrate the existence of facts which would, if proved at trial, support a judgment in her favor. (Wilson v. Parker, Covert & Chidester (2002) 28 Cal.4th 811, 821.) She asserted that she could prevail because the association would not be able to show that her refusal to allow access through her property resulted in any increased weed abatement cost. Even if this is factually correct, however, it is irrelevant because the statements in the letter are absolutely privileged, even if they were defamatory. (Rubin v. Green, supra, 4 Cal.4th at pp. 1193-1194.)
Richli, J., and King, J., concurred.
FN 1. All further statutory references will be to the Code of Civil Procedure unless otherwise indicated.
Related Links
“Requesting HOA Enforcement Held to be Constitutionally Protected Activity” – Published on HOA Lawyer Blog (January 2018)
Artus v. Gramercy Towers Condominium Association
[Election Challenge; Attorney’s Fees] Attorney’s fees not available to party who secures only interim injunctive relief in an election challenge.
Millstein & Associates, David J. Millstein, Gerald Richelson; Moskovitz Appellate Team, Myron Moskovitz, William D. Stein and Donald Horvath for Plaintiff and Appellant.
Wendel, Rosen, Black & Dean, Albert Flor, Jr., Charles A. Hansen and Jason M. Horst for Defendant and Respondent.
OPINION
BANKE, J. —
After members of a condominium homeowners association (HOA) voted by a very substantial majority to eliminate the practice of cumulative voting, plaintiff Kazuko K. Artus, who owns three units in the Gramercy Towers condominium development, sued the HOA. Artus claimed, among other things, that aspects of the election violated provisions of the Davis-Stirling Common Interest Development Act (Davis-Stirling Act; Civ. Code, § 4000 et seq.).[1] She obtained preliminary injunctive relief on the basis of two of her statutory claims, staving off a board election under the new, direct vote rule. After a three-day bench trial, however, the trial court ruled against her on the merits. In the meantime, the HOA held a second election on the issue of cumulative voting, the outcome of which was the same as the first — approval of direct, rather than cumulative, voting by a very substantial margin. Finding that the second election addressed “whatever valid objections [Artus] may have had to the first” and the HOA had made good faith efforts to comply with the law, the court denied permanent injunctive and declaratory relief on that basis, as well.
Artus challenges the trial court’s ultimate rejection of her two statutory claims on which she obtained preliminary injunctive relief and claims she is entitled, at the very least, to declaratory relief. However, we need not, and do not, reach the merits of her statutory claims, as we conclude the trial court did not, in any event, err in denying declaratory relief.
We additionally reject Artus’s claim that, regardless of the ultimate out-come, she is entitled to statutory fees and costs under the reasoning of Monterossa v. Superior Court (2015) 237 Cal.App.4th 747 [188 Cal.Rptr.3d 453] (Monterossa), because she obtained preliminary injunctive relief. As we explain, unlike the California Homeowner Bill of Rights statute at issue in Monterossa (§ 2924.12), neither the language of the Davis-Stirling Act, nor the legislative history of the fee provision Artus invokes, evidences any intent [927] on the part of the Legislature to depart from well-established principles that fees and costs are ordinarily not granted for interim success, and that the prevailing party is determined, and fees and costs awarded, at the conclusion of the litigation.
We therefore affirm the judgment and the order denying statutory fees and costs.
BACKGROUND
Gramercy Towers HOA manages and maintains a 260-unit condominium property in San Francisco and, as such, is subject to the provisions of the Davis-Stirling Act. Artus, who has both a Ph.D. in economics and a Juris Doctorate, owns three condominiums in the development.
The HOA is governed by a seven-member board. Prior to the instant litigation, the HOA’s bylaws and election rules provided for cumulative voting, whereby a member “would receive a number of votes equal to the total number of directors to be elected and a member could, for example, choose to cast all her ballots for one candidate.”[2] While the practice of cumulative voting was in place, Artus was elected to the board three times, in 2007, 2008, and 2013.
The HOA first adopted election rules in 2007. “In general, there [are] two types of [HOA] elections: to choose directors or to decide issues. Where the election involved an issue to be decided[,] the Board always advised the membership of the Board’s position on the question. The election rules specify that any member may ask to submit a written statement setting forth his or her position on any election.” As a board member, Artus “personally participated in drafting these election rules … [and] therefore had intimate knowledge of both the rules and the custom and practice of the organization in how the rules were implemented for elections.” (Italics & boldface omitted.)
Eventually, a number of board members wanted to amend the HOA bylaws and election rules to eliminate cumulative voting. Accordingly, in May 2014, the board adopted a resolution proposing elimination of the practice by a six-to-one vote, Artus casting the lone dissenting vote. The board scheduled an election on the issue for July 25, 2014.
The board notified the HOA membership of the proposed change and the date of the election. It also sent the membership, in addition to a ballot, a [928] two-page, unsigned letter “`solicit[ing] [member’s] support for'” the proposed voting change and stating the board’s reasons for proposing it. The letter posited six questions: (1) What is cumulative voting? What is direct voting? (2) Why does Gramercy Towers have cumulative voting now? (3) Why should we eliminate cumulative voting? (4) What do other authorities say? (5) What are the disadvantages of cumulative voting? and (6) What are the most compelling reasons for straight voting? The answers were all supportive of direct, rather than cumulative, voting. Among the points made were that the cumulative voting rule originated with the developer and gave the developer a weighted advantage in elections, cumulative voting enables minority interests to obtain disproportionate power over HOA matters, the author of the Davis-Stirling Act was on record as saying cumulative voting provides no significant benefit other than to the developer, and direct voting is more democratic and is more easily administered. The letter closed by stating: “Remember: Vote `Yes’ on the upcoming special election. Amend our Bylaws and give Gramercy Towers the up-to-date election procedures it deserves.”
The board additionally posted notices in condominium elevators urging members to vote. These notices asked members to “Vote,” and stated: “We need quorum by July 25th.”
The only complaint Artus voiced at the time was in an e-mail to the board president calling attention to an issue of whether staff materials of the HOA were used in relation to the posted notice and that members who opposed the proposed change were not given an opportunity to post their own messages on the elevator boards.
The July election proceeded, and a large majority of voting HOA members approved the elimination of cumulative voting — 136 units in favor and 28 units opposed.
A month later, Artus filed the instant action. She made numerous allegations, including that the HOA had adopted a new rule without consideration of member comments and without giving all members an opportunity to be heard, appointed an interested election inspector, violated member inspection rights, increased assessments excessively and without the required reserve study and budgetary disclosures, and failed to provide accurate disclosure of material aspects of HOA finances. She also sought preliminary injunctive relief to prevent immediate implementation of the new direct voting rule so it would not apply to the upcoming board election.
The trial court granted preliminary relief, ruling Artus had made a sufficient showing that the HOA had violated the Davis-Stirling Act by (1) failing [929] to provide equal access to HOA communications for those with opposing views (§ 5105, subd. (a)(1)),[3] and (2) using association funds for “campaign purposes” in enclosing the two-page letter with the ballot (§ 5135, subd. (a)),[4] and that the balance of harm weighed in her favor given the upcoming board election.
Following the issuance of the preliminary injunction, the HOA held a second election on cumulative voting in February 2015. Artus raised no objections to this election. The result was the same as the first — approval of the change by a wide margin, 119 votes in favor and 15 against. The following month, the deferred HOA board elections took place. Artus was not reelected to the board.
In June, Artus proceeded to trial on her claims for permanent injunctive and declaratory relief. Following a three-day bench trial, the trial court issued an eight-page statement of decision. As to the two statutory claims on which preliminary injunctive relief had been granted, the court ruled as follows:
Violation of section 5105, subdivision (a)(1). The court found, in connection with the July 2014 election, that Artus never asked for equal access to “association media” to present an opposing view. She did, however, make such a request in connection with the February 2015 election, which the HOA accommodated.[5] In short, even assuming the equal-access provisions of section 5105, subdivision (a)(1) applied, the court found Artus failed to prove that the HOA, in fact, violated that statute.
[930] Violation of section 5135, subdivision (a). The court found that the board’s two-page letter merely explained its reasons for proposing the change in voting and, thus, the board had not violated the prohibition against the use of HOA funds for “campaign purposes.” The court, in other words, determined that the board’s letter did not come within the statutory meaning of “campaign purposes.”
The trial court went on to deny permanent injunctive and declaratory relief, recounting that the board had conducted a second election, the results of which were the same as the first. “The second election having addressed whatever valid objections Plaintiff may have had to the first there accordingly is no need for a permanent injunction…. If there was any violation of law in the conduct of the first election that has been completely remedied by the second election which was properly conducted and which invalidated the results of the first…. [¶] Declaratory relief acts prospectively. For the same reasons as stated above the petition for declaratory relief is denied.” The court further found the HOA had “made good faith efforts to comply with all procedures required by law to remedy any deficiencies in the first election” and there was “absolutely no need or basis for appointment of a receiver.”
The court additionally ruled the HOA was the “prevailing party” and denied Artus statutory fees and costs.
DISCUSSION
The Trial Court Did Not Err in Denying Declaratory Relief
Artus has assumed that if she proved either of her claims under the Davis-Stirling Act, then she was entitled to declaratory relief.[6] As we explain, that is not the case — declaratory relief is an equitable remedy and need not be awarded if the circumstances do not warrant.
(1) The propriety of a trial court’s denial of declaratory relief involves a two-prong inquiry. The first prong concerns whether “a probable future dispute over legal rights between parties is sufficiently ripe to represent an `actual controversy’ within the meaning of the statute authorizing declaratory relief (Code Civ. Proc., § 1060), as opposed to purely hypothetical concerns.” (Steinberg v. Chiang (2014) 223 Cal.App.4th 338, 343 [167 Cal.Rptr.3d 249].) This is a “question of law that we review de novo on appeal.” (Ibid.; see In re Tobacco Cases II (2015) 240 Cal.App.4th 779, 804 [192 Cal.Rptr.3d 881].) The second prong concerns “[w]hether such [an] actual controversy merits declaratory relief as necessary and proper (Code Civ. Proc., § 1061).” [931] (Steinberg, at p. 343; see In re Tobacco Cases II, at p. 804.) This is a matter within the trial court’s sound discretion “except in the extreme circumstances where relief is `entirely appropriate’ such that a trial court would abuse its discretion in denying relief … or where relief would never be necessary or proper.” (Steinberg, at p. 343.)
In the proceedings below, neither the parties nor the trial court distinguished between these two prongs of the declaratory relief analysis. The HOA simply asserted the second election made any relief “moot” (although it correctly characterized the issue as one of mootness rather than ripeness, given that at the outset of the litigation, there was, indeed, an “actual controversy” that was ripe for judicial determination (see Wilson & Wilson v. City Council of Redwood City (2011) 191 Cal.App.4th 1559, 1572-1576 [120 Cal.Rptr.3d 665] (Wilson) [comparing ripeness and mootness])). The trial court, in turn, cited no legal authority supporting its denial of declaratory relief, stating only: “Declaratory relief acts prospectively. For the same reasons as stated above [in connection with denying injunctive relief] the petition for declaratory relief is denied.” In the referenced denial of injunctive relief, the trial court cited to Connerly v. Schwarzenegger(2007) 146 Cal.App.4th 739, 748-750 [53 Cal.Rptr.3d 203]. Connerly dealt with whether the plaintiff had adequately alleged a “case or controversy,” which included whether he had alleged a particularized injury supporting injunctive relief and whether he had alleged an “actual controversy” supporting declaratory relief. (See id. at pp. 746-750.) Thus, the trial court’s citation to Connerly in connection with its denial of injunctive relief, at least suggests the court based its denial of declaratory relief on a “prong one” determination.
On appeal, Artus presumes the trial court made a “prong one” determination that no “actual controversy” existed and, therefore, we are presented with “a legal issue which this Court reviews de novo.” The HOA, in turn, provides an unhelpful potpourri of standards of review at the outset of its legal argument in its respondent’s brief, while later in its brief contends the trial court did not “abuse its discretion” in “finding” Artus’s declaratory relief and injunction claims “moot.”
Even assuming, as Artus has, that the trial court based its denial of declaratory relief on a “prong one” determination that there was no longer an “actual controversy,” we see no legal error given the facts of this case. The cases she cites in support of her assertion that the trial court erred as a matter of law dealt with significantly different circumstances.
(2) In Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 881 [70 Cal.Rptr.3d 474] (Environmental Defense), an environmental group claimed the county’s “`streamlined zoning [932] process'” violated state planning and zoning laws. The county appealed from an adverse judgment that found the case “ripe” and granted declaratory relief. (Id. at pp. 883-884.) On appeal, the county urged there was no “`actual controversy'” and the trial court had “`abused its discretion'” in granting declaratory relief — in other words, the county conflated the two prongs of the declaratory relief analysis. (Id. at p. 884.) As the Court of Appeal explained, the initial inquiry as to whether there is an “`actual controversy'” is a species of “ripeness” inquiry, presenting a question of law the appellate court reviews de novo. (Id. at p. 885 [“For a probable future controversy to constitute an `actual controversy,’ … the probable future controversy must be ripe.”].) “Once an `actual controversy’ exists, it is within the trial court’s discretion to grant or deny declaratory relief, and a reviewing court will not disturb that exercise of discretion absent abuse.” (Ibid.) “Properly framed, then, the initial question” the Court of Appeal had to decide was “whether as a matter of law there was an `actual controversy’ allowing the trial court to exercise its discretion to grant declaratory relief.” (Ibid.)
The appellate court concluded the case was ripe given the county’s response to direct inquiry by the trial court as to whether it intended to continue with its streamlined zoning process, and the trial court’s finding that “the county’s response meant it would continue with streamlined zoning, as the county believed that such zoning was consistent with state law.” (Environmental Defense, supra, 158 Cal.App.4th at p. 886.) “Under these circumstances,” said the Court of Appeal, “`there [i]s a reasonable expectation that the wrong, if any, will be repeated …,’ and the controversy does not present only an `academic question.’ [Citation.] Declaratory relief was therefore appropriate.” (Id. at p. 887.)
Here, while the HOA has disputed Artus’s claims about the first election, it has not, in contrast with the county’s adoption of a streamlined zoning process in Environmental Defense, adopted any bylaws or rules that are allegedly unlawful. No current provision of the HOA’s bylaws or rules, for example, sets forth a procedure allegedly in violation of the Davis-Stirling Act. Nor did the HOA tell the trial court, in contrast to what the county told the trial court in Environmental Defense, that it was going to continue operating under any allegedly unlawful rule or practice. On the contrary, the trial court here found “[t]he evidence demonstrates [the HOA] has made good faith efforts to comply with all procedures required by law to remedy any deficiencies in the first election, and in fact, … conducted a lawful second election….” The trial court also found there was “absolutely no need or basis” for appointing a receiver to monitor the HOA’s future conduct.
In California Alliance for Utility etc. Education v. City of San Diego (1997) 56 Cal.App.4th 1024 [65 Cal.Rptr.2d 833] (California Alliance), a citizen [933] group alleged “four continuing violations” of the Ralph M. Brown Act (Brown Act; Gov. Code, § 54950 et seq.) by the city in connection with undergrounding power lines under a 50-year franchise agreement with a local power company. (California Alliance, at pp. 1026, 1028.) Specifically, the group alleged the city had “adopted a practice” of violating the act by holding closed meetings on the pretext of pending litigation, failing to give notice of or reasons for the closed sessions, holding improper discussions during closed sessions, and posting misleading agendas. (Id. at p. 1028.) The city successfully demurred on the ground any claims for future violations were not “ripe.” (Ibid.) The Court of Appeal reversed, pointing out that the citizens group alleged the city would continue its allegedly unlawful conduct and observing that the city’s insistence it had not violated the Brown Act confirmed there would continue to be a controversy. (California Alliance, at p. 1030.) “Thus there can be no serious dispute that a controversy between the parties exists over [the] city’s past compliance with the Brown Act and the [city’s] charter. On that basis alone plaintiffs are entitled to declaratory relief resolving the controversy.” (Ibid.; see id. at p. 1031 [“the allegations of the complaint also strongly suggest that in the absence of declaratory relief plaintiffs will have some difficulty in preventing future violations”].) While “not controlling,” the appellate court also pointed out the controversy was one of public importance. (Id. at p. 1030.) “In the most general sense the controversy is over a long-term contract with the provider of a vital public service and involves literally hundreds of millions of dollars in potential infrastructure improvements over the next 23 years.” (Ibid.) Resolution of the Brown Act issues “will protect not only the public’s ability to monitor the activities of its public officials but it will also clarify for city officials the manner in which they may proceed in protecting [the] city’s legitimate interests under the franchise agreement.” (California Alliance, at pp. 1030-1031.)
The circumstances of the instant case are not comparable. Artus did not even allege “continuing violations” of the Davis-Stirling Act, let alone prove any such conduct. On the contrary, she challenged a single HOA election. And while she may have had a variety of complaints about that one election, she never claimed the HOA habitually violated the Davis-Stirling Act, in contrast to the citizens group’s allegations in California Alliance that the city chronically violated the Brown Act. Further, after a three-day trial, the trial court here expressly found the HOA had acted in good faith to comply with the law and there was “absolutely no need or basis for appointment of a receiver” to monitor the HOA’s future conduct. California Alliance, in contrast, involved a dismissal following a demurrer. Accordingly, the appellate court in that case was required to credit the citizen group’s allegations [934] that the city would continue to violate the Brown Act, an allegation underscored by the city’s insistence it was not violating the act and would continue as it had. (California Alliance, supra, 56 Cal.App.4th at p. 1030.)
In short, given the record in this case, including the trial court’s express findings, Artus cannot rely on generic statements in California Alliance, for example, that ripeness does not require allegations and proof of a pattern or practice of past violations, or that a dispute over a public entity’s past compliance with a statutory scheme is sufficient to establish an actual controversy. (California Alliance, supra,56 Cal.App.4th at p. 1029.) If either of those propositions, alone and in a vacuum, and without regard for the context of the case at hand, were enough to meet the “actual controversy” requirement, the courts would be saddled with the task of resolving historic disputes that have become matters of only academic interest. The courts, however, are not tasked with that obligation. (See, e.g., In re Tobacco Cases II, supra, 240 Cal.App.4th at p. 805 [the actual, present controversy requirement for declaratory relief “`would be illusory'” if a plaintiff could meet it “`simply by pointing to the very lawsuit in which he or she seeks [declaratory] relief'”; the requirement “`cannot be met in such a bootstrapping manner'”].)
(3) Artus’s assertion that she is entitled to declaratory relief to ensure there is no violation of the Davis-Stirling Act in connection with future HOA elections does not satisfy the “actual controversy” requirement. “`”`The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.'”‘” (Linda Vista Village San Diego Homeowners Assn., Inc. v. Tecolote Investors, LLC (2015) 234 Cal.App.4th 166, 181 [183 Cal.Rptr.3d 521], italics added; see Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 367 [119 Cal.Rptr.3d 346] [“`There is unanimity of authority to the effect that the declaratory procedure operates prospectively, and not merely for the redress of past wrongs.'”].) Other than pointing to the fact the HOA has defended itself in this one lawsuit, she has not pointed to any evidence that it is probable the HOA will violate the Davis-Stirling Act in conducting future elections. On the contrary, the trial court expressly found that in holding the second election, the HOA corrected any perceived deficiencies Artus observed in connection with the first, and that there was “absolutely no need or basis for appointment of a receiver” to ensure the HOA complied with the law. Accordingly, Artus’s suggestion future elections could violate the Davis-Stirling Act is pure speculation, which is insufficient to support declaratory relief. (See Wilson, supra,191 Cal.App.4th at p. 1582 [“`The “actual controversy” language in Code of Civil Procedure section 1060 encompasses a probable future controversy…. [Citation.]’ [Citation.] It does not embrace controversies that are `conjectural, anticipated to occur in the future, or an attempt to obtain an advisory opinion from the court.'”].)
[935] In sum, even applying a de novo standard in reviewing the trial court’s denial of declaratory relief, we conclude the court did not err in determining there is no basis for such relief on this record.[7]
Statutory Fees and Costs
Even if she does not succeed in obtaining a final judgment in her favor, Artus maintains she is entitled to interim attorney fees and costs under section 5145 because she obtained preliminary injunctive relief, relying on Monterossa, supra,237 Cal.App.4th 747.
Monterossa involved the California Homeowner Bill of Rights, and specifically its prohibition against the practice of “`dual tracking,'” whereby a lender ostensibly works with a defaulting homeowner on a loan modification, but at the same time pursues the foreclosure process. (Monterossa, supra, 237 Cal.App.4th at pp. 749-750.) The plaintiffs, claiming their lender was involved in the practice, obtained preliminary injunctive relief halting the foreclosure process and immediately sought fees and costs under section 2924.12, subdivision (h) (former subd. (i)). (Monterossa, at p. 750.) The trial court denied their interim request. The Court of Appeal granted writ relief. (Id. at pp. 750-751.)
Section 2924.12 authorizes a borrower to “bring an action for injunctive relief to enjoin a material violation of” several statutory provisions, including those that prohibit dual tracking.[8] (§ 2924.12, subd. (a)(1).) It further specifies that “[a]ny injunction shall remain in place and any trustee’s sale shall be enjoined until the court determines that the mortgage servicer, mortgagee … or authorized agent has corrected and remedied the violation … giving rise to the action for injunctive relief. An enjoined entity may move to dissolve an injunction based on a showing that the material violation has been corrected and remedied.” (§ 2924.12, subd. (a)(2).) If a violation remains unremedied [936] on the recording of a trustee’s deed upon sale, the lender or its agents are liable for damages and, if the violation is the result of intentional or reckless conduct, for civil penalties. (§ 2924.12, subd. (b).) However, the lender or its agent “shall not be liable for any violation that it has corrected and remedied” prior to the recording of the trustee’s deed upon sale. (§ 2924.12, subd. (c).) “A court may award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section. A borrower shall be deemed to have prevailed for purposes of this subdivision if the borrower obtained injunctive relief or was awarded damages pursuant to this section.” (§ 2924.12, subd. (h).)
As the Court of Appeal observed, this statute is focused on putting an immediate stop to specific unfair practices by lenders and plainly authorizes interim injunctive relief. (Monterossa, supra, 237 Cal.App.4th at pp. 753-754.) For example, the statute provides that an injunction “shall remain” in place “until” the court determines the lender has ceased violating the statute and that a lender “may move to dissolve” an injunction on showing the violation has ceased. (§ 2924.12, subd. (a)(2).) The statute further specifies that the lender is not liable for “any” violation that “it has corrected and remedied” prior to the recording of the trustee’s deed upon sale. (§ 2924.12, subd. (c).) In short, the Legislature has expressly authorized borrowers to seek preliminary injunctive relief, on the one hand, and strongly encouraged lenders to immediately comply with such relief, on the other. The prompt compliance the Legislature clearly desires will, of course, necessarily moot the need for permanent relief, so it is implicit, if not explicit, that the one-way fee provision designed to encourage borrowers to seek prompt relief, must pertain to preliminary, as well as to permanent, injunctive relief. (Monterossa, at pp. 753-755.)
Moreover, said the appellate court, what the plain language of section 2924.12, itself, reflects is consistent with the fundamental purpose of the statutory scheme, which is “`to ensure that, as part of the nonjudicial foreclosure process, borrowers … have a meaningful opportunity to obtain, available loss mitigation options, if any, … such as loan modifications or other alternatives to foreclosure.'” (Monterossa, supra, 237 Cal.App.4th at p. 755, quoting § 2923.4, subd. (a).) Keeping in mind that the nonjudicial foreclosure process is intended to be relatively expeditious (see Gomes v. Countrywide Home Loans, Inc. (2011) 192 Cal.App.4th 1149, 1154 [121 Cal.Rptr.3d 819]), the importance of preliminary injunctive relief to ensure that a borrower is accorded the rights secured by the statute “as part of the nonjudicial foreclosure process” is self-evident (§ 2923.4, subd. (a), italics added; see Monterossa, at p. 755).
[937] Finally, the appellate court concluded the legislative history of section 2924.12 “unequivocally” demonstrated that the Legislature intended to authorize interim fee and cost awards when a borrower obtains preliminary injunctive relief. (Monterossa, supra, 237 Cal.App.4th at p. 755.) For example, the history described exactly the considerations a trial court must weigh in deciding whether or not to issue a preliminary injunction, namely the likelihood of success of the merits and the evidence of harm if preliminary relief is not granted. (Id. at pp. 755-756.) “Thus,” said the court, “the Legislature understood that the intent of the statutory scheme was to permit a trial court to award attorney fees and costs to a borrower who prevails in obtaining a preliminary injunction.” (Id. at p. 756.)
(4) The Monterossa court acknowledged the general rule that fees and costs are not authorized for only interim success, but are awarded at the conclusion of the litigation, when the trial court can evaluate the parties’ relative degree of success and declare one or the other, or neither, as having prevailed in the lawsuit. (Monterossa, supra, 237 Cal.App.4th at p. 756; see, e.g., DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968, 977 [216 Cal.Rptr.3d 109, 391 P.3d 1181]; Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805, 833 [105 Cal.Rptr.2d 59]; Liu v. Moore (1999) 69 Cal.App.4th 745, 754-755 [81 Cal.Rptr.2d 807].) However, said the court, the Legislature has the power to authorize interim fee and cost awards, and has clearly done so in section 2924.12. (Monterossa, at p. 756.)
Artus maintains the “same reasoning” employed in Monterossa should apply here because the Davis-Stirling Act, and specifically section 5145, expressly authorizes injunctive relief. As we explain, section 5145 is part of an entirely different statutory scheme, its language differs markedly from that of section 2924.12, and its legislative history does not suggest, let alone “unequivocally” demonstrate, that the Legislature intended to supplant the general rule that the prevailing party is to be determined, and fees and costs are to be awarded, at the conclusion of a case.
Section 5145 is one of a dozen statutory fee provisions sprinkled throughout the Davis-Stirling Act. (§§ 4225, subd. (d) [action under ch. 3, art. 1 to remove unlawful restrictive covenants], 4540 [action under ch. 4, art. 2 for violation of statutory provisions concerning transfer disclosures], 4605, subd. (b) [action under ch. 4, art. 4 for violation of restrictions on grants of exclusive use of common areas], 4705, subd. (c) [action under ch. 5, art. 1 for violation of right to display flag], 4725, subd. (d) [action under ch. 5, art. 1 for violation of restrictions on television antennas and satellite dishes], 4745, subd. (k) [action under ch. 5, art. 1 for violation of statutory provisions concerning electric vehicle charging stations], 4955, subd. (b) [action under ch. 6, art. 2, for violation of statutory provisions concerning board meetings [938] (HOA open meeting law)], 5145, subd. (b) [action under ch. 6, art. 4, for violation of statutory provisions concerning association elections], 5230, subd. (c) [action under ch. 6, art. 5, for violation of statutory provisions restricting member’s use of association records]; 5235, subd. (a) [action under ch. 6, art. 5, for violation of statutory provisions concerning members right to inspect association records], 5380, subd. (e) [action under ch. 6, art. 9, for violation of statutory provisions concerning trust fund account], 5975, subd. (c) [action under ch. 10, art. 4 to enforce governing documents].)
Some of these are traditional “prevailing party” fee statutes. Many are “one-sided” fee provisions or authorize fees to a prevailing defendant HOA only when the trial court finds the action was frivolous or brought without any reasonable basis. (E.g., §§ 4540 [“[i]n an action to enforce this liability, the prevailing party shall be awarded reasonable attorney’s fees”], 4605, subd. (b) [a “member who prevails in a civil action … shall be entitled to reasonable attorney’s fees and court costs”; a “prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation”], 4705, subd. (c) [“In any action to enforce this section, the prevailing party shall be awarded reasonable attorney’s fees and costs.”], 4725, subd. (d) [“In any action to enforce compliance with this section, the prevailing party shall be awarded reasonable attorney’s fees.”], 4745, subd. (k) [“In any action to enforce compliance with this section, the prevailing plaintiff shall be awarded reasonable attorney’s fees.”], 5235, subds. (a) & (c) [in action to enforce member’s right to inspect and copy association records, if court finds association unreasonably withheld records, the court “shall award the member reasonable costs and expenses, including reasonable attorney’s fees”; “prevailing association may recover any costs if the court finds the action to be frivolous, unreasonable, or without foundation”], 5380, subd. (e) [“The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.”], 5975, subd. (c) [“In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.”].)
Four of the Davis-Stirling Act fee statutes, in addition to section 5145, expressly authorize injunctive relief. Section 4225, subdivision (d), provides that “any person” can bring an action “for injunctive relief” to enforce the prohibition in subdivision (a) against unlawful restrictive covenants. In such action, “[t]he court may award attorney’s fees to the prevailing party.” (§ 4225, subd. (d).) Section 4605 mirrors much, but not all, of the language of section 5145 and provides that a “member of an association may bring a civil action” (for a violation of the provisions concerning the exclusive use of common areas (§ 4600)) “for declaratory or equitable relief … including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues.” (§ 4605, subd. (a).) It further provides that a “member who prevails in a civil action to enforce the [939] member’s rights pursuant to [s]ection 4600 shall be entitled to reasonable attorney’s fees and court costs.” (Id., subd. (b).) However, a “prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.” (Ibid.) Section 4955, subdivision (a), is virtually identical to section 4605 and, thus, also mirrors much of the language of section 5145. It provides that a “member of an association may bring a civil action” (for a violation of the provisions of the Davis-Stirling Act commonly known as the “Common Interest Development Open Meeting Act” (§ 4900)) “for declaratory or equitable relief … including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues.” (§ 4955, subd. (a).) It also further provides that a “member who prevails in a civil action to enforce the member’s rights pursuant to this article shall be entitled to reasonable attorney’s fees and court costs.” (Id., subd. (b).) However, a “prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.” (Ibid.) Finally, section 5230, one of the statutory provisions concerning the inspection of association records, provides that an HOA “may bring an action against any person who violates this article for injunctive relief and for actual damages to the association caused by the violation.” (§ 5230, subd. (a).) It further provides that an “association shall be entitled to recover reasonable costs and expenses, including reasonable attorney’s fees, in a successful action to enforce its rights under this article.” (Id., subd. (c).)
(5) What is immediately striking about all of the fee statutes in the Davis-Stirling Act, whether or not they expressly authorize injunctive relief, is that they implicitly, if not explicitly, permit such relief, as they provide for the enforcement of specific statutory provisions. Enforcement actions, almost by definition, can involve some form of injunctive relief. We cannot imagine that, in the absence of an explicit directive, the Legislature intended that the general rules governing the prevailing party determination and the timing of fee and cost awards, do not apply to this array of fee statutes merely because they allow for such equitable relief. In fact, for many years, the courts have utilized these general rules in reviewing statutory fee awards under the Davis-Stirling Act, without triggering any reaction by the Legislature. (E.g., Almanor Lakeside Villas Owners Assn. v. Carson (2016) 246 Cal.App.4th 761, 773-777 [201 Cal.Rptr.3d 268] [no abuse of discretion where trial court deemed plaintiff HOA the prevailing party under § 5975 in action to enforce governing documents]; Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1150, 1152-1156 [132 Cal.Rptr.3d 886] [trial court abused discretion in failing to award defendant HOA fees and costs under former § 1354 in action to enforce association documents where plaintiff member “prevailed on no level …, let alone on a `practical [940] level'”].) With these initial observations, we turn specifically to the language and history of section 5145.
As we have noted, the language of section 5145 is largely the same as that of two of the other Davis-Stirling Act fee statutes — sections 4605 (concerning the exclusive use of common areas) and 4955 (part of the HOA open meeting law). The California Law Revision Commission comments to all three sections state their language “continues” former section 1363.09, except for minor, nonsubstantive changes. (Cal. Law Revision Com. com., 12B pt. 2 West’s Ann. Civ. Code (2016 ed.) foll. §§ 4955, p. 69, 5145, p. 93; Cal. Law Revision Com. com., 12B pt. 1 West’s Ann. Civ. Code (2016 ed.) foll. § 4605, pp. 464-465.) We therefore turn our attention to former section 1363.09.
Former section 1363.09 was added to the Davis-Stirling Act in 2005 at the same time the election provisions were added. Entitled “Remedy,” former section 1363.09 did not apply just to the new election provisions, but to any “violation of this article,” namely then article 2 of chapter 4. (Italics added; see Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended June 28, 2005, § 5, p. 7.) At that time, former article 2 included not only the new election provisions (codified as former § 1363.03), but also the existing HOA open meeting provisions (codified as former § 1363.05), and another new statute added in 2005 concerning the exclusive use of common areas (codified as former § 1363.07). (Sen. Bill No. 61 (2005-2006 Reg. Sess.) as introduced Jan. 14, 2005, § 1; Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended June 28, 2005, §§ 3, 4, pp. 5-6.) Thus, former section 1363.09 was, so to speak, an omnibus remedies provision for former chapter 4, article 2.
Former section 1363.09 provided in pertinent part that a “member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by an association …, including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues.” (See Assem. Bill No. 1098 (2005-2006 Reg. Sess.) June 28, 2005, § 5, p. 7.) It further provided that a “member who prevails in a civil action to enforce his or her rights pursuant to this article shall be entitled to reasonable attorney’s fees and court costs.” (Former § 1363.09, subd. (b).) A prevailing defendant association was not entitled to recover costs unless the court found the action “to be frivolous, unreasonable, or without foundation.” (Ibid.) The statute additionally specified that certain claims under the new election provisions, including those seeking access to association resources to express a point of view, could be brought in small claims court if the amount demanded did not exceed that court’s jurisdictional amount. (Id., subd. (c).)
[941] Former section 1363.09 found its way into the Davis-Stirling Act through two complimentary pieces of legislation that moved in tandem through the Legislature — Senate Bill No. 61 (2005-2006 Reg. Sess.) and Assembly Bill No. 1098 (2005-2006 Reg. Sess.).
As introduced, Senate Bill No. 61 (2005-2006 Reg. Sess.) proposed adding a new statute, former section 1363.03, that would impose basic requirements for HOA elections. (Sen. Bill No. 61 (2005-2006 Reg. Sess.) as introduced Jan. 14, 2005.) It additionally provided, in a proposed subdivision (f) of the new statute, that any member could bring “a civil action for declaratory relief, injunctive relief, restitution, or a combination thereof.” (Sen. Bill No. 61 (2005-2006 Reg. Sess.) as introduced Jan. 14, 2005, § 1, p. 3.) The proposed new statute did not, however, include any provision for attorney fees. (Id. at pp. 2-3.)
Assembly Bill No. 1098 (2005-2006 Reg. Sess.), upon its first amendment, also proposed adding a new statute, former section 1363.07, that would impose HOA election requirements. (Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended Apr. 11, 2005, § 1, pp. 2-5.) These requirements were focused on certain kinds of elections and were more detailed than the requirements set forth in Senate Bill No. 61 (2005-2006 Reg. Sess.). The Assembly bill also authorized a member to “initiate a civil action to enforce his or her rights” and required a court to void an election that violated the proposed statutory requirements. (Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended Apr. 11, 2005, § 1, p. 5.) It additionally provided, in a proposed subdivision (f) of the new statute, for fees and costs to “[a]ny member who initiates a civil action.” (Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended Apr. 11, 2005, § 1, p. 5, italics added.) However, the author quickly proposed an amendment to correct “a drafting error” and replaced the word “initiates,” with “prevails.” (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended Apr. 11, 2005, p. D.) Thereafter, the Assembly bill was amended to delete all election requirements, but was then amended again to reinclude the focused election provisions and the remedy and fee provisions. (Assem. Bill. No. 1098 (2005-2006 Reg. Sess.) as amended June 14, 2005, § 2, pp. 4-5.) At this point, the Assembly bill proposed removing the remedy and fee provisions from the proposed new section 1363.07, and placing them, instead, in another proposed new section 1363.09. (Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended June 14, 2005, § 3, p. 5.) The fee provisions were also amended to specify that only a member “who prevails” in a civil action would be entitled to recover fees and costs. (Ibid.)
In the meantime, Senate Bill No. 61 (2005-2006 Reg. Sess.) was also amended several times, expanding election requirements and eventually [942] providing for both remedies and fees, again in a proposed new, separate statute — former section 1363.09. (Sen. Bill No. 61 (2005-2006 Reg. Sess.) as amended June 23, 2005, § 3, p. 6.) Thus, at this juncture, both Senate Bill No. 61 and Assembly Bill No. 1098 (2005-2006 Reg. Sess.) contained the language that ultimately became former section 1363.09.
Senate Bill No. 61 (2005-2006 Reg. Sess.) was then amended to state that the author of Assembly Bill No. 1098 (2005-2006 Reg. Sess.) was the principal “co-author” of Senate Bill No. 61. (See Sen. Bill No. 61 (2005-2006 Reg. Sess.) as amended Aug. 31, 2005.) Assembly Bill No. 1098, in turn, was amended to delete all election requirements and the election remedies and fee provisions, and to, instead, impose requirements on the use of common areas in the proposed new former section 1363.07 and to add further requirements pertaining to the disclosure of HOA records to then existing former section 1365.2. (Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended Sept. 2, 2005.) Accordingly, as ultimately passed by the Legislature, Senate Bill No. 61 added the election provisions codified as former sections 1363.03 and 1363.04, and the remedies and fee provisions codified as former section 1363.09. (Sen. Bill No. 61 (2005-2006 Reg. Sess.) as amended Sept. 2, 2005, §§ 3-5, pp. 3-8.)
The report of the Assembly Committee on Judiciary on Senate Bill No. 61 (2005-2006 Reg. Sess.) had this to say about the proposed new remedies statute: “In order to protect the vital rights established here, the bill also provides a remedy for any violation, including equitable relief and a discretionary civil penalty in an amount to be determined by the court up to a maximum of $1000 per violation. In order to make the remedy meaningful, the bill provides for recovery of reasonable attorney’s fees, as are currently allowed with respect to a prevailing member when an association violates its obligations regarding the disclosure of association records.[[9]] Prevailing associations may also recover litigation costs if an action is frivolous, unreasonable or without foundation. Finally, in order to allow for an expeditious and economical method of enforcement, the bill allows specified actions to be brought in small claims court where the court may order compliance with the statute.” (Assem. Com. on Judiciary, Analysis of Sen. Bill. 61 (2005-2006 Reg. Sess.) as amended Apr. 12, 2005, pp. 5-6; see Assem. Com. [943] on Housing & Community Development, Analysis of Sen. Bill No. 61 (2005-2006 Reg. Sess.) as amended June 23, 2005, pp. 6-7 [referencing the record disclosure fee provisions and also stating “in order to allow for an expeditious and economical method of enforcement, the bill allows specified actions to be brought in small claims court”]; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 61 (2005-2006 Reg. Sess.) as amended Sept. 2, 2005, pp. 5-6 [also referencing the record disclosure fee provisions and noting specified actions can be brought in small claims court].)
In 2011, the California Law Revision Commission submitted its recommendations on the “Statutory Clarification and Simplification of CID Law.” (Recommendation: Statutory Clarification and Simplification of CID Law (Feb. 2011) 40 Cal. Law Revision Com. Rep. (2010) p. 235.) Observing that the Davis-Stirling Act was “not well organized or easy to use” and “[r]elated provisions are not always grouped together in a coherent order” (Recommendation: Statutory Clarification and Simplification of CID Law, supra, 40 Cal. Law Revision Com. Rep., p. 242), the commission proposed a total recodification of the Davis-Stirling Act, which the Legislature implemented in 2012. (§ 4000 et seq.; e.g., Assem. Com. on Judiciary, Analysis of Assem. Bill No. 805 (2011-2012 Reg. Sess.) as introduced Feb. 17, 2011, p. 1 [“bill reflects the fruit of four-year’s of public input and extensive study on the part of the [commission] to revise and recast the state’s cumbersome and often confusing statutory provisions relating to the regulation of a common interest development (CID) and the respective rights and duties of a home owner’s association (HOA) and its members” (italics omitted)].) This reorganization and recodification made only “minor substantive changes,” and these were to “achieve internal consistency.” (Assem. Com. on Judiciary, Analysis of Assem. Bill No. 805 (2011-2012 Reg. Sess.) as introduced Feb. 17, 2011, p. 1.)
As a result of this recodification, former section 1363.09 was eliminated and its remedial provisions were thrice replicated and recodified as three new statutes. Since the substantive statutory provisions concerning the exclusive use of common areas (codified as former § 1363.07) were recodified as section 4600 and placed in a new chapter 4, the correlating remedial provisions in former section 1363.09 were recodified as section 4605. Since the substantive open meeting provisions (codified as former § 1363.05) were recodified as section 4900 et seq. and placed in a new chapter 6, the correlating remedial provisions in former section 1363.09 were recodified as section 4955. And since the substantive election provisions (codified as former § 1363.03) were recodified as section 5000 et seq. and also placed in new chapter 6, the correlating remedial provisions in former section 1363.09 were recodified as section 5145. (See Cal. Law Revision Com. com., 12B pt. 1 West’s Ann. Civ. [944] Code, supra, foll. § 4605, pp. 464-465; Cal. Law Revision Com. com., 12B pt. 2 West’s Ann. Civ. Code, supra, foll. §§ 4955, p. 69, 5145, p. 93.)
(6) This excursion through the history of section 5145 demonstrates that this statute differs markedly from the fee provision in the California Homeowner Bill of Rights (§ 2924.12, former subd. (i)) at issue in Monterossa. Section 5145 is not tied to any substantive provisions like those in section 2924.12, which expressly set forth a process whereby the borrower is incentivized to seek preliminary injunctive relief, the lender is incentivized to promptly comply, and upon compliance, the lender can move to dissolve the injunction and is protected from further liability under the statute. (§ 2924.12, subds. (a)-(f).) The Monterossa court quite rightly described section 2924.12 as a “unique statutory scheme” and one that clearly envisions preliminary injunctive relief as a principal tool for compliance and the reward of fees and costs for achieving compliance in such manner. (Monterossa, supra, 237 Cal.App.4th at pp. 754-755.) The same cannot be said about either the substantive election provisions now set forth in section 5100 et seq. or the remedy and fee provisions now set forth in section 5145.
Furthermore, when we consider the language of section 5145, we are not considering only this statute. Rather, we are actually considering the language of former section 1363.09, since section 5145 merely “continue[d]” the former statute’s remedial provisions. (Cal. Law Revision Com. com., 12B pt. 2 West’s Ann. Civ. Code, supra, foll. § 5145, p. 93.) As we have discussed, former section 1363.09 set forth the remedy and fee provisions for three different substantive provisions of the Davis-Stirling Act — those pertaining to HOA elections (codified as former § 1363.03, now codified as § 5100 et seq.), those setting forth the HOA open meeting laws (codified as former § 1363.05, now codified as § 4900 et seq.), and those pertaining to the exclusive use of common areas (codified as former § 1363.07, now codified as § 4600). Accordingly, were we to conclude, as Artus urges, that the Legislature intended that the general rules governing the prevailing party determination and the timing of an award of fees and costs do not apply to section 5145, we would have to conclude the same as to sections 4605 (pertaining to the exclusive use of common areas) and 4955 (pertaining to the HOA open meeting law), as well. Had the Legislature intended this when it enacted the remedy and fee provisions in former section 1363.09 and now replicated and recodified in these three statutes, it could have, and undoubtedly would have, made that clear. As it is, there is no suggestion in either the language of these statutes or the legislative history of former section 1363.03 or section 1363.09 that the Legislature intended that the courts abandon the general rules pertaining to attorney fee and cost awards and treat these provisions as uniquely authorizing fees and costs for only interim success.
[945] (7) Finally, as to section 5145, in particular, the Legislature has expressly authorized a means to seek expedited relief, with a minimal expenditure of party resources. As we have observed, subdivision (c) of former section 1363.09 provided that “[a] cause of action under Section 1363.03 with respect to access to association resources by candidates and advocates, the receipt of a ballot by a member, or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after tabulation may be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court.” (Sen. Bill No. 61 (2005-2006 Reg. Sess.) as amended June 23, 2005, § 3, pp. 6-7.) Subdivision (c) of section 5145 continues this express authorization of small claims court jurisdiction. (Cal. Law Revision Com. com., 12B pt. 2 West’s Ann. Civ. Code, supra, foll. § 5145, p. 93.) Thus, while the Legislature could have enacted a substantive and procedural scheme like the one it set forth in section 2924.12 of the California Homeowner Bill of Rights act, it chose to provide a different, albeit more limited, procedural device to facilitate a relatively expeditious and less costly means to resolve certain violations of the election provisions of the Davis-Stirling Act. It is not the role of the courts to add statutory provisions the Legislature could have included, but did not. (See City of Scotts Valley v. County of Santa Cruz(2011) 201 Cal.App.4th 1, 32-36 [133 Cal.Rptr.3d 235]; County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 594 [79 Cal.Rptr.3d 489].)
(8) We therefore conclude, for all the reasons we have set forth, that the reasoning of Monterossa does not apply to section 5145. As Artus advances no other theory in support of her claim for statutory fees and costs, we affirm the trial court’s order denying such fees and costs.
DISPOSITION
The judgment and order denying statutory attorney fees and costs is affirmed. The parties are to bear their own costs on appeal.
Humes, P. J., and Margulies, J., concurred.
[1] All further statutory references are to the Civil Code unless otherwise indicated.
[2] Quoted material is from the trial court’s statement of decision. Artus does not challenge the court’s findings as to the operative facts.
[3] Section 5105, subdivision (a)(1), provides in relevant part: “An association shall adopt rules … that do all of the following: [¶] (1) Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.”
[4] Section 5135, subdivision (a), provides: “Association funds shall not be used for campaign purposes in connection with any association board election. Funds of the association shall not be used for campaign purposes in connection with any other association election except to the extent necessary to comply with duties of the association imposed by law.”
[5] In accordance with the mandate of section 5105, subdivision (a)(1) the HOA’s bylaws state: “If any candidate or Owner advocating a point of view is provided access to Association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and Owners advocating a point of view, including those not endorsed by the Board, for purposes that are reasonably related to the election.” The HOA’s election rules set forth the procedure for effectuating this right and provide: “Each candidate or Member advocating a point of view may prepare and deliver to a person specified in the election notice, care of the Association’s office, a statement not exceeding 500 words to be enclosed with the election notice. The Association shall not edit or redact any content from campaign communications. The candidate or Member who issues the communication shall be solely responsible for its content.” Artus did not, in connection with the first election, ask to present an opposing view or submit an opposing statement. She did in connection with the second election, and the HOA circulated her opposition statement.
[6] Artus does not challenge the trial court’s denial of permanent injunctive relief.
[7] Although we need not, and do not, reach the merits of Artus’s two statutory claims, it appears likely the two-page letter the HOA enclosed with the ballot for the first election had a “campaign purpose[]” within the meaning of section 5135, subdivision (a). On its face, this statute is not confined to “board” elections (§ 5135, subd. (a)), and the letter did more than merely explain the proposed bylaw change and expressly exhorted members to vote “yes.” (See Vargas v. City of Salinas (2009) 46 Cal.4th 1, 34-37 [92 Cal.Rptr.3d 286, 205 P.3d 207]; Stanson v. Mott (1976) 17 Cal.3d 206, 221-223 [130 Cal.Rptr. 697, 551 P.2d 1]; see also Wittenburg v. Beachwalk Homeowners Assn. (2013) 217 Cal.App.4th 654, 666, fn. 5 [158 Cal.Rptr.3d 508].) We make no comment on whether Artus proved, as also required by the statute, that HOA funds were used specifically to prepare and disseminate the letter.
[8] Until January 1, 2018, this statute applied “only to certain entities that foreclosed on more than 175 real properties during their immediately preceding annual reporting period.” (Monterossa, supra, 237 Cal.App.4th at p. 753, fn. 5; see § 2924.12, former subd. (j); see also former § 2924.18, subd. (b).)
[9] The provisions concerning inspection and copying of association records were enacted two years earlier and codified as former section 1365.2. Then subdivision (e) provided in pertinent part: “A member of an association may bring an action to enforce the member’s right to inspect and copy [specified association records]. If a court finds that the association unreasonably withheld access to [these] records …, the court shall award the member reasonable costs and expenses, including reasonable attorney’s fees, and may assess a civil penalty….” (Former § 1365.2, subd. (e).) As we have discussed, these record disclosure provisions were expanded in 2005 through Assembly Bill No. 1098 (2005-2006 Reg. Sess.). (Assem. Bill No. 1098 (2005-2006 Reg. Sess.) as amended Apr. 11, 2005, § 2, p. 7.)
Related Links
Attorney’s Fees and Costs are not Available to a Moving Party who Secures Interim Injunctive Relief
-Published on HOA Lawyer Blog (March, 2018)
Greenfield v. Mandalay Shores Community Association
[Short-term Rental Restrictions; Coastal Communities] A HOA within a coastal zone may not have the ability to restrict short-term rentals without approval of the California Coastal Commission.
Ferguson Case Orr Paterson, Wendy Cole Lascher and Michael A. Velthoen for Plaintiffs and Appellants.
Hathaway, Perrett, Webster, Powers, Chrisman & Gutierrez, Robert A. Bartosh and Seth P. Shapiro for Defendant and Respondent.
OPINION
YEGAN, Acting P. J.—
One of the basic goals of the California Coastal Act of 1976 (Pub. Resources Code, § 30000 et seq.; Coastal Act) is to “[m]aximize public access” to the beach (Pub. Resources Code, § 30001.5, subd. (c)). An appellate court is to liberally construe the Coastal Act to achieve this goal. Respondent Mandalay Shores Community Association has not erected a physical barrier to the beach but has erected a monetary barrier to the beach. (See post, at p. 899.) It has no right to do so.
Robert S. Greenfield and Demetra Greenfield appeal the denial of their motion for a preliminary injunction to stay the enforcement of a homeowners association resolution banning short-term rentals (STR ban) in Oxnard Shores. Appellants contend that the STR ban violates the Coastal Act (Pub. Resources Code, § 30000 et seq.),[1] which requires a coastal development permit for any “development” that results in a change in the intensity of use of or access to land in a coastal zone. (§§ 30600, subd. (a), 30106.) Respondent failed to get a coastal development permit before adopting the STR ban.
Denying the motion for preliminary injunction, the trial court remarked that “[t]he Superior Court is not the proper venue to assess whether or not Mandalay Bay HOA rules conflict with the Coast[al] Commission goals and plans. The parties should take this dispute to the Coastal Commission which has the authority and resources to develop a comprehensive plan to regulate the limited coastal beach front state asset.”
We reverse. Section 30803, subdivision (a) of the Coastal Act provides that “[a]ny person may maintain an action for declaratory and equitable relief to restrain any violation of this division…. On a prima facie showing of a violation of this division, preliminary equitable relief shall be issued to restrain any further violation of this division.” (Italics added.)
Facts and Procedural History
Oxnard Shores is a beach community located in the Oxnard Coastal Zone. (§ 30103, subd. (a).) Nonresidents have vacationed at Oxnard Shores for decades, renting beach homes on a short-term basis.
[899] Appellants own a single-family residence at Oxnard Shores and, in 2015, started renting their home to families for rental periods of less than 30 days. The property is zoned R-B-1 (single-family-beach) pursuant to City of Oxnard’s (City) local coastal program implementation plan, which was approved by the California Coastal Commission (Coastal Commission) in 1982. (Oxnard Ordinances, § 17-10(B).) The R-B-1 zoning ordinance makes no mention of STRs. City has historically treated STRs as a residential activity and collected a transient occupancy tax for short-term rentals. In 2016, City announced that STRs are not addressed in the city code and that it was considering drafting an STR ordinance to establish standards for the licensing and operation of STRs.
Respondent, Mandalay Shores Community Association, is a mutual benefit corporation established for the development of Oxnard Shores, now known as Mandalay Shores. In June 2016, respondent adopted a resolution barring the rental of single-family dwellings for less than 30 days. The STR ban affects 1,400 units and provides that homeowners who rent their homes “for less than 30 consecutive days will be levied incrementally. The first offense will result in a $1,000 fine; the second offense will result in a $2,500 fine; the third, and subsequent offenses will result in a $5,000 fine, per offense.”[2]
In August of 2016, Andrew Willis, regional enforcement supervisor for the Coastal Commission, sent a letter advising respondent that the STR ban was a “development” under the Coastal Act and required a coastal development permit. Willis requested that respondent work with the City and the Coastal Commission to “develop suitable regulations before taking action in the future related to short-term rentals in the community.”
Appellants sued for declaratory and injunctive relief. (§ 30803.) The trial court denied an ex parte application for a temporary restraining order and thereafter conducted a hearing on appellants’ motion for preliminary injunction. The trial court found that the STR ban was not a “development” within the meaning of the Coastal Act and denied the request for a preliminary injunction.
Standard of Review
(1) Where the grant or denial of a preliminary injunction depends upon the construction of a statute, our review is de novo. (Ciani v. San Diego Trust & Savings Bank (1991) 233 Cal.App.3d 1604, 1611 [285 Cal.Rptr. 699].) [900] “[T]he standard of review is not whether discretion was appropriately exercised but whether the statute was correctly construed. [Citation.]” (Ibid.) Section 30803, subdivision (a) states in pertinent part: “On a prima facie showing of a violation of this division, preliminary equitable relief shall be issued to restrain any further violation of this division.” (Italics added.) Under section 30803, any person may bring a lawsuit to enjoin an activity that violates the Coastal Act. (California Coastal Com. v. Quanta Investment Corp. (1980) 113 Cal.App.3d 579, 610-611 [170 Cal.Rptr. 263].) Because standing is conferred on “any person” (§ 30803, subd. (a)), it matters not when appellants started renting to short-term tenants or that appellants can be adequately compensated for economic damages if the STR ban is found to be invalid at trial.
Coastal Zone Development
(2) Enacted in 1976, the Coastal Act is intended to, among other things, “[m]aximize public access to and along the coast and maximize public recreational opportunities in the coastal zone consistent with sound resources conservation principles and constitutionally protected rights of private property owners.” (§ 30001.5, subd. (c).) The Coastal Act requires that any person who seeks to undertake a “development” in the coastal zone obtain a coastal development permit. (§ 30600, subd. (a).) “Development” is broadly defined to include, among other things, any “change in the density or intensity of use of land….” (§ 30106.) Our courts have given the term “development” “[a]n expansive interpretation … consistent with the mandate that the Coastal Act is to be `liberally construed to accomplish its purposes and objectives.’ [Citation.]” (Pacific Palisades Bowl Mobile Estates, LLC v. City of Los Angeles (2012) 55 Cal.4th 783, 796 [149 Cal.Rptr.3d 383, 288 P.3d 717].) “Development” under the Coastal Act “is not restricted to activities that physically alter the land or water [citation].” (Ibid.)
Closing and locking a gate that is usually open to allow public access to a beach over private property is a “development” under the Coastal Act. (Surfrider Foundation v. Martins Beach 1, LLC (2017) 14 Cal.App.5th 238, 248-250 [221 Cal.Rptr.3d 382] (Surfrider).) So is posting “no trespassing” signs on a 23-acre parcel used to access a Malibu beach. (LT-WR, L.L.C. v. California Coastal Com.(2007) 152 Cal.App.4th 770, 779, 805 [60 Cal.Rptr.3d 417].)
In Surfrider, the landowner argued that a broad interpretation of the term “development” would lead to absurd results and require a coastal development permit if a homeowner wanted to throw a party. (Surfrider, supra, 14 Cal.App.5th at p. 254.) Rejecting the argument, the Court of Appeal noted that the Coastal Act exempts certain activities such as “temporary events” [901] that do not have a significant adverse impact on coastal resources. (Ibid., citing § 30610, subd. (i)(1).) Such an exemption must be determined by the Coastal Commission executive director. (Ibid.) The Coastal Commission “shall, after public hearing, adopt guidelines to implement this subdivision to assist local governments and persons planning temporary events in complying with this division by specifying the standards which the executive director shall use in determining whether a temporary event is excluded from permit requirements pursuant to this subdivision.” (§ 30610, subd. (i)(1).)
Here the STR ban changes the intensity of use and access to single-family residences in the Oxnard Coastal Zone. STRs were common in Oxnard Shores before the STR ban; now they are prohibited. The trial court found that if it did not issue a preliminary injunction, “arguably the public will be restricted in its access to the coast.”
Respondent asserts that the STR ban is necessary to curtail the increasing problem of short-term rentals which cause parking, noise, and trash problems. STR bans, however, are a matter for the City and Coastal Commission to address. STRs may not be regulated by private actors where it affects the intensity of use or access to single-family residences in a coastal zone. The question of whether a seven-day house rental is more of a neighborhood problem than a 31-day rental must be decided by City and the Coastal Commission, not a homeowners association.
(3) Respondent claims that the STR ban is consistent with City’s R-G-1 zoning but points to nothing in the coastal zoning ordinance that says that the rental of a single-family dwelling for 29 days is prohibited.[3] The trial court stated that it is not in the business of tailoring STR rules. “That should be left for the City, which is in the process of considering amending its coastal zoning section to specifically deal with [STRs] and the Coastal Commission, which reviews any proposed amendment to the local coastal plan.” We concur. The decision to ban or regulate STRs must be made by the City and [902] Coastal Commission, not a homeowners association. Respondent’s STR ban affects 1,400 units and cuts across a wide swath of beach properties that have historically been used as short-term rentals. A prima facie showing has been made to issue a preliminary injunction staying enforcement of the STR ban until trial. (§ 30803.)
Disposition
The judgment is reversed. The trial court is ordered to enter a new order granting appellant’s motion for preliminary injunction. (§ 30803, subd. (a).) No bond shall be required. (Ibid.) Appellant is awarded costs on appeal. Appellant’s request for attorney fees under the private attorney general statute (see Code Civ. Proc., § 1021.5) is an issue to be decided in the first instance in the trial court on noticed motion. (Arden Carmichael, Inc. v. County of Sacramento (2000) 79 Cal.App.4th 1070, 1079-1080 [94 Cal.Rptr.2d 673].)
Perren, J., and Tangeman, J., concurred.
[1] Unless otherwise stated, all statutory references are to the Public Resources Code, also referred to as the Coastal Act.
[2] This escalating fine structure for “offenses” sounds like respondent may think it is a governmental entity. At oral argument, Justice Perren remarked that it looked like respondent had appointed itself “Emperor of the Beach.”
[3] Respondent asserts that the short-term rental of a single-family dwelling is a commercial use of property, similar to a bed and breakfast facility, and is subject to City’s Coast Visitor-Serving Commercial Sub-Zone zoning ordinance. (Oxnard Ordinances, § 17-18.) That ordinance regulates commercial/recreational activities in the coastal area such as skating rinks, amusement centers, boat rentals, night clubs, tourist hotels, motels, convention and conference facilities, and vacation timeshare developments. Section 17-18 makes no mention of bed and breakfast facilities or the short-term rental of single-family dwellings.
Respondent also argues that “family,” as used in the R-B-1 “single family dwelling” zoning ordinance, does not include families living in short-term rentals. City has never interpreted the R-B-1 zoning ordinance to ban STRs nor has the Coastal Commission. City’s interpretation of its zoning ordinance is entitled to deference (MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 219 [130 Cal.Rptr.2d 564]), as is the Coastal Commission’s interpretation of the Oxnard Local Coastal Program. (Hines v. California Coastal Com. (2010) 186 Cal.App.4th 830, 849 [112 Cal.Rptr.3d 354].)
Related Links
HOA Short-term Rental Rule Violated California Coastal Act
-Published on HOA Lawyer Blog (April, 2018)
Branches Neighborhood Corporation v. CalAtlantic Group, Inc.
[Construction Defect; Membership Approval Prior to Filing Claim] CC&R provisions requiring membership approval prior to the initiation of a construction defect claim are enforceable and must be complied with.
Fenton Grant Mayfield Kaneda & Litt, Gregory S. Lew and Daniel H. Glifford for Plaintiff and Appellant.
Plante Lebovic, Brian C. Plante and Gregory M. Golino for Defendant and Respondent.
OPINION
MOORE, J. —
Plaintiff Branches Neighborhood Corporation (Branches or the association), a community association incorporated pursuant to the Davis-Stirling Common Interest Development Act (the Act) (Civ. Code, § 4000 et seq.),[1] filed an arbitration claim against the association’s developer, defendant CalAtlantic Group, Inc., formerly known as Standard Pacific Corp. (Standard), for construction defects. The arbitrator granted summary judgment in Standard’s favor, concluding the association did not receive the consent of its members to file the claim until after the claim was filed, in violation of its declaration of covenants, conditions and restrictions (CC&Rs). The trial court subsequently denied the association’s motion to vacate the award, concluding the court had no power to review the arbitrator’s decision.
Branches argues on appeal that the trial court incorrectly denied its motion to vacate because the arbitrator exceeded its powers by abridging an unwaivable statutory right or public policy. We find no such right or policy, and accordingly, the plain language of the CC&Rs controls. We therefore affirm the judgment.
I. FACTS
Branches is located in Ladera Ranch and consists of residential condominium units. Its operation is subject to both the provisions of the Act and its own CC&Rs. Standard was the builder, as defined by the Act. (§ 911.)
In October 2014, Branches gave notice to Standard under section 910, stating that it intended to make a claim for construction and design defects. Branches requested that Standard provide relevant plans and specifications within 30 days, and provided a preliminary list of defects. The listed defects were wide ranging, including problems impacting both individual units and the common area.
In March 2015, the parties entered into a stipulation to engage in the prelitigation procedures set forth in the Act. (§ 6000.) Jim Roberts, an attorney, was designated as mediator and dispute resolution facilitator. The [748] parties agreed to a list of steps, including joint site inspections and testing, production of documents by each side, preparation of expert reports, creation of a more detailed defect list, and ultimately, mediation and a settlement meeting. The parties were ultimately unsuccessful, and the prelitigation procedures ended in November 2015.
On January 12, 2016, Branches filed a demand for arbitration with JAMS. The claim alleged various construction defects and sought in excess of $5 million in damages, alleging strict liability, breach of warranties, negligence, statutory liability, and various other theories. The Hon. James Smith, a retired judge, was appointed to serve as arbitrator.
At an initial conference, the arbitrator ordered Branches to file a short statement of the factual basis for each claim being asserted, and directed the parties to meet and confer about a case management order. On May 31, Branches served a revised demand for arbitration that included the short statement the arbitrator had ordered. Standard subsequently served an answer. Among many other defenses, Standard asserted Branches had failed to comply with the CC&Rs: “Respondent is informed and believes based thereon alleges that Claimant failed to comply with numerous provisions in the CC&Rs, including but not limited to, section 12.4.2 (obtaining the vote or written consent of 51 % [of] Claimant’s members prior to initiating a construction defect claim)….”
In late June, the arbitrator filed a case management order, governing discovery and prehearing motions, and set a tentative timeline for the arbitration for “sometime after May 8, 2017.”
Standard propounded interrogatories to Branches, which provided responses on August 22. Question No. 1 asked if Branches had obtained the written vote or written consent of no less than 51 percent of the members before serving Standard with notice in October 2014. Branches provided rather boilerplate objections, but ultimately answered: “No.” It provided the same answer to the next question, which asked whether it had received a vote or consent of at least 51 percent of the members prior to commencing arbitration. Branches again answered “[n]o,” after stating its objections to the question.
On October 20, Branches held a membership meeting. According to the declaration of the property manager, 93 of 173 members appeared in person or by proxy, constituting a quorum under the association’s bylaws. The membership was asked to either “1) Approve and ratify the prosecution of the construction defect claim against … [Standard]; or 2) Disapprove the prosecution of the construction defect claim against … [Standard].” Of the 93 members present in person or by proxy, 92 voted to ratify.
[749] On November 1, Standard filed a motion for summary judgment based on the association’s “failure to obtain the requisite vote or written consent of the Owners who represent not less than fifty-one percent (51%) of the [association’s] voting power, which is a condition precedent to bringing this action.” Standard argued that section 12.4.2 of the CC&Rs requires a vote prior to filing the claim. That section states: “Required Vote to Make Claim. Prior to filing a claim pursuant to the ADR Provisions, the Neighborhood Corporation must obtain the vote or written consent of Owners other than Neighborhood Builder who represent not less than fifty-one percent (51%) of the Neighborhood Corporation’s voting power (excluding the voting power of Neighborhood Builder).”[2] Branches filed an opposition, to which Standard replied.
The arbitrator heard argument on the matter, and on January 12, 2017, issued a case management order granting Standard’s motion. It was undisputed, the order stated, that the requisite consent of the membership had not been obtained prior to starting arbitration proceedings, as was the relevant language in the CC&Rs. The arbitrator concluded that the October ratification vote was insufficient. “The effect of the ratification Vote is nothing more than an indication by the voting owners that on October 12, 2016 they approved the action of the Association in filing the Demand for Arbitration. This after the fact expression of consent cannot be transmuted into the prior consent required by the CC&Rs. This is particularly so when such a result would adversely impact the rights of a party to the agreement by which the CC&Rs were created. The Developer is such a party.” The arbitrator also rejected Branches’ contentions that the CC&Rs provision was unenforceable, that enforcing it in the present context would be unconscionable, or that Standard had no standing to enforce it. The arbitrator subsequently denied a motion for reconsideration or a new trial.
In April 2017, Standard filed a motion to confirm the arbitration award. Branches filed a combined response to Standard’s motion and a petition to vacate, arguing the arbitrator had exceeded his powers by depriving Branches of its statutory rights. The parties extensively briefed the issue and the trial court heard the parties’ arguments.
[750] The trial court granted the motion to confirm and denied the motion to vacate, finding the arbitrator had not exceeded his powers.
II. DISCUSSION
Statutory Scheme and Standard of Review
(1) “The California Arbitration Act (CAA; [Code Civ. Proc.,] § 1280 et seq.) `represents a comprehensive statutory scheme regulating private arbitration in this state.'” (Cooper v. Lavely & Singer Professional Corp. (2014) 230 Cal.App.4th 1, 10 [178 Cal.Rptr.3d 322]; see Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [10 Cal.Rptr.2d 183, 832 P.2d 899] (Moncharsh).) Under the California Arbitration Act, “[t]he scope of judicial review of arbitration awards is extremely narrow because of the strong public policy in favor of arbitration and according finality to arbitration awards. [Citations.] An arbitrator’s decision generally is not reviewable for errors of fact or law.” (Ahdout v. Hekmatjah (2013) 213 Cal.App.4th 21, 33 [152 Cal.Rptr.3d 199]; see Moncharsh, supra, 3 Cal.4th at p. 11.) This is true even when the “error appears on the face of the award and causes substantial injustice to the parties.” (Moncharsh, at p. 6.)
Judicial review of an arbitration award is ordinarily limited to the statutory grounds for vacating an award under Code of Civil Procedure section 1286.2 or correcting an award under Code of Civil Procedure section 1286.6. (Moncharsh, supra, 3 Cal.4th at pp. 12-13; SunLine Transit Agency v. Amalgamated Transit Union, Local 1277 (2010) 189 Cal.App.4th 292, 302-303 [116 Cal.Rptr.3d 839].)
There are, however, certain “narrow exceptions” to the general rule of arbitral finality. (Moncharsh, supra, 3 Cal.4th at p. 11.) Branches advances one of those exceptions here, specifically, that the arbitrator exceeded his powers. We discuss this in detail below.
As for the relevant standard of review, “[t]o the extent the trial court made findings of fact in confirming the award, we affirm the findings if they are supported by substantial evidence. [Citation.] To the extent the trial court resolved questions of law on undisputed facts, we review the trial court’s rulings de novo. [Citation.] [¶] We apply a highly deferential standard of review to the award itself, insofar as our inquiry encompasses the arbitrator’s resolution of questions of law or fact. Because the finality of arbitration awards is rooted in the parties’ agreement to bypass the judicial system, ordinarily `”[t]he merits of the controversy between the parties are not [751] subject to judicial review.” [Citations.]’ [Citation.]” (Cooper v. Lavely & Singer Professional Corp., supra, 230 Cal.App.4th at pp. 11-12.) Because the issue of whether the arbitrator exceeded his powers is a legal question based on undisputed facts, our review on that point is de novo. (Richey v. AutoNation, Inc. (2015) 60 Cal.4th 909, 918, fn. 1 [182 Cal.Rptr.3d 644, 341 P.3d 438] (Richey).)
The Pertinent Exception to the Rule of Finality
(2) Code of Civil Procedure section 1286.2, subdivision (a)(4), states that the trial court shall vacate an arbitration award if “[t]he arbitrators exceeded their powers and the award cannot be corrected without affecting the merits of the decision upon the controversy submitted.”
“Arbitrators may exceed their powers by issuing an award that violates a party’s unwaivable statutory rights or that contravenes an explicit legislative expression of public policy.” (Richey, supra, 60 Cal.4th at p. 916.)[3] This departure from the general rule applies only in “limited and exceptional circumstances.” (Moncharsh, supra, 3 Cal.4th at p. 32.) “`Arbitrators do not ordinarily exceed their contractually created powers simply by reaching an erroneous conclusion on a contested issue of law or fact, and arbitral awards may not ordinarily be vacated because of such error….'” (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1360-1361 [82 Cal.Rptr.3d 229, 190 P.3d 586].) “Without an explicit legislative expression of public policy, however, courts should be reluctant to invalidate an arbitrator’s award on this ground. The reason is clear: the Legislature has already expressed its strong support for private arbitration and the finality of arbitral awards…. Absent a clear expression of illegality or public policy undermining this strong presumption in favor of private arbitration, an arbitral award should ordinarily stand immune from judicial scrutiny.” (Moncharsh, supra, 3 Cal.4th at p. 32.)
(3) “[E]valuating a challenge to an arbitration award is a two-step process — first the court must determine whether the award is reviewable, and only if review is appropriate does the court consider whether the award should be upheld.” (SingerLewak LLP v. Gantman (2015) 241 Cal.App.4th 610, 622 [193 Cal.Rptr.3d 672] (SingerLewak).) “The threshold question here, then, is whether according the arbitration award finality would be inconsistent with protecting [respondent’s] statutory rights.” (Ibid.)
The right that Branches claims applies here is the “right” to ratify the association’s actions; it claims this is not conferred by a single statute, but by [752] several statutes. Because the arbitrator misconstrued these statutes and denied the association this “right,” the association claims, the arbitrator exceeded the scope of his powers.
To shed some light on this subject, we examine cases where an arbitrator was found to have exceeded his or her powers on this basis. Pearson Dental Supplies, Inc. v. Superior Court (2010) 48 Cal.4th 665 [108 Cal.Rptr.3d 171, 229 P.3d 83], involved an arbitration award rejecting an employee’s statutory employment claims as time-barred. The court held the arbitrator clearly erred in concluding the employee’s claims were time-barred, and that error was reviewable because the arbitration involved unwaivable statutory claims and the legal error deprived the employee of a hearing on the merits. (Id. at p. 675.) “We held that when `an employee subject to a mandatory employment arbitration agreement is unable to obtain a hearing on the merits of his FEHA claims, or claims based on other unwaivable statutory rights, because of an arbitration award based on legal error, the trial court does not err in vacating the award.’ [Citation.]” (Richey, supra, 60 Cal.4th at p. 918.)
In Richey, the California Supreme Court went on to recognize the limited application of the unwaivable right exception: “The arbitrator [in Pearson Dental] `misconstrued the procedural framework under which the parties agreed the arbitration was to be conducted, rather than misinterpreting the law governing the claim itself’ [citation], a distinction that explained the narrow application of our holding and one that also guides the scope of our review here. Pearson Dental emphasized that its legal error standard did not mean that all legal errors are reviewable. [Citation.] The arbitrator had committed clear legal error by (1) ignoring a statutory mandate, and (2) failing to explain in writing why the plaintiff would not benefit from the statutory tolling period.” (Richey, supra, 60 Cal.4th at p. 918.)[4]
In SingerLewak, supra, 241 Cal.App.4th 610, the court rejected the claim that the unwaivable right exception applied. The case involved the enforcement of a noncompete clause in a partnership agreement. (Id. at p. 614.) The arbitrator concluded the defendant was a partner, thus defeating the defendant’s argument that Business and Professions Code section 16602, which [753] prohibits noncompete clauses for most employees, did not apply to him. In the trial court, the defendant opposed a motion to confirm the award in the plaintiff’s favor, arguing the award was illegal and violated public policy. (SingerLewak, at p. 615.)
The Court of Appeal disagreed, finding that although the restraint on noncompete clauses constitutes an unwaivable statutory right, the statutory scheme in the Business and Professions Code itself created an exception to the policy. (SingerLewak, supra, 241 Cal.App.4th at p. 624.) “[T]he arbitration award, even if legally erroneous, did not contravene a public policy indicating that certain issues not be subject to resolution by the arbitrator. [Citation.]” (Ibid.) Further, “[i]n contrast to Pearson, any arbitrator error did not `[misconstrue] the procedural framework under which the parties agreed the arbitration was to be conducted, rather than misinterpreting the law governing the claim itself.’ [Citation.] Indeed, [the defendant’s] argument is precisely that the arbitrator misinterpreted the law governing the claim itself.” (Ibid.)
(4) Recent case law, therefore, stands “for the proposition that where an arbitrator’s decision has the effect of violating a party’s statutory rights or well-defined public policies — particularly those rights and policies governing the conduct of the arbitration itself — that decision is subject to being vacated or corrected.” (Sargon Enterprises, Inc. v. Browne George Ross LLP (2017) 15 Cal.App.5th 749, 765 [223 Cal.Rptr.3d 588].) The question, then, is whether that principle applies to the instant case.
“Unwaivable Statutory Right”
Branches first asserts, without supporting authority, that section 12.4.2 of the CC&Rs “conflicts with governing statutes, and is, for that reason, unenforceable.” The CC&Rs language is clear: “Required Vote to Make Claim. Prior to filing a claim pursuant to the ADR Provisions, the Neighborhood Corporation must obtain the vote or written consent of Owners other than Neighborhood Builder who represent not less than fifty-one percent (51%) of the Neighborhood Corporation’s voting power (excluding the voting power of Neighborhood Builder.” Unless Branches can provide legal authority why that clause should not be given effect, the plain language of the CC&Rs controls. (Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 829 [23 Cal.Rptr.2d 744].)
(5) Branches turns to a number of statutes which it claims give it the “statutory right” to use ratification as an alternate method to obtaining the prior consent the CC&Rs command. First, Branches turns to section 4065, which states: “If a provision of this act requires that an action be approved by [754] a majority of all members, the action shall be approved or ratified by an affirmative vote of a majority of the votes entitled to be cast.” (Italics added.) The California Law Revision Commission comments on section 4065,[5] however, state: “Section 4065 is new. It is added for drafting convenience. This section only governs an election conducted pursuant to a provision of this act (i.e., the Davis-Stirling Common Interest Development Act). An election that is not required by this act would be governed by the association’s governing documents.”[6] (Cal. Law Revision Com. com., Deering’s Ann. Civ. Code (2018 supp.) foll. § 4065, p. 106.)
Branches similarly relies on section 4070, which states: “If a provision of this act requires that an action be approved by a majority of a quorum of the members, the action shall be approved or ratified by an affirmative vote of a majority of the votes represented and voting in a duly held election in which a quorum is represented, which affirmative votes also constitute a majority of the required quorum.” (Italics added.) Section 4070 includes a California Law Revision Commission comment identical to the substance of the one quoted above with regard to section 4065.
(6) Next, Branches cites section 6150, subdivision (a), which requires an association to hold a meeting “[n]ot later than 30 days prior to the filing of any civil action by the association against the declarant or other developer of a common interest development for alleged damage to the common areas, alleged damage to the separate interests that the association is obligated to maintain or repair, or alleged damage to the separate interests that arises out of, or is integrally related to, damage to the common areas or separate interests that the association is obligated to maintain or repair….” The notice has several requirements, but states nothing about a vote of the members.
Branches argues that CC&Rs section 12.4.2 “incorporates the requirements of Civil Code section 6150. It is, consequently, a requirement of the Act itself.” It argues the arbitrator misconstrued the trial court to limit the word “election” to “a vote for the purpose of appointing someone to a position,” rather than “anything requiring owner approval,”[7] and therefore, a vote on [755] whether to proceed with a claim against the developer was within “a provision of” the Act. But the cases Branches cites do not stand for this proposition. None of them address section 4065, 4070, or 6150 at all, and certainly none of them state that an election required by the association’s documents, but not by a statute, falls within those provisions.
Indeed, Branches next points out that some provisions of the Act do require votes of the membership: “The Davis-Stirling Act, for example, explicitly requires section 4065 elections to extend the term of the declaration (Civ. Code, § 4265, subd. (a)), to amend the declaration (Civ. Code, § 4270, subd. (b)), and to make the association responsible for repairing damage to units from wood-destroying pests or organisms (Civ. Code, § 4780, subd. (b)).” The fact that certain provisions explicitly require such votes does not help Branches; it only supports the contention that absent a specific requirement in the Act to hold an election, the association’s governing documents control. (§§ 4065, 4070.) Branches points to no provision of the Act requiring a vote before filing a claim against a developer; accordingly, neither section 4065 nor 4070 is an “unwaivable statutory right” in this context.
Branches contends, for the first time on appeal, that section 6150, which requires notice and a meeting before filing a claim against a developer, is “triply germane here.” First, it asserts it is the “same requirement imposed by CC&R section 12.4.2.” This is incorrect on its face. Section 12.4.2 of the CC&Rs does not require a meeting, it requires a vote. Branches next claims that section 6150’s “prior to” language mirrors the CC&Rs language. While this is indisputably true, it is of little import here. The statute and the CC&Rs section have different requirements.
Most importantly, Branches claims, section 6150 permits an association to file its claim before giving notice of the required meeting if it “has reason to believe that the applicable statute of limitations will expire before the association files the civil action, the association may give the notice, as described above, within 30 days after the filing of the action.” (§ 6150, subd. (b).) Branches claims this to be the situation here, because Standard had previously filed and served a dispositive motion based on the statute of limitations (which, in fact, the arbitrator denied).
(7) This does not help Branches in any event. Section 6150, subdivision (b), does not provide for “ratification,” as Branches claims. Section 6150 does not require membership approval, merely notice and a meeting; there is nothing to “ratify.” After complying with the section, the board can proceed to do anything it wishes with respect to filing a claim. Allowing notice after [756] filing the claim if the statute of limitations is a concern merely creates a limited exception to the notice requirement. Section 6150 simply does not apply here.
Further, as Standard points out, even if the section did apply, Branches failed to comply with it. It filed its arbitration claim in January 2016 and did not obtain a vote of the membership until October 2016. It points to nothing in the statute that permits “ratification” outside the 30-day notice period.
Branches also contends that Corporations Code section 5034 confers an unwaivable right on an association’s members to ratify any action taken. Branches is incorrect. That section states that the phrase “`Approval by (or approval of) the members’ means approved or ratified by the affirmative vote of a majority of the votes….” (Corp. Code, § 5034.) Branches argues, in effect, that the plain language of the CC&Rs must be ignored. It cites cases that do not interpret this language in the context of a homeowners association, and which do not stand for this proposition. It does not cite any case (or statute) stating that CC&Rs requiring membership approval before the board takes a certain action are unenforceable. Accordingly, we reject this contention. “Prior to” means “prior to.” It does not mean “after,” unless there is specific statutory authority permitting later ratification.
(8) Branches next turns to section 5000, which states association meetings “shall be conducted in accordance with a recognized system of parliamentary procedure….” (Id., subd. (a).) Branches contends that because Robert’s New Rules of Order (4th ed. 2013) art. VI, section 39, states that approval of an action may occur by ratification, ratification is required as a method of approval in all circumstances. No authority on point supports this argument. Robert’s New Rules of Order, supra, art. VI, section 39, itself states that ratification is only available when ratifying an action would not “violate … [an organization’s] own constitution or by-laws.” Here, the association’s “constitution” — its CC&Rs — state that prior assent is required.
(9) Branches’ next argument (offered for the first time on appeal) is that “[a]s a practical matter” the association “acts as the owner’s agent.” Branches cites no California authority for this proposition, but asserts that because section 2307 provides that an agent’s authority to act for its principal “may be” ratified after the fact, this creates a legal requirement that ratification “be available” as an alternate method of approval. We fundamentally disagree with Branches’ “agency” theory, given that the Act sets forth extensive legal principles governing the management of associations. (See § 4000 et seq.; see also Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81 [14 Cal.Rptr.3d 67, 90 P.3d 1223].) At no point in the Act is the association declared the “agent” of the owners; surely, had the Legislature [757] intended to create an agency relationship, it would have done so. Moreover, even if we were to accept this theory, the fact that section 2307 states that actions “may be” ratified after the fact does not create a statutory right requiring that ratification be available in all circumstances.
(10) Branches’ attempts to bring the relatively few cases that found an arbitrator violated an unwaivable statutory right within the facts here are unavailing. Those cases involve specific statutory directives or address the conduct of the arbitration itself, as Branches admits. (See, e.g., Board of Education v. Round Valley Teachers Assn. (1996) 13 Cal.4th 269 [52 Cal.Rptr.2d 115, 914 P.2d 193]; Ahdout v. Hekmatjah, supra, 213 Cal.App.4th 21; Jordan v. Department of Motor Vehicles(2002) 100 Cal.App.4th 431 [123 Cal.Rptr.2d 122]; City of Palo Alto v. Service Employees Internat. Union (1999) 77 Cal.App.4th 327 [91 Cal.Rptr.2d 500].) Branches insists “the Act mandates ratification,” however, which, as discussed above, we find to be untrue. Therefore, these cases are unhelpful. In sum, we conclude Branches has not identified an unwaivable statutory right preventing an association’s CC&Rs from requiring approval prior to the board instituting a legal claim against a developer.[8]
Public Policy
Branches alludes to public policy at several points, claiming, for example, that the Legislature has made a “clear pronouncement of public policy favoring ratification.” We disagree that public policy works in its favor here.
(11) The Act, as we have mentioned, provides a comprehensive framework for the governance of homeowners associations. The Act provides for numerous limits on the power of the board, and a system of checks on the board’s power. Associations are required to publish certain information to the membership to keep them informed. (§§ 5300, 5305, 5310.) Associations are required to act by a majority vote or a majority of a quorum if a vote is required. (§§ 4065, 4070.) Even amendments to the governing documents to delete construction or marketing provisions after an association is built must be approved by the membership. (§ 4230.) Rules adopted by the board must be in writing, within the authority of the board as conferred by the governing documents, and reasonable. (§ 4350.) On certain subjects, the board cannot act by fiat and must provide notice to members of potential changes in the association’s rules (§ 4360), and a sufficient number of members can call a special meeting to attempt to reverse those changes (§ 4365).
[758] Section 6150 is a part of those checks. As we discussed above, it requires notice to the membership and a meeting before legal action may be instituted against a developer. The reason for this is sound: to ensure that a board, dealing with a difficult issue like construction defects, has not lost the forest for the trees and decided to institute legal action without notifying the members. This is completely consistent with the many other homeowner rights that are set forth in the Act.
The CC&Rs provision here goes a step further, requiring affirmative consent of a quorum of the members “prior to” instituting such action. This, too, is consistent with the aims of the Act — to balance the association’s need to operate efficiently with the rights of its members to be informed and participate in decisions that could impact the association for years, if not decades, to come. Branches would have us believe that there is a “right to ratify” after the fact, as if that confers some benefit on the owners. It does not; it ignores their explicit right to consent beforehand, before a road has been taken that will be difficult, expensive, and time consuming. We cannot ignore such a provision because it is inconvenient for the association in this particular case; the association had the CC&Rs and was on notice of their contents. Public policy requires us to follow their plain language.
Accordingly, we find no violation of public policy in the arbitrator’s decision, and conclude that judicial review of the arbitration award was not merited in this instance.
III. DISPOSITION
The judgment is affirmed. Respondent is entitled to its costs on appeal.
O’Leary, P. J., and Fybel, J., concurred.
[1] Subsequent statutory references are to the Civil Code unless otherwise indicated.
[2] The referenced “ADR Provisions” state that any “dispute” is governed by the arbitration provisions in the home or common property warranties. “Dispute” is defined as “any and all actions or claims between any Neighborhood Builder party on the one hand and any Owner and/or the Neighborhood Corporation on the other hand arising out of or in any way relating to the Neighborhood, any real property or Improvements in the Neighborhood[,] … the Common Property Warranty, and/or any other agreements or duties or liabilities as between any Neighborhood Builder party and any Owner and/or the Neighborhood Corporation relating to the sale or transfer of the Condominiums or the Common Property, or regarding the use or condition of the Condominiums and/or the Common Property, or the design or construction of or any condition on or affecting the Neighborhood and/or any Condominium and/or the Common Property in the Neighborhood, including without limitation construction defects….”
[3] In the interests of brevity, we refer to this as the “unwaivable right exception,” although it encompasses both unwaivable statutory rights and public policy.
[4] Despite the California Supreme Court’s useful discussion of the exception, the facts of Richey itself are not helpful to our analysis, as the case ultimately turned on the lack of prejudicial error. In Richey,the court was reviewing an appeal under the Moore-Brown-Roberti Family Rights Act (CFRA). (Gov. Code, §§ 12945.1, 12945.2.) The arbitrator had rejected an employee’s claim for reinstatement under the CFRA, relying on a federal defense previously untested in California. The trial court confirmed the award, but the Court of Appeal reversed, concluding the arbitrator had violated the employee’s statutory right to reinstatement when he applied the federal defense to the employee’s claim. (Richey, supra, 60 Cal.4th at pp. 912, 915.) The California Supreme Court reinstated the award on the alternate ground that the employee had not demonstrated that applying the federal defense was prejudicial. (Id. at p. 920.)
[5] The official comments of the California Law Revision Commission “are declarative of the intent not only of the draftsman of the code but also of the legislators who subsequently enacted it.” (People v. Williams (1976) 16 Cal.3d 663, 667-668 [128 Cal.Rptr. 888, 547 P.2d 1000].) The comments are persuasive, albeit not conclusive, evidence of that intent. (Conservatorship of Wendland (2001) 26 Cal.4th 519, 542 [110 Cal.Rptr.2d 412, 28 P.3d 151].) Branches, however, offers no contrary evidence of legislative intent, and when taken together with the plain language of the statute, we find the comment accurately expresses the intent of the statute.
[6] An association’s “`[g]overning documents'” include its CC&Rs. (§ 4150.)
[7] The arbitrator made no such finding.
[8] Branches next looks to maxims of interpretation to support its argument that “prior” does not really mean what it says it means. But because it does not identify a statute including an “unwaivable statutory right,” we need not consider the arbitrator’s interpretation of the contract.
Colyear v. Rolling Hills Community Association of Rancho Palos Verdes
[Dispute Resolution; Anti-SLAPP] An action by a HOA member to invoke a HOA’s dispute resolution process over a tree-trimming covenant was a matter of public interest and thus constitutionally protected activity.
Law Offices of Michael D. Berk, Michael D. Berk; Greines, Martin, Stein & Richland, Kent Richland and Jonathan H. Eisenman for Petitioner and Appellant.
Hanson Bridgett, Christopher David Jensen; and Alice Liu Jensen for Defendant and Respondent Yu Ping Liu.
OPINION
COLLINS, J. —
INTRODUCTION
Defendant homeowner Yu Ping Liu submitted an application to his homeowners association, defendant Rolling Hills Community Association of Rancho Palos Verdes (HOA), seeking to invoke the HOA’s dispute resolution process against a neighbor who refused to trim trees blocking Liu’s view. Plaintiff Richard C. Colyear, another neighbor and HOA member, sued Liu and the HOA, alleging that two of the offending trees were actually on his property, that the relevant tree-trimming covenant did not encumber his property, and therefore that Liu and the HOA were wrongfully clouding his [124] title by seeking to apply such an encumbrance. Liu filed a special motion to strike the claims alleged against him under Code of Civil Procedure section 425.16, the anti-SLAPP statute.[1] The trial court granted the motion and Colyear now appeals.
We conclude Liu has made a prima facie showing that Colyear’s complaint arises from Liu’s statements made in connection with an issue of public interest, and therefore Liu’s statements are protected under section 425.16, subdivision (e)(4) (section 425.16(e)(4)). In addition, Colyear cannot show a probability of success on the merits of his claims against Liu, particularly because Liu dismissed his application shortly after the lawsuit was filed and has never sought to invoke the HOA’s tree-trimming process against Colyear. We therefore affirm.
FACTUAL AND PROCEDURAL HISTORY
A. Background
Liu and Colyear are both homeowners in Rancho Palos Verdes, a planned residential community in the city of Rolling Hills. The property immediately north of Liu’s property is owned by Richard and Kathleen Krauthamer. Colyear’s property is directly east of the Krauthamer’s property, and kitty-corner to Liu’s property. Liu, Colyear, and the Krauthamers are all members of the HOA.
Each home within the community is subject to a declaration of covenants, conditions, and restrictions (CC&Rs). The original declaration recorded in 1936, declaration 150 (Declaration 150), set forth the specific property to be included in the community, conferred authority on the HOA to (among other things) “interpret and enforce” the CC&Rs, and detailed a number of CC&Rs applicable to the specified lots. As relevant here, in article I, section 11, Declaration 150 conferred upon the HOA “the right at any time to enter on or upon any part” of a property subject to that declaration “for the purpose of cutting back trees or other plantings which, in the opinion of the [HOA], is warranted to maintain and improve the view of, and protect, adjoining property.”
As the community expanded, the HOA entered into new declarations covering the additional properties; those declarations contained provisions that were similar, but not identical, to Declaration 150. Declaration 150-M, recorded in 1944, added the property including the lots now owned by Liu, [125]
Colyear, and the Krauthamers. Liu does not dispute that these three lots are burdened by declaration 150-M (Declaration 150-M), rather than by Declaration 150, and that 150-M does not contain a provision similar to that in Declaration 150 regarding tree trimming.[2] According to Colyear, Declaration 150 applies to approximately 84 lots, Declaration 150-M applies to approximately 14 lots, and other declarations cover an additional 657 lots. Ultimately, the community subject to HOA jurisdiction grew to encompass the same boundaries as the city of Rolling Hills. (See Russell v. Palos Verdes Properties (1963) 218 Cal.App.2d 754, 758 [32 Cal.Rptr. 488], disapproved of on another ground by Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345 [47 Cal.Rptr.2d 898, 906 P.2d 1314].)
The HOA is governed by a board of directors. Starting in 1997, the board adopted resolutions to “establish procedures for its members to utilize the authority of the [HOA] to correct view impairments created by trees or other plantings.” The board adopted the most recent version, resolution 220 (Resolution 220), in 2012. Resolution 220 quoted the tree-trimming provision in article I, section 11 of Declaration 150 and stated that it “applies to some, if not all, properties in the City of Rolling Hills.” Resolution 220 further made the following findings: “WHEREAS, the [HOA] has held public meetings, circulated drafts of policy alternatives, and received numerous written and oral communications from its members; [¶] WHEREAS, Rolling Hills enjoys both beautiful views and an abundance of mature trees, and values both …; [¶] WHEREAS, the [HOA] wishes to adopt both guidelines and establish procedures for its members to utilize the authority of the [HOA] to correct view impairments, which cannot be resolved between the parties; [¶] WHEREAS, the Deed Restrictions give the [HOA] `… the authority to exercise such powers of control, interpretation, construction, consent, decision, determination … and/or enforcement of covenants … as far as may legally be done.'” Based on these and other findings, Resolution 220 established guidelines for processing “all view impairment applications” submitted to the HOA, including submission of an application by the homeowner requesting tree removal, payment by the applicant of an administrative fee and agreement to pay the entire cost of tree trimming or removal, notice sent by the HOA to the affected owner and contiguous property owners, a decision and report by a View Committee, and a process by which to appeal that decision to the board. Resolution 220 also noted that the “City of Rolling Hills Ordinance Chapter 17.26 provides a procedure for abatement of view impairment; so [HOA] members have another alternative for view restoration.”
[126] As early as 2002, Colyear began to inquire of the board (based on the predecessor to Resolution 220) whether it was the HOA’s position that the tree-trimming provision was enforceable against his lot. At the time, he was told it was not, and he would “have to use the City’s Ordinance” to settle any view disputes.
B. Liu’s Application and Colyear’s Complaint
In January 2015, in accordance with the process outlined in Resolution 220, Liu filed an “Application for Assistance to Restore View” with the HOA, identifying the Krauthamer property as the location of the obstructing trees or shrubs. In a statement attached to the application, Liu explained that the view from his residence was obstructed by several trees and hedges on the south side of the Krauthamers’ property. He said he had attempted to resolve the issue by speaking to Richard Krauthamer starting in late 2012, and by contacting the HOA’s city manager in June 2013 and requesting that she informally mediate the dispute. As a result, according to Liu, Krauthamer agreed to trim his trees but never did so. Liu also attached to his application several photographs of the offending trees and hedges. The application does not reference Colyear or Colyear’s property.
As an adjoining property owner, Colyear received notice of Liu’s application shortly after it was submitted. Colyear then filed the instant action on March 4, 2015, seeking writ relief and naming Liu, the HOA, its board, and individual board members as respondents. Colyear alleged that Liu’s application “may implicate” trees on Colyear’s property, but did not otherwise seek relief from Liu.
Liu withdrew his application to the HOA on April 14, 2015. As a result, the HOA never issued any decision on the application. Following the withdrawal, the HOA had no pending applications involving either Liu or Colyear’s property.
In August 2015, the trial court sustained the demurrers filed by all defendants, and granted leave to amend. Colyear filed an amended pleading, including a petition for writ of traditional mandate and prohibition against the HOA and its board, and a verified complaint “for Declaratory Relief, Injunctive Relief, To Quiet Title, and for Damages” against all defendants (FAC). The FAC sought a declaration, among other things, that Colyear’s lot was not subject to the tree-trimming covenant in Declaration 150 and that such covenant could not be enforced against his lot or other lots not encumbered by that declaration, and that Resolution 220 was void to the extent it purported to enforce such tree-trimming covenants in this manner. Colyear further alleged that some of the offending trees designated by Liu on [127] the photos attached to his application were on Colyear’s lot, thus Liu “sought to apply the Liu Application to cut back trees and plantings on Colyear’s lot.” Moreover, although Liu had withdrawn his application, Colyear alleged that Liu “expressly refused to acknowledge and agree” that he would not in the future “seek to enforce the Trees and Plantings Covenant against Colyear’s lot.”
The FAC also sought to quiet title “to Colyear’s lot against adverse claims” by defendants “in that each claims that Colyear’s lot is covered by the Trees and Plantings Covenant in Declaration 150, although Colyear’s lot is not covered by the Trees and Plantings Covenant, and seeks, or claims the right to seek, to enforce the Trees and Plantings Covenant against Colyear’s lot.” In addition, the FAC sought injunctive relief barring defendants from seeking to enforce the relevant covenant against Colyear’s lot or any other lots not encumbered by Declaration 150, as well as compensatory and punitive damages from the HOA and the board for alleged fraud and breaches of fiduciary duties.
C. Liu’s Anti-SLAPP Motion
Liu filed a special motion to strike the FAC pursuant to section 425.16, arguing that his view impairment application was protected under section 425.16(e)(4), as it constituted a written statement made in connection with an issue of public interest.[3] Further, he asserted Colyear could not establish a probability of success on his claims based on standing, mootness, and ripeness grounds.
Colyear opposed the motion to strike, arguing that Liu’s application to the HOA involved a private matter and thus was not protected conduct and that Colyear’s lawsuit did not arise out of the application, but rather from the “underlying controversy” regarding the proper application of Declaration 150. In his accompanying declaration, Colyear stated he had “confirmed” that two of the trees identified in Liu’s application were located on Colyear’s lot. Specifically, Colyear declared, “I [have] carefully reviewed the photograph or photographs attached to the Liu Application … which … has arrows added to it to point to trees that Liu requested to be cut…. I also walked my lot and the Krauthamers’ lot in the area where both lots meet the Liu property. Based on those observations, I now know for a fact that the trees and plantings that Liu claims in the Liu Application should be cut include two [128] trees on my lot.”[4] Colyear also declared his belief that “the Board’s acceptance of the Liu Application and initiation of proceedings for enforcement of the Trees and Plantings Covenant on behalf of Liu … clouds and encumbers the title to the Krauthamers’ lot and to my lot, as well as such other lots and decreases the utility and market value of those lots.” The Krauthamers both submitted declarations stating they “believed” one or two of the trees at issue was on Colyear’s lot.
Colyear attached numerous exhibits in support of his opposition, including Declarations 150 and 150-M, Resolution 220 and its predecessors, and Liu’s application. He also attached his correspondence to the board in 2002, as well as letters from several other homeowners on the same issue. In a letter dated September 4, 2002, addressed to the board and the attorney for the HOA, homeowner Philip Belleville referenced his presentation made at a prior hearing “on the proposed Resolution concerning trees and view,” and then reiterated his position that the proposed resolution should not purport to apply to all properties, including those not encumbered with a tree-trimming provision in the applicable CC&Rs. Belleville noted that, while he does “not have a view to protect,” he was nevertheless “vitally interested” in the issue, including the potential for exposure to expensive litigation against the HOA resulting in increased fees to the members and because “[i]t is very disturbing that the proposed Resolution exceeds the norms for such provisions of similar communities.” Belleville sent another letter in late 2005 objecting to proposed changes in Resolution 181 (a predecessor to 220), noting that the prior resolution had been adopted “after numerous hearings and public participation” and again objecting to language that could “wrongly cloud the property rights of the Members involved” and “lead to more costly and alienating litigation.” Another homeowner wrote a similar letter in 2015.
The trial court granted Liu’s motion. First, the court found Liu had met his burden to establish his conduct was protected under section 425.16(e)(4) because “the issue of view” was one of “general concern” to the homeowners in the community. Liu was “attempting to invoke the view covenants in his particular favor, but they are view covenants that impact, if not all, then a significant number of the people in this community association.” The trial court further found that Colyear’s lawsuit arose out of Liu’s protected conduct, noting that Liu’s application was the reason Colyear filed this action. Finally, the court found that Colyear had not carried his burden to show probability of success on the merits, particularly following the dismissal of Liu’s application.
[129] Colyear timely appealed the granting of the motion to strike.
DISCUSSION
I. Section 425.16 and Standard of Review
(1) “A SLAPP is a civil lawsuit that is aimed at preventing citizens from exercising their political rights or punishing those who have done so. `”While SLAPP suits masquerade as ordinary lawsuits such as defamation and interference with prospective economic advantage, they are generally meritless suits brought primarily to chill the exercise of free speech or petition rights by the threat of severe economic sanctions against the defendant, and not to vindicate a legally cognizable right.”‘ [Citations.]” (Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 21 [109 Cal.Rptr.3d 329, 230 P.3d 1117] (Simpson).)
The Legislature has declared that “it is in the public interest to encourage continued participation in matters of public significance, and … this participation should not be chilled through abuse of the judicial process.” (§ 425.16, subd. (a).) To this end, the Legislature enacted section 425.16, subdivision (b)(1), which authorizes the filing of a special motion to strike for “[a] cause of action against a person arising from any act of that person in furtherance of the person’s right of petition or free speech under the United States Constitution or the California Constitution in connection with a public issue.” “[T]he Legislature expressly provided that the anti-SLAPP statute `shall be construed broadly.’ (§ 425.16, subd. (a).)” (Simpson, supra, 49 Cal.4th at p. 21.)
(2) Analysis of a motion to strike pursuant to section 425.16 involves a two-step process. (Simpson, supra, 49 Cal.4th at p. 21.) “First, the defendant must make a prima facie showing that the plaintiff’s `cause of action … aris[es] from’ an act by the defendant `in furtherance of the [defendant’s] right of petition or free speech … in connection with a public issue.’ (§ 425.16, subd. (b)(1).) If a defendant meets this threshold showing, the cause of action shall be stricken unless the plaintiff can establish `a probability that the plaintiff will prevail on the claim.’ (Ibid.)” (Simpson, supra, 49 Cal.4th at p. 21, fn. omitted.) “Only a cause of action that satisfies both prongs of the anti-SLAPP statute — i.e., that arises from protected speech or petitioning and lacks even minimal merit — is a SLAPP, subject to be stricken under the statute.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89 [124 Cal.Rptr.2d 530, 52 P.3d 703], italics omitted.)
(3) We review a trial court’s decision on a special motion to strike de novo. (Flatley v. Mauro (2006) 39 Cal.4th 299, 325 [46 Cal.Rptr.3d 606, [130] 139 P.3d 2].) In engaging in the two-step process, we consider “the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based.” (§ 425.16, subd. (b)(2).) “However, we neither `weigh credibility [nor] compare the weight of the evidence. Rather, [we] accept as true the evidence favorable to the plaintiff [citation] and evaluate the defendant’s evidence only to determine if it has defeated that submitted by the plaintiff as a matter of law.’ [Citation.]” (Soukup v. Law Offices of Herbert Hafif (2006) 39 Cal.4th 260, 269, fn. 3 [46 Cal.Rptr.3d 638, 139 P.3d 30] (Soukup).)
II. Liu’s Claims Arise From Protected Activity
(4) Under the first prong of a motion to strike under section 425.16, the moving party has the burden of showing that the cause of action arises from an act in furtherance of the right of free speech or petition — i.e., that it arises from a protected activity. (Zamos v. Stroud (2004) 32 Cal.4th 958, 965 [12 Cal.Rptr.3d 54, 87 P.3d 802].) Thus, the moving party must establish both (1) that its act constituted protected activity and (2) the opposing party’s cause of action arose from that protected activity. Colyear challenges Liu’s showing on both of these steps, so we examine each in turn.
A. Protected Activity
First, we must determine whether Liu’s speech was in fact protected conduct. To meet this burden, Liu must demonstrate that his statements fit one of the four categories of conduct set forth in section 425.16, subdivision (e): “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.”
Liu asserts his conduct is protected under section 425.16, subdivision (e)(2) as a statement made in connection with an “official proceeding authorized by law,” or, alternatively, under subdivision (e)(4) as a statement made in connection with “an issue of public interest.” We agree that Liu’s conduct here is protected by section 425.16(e)(4); thus, we need not reach the issue of whether the HOA process is an “official proceeding” under subdivision (e)(2).
(5) Colyear argues that Liu’s application involved a private tree-trimming dispute between two neighbors and therefore does not qualify as a matter of [131] “public interest.” “Section 425.16 does not define `an issue of public interest.’ Nevertheless, the statute requires the issue to include attributes that make it one of public, rather than merely private, interest. [Citation.] A few guiding principles can be gleaned from decisional authorities. For example, `public interest’ is not mere curiosity. Further, the matter should be something of concern to a substantial number of people. Accordingly, a matter of concern to the speaker and a relatively small, specific audience is not a matter of public interest. Additionally, there should be a degree of closeness between the challenged statements and the asserted public interest. The assertion of a broad and amorphous public interest that can be connected to the specific dispute is not sufficient. [Citation.] One cannot focus on society’s general interest in the subject matter of the dispute instead of the specific speech or conduct upon which the complaint is based.” (Grenier v. Taylor (2015) 234 Cal.App.4th 471, 481 [183 Cal.Rptr.3d 867] (Grenier).)
(6) Cases that have found an issue of public interest have done so where “the subject statements either concerned a person or entity in the public eye [citations], conduct that could directly affect a large number of people beyond the direct participants [citations] or a topic of widespread, public interest [citation].” (Rivero v. American Federation of State, County and Municipal Employees, AFL-CIO (2003) 105 Cal.App.4th 913, 924 [130 Cal.Rptr.2d 81] (Rivero).)
Within these parameters, “`public interest’ within the meaning of the anti-SLAPP statute has been broadly defined to include, in addition to government matters, `”private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity.”‘ (Du Charme v. International Brotherhood of Electrical Workers (2003) 110 Cal.App.4th 107, 115 [1 Cal.Rptr.3d 501]….)” (Ruiz v. Harbor View Community Assn. (2005) 134 Cal.App.4th 1456, 1468 [37 Cal.Rptr.3d 133] (Ruiz).) “[I]n cases where the issue is not of interest to the public at large, but rather to a limited, but definable portion of the public (a private group, organization, or community), the constitutionally protected activity must, at a minimum, occur in the context of an ongoing controversy, dispute or discussion, such that it warrants protection by a statute that embodies the public policy of encouraging participation in matters of public significance.” (Du Charme, supra, 110 Cal.App.4th at p. 119, italics omitted; see also Grenier, supra, 234 Cal.App.4th at p. 482.)
Applying these principles, several courts have found protected conduct in the context of disputes within a homeowners association. In Ruiz, for example, a homeowner sued his homeowners association, alleging letters written by association counsel defamed him. (Ruiz, supra, 134 Cal.App.4th at pp. 1463-1465.) The letters concerned a dispute over the association’s rejection of Ruiz’s building plans, and Ruiz’s complaints that the association was not applying its architectural guidelines evenhandedly. (Ibid.) The court concluded the letters fell within section 425.16(e)(4), noting, (a) the letters [132] were written during an ongoing dispute between Ruiz and the association over denial of Ruiz’s plans and the application of the association’s architectural guidelines, and (b) the dispute was of interest to a definable portion of the public, i.e., residents of 523 lots, because they “would be affected by the outcome of those disputes and would have a stake in [association] governance.” (Ruiz, at p. 1468.) Moreover, the attorney’s letters “were part of the ongoing discussion over those disputes and `contribute[d] to the public debate’ on the issues presented by those disputes. [Citation.]” (Id. at p. 1469.)
Similarly, in Country Side Villas Homeowners Assn. v. Ivie (2011) 193 Cal.App.4th 1110, 1113 [123 Cal.Rptr.3d 251], the homeowner raised objections with her homeowners association over a change in practices regarding whether individual homeowners or the association had responsibility to pay for maintaining balconies and siding on individual units. The association filed suit against Ivie, seeking declaratory relief in interpreting the association’s governing documents regarding maintenance obligations. (Ibid.) The court found that Ivie’s complaints to the board were a matter of public interest, because her statements concerned issues “that affected all members of the association,” including whether all members would have to pay for maintenance costs assumed by the association. (Id. at p. 1118; see also Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 479 [102 Cal.Rptr.2d 205] [protecting allegedly defamatory statements about the competence of a manager of a homeowners association]; Lee v. Silveira(2016) 6 Cal.App.5th 527, 540 [211 Cal.Rptr.3d 705] [protecting complaints by homeowners association board members against other board members regarding board’s decisionmaking process in approving a large roofing project and a management company contract, as affecting “a broad segment, if not all,” association members]; Grenier, supra, 234 Cal.App.4th at p. 483 [defamatory statements accusing church pastor of theft and misuse of church funds, and of abuse, are of interest to the church’s 500 or more members, and therefore are of “public interest”]; Ludwig v. Superior Court(1995) 37 Cal.App.4th 8, 15 [43 Cal.Rptr.2d 350] [concluding that development of a mall, “with potential environmental effects such as increased traffic and impaction on natural drainage, was clearly a matter of public interest”].) By contrast, in Rivero, supra, 105 Cal.App.4th at p. 924, the court rejected anti-SLAPP protection for complaints in a union newsletter alleging a janitorial supervisor mistreated his employees. The court held that the allegedly defamatory statements were not a matter of public interest as they concerned “the supervision of a staff of eight custodians by Rivero, an individual who had previously received no public attention.” (Ibid.)
(7) Here, the record presents sufficient evidence to sustain Liu’s burden that at the time he submitted his application, there was an ongoing controversy, dispute, or discussion regarding the applicability of tree-trimming covenants to lots not expressly burdened by them, and the HOA’s authority to [133] enforce such covenants. While the evidence in the record is somewhat sparse, it is sufficient to show that the issue was an ongoing topic of debate between the board and homeowners, resulting in multiple hearings, letters, and several changes to the board’s policy on the matter starting as early as 2002 and continuing up to the current dispute. In this context, Liu’s application sought to invoke the HOA process at the center of that dispute, as he invoked the process under Resolution 220 to request authority from the board to trim trees on a neighbor’s property that admittedly was not expressly burdened by Declaration 150. Indeed, this is the crux of Colyear’s argument for injecting himself into this dispute — that Liu’s conduct in submitting the application unleashed a process unfair to Colyear and all other homeowners not subject to a tree-trimming covenant and thereby clouded his title with an improper encumbrance. As such, Colyear’s current suggestion that Liu’s application involves nothing more than a private tree-trimming dispute between two neighbors is unavailing.
Colyear does not dispute that the issue of the board’s authority to apply tree-trimming covenants to all lots in the community is a subject of interest to the entire membership of the community, and therefore meets the definition of “public interest” under section 425.16(e)(4). (See, e.g., Damon v. Ocean Hills Journalism Club, supra, 85 Cal.App.4th at p. 479 [“Although the allegedly defamatory statements were made in connection with the management of a private homeowners association, they concerned issues of critical importance to a large segment of our local population. `For many Californians, the homeowners association functions as a second municipal government….’ [Citation.]”].) Instead, he argues that the proper focus for this step in the anti-SLAPP inquiry must be much narrower, and that here, Liu’s application only directly involved two homeowners — Liu and the Krauthamers — and was therefore a private dispute rather than an issue of public interest. Colyear further asserts that to the extent his complaint raised the broader issues of enforceability of the tree-trimming covenant and HOA governance, his conduct cannot serve to insulate Liu’s statements. We agree with the principle that we must avoid looking to “society’s general interest in the subject matter of the dispute instead of the specific speech or conduct upon which the complaint is based.” (World Financial Group, Inc. v. HBW Ins. & Financial Services, Inc. (2009) 172 Cal.App.4th 1561, 1570 [92 Cal.Rptr.3d 227]; see also Commonwealth Energy Corp. v. Investor Data Exchange, Inc. (2003) 110 Cal.App.4th 26, 34 [1 Cal.Rptr.3d 390] [cautioning against the “synecdoche theory of public issue in the anti-SLAPP statute,” where “[t]he part [is considered] synonymous with the greater whole”].)
However, we are not persuaded that Liu’s statement here lacks the requisite degree of closeness with the asserted public interest. As discussed, Liu’s application itself invoked the same HOA processes that Colyear (and other community members) sought to challenge. The cases rejecting anti-SLAPP [134] protection on this basis involve a much greater level of abstraction to a “`”broad and amorphous public interest,”‘” and are thus distinguishable. (World Financial Group, Inc. v. HBW Ins. & Financial Services, Inc., supra, 172 Cal.App.4th at p. 1570 [rejecting defendants’ attempt to tie their conduct — allegedly reaching out to their former employer’s customers to promote a competitor business — to broader issues of employee mobility and competition]; see also, e.g., Consumer Justice Center v. Trimedica International, Inc. (2003) 107 Cal.App.4th 595, 601 [132 Cal.Rptr.2d 191] [“Trimedica’s speech is not about herbal supplements in general. It is commercial speech about the specific properties and efficacy of a particular product.”]; Commonwealth Energy Corp. v. Investor Data Exchange, Inc., supra, 110 Cal.App.4th at p. 34 [“hawking an investigatory service is not an economics lecture on the importance of information for efficient markets”].) Accordingly, we conclude Liu has established he made a statement in connection with an issue of public interest within the meaning of section 425.16(e)(4).
B. Claim Arises From Protected Activity
We next turn to Colyear’s claim that, even if Liu’s statement was protected, Colyear’s complaint did not arise out of that statement. We disagree.
(8) “Our Supreme Court has recognized the anti-SLAPP statute should be broadly construed [citation] and that a plaintiff cannot avoid operation of the anti-SLAPP statute by attempting, through artifices of pleading, to characterize an action as a garden variety tort or contract claim when in fact the claim is predicated on protected speech or petitioning activity. [Citation.] Accordingly, we disregard the labeling of the claim [citation] and instead `examine the principal thrust or gravamen of a plaintiff’s cause of action to determine whether the anti-SLAPP statute applies’…. [Citation.]” (Hylton v. Frank E. Rogozienski, Inc. (2009) 177 Cal.App.4th 1264, 1271-1272 [99 Cal.Rptr.3d 805].) We assess the principal thrust by identifying “[t]he allegedly wrongful and injury-causing conduct … that provides the foundation for the claim.” (Martinez v. Metabolife Internat., Inc. (2003) 113 Cal.App.4th 181, 189 [6 Cal.Rptr.3d 494].) “If the core injury-producing conduct upon which the plaintiff’s claim is premised does not rest on protected speech or petitioning activity, collateral or incidental allusions to protected activity will not trigger application of the anti-SLAPP statute. [Citation.]” (Hylton, supra, 177 Cal.App.4th at p. 1272.) “[T]he critical point is whether the plaintiff’s cause of action itself was based on an act in furtherance of the defendant’s right of petition or free speech.” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 78 [124 Cal.Rptr.2d 519, 52 P.3d 695], italics omitted.) “In other words, `the defendant’s act underlying the plaintiff’s cause of action must itselfhave been an act in furtherance of the right of petition or free speech. [Citation.]'” [135] (Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 670 [35 Cal.Rptr.3d 31].)
Colyear argues that the dispute here arose from “the question of the applicability of a tree-trimming covenant”; conversely, he argues, “Liu’s application to enforce the covenant against Colyear’s property was simply the trigger for Colyear’s suit to resolve that question.” He further notes that the trial court’s reliance on “but-for causation” in analyzing the issue was therefore in error. To the extent the trial court focused on whether Liu’s application caused Colyear to file a lawsuit, such an analysis would provide an insufficient basis from which to find that Liu had established the lawsuit arose out of his protected conduct. Based on our independent review, however, we conclude that Liu did make the requisite showing.
Liu’s application did not simply “trigger” Colyear’s lawsuit, as Colyear claims. Rather, the gravamen of Colyear’s claims against Liu was the allegation that by submitting an application to the HOA concerning property unencumbered by Declaration 150, Liu invoked an invalid HOA process and clouded Colyear’s title. As such, the only injury-producing conduct Colyear alleges Liu committed was Liu’s petitioning act.
These circumstances are factually distinct from cases, including those cited by Colyear, in which the defendant’s protected speech was ancillary to the heart of the plaintiff’s claims. In City of Cotati v. Cashman, supra, 29 Cal.4th at pp. 71, 72 for example, owners of mobilehome parks brought a declaratory relief action against the city in federal court seeking a judicial determination that the city’s mobilehome park rent-control ordinance constituted an unconstitutional taking. In response, the city sued the park owners in state court, also requesting a declaration regarding the constitutionality and enforceability of the rent-control ordinance. (Id. at p. 72.) The city conceded that its state lawsuit was triggered by the federal action and was an attempt to “gain a more favorable forum” in which to litigate the issue. (Id. at p. 73.) As the Supreme Court explained, “the mere fact an action was filed after protected activity took place does not mean it arose from that activity.” (Id. at pp. 76-77.) Instead, because the “fundamental basis” for both actions was the “same underlying controversy respecting [the rent control] ordinance,” the city’s lawsuit “therefore was not one arising from [the park owners’] federal suit” and “was not subject to a special motion to strike.” (Id. at p. 80; see also, e.g., Talega Maintenance Corp. v. Standard Pacific Corp. (2014) 225 Cal.App.4th 722, 729 [170 Cal.Rptr.3d 453][homeowners association’s claim against board members arose from “the act of spending money in violation of [the board members’] fiduciary duties,” not from the vote that precipitated such expenditure]; McConnell v. Innovative Artists Talent and Literary Agency, Inc. (2009) 175 Cal.App.4th 169, 176-177 [96 Cal.Rptr.3d 1] [talent [136] agents’ claims against former employer for retaliation and wrongful termination were based on employer’s course of conduct preventing the agents from performing their work, not the letter that communicated the purported job modifications]; Martinez v. Metabolife Internat., Inc., supra, 113 Cal.App.4th at p. 189 [holding that “the gravamen of Plaintiffs’ second cause of action, alleging the Product was not merchantable because it contained dangerous properties and ingredients that caused injury, is based on the nature and effects of the Product itself, not the marketing efforts undertaken by” the defendant].) Here, by contrast, Liu’s protected conduct — his application to the HOA — served as the foundation for Colyear’s claims against him.
In sum, we conclude that Liu met his burden on the first prong of the anti-SLAPP motion to strike. We therefore turn to the second prong, i.e., whether Colyear met his burden to demonstrate a probability of prevailing on his claims against Liu.
III. Colyear Cannot Demonstrate a Probability of Prevailing Against Liu
(9) Once a defendant satisfies the first prong of the anti-SLAPP analysis, “the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. The court, without resolving evidentiary conflicts, must determine whether the plaintiff’s showing, if accepted by the trier of fact, would be sufficient to sustain a favorable judgment. If not, the claim is stricken.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 396 [205 Cal.Rptr.3d 475, 376 P.3d 604].) “In making this assessment it is `the court’s responsibility … to accept as true the evidence favorable to the plaintiff….’ [Citation.] The plaintiff need only establish that his or her claim has `minimal merit’ [citation] to avoid being stricken as a SLAPP.” (Soukup, supra, 39 Cal.4th at p. 291.)
(10) Colyear contends he has shown his likelihood of success on his quiet title claim against Liu with evidence that (1) he has title and (2) Liu made a claim adverse to that title by invoking the tree-trimming covenant against Colyear’s property. However, the trial court found that Colyear’s quiet title claim against Liu was mooted by the withdrawal of Liu’s application. We agree. Assuming Liu’s application implicated Colyear’s property when filed, Liu withdrew his application before any action was taken, leaving no pending challenges against Colyear’s property. Thus, at the time Colyear filed his FAC, there was no “adverse claim” by Liu against Colyear’s property (§§ 760.020, 761.020 [elements to quiet title claim]), and no effective relief the court could grant against Liu. (See, e.g., Giles v. Horn (2002) 100 Cal.App.4th 206, 227 [123 Cal.Rptr.2d 735] [court “`cannot render opinions “`… upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before [137]it'”‘”]; Wilson v. L. A. County Civil Service Com. (1952) 112 Cal.App.2d 450, 453 [246 P.2d 688] [“`although a case may originally present an existing controversy, if before decision it has, through act of the parties or other cause, occurring after the commencement of the action, lost that essential character, it becomes a moot case or question which will not be considered by the court'”].)[5] In light of these findings, we need not reach the parties’ alternate arguments regarding ripeness, standing, or the admissibility of Colyear’s statements regarding ownership of the trees.
As such, we conclude that Colyear has not shown a probability of success on the merits of his quiet title claim.
DISPOSITION
The order granting Liu’s motion to strike pursuant to section 425.16 is affirmed. Liu is awarded his costs on appeal.
Epstein, P. J., and Manella, J., concurred.
[1] SLAPP is an acronym for strategic lawsuit against public participation. All further statutory references are to the Code of Civil Procedure unless stated otherwise.
[2] Whether other, more general language in Declaration 150-M could be applied to confer the same authority, as Liu seems to suggest, is not at issue in this appeal.
[3] Liu’s motion also stated in passing that his conduct should be protected under section 425.16(e)(2) as a statement “made in connection with an issue under consideration or review” by an “official proceeding authorized by law,” but offered no other argument or citation on this point.
[4] The trial court subsequently granted Liu’s objections to multiple paragraphs in Colyear’s declaration, including these statements regarding the placement of two trees. During oral argument, the court noted Colyear’s declaration provided no foundation for how Colyear “knew where the boundary line” lay between his and the Krauthamers’ property and that Colyear’s statements were conclusory.
[5] Colyear argues that the trial court should have considered his claim because Liu’s conduct was capable of repetition, yet could continue to evade the courts’ review. Colyear has raised this argument for the first time on appeal; it is therefore forfeited. (See, e.g., Sanchez v. Truck Ins. Exchange (1994) 21 Cal.App.4th 1778, 1787 [26 Cal.Rptr.2d 812].) We are not persuaded by Colyear’s suggestion that we may review this issue as a “`”pure question of law which is presented by undisputed facts.” [Citation.]'” (Ibid.)
Related Links
“Requesting HOA Enforcement Held to be Constitutionally Protected Activity” – Published on HOA Lawyer Blog (January 2018)
Tract No. 7260 Association, Inc. v. Parker
[Membership List; Inspection Denial] A homeowners association (HOA) may restrict a member’s request for access to the HOA’s membership list when the request is for an improper purpose.
Wheeler & Associates and David C. Wheeler for Defendant and Appellant.
Wilson Keadjian Browndorf, Marc Y Lazo and Charles K. Stec for Plaintiff and Appellant.
OPINION
SORTINO, J.*—A member of a nonprofit mutual benefit corporation requested inspection of the corporation’s membership list, and other books and records. The corporation refused, and the member brought a petition for writ of mandate to compel inspection. The trial court agreed with the corporation that the member sought the inspection for an improper purpose, unrelated to his interest as a member of the corporation. As a result, the court denied the petition with respect to the books and records. However, the court concluded the corporation did not timely challenge the request for the membership list as required by statute, and therefore ordered the list disclosed. Both parties appeal. We conclude (1) substantial evidence supports the trial court’s finding that the member sought the information for an improper purpose and (2) the corporation’s challenge to disclosing the membership list was not barred [28] by statute. We therefore reverse that part of the court’s judgment requiring disclosure of the membership list, and otherwise affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Don Parker is a member of Tract No. 7260 Association, Inc., a nonprofit homeowners association (the HOA). This action arises out of his request for inspection of the HOA’s membership list and other records. As far as the HOA is concerned, though, the action also arises out of a dispute the HOA has with another entity known as Fix the City.
Parker used to be the treasurer of the HOA. When Parker was treasurer, a man named Michael Eveloff was the President. Eveloff created Fix the City. According to the HOA, it had been granted the right to control a substantial amount of money. However, Eveloff convinced the HOA board to transfer that money to Fix the City, which used it for purposes which were of no use to the HOA. The HOA is now suing Fix the City for usurping its corporate opportunity. The HOA believes that Parker is aligned with Eveloff and Fix the City, and that he sought access to the membership list and other HOA records [*3] to use them against the HOA in the dispute with Fix the City.
A. Parker’s Request
On January 29, 2015, the same day that the HOA filed suit against Fix the City (the “HOA/Fix the City” action), Parker requested seven categories of corporate information from the HOA, including its membership list. He stated legitimate reasons for which he sought the information. For example, he stated that he wanted to inspect the HOA’s books to make certain the HOA was following generally accepted accounting principles. He explained that he sought the membership list for possible communications with the members to ascertain whether there had been corporate misdeeds.
Parker sought the information under Corporations Code section 8330 et seq.1 Requests under those sections may be made by “[a]ny member” of the corporation (§ 8330, subd. (b)(1)) or by the “authorized number of members” (§ 8330, subd. (b)(2)). When the corporation has less than 1,000 voting members, the “authorized number” is 5 percent of voting power. (§ 5036.) As we shall discuss, different procedures apply depending on whether a single member, or the authorized number of members, is making the request. Parker made his request as “the undersigned member,” and signed it as “Homeowner—Tract 7260.” He did not state that he was [*4] acting for the authorized number of members, nor did he suggest that he had written authorizations from members holding sufficient voting power.
B. The HOA Largely Denies the Request
There is no serious dispute that the HOA did not fully comply with Parker’s request. A representative of the HOA met with Parker briefly and let him review certain of the documents he had sought—but not all of them, and not the membership list.
C. Parker Files His Petition
On April 6, 2015, Parker filed a petition for writ of mandate, seeking an order compelling the HOA to allow him to inspect and copy the membership list and the other books and records he had sought. As in his written request for inspection, Parker asserted he had a right to inspect “in his capacity as a member” of the HOA. The HOA answered the petition, arguing that Parker had no right to inspect because he sought the information for an improper purpose.
D. The HOA Fails to Have the Cases Related
On May 27, 2015, the HOA filed a notice of related case, in order to relate this case (Parker’s writ petition) to the HOA/Fix the City action. In its notice, the HOA argued that Parker was seeking inspection in this case in order to give Fix the [*5] City an unfair advantage in the HOA/Fix the City case. Parker opposed relation on both procedural and substantive grounds. On June 24, 2015, the court in the HOA/Fix the City case denied relation, stating that the writ petition must be decided in a writ and receivers department, and would not be moved to the civil department in which the HOA/Fix the City case was pending.
E. Briefing on the Writ Petition
The briefing on the merits of the writ petition turned to the issue of Parker’s reasons for seeking inspection of the membership list and other documents. Parker filed a declaration stating that he sought the information for legitimate reasons reasonably related to his interests as a member. He expressly represented that he did not make his demand “for any reason related to the other lawsuit subsequently filed by [the HOA] after I made the Demand.”
The HOA presented evidence as to why it believed Parker was, in fact, aligned with Fix the City, and seeking the inspection in order to improperly assist Fix the City in the HOA/Fix the City action. This included evidence of the following facts: (1) Parker had been aligned with Eveloff in convincing the HOA to transfer the corporate opportunity [*6] to Fix the City, which the HOA alleges Parker accomplished by misrepresentation; (2) the HOA’s then-lawyers gave the HOA an opinion that the transfer to Fix the City was lawful; (3) shortly after the transfer to Fix the City was approved by the HOA’s board, Parker and Eveloff simultaneously resigned, effective April 7, 2013; (4) on April 5, 2013, the last business day prior to his resignation, Parker e-mailed the HOA’s bank with an emergency request for a cashier’s check for nearly $49,000 to the attorneys who had opined on the legality of the transfer; (5) the HOA’s current treasurer can conceive of no “legitimate reason” why it would be in the HOA’s interest to pay the attorneys with a cashier’s check or to speed such a payment through as a treasurer’s last official act; (6) that same law firm has since represented Fix the City in other cases (but not the HOA/Fix the City case); and (7) Parker’s counsel in the current writ case is the same firm that is presently representing Fix the City in the HOA/Fix the City case.
In short, the HOA painted the picture of a treasurer who, by misrepresentations and aided by a possibly biased legal opinion, convinced the board to transfer an opportunity [*7] to Fix the City; then quit the board, making certain that the lawyers were paid off; and is now represented by the same firm that is defending Fix the City against the HOA’s allegation that the transfer was improper.
F. The Trial Court Grants the Writ in Part
The trial court recognized that the law requires a member seeking membership lists and other corporate records to have a purpose related to his interests as a member. The court considered the facts and concluded that Parker’s purpose was improper, stating, “Particularly since Parker approved the transfer to Fix the City and his lawyer is defending Fix the City in [the] lawsuit, a reasonable conclusion is that Parker is using his membership status to aid Fix the City in defending the [HOA/Fix the City] lawsuit.”
Based on this factual finding, the court denied Parker’s request for corporate books and records under section 8333. However, the court concluded the membership list must be disclosed. The court relied on section 8331, subdivision (i), which provides that, when a demand for membership lists is made by an authorized number of members, the corporation must seek an order setting aside the demand. If it does not do so, the requesting parties may seek mandamus and “[n]o [*8] inquiry may be made in such proceeding into the use for which the authorized number seek the list.” As the HOA did not timely seek a set-aside order, the court concluded, the HOA’s defense of improper purpose came too late insofar as the request involved the membership list.
G. Further Proceedings
Each party prepared a proposed judgment; each party objected to the other’s proposed judgment. Specifically, the HOA believed the trial court had erred in relying on section 8331, subdivision (i) to allow Parker to access the membership list, as that provision applies only when the “authorized number” seeks a membership list, not when a single member does so. The HOA’s counsel wrote Parker’s counsel suggesting that the court relied on this statute due to Parker’s counsel having misrepresented the law in this regard, and requesting that he inform the court of his error. Parker believed section 8331, subdivision (i) applied, and, in any event, it was too late for the HOA to raise the issue, as it would turn on the factual issue of whether Parker alone constituted the “authorized number” of members—an issue on which neither party had introduced evidence.
H. Judgment, Appeal, and Cross-Appeal
The trial court signed a judgment consistent with its ruling, [*9] granting Parker access to the membership list only. Both parties timely appealed.
DISCUSSION
On appeal, the HOA argues that the court erred in concluding the HOA was procedurally barred from challenging Parker’s purpose in seeking the membership list and that, instead, the court’s finding of Parker’s improper purpose should bar him from inspecting the membership list as well as the other documents. In his cross-appeal, Parker argues that the evidence of improper purpose is insufficient as a matter of law, and his mere assertion of a single proper purpose is sufficient to justify inspection. Considering the cross-appeal first, we conclude the evidence is sufficient to support the trial court’s finding of improper purpose, and that Parker’s assertion of a proper purpose does not defeat this finding. Turning to the HOA’s appeal, we conclude that the court erred in applying the “authorized number” law to Parker’s single member request. Under the proper authority, the HOA timely raised the issue of Parker’s improper purpose, and the court therefore should have also refused Parker’s request to inspect the membership list.
A. Parker Sought the Information for an Improper Purpose
(1) A member’s right [*10] of inspection is limited to purposes reasonably related to the member’s interests as a member. (§§ 8330, subd. (b)(1) [membership lists], 8333 [corporate financial records].) “This limitation is always subject to judicial review to determine whether a lawful purpose exists.” (Dandini v. Superior Court (1940) 38 Cal.App.2d 32, 35 [100 P.2d 535].) A corporation has the burden of proving that the member “will allow use of the information for purposes unrelated to the person’s interest as a member.” (WorldMark, The Club v. Wyndham Resort Development Corp. (2010) 187 Cal.App.4th 1017, 1029 [114 Cal. Rptr. 3d 546].) On appeal, we review the trial court’s order for substantial evidence. (Ibid.) (2) Mere speculation that the member will use the information for an improper purpose is not sufficient to nullify inspection rights; any suspicion must be based on adequate facts in order to justify denial of inspection. (Gilmore v. Emsco Derrick & Equipment Co. (1937) 22 Cal.App.2d 64, 67 [70 P.2d 251] [improper to deny shareholder inspection rights simply because she was employed by a detective agency, when there was no evidence her inspection demand was related to her employment].)
Here, Parker contends the court’s finding of improper purpose is unsupported by the evidence, as it is mere suspicion based on the fact that Parker’s counsel is currently representing Fix the City in “unrelated” litigation. In Parker’s briefing, he repeatedly characterizes the HOA/Fix the City case as [*11] “unrelated,” because the judge in the HOA/Fix the City matter refused to relate the two cases. But the court’s order declining to relate the cases was made on the procedural basis that a writ petition should remain in the writ department; it did not conclude that the two cases were factually unrelated. Indeed, they are factually related. The HOA/Fix the City litigation challenges a transfer which Parker himself recommended, allegedly by misrepresentations. That Parker is pursuing his inspection claim aided by the same counsel defending Fix the City in the HOA/Fix the City litigation certainly gives rise to the reasonable inference that Parker seeks the information to aid Fix the City in defending against that action. Parker argues that this cannot be the case, in that the HOA/Fix the City complaint was not filed until the day he served his inspection demand, and he did not learn of the complaint until it was served on Fix the City some weeks later. But this does not mean that Parker did not know that litigation was imminent, and does not undermine the conclusion that he sought inspection to defend Fix the City against the complaint that he knew was coming.
Moreover, the fact that Parker’s [*12] counsel is representing Fix the City in the HOA/Fix the City litigation is not the only fact supporting the trial court’s conclusion. That Parker and Eveloff simultaneously resigned from the board after pushing through the transfer to Fix the City tends to show Parker is aligned with the HOA’s litigation adversary. That Parker made certain that the HOA’s former counsel, which now represents Fix the City in other matters, was paid by a cashier’s check on an emergency basis confirms the conclusion. The court’s finding that Parker’s purpose was improper is supported by substantial evidence.
(3) Parker also argues that, even if he did have a “secondary” improper purpose, the fact that he asserted a proper purpose, related to his interests as a member, is sufficient to justify his inspection demand. Parker’s authority for this remarkable proposition is Private Investors v. Homestake Mining Co. (1936) 11 Cal.App.2d 488 [54 P.2d 535]. That case does not support the argument. In Homestake Mining, the trial court overruled a corporation’s demurrer to a shareholder’s complaint seeking to enforce inspection rights, and, as the corporation had filed no answer, issued a writ. The corporation sought a writ of supersedeas to stay enforcement pending its appeal. The court, therefore, [*13] was tasked with determining whether the appeal presented a substantial or debatable question. (Id. at p. 496.) One of the corporation’s arguments in its demurrer was that the shareholder’s complaint did not allege that the purposes for which inspection was sought were reasonably related to the plaintiff’s interests as a shareholder, although the reasons themselves had been alleged. The appellate court concluded the corporation’s argument was utterly meritless, in that two of the four reasons alleged by the plaintiff shareholder had been held, in another case, to be reasonably related to shareholders’ interests. The court stated that any one of the four reasons would have been sufficient for the demand, and concluded, “the additional allegation that any one of these alleged purposes was ‘reasonably’ related to the shareholder’s interest would have been but a conclusion of law.” (Id. at p. 497.) In other words, the court held only that when a plaintiff alleges a purpose reasonably related to the plaintiff’s interests as a shareholder, the plaintiff need not also allege the legal conclusion that the purpose was, in fact, reasonably related to the plaintiff’s interests as a shareholder. The court did not hold that [*14] the mere allegation of a proper purpose is sufficient to require inspection when the court has found other, improper purposes are actually motivating the shareholder.2
As the court’s finding that Parker’s purpose was improper is supported by substantial evidence, and Parker’s assertion of a proper purpose does not undermine the conclusion, the trial court did not err in denying Parker inspection of all books and records other than the membership list.
B. Parker’s Improper Purpose Defeats Inspection of the Membership List
We now turn to the HOA’s appeal, which requires a discussion of the procedures that apply when a single member, as opposed to an “authorized number” of members, seeks inspection of a nonprofit corporation’s membership list. This is a legal issue of statutory interpretation, which we review de novo. (Rodriguez v. Solis (1991) 1 Cal.App.4th 495, 502 [2 Cal. Rptr. 2d 50].)
(4) Section 8330, subdivision (a) provides for a right of membership list inspection. Subdivision (b) explains that this right applies to (1) any member and (2) the authorized number of members. Both can inspect only for a purpose reasonably related to their interest as members. The statutes provide for different procedures, however, when the corporation believes inspection is sought for an improper purpose. [*15]
If a demand is made by a single member and the corporation believes the demand is for an improper purpose, the corporation “may deny the member access to the list. In any subsequent action brought by the member [to enforce inspection], the court shall enforce the [inspection right] unless the corporation proves that the member will allow use of the information for purposes unrelated to the person’s interest as a member … .” (§ 8330, subd. (b)(1).)
(5) In contrast, if the demand is made by the authorized number of members, and the corporation believes the demand is for an improper purpose, the corporation “may petition the superior court … for an order setting aside the demand.” (§ 8331, subd. (a).) The corporation has only 10 business days in which to file its petition; this may be extended to 30 days, upon a showing of excusable neglect. (§ 8331, subds. (b) & (c).) If the corporation does not act within that time limit, it “shall comply with the demand … .” (§ 8331, subd. (e).) Where the corporation has not timely sought an order setting aside the demand, the “requesting parties” may petition for mandate to compel the corporation to comply with the demand. At the hearing, the court shall issue the writ unless it appears “that the demand was not made [*16] by an authorized number,” the demand has been complied with, or a protective order is in effect. “No inquiry may be made in such proceeding into the use for which the authorized number seek the list.” (§ 8331, subd. (i).) By the express terms of section 8331, subdivision (i), these procedures apply only when the demand is made by the “authorized number” of members.
In short, when the demand is made by a single member, the burden is on that member to bring court action to enforce the right—although once the action is brought, the corporation has the burden of proving the member’s purpose is improper. But when the demand is made by the authorized number of members, the corporation bears the burden of bringing court action, and must comply with the demand if it does not.
The two different procedures are intentional. The comments based on the legislative committee summary to section 6330, which deals with public benefit nonprofit corporations and which contains language virtually identical to section 8330, explain that prior law allowed a single member to gain access to the membership list, but “a member had to bring suit to enforce this right if the corporation refused to provide the list.” The new law adopts this law “as to the rights of a single member [*17] … .” (Coms. Based on Legis. Com. Summary, Deering’s Ann. Corp. Code (2009 ed.) foll. § 6330, p. 209.) However, the new law provides that upon demand by the “authorized number,” the corporation must provide the list, and if it fails to do so, the authorized number may enforce the right in a summary action. “The committee felt that the above provisions would draw a proper balance between a member’s need for adequate access to membership lists and the need of a corporation to protect itself from wrongful exploitation of an important asset.” (Ibid.)
(6) Here, Parker sought inspection rights of the membership list as a single member. As such, the HOA was not required to seek court involvement, and when Parker brought suit, the HOA had the right to argue that Parker’s purpose was improper. The court’s reliance on section 8331, subdivision (i), to conclude that the HOA was barred from relying on Parker’s improper purpose, was error. As noted above, that subdivision’s provisions apply only when the inspection demand is made by an authorized number of members, not a single member. When Parker sought writ relief, the HOA timely invoked Parker’s improper purpose, and the court found the purpose to be improper. Inspection of the [*18] membership list should have been denied.
In passing, Parker suggests that courts have eliminated the distinction between requests by a “member” and requests by the “authorized number” of members, due to some language in WorldMark, The Club v. Wyndham Resort Development Corp., supra, 187 Cal.App.4th at page 1037. In that case, the inspection demand was made by a single member acting on behalf of the authorized number, and the corporation filed a petition under section 8331 to set aside the demand. (WorldMark, at pp. 1025–1026.) On appeal, the corporation argued that although the member claimed he was acting on behalf of the authorized number of members, his paperwork did not properly establish that the other members had authorized him to act for them. The court responded that the membership list inspection rights “may be exercised either by a single member or by the authorized number of members. Thus, it was not necessary for [the member] to obtain authorizations from any other members in order to exercise his right of inspection and copying.” (Id. at p. 1037.) This was not a holding that the strict procedures applicable to a corporation refusing a membership list request by an authorized number also apply to a corporation refusing the same request by an individual member. Instead, the court was simply acknowledging the uncontroverted [*19] fact that a member alone may, in fact, request inspection of a membership list. The procedures for a corporation’s challenge to such a request were not at issue.
Parker also argues that the HOA may not raise this error for the first time on appeal. He notes that he relied on section 8331, subdivision (i)’s limitations in his briefing in the trial court in support of his petition, and that the HOA did not argue that this subdivision applied only to demands by the authorized number until after the trial court had relied on it to rule in Parker’s favor. Parker argues that it is too late to raise the issue now, when neither party has produced evidence as to whether Parker himself constituted the “authorized number”—that is, if the HOA was so small that Parker alone had a 5 percent voting share.
(7) “‘The rule is well settled that the theory upon which a case is tried must be adhered to on appeal. A party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant. [Citation.]’ [Citations.] ‘Application of the doctrine may often be justified on principles of estoppel or waiver.’ [*20] [Citation.]” (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 874 [242 Cal. Rptr. 184].) Whether “the rule is to be applied is largely a question of an appellate court’s discretion. [Citation.]” (Ibid.) It is generally unfair to allow a party to raise a new theory which contemplates a factual situation not put at issue below. (Ibid.)
Here, we exercise our discretion to allow the HOA to raise on appeal the issue of whether a corporation must seek court relief against a single member’s improper membership list request or forever be barred from challenging the member’s purposes. This is a purely legal issue which raises no new facts. Moreover, public policy interests suggest we intervene to protect the innocent HOA members whose privacy rights are implicated.
On the contrary, it is Parker whose new argument raises factual issues. That is, Parker pursued his request, and his petition, solely on the theory that he was seeking the membership list as a single member. It was only when the HOA suggested that it was not barred from challenging Parker’s purpose that Parker raised the new legal theory that he, in fact, constituted the authorized number of members all by himself. He had not sought the membership list as the authorized number of members, and had not pursued [*21] writ relief on that basis. He cannot for the first time on appeal change his factual theory, and argue that he sought the list as the authorized number, when he never gave the HOA notice that he made his request in anything other than “his capacity as a member.”
DISPOSITION
That part of the court’s judgment requiring disclosure of the HOA’s membership list is reversed. The remainder of the judgment, denying inspection of all other documents due to Parker’s improper purpose, is affirmed. Parker is to pay the HOA’s costs on appeal.
Bigelow, P. J., and Grimes, J., concurred.
* Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
1 All undesignated statutory references are to the Corporations Code.
2 Indeed, such a holding would entirely undermine the statutory limitation on inspection rights, as any member with an improper purpose would surely be capable of asserting a proper one.
Related Links
Access to HOA Membership List Must be for a Proper Purpose – Published on HOA Lawyer Blog (April, 2017)
Parrott v. Mooring Townhomes Association
[Attorney’s Fees; Prevailing Party] The court found the Association to be the prevailing party and awarded its attorney fees after homeowners filed a request for dismissal of complaint.
Peter M. Parrott and Lane P. Parrott, in pro. per., for Plaintiffs and Appellants.
Swedelson & Gottlieb, Los Angeles, David C. Swedelson and Melanie J. Bingham for Defendant and Respondent.
DOI TODD, J.
Peter M. Parrott and Lane P. Parrott appeal the award of attorney fees to respondent [*118] The Mooring Townhomes Association, Inc. (the Association) after appellants voluntarily dismissed their complaint seeking injunctive and declaratory relief against the Association. Appellants contend (1) the trial court was without jurisdiction to award attorney fees after the dismissal of the complaint, and (2) attorney fees are barred by Civil Code section 1717, subdivision (b)(2). We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The Association is comprised of owners of town homes located in a common interest development in Hermosa Beach, California. Appellants are members of the Association by virtue of their ownership of one of the town homes. On April 3, 2002, association members were notified that a vote was to be conducted on April 13, 2002 to consider approval of an assessment of $1,372,500, or $18,300, on each of the 75 owners, to replace all of the exterior siding of the town homes with stucco. Counsel for the Association informed the members that this “special assessment” required a vote of 51 percent of a quorum for approval. Appellants objected, asserting that the vote required a “super majority” of 75 percent, i.e., 57 members, pursuant to Section 7.01 of the Association’s Declaration of Covenants, Conditions and Restrictions (CC & R’s), as a “Restoration,” or a 66-2/3 percent vote, i.e., 50 members, to change the “exterior appearance” of the town homes, pursuant to section 9.01(d)(3) of the CC & R’s. At the meeting, a simple majority of 43 of the members approved the proposal.
On April 17, 2002, appellants filed suit against the Association for injunctive and declaratory relief to invalidate the vote approving the special assessment to replace the siding with stucco. On May 13, 2002, appellants sought a temporary restraining order and preliminary injunction, seeking to enforce the “super majority” rule. The court granted a preliminary restraining order to maintain the status quo, but on May 31, 2002, denied a preliminary injunction and dissolved the restraining order.
On June 14, 2002, the Association filed an answer to the complaint. On June 18, 2000, appellants filed a request for dismissal of their complaint without prejudice, which was entered by the clerk the same day.
Pursuant to Civil Code section 1354, subdivision (f), the Association then moved to be determined the prevailing party and for recovery of attorney fees incurred in defending the action. The court found the Association to be the prevailing party and awarded it $9,000 in fees. This appeal followed.
DISCUSSION
The Court Had Jurisdiction to Award Attorney Fees to Respondent
Appellants contend that the trial court “was ousted from subject matter jurisdiction” by their dismissal of the lawsuit under Code of Civil Procedure section 581, subdivision (b). Appellants argue that under Harris v. Billings (1993) 16 Cal.App.4th 1396, 1405, 20 Cal.Rptr.2d 718, a trial court is without jurisdiction to take further action after the plaintiff has voluntarily dismissed the lawsuit.[FN.1]
[*119] Appellants filed this lawsuit pursuant to Civil Code section 1354, subdivision (a), which provides that an owner of a separate interest in a common interest development may enforce covenants and restrictions as set forth in a recorded declaration which is intended to be an enforceable equitable servitude.
Subdivision (f) of Civil Code section 1354, pursuant to which the Association sought recovery of its fees, provides as follows: “In any action specified in subdivision (a) to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs. Upon motion by any party for attorney’s fees and costs to be awarded to the prevailing party in these actions, the court, in determining the amount of the award, may consider a party’s refusal to participate in alternative dispute resolution prior to the filing of the action.”
Relying on Harris v. Billings, supra, 16 Cal.App.4th at page 1405, 20 Cal.Rptr.2d 718, appellants contend that because the statute does not define who is a “prevailing party,” the trial court was required to make this “substantive determination” after the lawsuit had been dismissed and the court had lost subject matter jurisdiction. But as the Association points out, appellants rely on an incomplete statement of the rule set forth in Harris, which provides in full: “Following entry of a dismissal of an action by a plaintiff under Code of Civil Procedure section 581, a `trial court is without jurisdiction to act further in the action [citations] except for the limited purpose of awarding costs and statutory attorney’s fees.‘” (Id. at p. 1405, 20 Cal.Rptr.2d 718, italics added; quoting Associated Convalescent Enterprises v. Carl Marks & Co., Inc. (1973) 33 Cal.App.3d 116, 120, 108 Cal.Rptr. 782.)
Appellants assert that Associated Convalescent Enterprises “held that a trial court cannot make a substantive, prevailing party determination in a case after a voluntary dismissal of the action has been entered by the clerk.” But appellants misstate the holding of the case. The court in Associated Convalescent Enterprises held that the defendants, against whom a lawsuit had been voluntarily dismissed by the plaintiff, could not be considered prevailing parties under the then language of Civil Code section 1717 because no final judgment was rendered. (Associated Convalescent Enterprises v. Carl Marks & Co., Inc., supra, 33 Cal.App.3d at p. 121, 108 Cal.Rptr. 782.) But the appellate court never stated that the trial court was without authority to make this determination after the dismissal had been filed. To the contrary, the appellate court specifically stated that because the prevailing party had a statutory right to recover fees under section 1717, “such issue required a judicial determination.” (Associated Convalescent Enterprises, at p. 120, 108 Cal.Rptr. 782.) Nor do any of the other authorities cited by appellants state that a trial court may not make a determination of “prevailing party” status for the purpose of awarding statutory attorney fees after the action has been voluntarily dismissed.
Appellants attempt to distinguish the case of Heather Farms Homeowners Ass’n. v. Robinson (1994) 21 Cal.App.4th 1568, 26 Cal.Rptr.2d 758, but we find this case to be persuasive. In Heather Farms, a homeowners’ association dismissed its suit without prejudice against an association owner in a dispute to enforce the association’s CC & R’s after the parties had settled the action. The settlement judge made a finding that there were no prevailing parties with respect to the dismissal. [*120] ( Id. at p. 1571, 26 Cal.Rptr.2d 758.) Following the dismissal, the homeowner sought recovery of his attorney fees as a “prevailing party” under Civil Code section 1354. The trial court denied the request, agreeing with the settlement judge that there was no prevailing party within the meaning of section 1354. (Heather Farms, at p. 1571, 26 Cal.Rptr.2d 758.) The appellate court affirmed: “[W]e hold that a trial court has the authority to determine the identity of the `prevailing party’ in litigation, within the meaning of Civil Code section 1354, for purposes of awarding attorney fees.” (Id. at p. 1570, 26 Cal.Rptr.2d 758.) The court clarified that such an analysis should be made by determining who prevailed on a “practical level.” (Id. at p. 1574, 26 Cal.Rptr.2d 758.)
Accordingly, under Harris and Heather Farms, we conclude that the trial court had jurisdiction to determine who was a prevailing party under section Civil Code section 1354, subdivision (f), for the purposes of awarding attorney fees after appellants’ voluntary dismissal.[FN.2]
Civil Code Section 1717(b)(2) Does Not Apply
Appellants also contend that the award of attorney fees was barred by Civil Code section 1717, subdivision (b)(2).[FN.3] Under section 1717(b)(2), attorney fees shall be awarded to a prevailing party in an action on a contract that contains an attorney fee provision, except “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” Appellants assert that since they were seeking to enforce voting provisions in the CC & R’s, which other cases have determined constitute contracts,[FN.4] and because the CC & R’s contain an attorney fee provision (§ 6.24), their voluntary dismissal of the action brings into play the bar of section 1717(b)(2). The Association counters that section 1717(b)(2) has no application where, as here, attorney fees were not sought under a contract, but pursuant to statute (Civ.Code, § 1354, subd. (f)). We agree.
To support their position, appellants rely primarily on the case of Santisas v. Goodin (1998) 17 Cal.4th 599, 71 Cal.Rptr.2d 830, 951 P.2d 399. But Santisas does not advance appellants’ cause. In Santisas, the plaintiffs, who were buyers of a residence, sued the sellers under a real estate purchase agreement with an attorney fee clause. When the buyers dismissed their action with prejudice before trial, the sellers sought to recover their fees under the agreement. Our Supreme Court held that section 1717(b)(2) barred the recovery of attorney fees on the contract claim. (Santisas, at p. 617, 71 Cal.Rptr.2d 830, 951 P.2d 399.) But unlike the situation here, the defendants in Santisas were not seeking to recover their attorney fees under an independent statute. Indeed, the Santisas court itself specifically noted this distinction, stating, “The seller defendants do not contend that their claim for attorney fees [*121] has a legal basis that is both independent of the cost statutes and grounded in a statute or other noncontractual source of law.” (Id. at pp. 606-607, 71 Cal.Rptr.2d 830, 951 P.2d 399.)
In Damian v. Tamondong (1998) 65 Cal.App.4th 1115, 77 Cal.Rptr.2d 262, upon which the Association relies, the court also distinguished Santisas from the situation before it, which is far more analogous to the case at hand. In Damian, the lender under an automobile sales contract, which contained an attorney fee clause, sued the buyer to collect a deficiency judgment after the vehicle had been repossessed. (Id. at p. 1118, 77 Cal.Rptr.2d 262.) Prior to trial, the lender voluntarily dismissed the action. The buyer then sought to recover its attorney fees pursuant to Civil Code section 2983.4 of the Rees-Levering Automobile Sales Finance Act.[FN.5] Like appellants here, the lender opposed the fee request on the ground that section 1717(b)(2) barred the award. The lower court agreed, but the appellate court reversed. The appellate court held that section 1717(b)(2) does not bar a fee award where, as here, the prevailing party’s right to recover fees arises under a fee-shifting statute. In so holding, the court observed that “numerous California courts have held that section 1717 does not control upon dismissal of an `action on a contract’ where a fee-shifting statute, as opposed to a contract, authorizes an award of attorney fees.”[FN.6] (Damian, at p. 1124, 77 Cal.Rptr.2d 262, fn. omitted.) Thus, the court rejected the lender’s contention that even though attorney fees were being sought pursuant to statute, the mere existence of an attorney fee provision in the parties’ contract brings the case within section 1717.
Appellants criticize Damian for not following the proposition in Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 75 Cal.Rptr.2d 376, Jackson v. Homeowners Assn. Monte Vista Estates-East (2001) 93 Cal.App.4th 773, 113 Cal.Rptr.2d 363 and Wong v. Thrifty Corp. (2002) 97 Cal.App.4th 261, 118 Cal.Rptr.2d 276 that application of section 1717(b)(2) is mandatory in contract cases. But these cases are not applicable because in each case the parties were moving to recover attorney fees pursuant to a contract and not, as here, a fee-shifting statute.
Appellants also argue that applying Civil Code section 1354, subdivision (f), but not section 1717(b)(2), violates the rule that statutes which relate to the same subject matter should be harmonized to give effect to both. We disagree. Section 1717(b)(2) deals only with attorney fee provisions in contracts and limits the “prevailing party” specifically “for purposes of this section.” But here, the Association was not seeking [*122] to enforce a contractual attorney fee provision. To the contrary, it was seeking recovery of its fees under an independent fee-shifting statute, and a prevailing party would be entitled to its fees under this statute even without a contractual fee provision. (See, e.g., Heather Farms Homeowners Ass’n. v. Robinson, supra, 21 Cal.App.4th at p. 1572, 26 Cal.Rptr.2d 758.) As the court in Damian v. Tamondong, supra, 65 Cal.App.4th at page 1124, 77 Cal.Rptr.2d 262 noted, the Legislature could have made the attorney fee statutes uniform, but chose not do to so.
We conclude that because the Association sought to recover its attorney fees pursuant to a fee-shifting statute, and not pursuant to a contract, section 1717(b)(2) did not bar an attorney fee award.
DISPOSITION
The order awarding attorney fees is affirmed. Respondent to recover its costs and attorney fees on appeal.
We concur: BOREN, P.J., and NOTT, J.
[*] George, C.J., did not participate therein.
[FN.1] The Association asserts that appellants waived this jurisdictional issue by failing to assert it below. But appellants did raise this issue before the trial court in their pleading entitled “Notice of Objection to Entry of Proposed Judgment Due to the Court’s Lack of Subject Matter Jurisdiction.” In any event, a court’s lack of subject matter jurisdiction is never waived and can be raised for the first time on appeal. (Ash v. Hertz Corp. (1997) 53 Cal.App.4th 1107, 1110-1112, 62 Cal.Rptr.2d 192; Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2003) ¶¶ 3:126, 3:128, p. 3-38.)
[FN.2] Because appellants do not otherwise challenge the trial court’s particular finding that the Association was the prevailing party or the reasonableness of the amount of attorney fees awarded, we do not address those issues here.
[FN.3] For convenience, we will hereafter refer to Civil Code section 1717, subdivision (b)(2) as “section 1717(b)(2).
[FN.4] See, e.g., MacKinder v. OSCA Development Co. (1984) 151 Cal.App.3d 728, 738-739, 198 Cal.Rptr. 864; Huntington Landmark Adult Community Assn. v. Ross (1989) 213 Cal.App.3d 1012, 1023-1024, 261 Cal.Rptr. 875.
[FN.5] Civil Code section 2983.4 provides: “Reasonable attorney’s fees and costs shall be awarded to the prevailing party in any action on a contract or purchase order subject to the provisions of this chapter….”
[FN.6] The Damian court also cited to Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 1997) ¶¶ 11:39.20 to 11:39.22, pp. 11-23 to 11-24 for the proposition that “section 1717(b)(2) does not apply where fees are awardable by statute to the `prevailing party’; in such cases, the trial court must determine which party prevailed on a practical level.” (Damian v. Tamondong, supra, 65 Cal.App.4th at p. 1125, 77 Cal.Rptr.2d 262.) Appellants note that in Wegner, Fairbank & Epstein, Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2002) ¶ 17:153.1, p. 17-71, the authors state “Statutory provisions authorizing attorney fees to the `prevailing party’ are not subject to the definition of `prevailing party’ in … Civ[il Code section] 1717.” In their reply brief, appellants ask to correct this misstatement in a published opinion. We decline to so because we find it to be a correct statement of the law.
Related Links
The court found the Association to be the prevailing party and awarded its attorneys fees after homeowners filed a request for dismissal of complaint
Mashiri v. Epsten Grinnell & Howell
[FDCPA; Collection Notice] Homeowner successfully alleged that HOA law firm violated FDCPA because pre-lien notice payment demand timeline was inconsistent with the right under the FDCPA to dispute the debt within 30 days of receipt of letter.
Asil Marhiri (argued), Mashiri Law Firm, San Diego, California, for Plaintiff-Appellant. Anne Lorentzen Rauch (argued), Mandy D. Hexom, and Rian W. Jones, Epsten Grinnell & Howell APC, San Diego, California, for Defendants-Appellees.
OPINION
[985] PAEZ, Circuit Judge:
Zakia Mashiri (“Mashiri”) appeals the dismissal of her complaint alleging that the [986] law firm of Epsten Grinnell & Howell and attorney Debora M. Zumwalt (collectively, “Epsten”) committed unlawful debt collection practices in violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692 et seq., the Rosenthal Fair Debt Collection Practices Act (“Rosenthal Act”), Cal. Civ. Code §§ 1788 et seq., and the California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq. Mashiri alleges that Epsten sent her a debt collection letter in May 2013 demanding payment of an assessment fee from her homeowners’ association. She alleges that the letter contained language that overshadowed and conflicted with her FDCPA right to thirty days in which to dispute the debt. On a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the district court dismissed Mashiri’s FDCPA claims, concluding that the collection letter satisfactorily explained her right to dispute the debt and therefore did not improperly threaten to record a lien. Because Mashiri’s state law claims were dependant on her FDCPA claims, the court also dismissed Mashiri’s Rosenthal Act and Unfair Competition Law claims.
We hold that the district court erred. Mashiri has alleged a plausible claim for relief because the collection letter contains language that overshadows and conflicts with her FDCPA debt validation rights when reviewed under the “least sophisticated debtor” standard. We also reject Epsten’s argument, raised for the first time on appeal, that in sending the collection letter, it merely sought to perfect a security interest and is therefore subject only to the limitations in § 1692f(6). We hold that Epsten is subject to the full scope of the FDCPA. We reverse and remand for further proceedings consistent with this Opinion.
I.
Mashiri alleges that she owns a home in San Diego, California and is a member of the Westwood Club homeowners’ association (“HOA”).1 As a member, Mashiri incurs annual assessment fees. Mashiri failed to pay in a timely manner the $385 fee assessed in July 2012.
In a collection letter dated May 1, 2013 (the “May Notice”), Epsten, on behalf of the HOA, sought to collect Mashiri’s overdue assessment fee, as well as corresponding late, administrative, and legal fees. The May Notice also included a warning that failure to pay the assessment fee would result in the HOA recording a lien against Mashiri’s property. This notice is required by section 5660 of the Davis-Stirling Common Interest Development Act, Cal. Civ. Code §§ 4000 et seq., which governs the collection of overdue homeowners’ association assessments.2 The May Notice stated, in pertinent part:
This letter is to advise you that $598.00 is currently owing on your Association assessment account. Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property upon authorization of the Board of Directors. All [987] collection costs incurred will be charged to your account.
Unless you notify this office within 30 days of receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days of receiving this notice that the debt, or any portion thereof, is disputed, we will obtain verification of the debt or a copy of the judgment against you (if applicable) and a copy of [] such verification or judgment will be mailed to you.
. . . .
You have the right to inspect the association records pursuant to Corporations Code Section 8333. You may submit a written request to meet with the Board to discuss a payment plan for this debt. You shall not be liable to pay the charges, interest and costs of collection if it is determined the assessment was paid on time to the Association. You have the right to dispute the assessment debt by submitting a written request for dispute resolution to the association pursuant to the association’s “meet and confer” program required in Civil Code Section [5900] et seq., and the Board offers to participate in dispute resolution. You have the right to request alternative dispute resolution with a neutral third party pursuant to Civil Code Section [5925] et seq. before the association may initiate foreclosure against your separate interest, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.
. . . .
IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION.
. . . .
This is a communication from a debt collector attempting to collect a debt and any information obtained will be used for that purpose.
Accompanying the May Notice, Epsten included copies of Mashiri’s account statement and the HOA’s assessment collection policy.
On or about May 20, 2013, in a letter to Epsten, Mashiri disputed the debt and requested that Epsten validate it. Mashiri also stated that she never received a bill for the July 2012 assessment fee. Approximately two weeks later, on June 5, Epsten responded with another copy of Mashiri’s account statement.
On June 18, 2013, Epsten, on behalf of the HOA, recorded a lien on Mashiri’s property in the amount of $928, reflecting the $598 she previously owed and $330 in additional legal fees. Three days later, on June 21, Mashiri sent the HOA a check for $385. In a letter accompanying the check, Mashiri disputed the balance of the debt. As required by the Davis-Stirling Act, on June 24, Epsten notified Mashiri of the lien. Cal. Civ. Code § 5675(e).
Mashiri ultimately filed her complaint alleging violations of the FDCPA, the Rosenthal Act, and the Unfair Competition Law based on the contents of the May Notice. Epsten subsequently moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. The district court granted Epsten’s motion to dismiss, concluding, inter alia, that the May Notice “complied with the clarity and accuracy requirements” of the FDCPA and therefore “did not threaten to take action that could not legally be taken” as prohibited by the FDCPA. The district court dismissed Mashiri’s state law claims as dependant on [988] her FDCPA claims. Mashiri timely appealed.
II.
We review de novo a dismissal under Rule 12(b)(6). Ariz. Students’ Ass’n v. Ariz. Bd. of Regents, 824 F.3d 858, 864 (9th Cir. 2016). For purposes of our review, we accept the complaint’s well-pleaded factual allegations as true and construe all inferences in favor of Mashiri. Id. The “complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (internal quotation marks omitted). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).
III.
Congress enacted the FDCPA “to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.” 15 U.S.C. § 1692(e). In furtherance of these stated goals, “[t]he FDCPA subjects ‘debt collectors’ to civil damages for engaging in certain abusive practices while attempting to collect debts.” Ho v. ReconTrust Co., NA, 840 F.3d 618, 620 (9th Cir. 2016).
Mashiri challenges the district court’s ruling that she did not allege a plausible violation of § 1692g of the FDCPA, and its corresponding dismissal of the § 1692e(5) and state law claims that depended on her § 1692g claim. See 15 U.S.C. § 1692g. She argues that the May Notice violated § 1692g for two reasons. First, she contends that the May Notice demanded payment sooner than the expiration of the debtor’s thirty-day dispute period. Second, she claims that by threatening to record a lien within thirty-five days, irrespective of whether she disputed the debt, Epsten failed to explain effectively a debtor’s right to dispute the debt. Epsten counters that it was not attempting to collect a debt and therefore the May Notice needed to comply only with the obligations in § 1692f(6) of the FDCPA relating to enforcement of security interests. Epsten further argues that even if it is subject to § 1692g, it complied with the statutory requirements. We turn first to whether Epsten is subject solely to § 1692f(6), and then discuss whether Mashiri has sufficiently alleged a violation of § 1692g and related claims.
A.
For the first time in its answering brief, Epsten argues that it is subject only to § 1692f(6)3 because it sent the May Notice to perfect the HOA’s right to record an assessment lien against Mashiri’s property under California Civil Code section 5660. “Ordinarily, we decline to consider arguments raised for the first time on appeal.” Dream Palace v. Cty. of Maricopa, 384 F.3d 990, 1005 (9th Cir. 2003). [989] We have, however, recognized an exception where “the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed.” Cold Mountain v. Garber, 375 F.3d 884, 891 (9th Cir. 2004) (quoting Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir. 1985)). Here, Epsten presents a legal issue concerning the applicability of FDCPA provisions when a debt collector seeks, in part, to perfect a security interest and preserve the creditor’s right to record a lien. The pertinent facts, including the communications between Epsten and Mashiri, are not disputed. In addition, Mashiri responded to Epsten’s argument in her reply brief and therefore suffers no prejudice if we consider the argument. See Dream Palace, 384 F.3d at 1005. Accordingly, we address the issue.
The FDCPA defines “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” 15 U.S.C. § 1692a(5) (emphasis supplied); see also Ho, 840 F.3d at 621 (“For the purposes of the FDCPA, the word ‘debt’ is synonymous with ‘money.'”). “The FDCPA imposes liability only when an entity is attempting to collect debt.” Ho, 840 F.3d at 621.
The contents of the May Notice plainly belie Epsten’s contention that it did not attempt to collect a debt. The May Notice requested payment of Mashiri’s homeowner’s assessment fee, stating: “This letter is to advise you that $598.00 is currently owing on your Association assessment account. Failure to pay your assessment account in full within thirty-five (35) days from the date of this letter will result in a lien being recorded against your property.” See supra at 5 (emphasis added). Mashiri’s obligation to pay the assessment fee relates to her household and arises from her membership in the HOA. The overdue assessment fee is a debt under § 1692a(5).
Epsten nonetheless argues that, based on the definition of a “debt collector” under § 1692a(6),4 entities engaged in the enforcement of security interests are subject only to § 1692f(6). There was, however, no existing security interest for Epsten to enforce at the time it sent the May Notice because a lien had yet to be recorded against Mashiri’s property. Rather than seeking to enforce an existing security interest or lien, the May Notice sought to collect Mashiri’s overdue assessment fee and to make necessary disclosures that would perfect the HOA’s security interest and permit it to record a lien at a later date. See Cal. Civ. Code § 5660 (providing that “[a]t least 30 days prior to recording a lien upon the separate interest of the owner of record to collect a debt that is past due under Section 5650, the association shall notify the owner of record in writing by certified mail” of specified information).5
[990] In addition, Epsten’s interpretation of § 1692a(6) is incorrect. As we recently observed in Ho, “[i]f entities that enforce security interests engage in activities that constitute debt collection, they are debt collectors.” 840 F.3d at 622. Ho addressed whether a trustee’s communications—limited solely to pursuing non-judicial foreclosure—were debt collection activities for purposes of the FDCPA. Id. at 619-20, 623. In contrast to this case, the trustee sought to enforce a secured loan and sent a notice of default that did not request payment but instead “merely informed Ho that the foreclosure process had begun, explained the foreclosure timeline, apprised her of her rights and stated that she could contact [the lender] (not [the trustee]) if she wished to make a payment.” Id. at 623. We held that where an entity is engaged solely in the enforcement of a security interest and not in debt collection, like the trustee and unlike Epsten, it is subject only to § 1692f(6) rather than the full scope of the FDCPA. See id. at 622 (“We do not hold that the FDCPA intended to exclude all entities whose principal purpose is to enforce security interests. . . . We hold only that the enforcement of security interests is not always debt collection.”).
Because Epsten sent the May Notice as a debt collector attempting to collect payment of a debt—irrespective of whether it also sought to perfect the HOA’s security interest and preserve its right to record a lien in the future—it is subject to the full scope of the FDCPA, including § 1692g and § 1692e. See id. Epsten’s attempt to escape liability under § 1692g and § 1692e therefore fails.
B.
As noted above, Mashiri argues that she alleged a violation of § 1692g on two grounds. First, she argues that the May Notice requested payment by a date that was inconsistent with a debtor’s right to dispute the debt within thirty days from receipt of the notice. Second, she argues that Epsten’s threat to record a lien within thirty-five days of the date of the letter overshadowed her right to dispute the debt. We address each of these arguments below, and hold that Mashiri has alleged a plausible § 1692g violation on both grounds.
The FDCPA requires a debt collector to send the debtor a written notice that informs the debtor of the amount of the debt, to whom the debt is owed, her right to dispute the debt within thirty days of receipt of the letter, and her right to obtain verification of the debt.6 Because the [991] notice must inform the debtor of her right to obtain verification of the debt, the notice is commonly referred to as a “validation” notice. However, “[t]he statute is not satisfied merely by inclusion of the required debt validation notice; the notice Congress required must be conveyed effectively to the debtor.” Swanson v. S. Or. Credit Serv., Inc., 869 F.2d 1222, 1225 (9th Cir. 1988).
Importantly, notice of the debtor’s right to dispute the debt and to request the name of the original creditor must not be overshadowed or inconsistent with other messages appearing in the communication.7 15 U.S.C. § 1692g(b). Overshadowing or inconsistency may exist where language in the notice would “confuse a least sophisticated debtor” as to her validation rights. Terran v. Kaplan, 109 F.3d 1428, 1432 (9th Cir. 1997). In other words, “[u]nder the law of this circuit, whether the initial communication violates the FDCPA depends on whether it is likely to deceive or mislead a hypothetical ‘least sophisticated debtor.'” Id. at 1431 (internal quotation marks omitted).
1.
Turning to Mashiri’s first basis for a § 1692g violation, Mashiri claims that the May Notice did not provide a debtor thirty days in which to dispute the debt. We have previously observed that a § 1692g violation would result if a debt collector demanded payment prior to the expiration of the thirty-day dispute period to which debtors are entitled. As we explained in Terran:
A demand for payment within less than the thirty-day timeframe necessarily requires the debtor to [forgo] the statutory right to challenge the debt in writing within thirty days, or suffer the consequences. For this reason, requiring a payment that would eliminate the debt before the debtor can challenge the validity of that debt directly conflicts with the protections for debtors set forth in section 1692g.
Id. at 1434.
In this case, the May Notice demanded payment within thirty-five days of the date of the letter, which is inconsistent with a debtor’s right to dispute a debt within thirty days of receipt of the letter. By the time a debtor receives such a letter, there may be fewer than thirty days before payment is due.8 Moreover, even if the debtor received the letter promptly, in order for the payment to be received within thirty-five days of the date of the letter, the debtor would likely need to mail the payment prior to the thirtieth day of the dispute period. See Chauncey v. JDR Recovery Corp., 118 F.3d 516, 519 (7th Cir. 1997). The least sophisticated debtor, when [992] confronted with such a notice, would reasonably forgo her right to thirty days in which to dispute the debt and seek verification. The infringement of the debtor’s right to thirty days in which to dispute the debt plausibly violates § 1692g. See Terran, 109 F.3d at 1434.
2.
Mashiri alleged a plausible § 1692g violation for the additional reason that the least sophisticated debtor may not understand, on the basis of the May Notice, that upon notifying Epsten of a dispute, debt collection activities would “cease . . . until the debt collector obtains verification of the debt . . . and a copy of such verification . . . is mailed to the consumer by the debt collector.” 15 U.S.C. § 1692g(b). Rather, the May Notice stated that a lien “will” be recorded if Mashiri “fail[ed] to pay.” The least sophisticated debtor would likely (and incorrectly) believe that even if she disputed the debt and Epsten had not yet mailed verification of the debt to her, Epsten would record a lien on the thirty-fifth day after the date of the letter. “In this manner, the letter effectively overshadows the disclosed right to dispute by conveying an inaccurate message that exercise of the right does not have an effect that the statute itself says it has.” Pollard v. Law Office of Mandy L. Spaulding, 766 F.3d 98, 105 (1st Cir. 2014).
Epsten relies on Shimek v. Weissman, Nowack, Curry & Wilco, P.C., 374 F.3d 1011 (11th Cir. 2004) (per curiam) for the proposition that, upon receipt of a request for debt verification, the FDCPA does not require a debt collector to take affirmative action to stop the recording of a lien that had already been filed. That case, however, correctly recognizes that “sending a lien to the clerk of the court [for filing] after a verification of the debt was requested is clearly contrary to § 1692g(b)’s requirement that a debt collector shall ‘cease collection of the debt’ once the verification is requested.” Id. at 1014. In addition, Shimek is factually inapposite because “[u]nder Georgia law, the filing of a lien by a creditor is a necessary step for securing payment of a debt,” and the Eleventh Circuit “assum[ed] the propriety of filing the lien with the Court Clerk contemporaneously with the demand letter.” Id. at 1013-14. In California, pursuant to the Davis-Stirling Act, a homeowners’ association may not record a lien with a county recorder’s office contemporaneously with mailing the demand letter, but instead must provide notice of the debt at least thirty days prior to recording a lien, during which time a debtor-homeowner may dispute the debt. Cal. Civ. Code § 5660.
The obligations imposed on the HOA pursuant to the FDCPA, including the provision requiring suspension of debt collection activities pending debt verification, are thus consistent with the requirements the HOA must satisfy pursuant to the Davis-Stirling Act. The HOA’s right to record a lien thirty days after providing notice under section 5660 is not absolute, but instead is dependent on whether the homeowner disputes the debt. Indeed, pursuant to the Davis-Stirling Act, if the homeowner disputes the debt and requests an informal dispute resolution proceeding, the HOA must participate in dispute resolution “prior to recording a lien.” Cal. Civ. Code § 5670.
In this context, the threat of recording of a lien is a debt collection activity, which under the FDCPA must cease if the debtor-homeowner disputes the debt and the debt collector has not yet mailed verification of the debt to the debtor-homeowner. The Davis-Stirling Act does not mandate otherwise. Epsten was obligated to explain such debt validation rights in an effective manner. See Swanson, 869 F.2d at 1225. In [993] failing to do so, the threat of filing a lien overshadowed Mashiri’s right to dispute the debt, in violation of § 1692g. Because Mashiri has plausibly alleged a violation of § 1692g on the basis of inconsistency and overshadowing, we reverse the district court’s dismissal of that claim.
IV. Conclusion
We hold that Mashiri has plausibly alleged a claim under § 1692g, and we reverse the district court’s dismissal of that claim. Because we reverse the district court’s dismissal of Mashiri’s § 1692g claim, we reverse the district court’s dismissal of Mashiri’s claims that depended on § 1692g and arose under § 1692e(5), the Rosenthal Act, and the Unfair Competition Law.9
REVERSED and REMANDED.
1 The facts are derived from the complaint and its accompanying exhibits, as well as documents that the district court judicially noticed.
2 The Davis-Stirling Act “consolidated the statutory law governing condominiums and other common interest developments.” Berryman v. Merit Prop. Mgmt., Inc., 152 Cal. App. 4th 1544, 62 Cal. Rptr. 3d 177, 183 (Cal. Ct. App. 2007) (internal quotation marks omitted). In enacting the Davis-Stirling Act, the California legislature “intended to protect homeowners from being foreclosed upon for small sums of delinquent assessments.” Huntington Cont’l Town House Ass’n v. Miner, 222 Cal. App. 4th Supp. 13, 167 Cal. Rptr. 3d 609, 612 (Cal. App. Dep’t Super. Ct. 2014).
3 Section 1692f(6) prohibits:
Taking or threatening to take any nonjudicial action to effect dispossession or disablement of property if—
(A) there is no present right to possession of the property claimed as collateral through an enforceable security interest;
(B) there is no present intention to take possession of the property; or
(C) the property is exempt by law from such dispossession or disablement.
4 Section 1692a(6) provides, in pertinent part:
The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. . . . For the purpose of section 1692f(6) of this title, such term also includes any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.
5 We also note that the Rosenthal Act, which functions as “the state analogue of the FDCPA,” does not exempt homeowners’ associations attempting to collect overdue assessment fees pursuant to California Civil Code § 5660. See Ho v. ReconTrust Co., NA, 840 F.3d 618, 623 n.8 (9th Cir. 2016).
6 Section 1692g(a) provides that the debt collector must notify the debtor of the following:
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
7 The terms “overshadowing” and “inconsistent” are often used interchangeably. See, e.g., Pollard v. Law Office of Mandy L. Spaulding, 766 F.3d 98, 104 (1st Cir. 2014) (“We note at the outset that, in the section 1692g milieu, courts do not always distinguish between violations based on the overshadowing of a validation notice and violations based on inconsistencies.”).
8 Although Epsten asks us to take judicial notice of a certified mail receipt showing that Mashiri received the May Notice on May 2, 2013, the district court did not consider the certified mail receipt, and we decline to do so as well. The date on which Mashiri received the May Notice is irrelevant because we undertake an “objective analysis that takes into account whether the least sophisticated debtor would likely be misled by a communication.” Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1017 (9th Cir. 2012) (emphasis added and internal quotation marks omitted).
9 To the extent Mashiri asserted claims under § 1692e, the Rosenthal Act, or the Unfair Competition Law on grounds unrelated to her § 1692g claim, Mashiri does not challenge the district court’s dismissal of those claims.
Related Links
“Pre-Lien Demands and FDCPA Concerns” – Published on HOA Lawyer Blog (April, 2017)
Almanor Lakeside Villas Owners Association v. Carson
[Attorney’s Fees; Prevailing Party] Where both sides achieved some positive net effect as a result of the court’s ruling, a prevailing party determination is made by comparing the practical effect of the relief attained by each; After resolving the issue of prevailing party in an action to enforce the governing documents, a trial court has no discretion to deny attorney’s fees.
Mellen Law Firm, Matthew David Mellen and Sarah Adelaars for Defendants, Cross-complainants and Appellants.
Gagen, McCoy, McMahon, Koss and Richard C. Raines for Plaintiff, Cross-defendants and Respondent.
OPINION
[*765]
GROVER, J.—The Almanor Lakeside Villas Owners Association (Almanor) is the homeowners association for the common interest development where appellants James and Kimberly Carson own properties. Almanor sought to impose fines and related fees of $19,979.97 on the Carsons for alleged rule violations related to the Carsons’ leasing of their properties as short-term vacation rentals. The Carsons disputed both the fines and Almanor’s authority to enforce those rules, which the Carsons viewed as unlawful and unfair use restrictions on their commercially zoned properties. Almanor sued, contending that its enforcement of rules against the Carsons was proper under governing law and the covenants, conditions and restrictions (CC&Rs) for the development. The Carsons cross-complained for breach of contract, private nuisance, and intentional interference with prospective economic advantage. The Carsons contended their properties were exempt based on contract and equitable principles and argued Almanor’s actions amounted to an unlawful campaign to fine them out of business.
Following a bench trial, the court ruled against the Carsons on their cross-complaint but also rejected as unreasonable many of the fines that Almanor had sought to impose. The court upheld a subset of the fines pertaining to the use of Almanor’s boat slips and ordered the Carsons to pay Almanor $6,620 in damages. On the parties’ competing motions for attorney’s fees, the court determined Almanor to be the prevailing party and awarded $101,803.15 in attorney’s fees and costs.
On appeal, the Carsons challenge the disposition of their cross-complaint and the award of attorney’s fees in favor of Almanor. The Carsons contend that uncontroverted evidence supported a finding in favor of their breach of contract cause of action because they paid Almanor $1,160 in fines that the court ultimately disallowed. The Carsons also contend that the trial court abused its discretion when it deemed Almanor the prevailing party despite having disallowed a majority of the fines it sought to impose. The Carsons also challenge the amount of the attorney’s fees award in light of Almanor’s limited success at trial. Almanor responds that the Carsons have waived any appeal of alleged error in the court’s finding on damages because they failed to raise the issue in response to the trial court’s proposed statement of decision. As to the award of attorney’s fees, Almanor argues that the court correctly determined it to be the prevailing party and did not abuse its discretion in awarding Almanor’s full fees. For the reasons stated here, we will affirm the judgment as to the Carsons’ cross-complaint, the determination of Almanor as prevailing party, and the award of attorney’s fees.
[*766]
I. FACTUAL AND PROCEDURAL HISTORY
A. History of the Properties and Underlying Dispute
The Kokanee Lodge and Carson Chalets are located within the Almanor Lakeside Villa development on Lake Almanor in Plumas County.1 Almanor is a homeowners association operating under the Davis-Stirling Common Interest Development Act (Davis-Stirling Act), now codified at sections 4000 through 6150 of the Civil Code (see Civ. Code, former §§ 1350–1376). The lodge and two chalets (the properties) are among only a few lots in the Almanor development that accommodate commercial use; the development otherwise is strictly residential. The properties’ commercial designation stems from the historic use of the lodge, which preexisted the subdivision and operated as a hunting, fishing, and vacation lodge.
The Carsons purchased the properties in 2001 and 2005 for use as short-term vacation rentals. The properties are subject to the CC&Rs of the Almanor development. As relevant to this appeal, section 4.01 of the CC&Rs designated certain lots, including the properties, that could be utilized for commercial or residential purposes. Section 4.09 prohibited owners from using their lots “for transient or hotel purposes” or renting for “any period less than 30 days.” Section 4.09 also required owners to report any tenants to Almanor’s board of directors by notifying the board of the name and address of any tenant and the duration of the lease.
In approximately 2009, the Almanor board changed composition and began to develop regulations to enforce the CC&Rs. By way of example, the 2010 rules sought to enforce section 4.09 of the CC&Rs to limit rentals to a minimum of 30 days. The 2011 and 2012 rules exempted the commercial lots from the 30-day rental restriction but maintained the requirement to provide a copy of any rental agreement to the association seven days before the rental period. The rules also purported to regulate other aspects of association life affecting the properties, such as parking, trash storage, use of common areas, and issuing decals for any boats using Almanor boat slips. And they set a schedule of fines for violations.
The Carsons believed their properties were exempt from the use restrictions of the CC&Rs, including the section 4.09 restriction on short-term rentals and the related reporting requirements. Several historic factors supported this belief, including that the Carsons had operated the properties as a short-term vacation rental business for many years. The Carsons similarly did not believe that the rules adopted by the board in 2010, 2011, and 2012 applied to their properties.
[*767]
Although the Carsons initially tried to comply with the renter reporting requirements, they continued to insist that section 4.01 of the CC&Rs and the long-established commercial status of the properties exempted them from the use restrictions and related rules. The board issued its first fines against the Carsons in September 2010, and continued to fine the Carsons throughout 2011 and 2012 for a wide range of purported violations, which the Carsons disputed.
The Carsons had stopped paying homeowners association dues on the properties for about two years, for reasons unrelated to the dispute over fines. In June 2012, the Carsons paid $14,752.35 toward delinquent dues on the properties, instructing that all of the money be applied to unpaid dues, not to the disputed fines. They stated in writing that the lump payment brought them current on dues. At trial, the parties disagreed whether the June 2012 payment actually covered the balance of dues that the Carsons owed. According to the Carsons, Almanor improperly applied $1,160 of the payment toward the fines imposed in 2011. Almanor insisted that a balance of unpaid dues remained and was reflected on the following months’ bills to the Carsons, along with the unpaid fines, attorney’s fees, and accruing interest.
B. Trial Court Proceedings
In its trial brief, Almanor estimated that the Carsons owed about $54,000 in dues, fees, fines and interest. Having cross-complained for damages and equitable relief based on breach of contract, private nuisance, and intentional interference with prospective economic advantage, the Carsons sought to establish that Almanor’s imposition of fines was “totally unlawful,” arbitrary and unfair, and reflected an effort to try to “fine the Carson’s [sic] business out of existence.” They argued that the “CC&Rs clearly do not contemplate the commercial businesses that sit on the subdivision’s land. In fact, these commercial lots are exempt by contract, based on principles of waiver, and by public policy.” The Carsons asserted that they “have been nearly put out of business and, even if Cross-Defendant’s conduct halts now, they will have immense lost income for the next 5–10 years.”
After a bench trial, the court issued its tentative decision. It concluded that the 30-day minimum rental restriction imposed by section 4.09 of the CC&Rs presented an “obvious conflict” with section 4.01, which “expressly allow[ed] the Carsons to use their lots for commercial purposes (presumably including lodging, since the properties are, in fact, lodges).” Citing Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 386 [33 Cal. Rptr. 2d 63, 878 P.2d 1275] (Nahrstedt), the trial court determined that it would be unreasonable to strictly enforce the absolute use restrictions against the Carsons. It explained: “Given the conflict between Section 4.01 and 4.09, the [*768] general rule espoused in Nahrstedt, that a use restriction in an association’s recorded CC&Rs is presumed to be reasonable and ‘will be enforced uniformly against all residents of the common interest development,’ should not apply.” The court noted, however, that it did “not … accept the Carsons’ argument that the conflict completely eliminates Almanor’s ability to impose reasonable use restrictions on the Carsons’ lots, consistent with the Carsons’ right to use their lots for commercial lodging purposes.”
Of the fines imposed in 2010, 2011, and 2012, the court concluded only the fines pertaining to the nonuse of Almanor’s boat decals were reasonable. Those fines amounted to $6,620, including late charges and interest. The court did not find adequate support for Almanor’s claim that the Carsons continued to owe unpaid dues. As to the Carsons’ cross-complaint, the court found they had not proven by competent evidence that Almanor’s alleged breaches of the CC&Rs caused damages or resulted in discernible lost profits.
The Carsons requested a statement of decision, asking whether they had suffered damages based on a former renter’s decision not to return to the properties after alleged mistreatment by Almanor board members, and whether violations relating to boat slips and decals had been properly imposed. The court issued a proposed statement of decision, to which neither party responded, followed by a final statement of decision and judgment. The final statement of decision was consistent with the tentative decision and repeated the court’s findings regarding the applicability of reasonable use restrictions to the Carsons’ properties. On the cross-complaint, the court concluded that even assuming Almanor had breached the CC&Rs, the Carsons had not proven damages. The Carsons were ordered to pay $6,620.00 in damages to Almanor, and they received nothing on their cross-complaint.
C. Cross-motions for Attorney’s Fees and Costs
The parties moved for attorney’s fees and costs pursuant to the fees provision of the Davis-Stirling Act, Civil Code section 5975. Civil Code section 5975 awards attorney’s fees and costs to the prevailing party in an action to enforce the CC&Rs of a common interest development.
Each side argued it was the prevailing party under the statute. Because the statement of decision confirmed that the properties’ commercial zoning did not preclude reasonable use restrictions in the CC&Rs, Almanor argued that it had achieved one of its main litigation objectives. Almanor also argued that having prevailed on a portion of the fines claimed, an attorney’s fees award was mandatory under the Davis-Stirling Act.
The Carsons asserted that they had achieved their main objective, which was to deny Almanor the financial windfall it sought and to establish that the fines were unreasonable and imposed a severe and unfair burden on their lawful, commercial use of the properties. They also argued that monetarily, Almanor had prevailed as to only $6,620 out of $54,000. The Carsons asserted that this net monetary recovery was insufficient because they had largely prevailed on the pivotal issue at stake. Both sides challenged the other’s request for fees as unreasonable and excessive.
The trial court held a hearing and took the motions under submission. In a brief written order, it deemed Almanor the prevailing party. The court granted Almanor’s motion for $98,535.50 in attorney’s fees and $3,267.65 in costs and denied the Carsons’ motion. The court annotated the final judgment to reflect the $101,803.15 in attorney’s fees and costs, in addition to the $6,620 in damages.
II. DISCUSSION
The Carsons’ appeal presents three distinct issues. We first consider whether the trial court erred in disposing of the Carsons’ cause of action for breach of contract. We then consider the parties’ competing claims for attorney’s fees and whether the trial court erred in deeming Almanor the prevailing party. Last we consider whether the trial court abused its discretion in awarding Almanor its full attorney’s fees.
A. Disposition of the Carsons’ Cause of Action for Breach of Contract
The Carsons challenge the trial court’s determination that they failed to prove damages for their breach of contract cause of action. Almanor argues that the Carsons waived any alleged error regarding contract damages by failing to raise the issue in response to the court’s tentative decision.
- Standard of Review
On appeal from a determination of failure of proof at trial, the question for the reviewing court is “‘whether the evidence compels a finding in favor of the appellant as a matter of law.’” (Sonic Manufacturing Technologies, Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456, 466 [126 Cal. Rptr. 3d 301] (Sonic).) Specifically, we must determine “‘whether the appellant’s evidence was (1) “uncontradicted and unimpeached” and (2) “of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.”’” (Ibid., quoting In re I.W. (2009) 180 Cal.App.4th 1517, 1527–1528 [103 Cal. Rptr. 3d 538].) We are also guided by the principle that the trial court’s judgment is presumed to be correct on appeal, and we indulge all intendments and presumptions in favor of its correctness. (In re [*770] Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [275 Cal. Rptr. 797, 800 P.2d 1227] (Arceneaux).)
- Waiver
(1) Almanor contends the Carsons failed to preserve for appeal the issue of damages from fines paid, which according to Almanor is actually a claim for offset.2 Almanor points to Arceneaux, in which the California Supreme Court clarified the procedural basis for the presumption on appeal that a judgment or order of a lower court is correct. (Arceneaux, supra, 51 Cal.3d at p. 1133.) The court in Arceneaux held that pursuant to Code of Civil Procedure section 634,3 a litigant who fails to point the trial court to alleged deficiencies in the court’s statement of decision waives the right to assert those deficiencies as errors on appeal.4 (Arceneaux, at p. 1132.) Because the Carsons failed to raise the alleged error regarding damages when the court issued its proposed statement of decision, Almanor argues that any assertion of error is waived. The Carsons respond that Arceneaux and section 634 are inapposite because their appeal is not based on an issue that was omitted or treated ambiguously in the statement of decision.
(2) We agree that Arceneaux is of limited application because the Carsons’ appeal as to this issue is premised on an unambiguous factual finding in the statement of decision. A trial court’s statement of decision need not address all the legal and factual issues raised by the parties; it is sufficient that it set forth its ultimate findings, such as on an element of a claim or defense. (Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 559 [66 Cal. Rptr. 3d 1].) Here the court’s statement of decision did not specifically reference the $1,160 damages claim now asserted by the Carsons, but the court did address the element of damages, finding that it had not been proven by competent evidence.5 Inasmuch as the trial court stated its finding on damages and did not omit the issue or treat it ambiguously, the Carsons’ [*771] failure to identify deficiencies in that aspect of the proposed statement of decision did not result in waiver of the type discussed in Arceneaux, supra, 51 Cal.3d at pages 1132–1133.
Because the Carsons never asked the trial court to make specific findings on the theory of damages they now appeal, the doctrine of implied findings remains applicable. That is, we presume that the trial court made the necessary factual findings in support of its ultimate finding on damages. (§ 634; Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 61–62 [58 Cal. Rptr. 3d 225] [appellate court infers all necessary factual findings in support of prevailing party on issue to support judgment, then reviews the implied findings under substantial evidence standard].) We turn to a review of those findings.
- The Carsons’ Proof of Damages
To support their contention that the trial court erred in finding insufficient proof of damages on their breach of contract cause of action, the Carsons draw on the court’s findings that most of the fines imposed by Almanor were unreasonable. The Carsons assert that because Almanor imposed fines ultimately disallowed by the court, they must have proven a breach of the CC&Rs. They further assert that evidence of their payment of a portion of those fines was uncontroverted. The Carsons point to their June 2012 payment of $14,752.35 to bring the dues current on their properties and argue that Almanor applied $1,160 to fines the court determined were not owed. They argue that their payment constituted cognizable, measurable damage equivalent to the amount paid, plus interest. (Civ. Code, § 3302.) The Carsons argue that instead of considering this proof, the court focused solely on the Carsons’ evidence pertaining to loss of business income, which the court ultimately concluded was too speculative.
It is uncontroverted that the Carsons paid Almanor a lump sum of $14,752.35 intended to bring current the dues on the properties. However, whether this amount in fact paid the dues in full, or whether some went toward fines that ultimately were disallowed, is difficult to discern from the record. The trial court concluded as much when it reviewed the same evidence in connection with Almanor’s open book stated cause of action. Almanor used the same accounting and billing statements to try to prove its [*772] position on unpaid dues as the Carsons have cited on appeal as evidence that Almanor applied $1,160 toward disallowed fines. The court’s statement of decision demonstrated a careful review of this evidence and concluded: “The Court cannot, with any confidence, discern the amount of dues owed by the Carsons at any given time. Although it is undisputed that the Carsons fell behind at some point on their association dues, and that they made several large payments to Almanor to pay off some component of what they owed, the Court finds that Almanor has failed to carry its burden of proving the ‘amount owed’ on dues, which is a necessary element of their open book cause of action with respect to the dues component of any damage award.”
Moreover, the trial record does not reveal that the Carsons articulated this theory of contract damages. For example, in the cross-examination of Almanor’s accountant, who was responsible for Almanor’s billing during the relevant period in 2012, counsel did not raise the issue of $1,160 being improperly applied to fines. At closing argument on the cross-complaint, the record reflects no mention of this payment as a basis for contract damages. The damages case instead centered on the Carsons’ attempt to show lost profits and loss of business goodwill. At one point the trial court asked, “Where are the damages, the monetary damages associated with that alleged breach of contract?” The Carsons’ response referenced attorney’s fees to “enforce the CC&Rs,” interference with quiet enjoyment, and lost customers.
The only mention of the $1,160 payment appeared in the Carsons’ supplemental written closing argument, in which they argued that Almanor “intentionally, or recklessly” mislabeled “rental violations” as “[s]pecial [a]ssessments,” resulting in Almanor paying rental violations instead of the dues as requested and required. That argument is not evidence sufficient to compel a finding that the Carsons suffered financial loss as a result of Almanor’s alleged breach of the CC&Rs. (Bookout v. State of California ex rel. Dept. of Transportation (2010) 186 Cal.App.4th 1478, 1486 [113 Cal. Rptr. 3d 356] [where the judgment is against the party with the burden of proof, it is “almost impossible” to prevail on appeal by arguing the evidence compels a judgment in that party’s favor].) The documentary evidence, which lacks any corroborating testimony to establish that Almanor shifted $1,160 of dues payment toward disallowed fines, does not satisfy the test for “‘“uncontradicted and unimpeached”’” evidence that leaves “‘“no room for a judicial determination that it was insufficient to support”’” the finding that the Carsons seek. (Sonic, supra, 196 Cal.App.4th at p. 466.)
On this record, the trial court’s finding that the Carsons failed to establish damages by competent evidence was sound, and the Carsons have not shown that evidence presented to the trial court should have compelled a contrary outcome.
[*773]
B. Determination of the Prevailing Party and Award of Attorney’s Fees
The Carsons and Almanor both claim to be the prevailing party, triggering an attendant award of fees and costs. The Carsons also contend that public policy and fairness require a reversal of the attorney’s fees award.
- Statutory Scheme
(3) The Davis-Stirling Act governs an action to enforce the recorded covenants and restrictions of a common interest development. Civil Code section 5975 provides that the CC&Rs may be enforced as “equitable servitudes” and that “[i]n an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (Civ. Code, § 5975, subds. (a), (c).) Reviewing courts have found that this provision of the Davis-Stirling Act “‘reflect[s] a legislative intent that [the prevailing party] receive attorney fees as a matter of right (and that the trial court is therefore obligated to award attorney fees) whenever the statutory conditions have been satisfied.’” (Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1152 [132 Cal. Rptr. 3d 886] (Salehi), original italics, quoting Hsu v. Abbara (1995) 9 Cal.4th 863, 872 [39 Cal. Rptr. 2d 824, 891 P.2d 804] (Hsu).)
The Davis-Stirling Act does not define “prevailing party” or provide a rubric for that determination. In the absence of statutory guidance, California courts have analyzed analogous fee provisions and concluded that the test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives. (Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 [26 Cal. Rptr. 2d 758] (Heather Farms); Salehi, supra, 200 Cal.App.4th at pp. 1153–1154.)
The California Supreme Court implicitly has confirmed this test. In Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94 [14 Cal. Rptr. 3d 67, 90 P.3d 1223], the court affirmed the award of attorney’s fees in an action to enforce a restrictive covenant under the Davis-Stirling Act, stating: “We conclude the trial court did not abuse its discretion in determining that the Association was the prevailing party [citation] … . On a ‘practical level’ [citation], the Association ‘achieved its main litigation objective.’” (Villa De Las Palmas, at p. 94, quoting Heather Farms, supra, 21 Cal.App.4th at p. 1574 and Castro v. Superior Court (2004) 116 Cal.App.4th 1010, 1020 [10 Cal. Rptr. 3d 865].)
[*774]
- Determination of The Prevailing Party
(4) We review the trial court’s determination of the prevailing party for abuse of discretion. (Villa De Las Palmas Homeowners Assn. v. Terifaj, supra, at p. 94; Heather Farms, at p. 1574.) “‘“The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.”’” (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1339 [104 Cal. Rptr. 3d 219, 223 P.3d 77].) As the California Supreme Court has explained in the related context of determining the prevailing party on a contract under Civil Code section 1717, the trial court should “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 … by ‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.’” (Hsu, supra, 9 Cal.4th at p. 876.)
The Carsons urge that they, not Almanor, attained their litigation objectives. They argue that but for their success in defeating most of the fines imposed by Almanor, they would have continued to face additional fines, making it impossible to continue to operate their business. They also argue that the trial court erred by focusing on net monetary recovery in determining who was the prevailing party.
In support of their position, the Carsons cite Sears v. Baccaglio (1998) 60 Cal.App.4th 1136 [70 Cal. Rptr. 2d 769] (Sears), in which the guarantor of a lease sued to recover $112,000 on a payment that he had made on the guaranty, which he contended was invalidated by a revocation. The defendant cross-complained for additional money under the guaranty. (Id. at p. 1140.) The trial court found that the guaranty was valid but that the plaintiff was entitled to recover some $67,000 plus interest because of payments the defendant had received in relation to the lease. (Id. at pp. 1140–1141.) Notwithstanding the plaintiff’s monetary recovery, the trial court deemed the defendant the prevailing party under the applicable fee provision and awarded attorney’s fees and costs. (Ibid.) The Court of Appeal affirmed the award, explaining: “The complaint and record demonstrate enforcement of the guaranty was the pivotal issue. [Plaintiff] received money not because the court found [defendant] liable for breach of contract. Instead, the court ordered [defendant] to return a portion of [plaintiff’s] payment because of the fortuitous circumstances [surrounding defendant’s receipt of other payments related to the lease].” (Id. at p. 1159.)
Whereas the pivotal issue in Sears was enforcement of the guaranty, the pivotal issue here was whether Almanor’s fines were enforceable under the [*775] CC&Rs and governing body of California law. It is true that the Carsons prevailed to the extent of the fines that the court disallowed. 6 That partial success substantially lowered the Carsons’ liability for damages and supported their position that the CC&Rs and associated rules could not impose an unreasonable burden on the properties. Yet by upholding a subset of the fines, the court ruled more broadly that Almanor could impose reasonable use restrictions on the Carsons’ properties, despite their authorized commercial use. That ruling echoed Almanor’s stated objective at trial that the association sought to counter the Carsons’ position that “because their lot is zoned ‘Commercial,’ they are not bound by the CC&R’s or the Rules.”
(5) The mixed results here are distinguishable from those in Sears, in which there was a clear win by the defendant on the pivotal issue of the guaranty, and the monetary award was fortuitous and unrelated to the determination of liability. (Sears, supra, 60 Cal.App.4th at p. 1159.) Where both sides achieved some positive net effect as a result of the court’s rulings, we compare the practical effect of the relief attained by each. (Hsu, supra, 9 Cal.4th at p. 876.) Here, the trial court’s findings eliminated many of the alleged rule violations that depended on the Carsons being in arrears on dues and rejected those fines by which Almanor tried to strictly enforce the absolute use restrictions on the Carsons’ lots. Insofar as the court found that some of the fines were enforceable, Almanor met its objective and satisfied the first part of the statutory criteria under the Davis-Stirling Act “to enforce the governing documents.” (Civ. Code, § 5975, subd. (c).) The fractional damages award does not negate the broader practical effect of the court’s ruling, which on the one hand narrowed the universe of restrictions that Almanor could impose on the properties, but on the other hand cemented Almanor’s authority to promulgate and enforce rules pursuant to the CC&Rs so long as they are not unreasonable under Nahrstedt. Thus the trial court rejected the Carsons’ position that the ambiguity in the CC&Rs “completely eliminate[d] Almanor’s ability to impose reasonable use restrictions on the Carsons’ lots, consistent with the Carsons’ right to use their lots for commercial lodging purposes.” The court also ruled entirely in favor of Almanor on the Carsons’ cross-complaint by finding that the Carsons’ alleged damages were unsupported by competent evidence and too speculative.
Taken together and viewed in relation to the parties’ objectives as reflected in the pleadings and trial record, we conclude that these outcomes were [*776] adequate to support the trial court’s ruling.7 (Goodman v. Lozano, supra, 47 Cal.4th at p. 1339.) In reviewing a decision for abuse of discretion, we do not substitute our judgment for that of the trial court when more than one inference can be reasonably deduced from the facts. (Ibid.) The trial court did not abuse its discretion in determining Almanor to be the prevailing party.
- Public policy
The Carsons argue that the fee award flouts public policy because it (1) creates disincentive for homeowners to defend against unlawful fines levied by the association and (2) rewards the association for acting in an egregious manner by imposing fines that were, for the most part, unlawful. The Carsons suggest that by granting attorney’s fees to Almanor, “the Court is stating that the Carsons should have paid the $54,000.00 that Respondent claimed was owed … , even though only $6,620.00 was actually owed, because they would be penalized for defending themselves and, in the end, owe an additional $101,803.15 in attorney’s fees for defending themselves.” The Carsons offer no direct authority to support their position but contend that this outcome contradicts California public policy which seeks to ensure that creditors do not overcharge debtors for amounts not owed.8
(6) This argument runs contrary to the statutory scheme governing the fee award in this case. As the trial court correctly noted at the hearing on the competing motions for attorney’s fees, the Davis-Stirling Act mandates the award of attorney’s fees to the prevailing party. (Civ. Code, § 5975; Salehi, supra, 200 Cal.App.4th at p. 1152 [language of Civ. Code, § 5975 reflects legislative intent to award attorney’s fees as a matter of right when statutory criteria are satisfied].) After resolving the threshold issue of the prevailing party, the trial court had no discretion to deny attorney’s fees. (Salehi, at p. 1152.) Any argument concerning the magnitude of the fees award, especially in comparison to the damages awarded or originally sought, is better directed at challenging the reasonableness of the award amount. The amount to be awarded is distinct from whether an award is justified, and “‘the factors relating to each must not be intertwined or merged.’” (Graciano v. Robinson [*777] Ford Sales, Inc. (2006) 144 Cal.App.4th 140, 153 [50 Cal. Rptr. 3d 273], quoting Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 647 [71 Cal. Rptr. 2d 632].)
C. Reasonableness of the Fee Award
The remaining question is whether the attorney’s fees award of $98,535.50 was reasonable. What constitutes reasonable attorney’s fees is committed to the discretion of the trial court. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095–1096 [95 Cal. Rptr. 2d 198, 997 P.2d 511] (PLCM Group).) “An appellate court will interfere with the trial court’s determination of the amount of reasonable attorney fees only where there has been a manifest abuse of discretion.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 1004 [156 Cal. Rptr. 3d 26] (Monroy).)
The Carsons argue that the trial court abused its discretion by awarding fees which are “grossly disproportionate” to the monetary award and scale of success on the claims litigated.9 The Carsons point to section 1033, subdivision (a) for the proposition that the court, in its discretion, can disallow attorney’s fees and costs if a party obtains less than the statutory minimum to be classified as an unlimited civil matter. Yet their briefs on appeal offer no case or other authority to support the proposed application of section 1033, subdivision (a) to a mandatory fees award under Civil Code section 5975.
(7) The Carsons also argue that the trial court should have apportioned the award to reflect the court’s rejection of all but a single category of fines imposed, representing eight out of 88 fines. Again, the Carsons fail to cite any authority to support a reduction based on the degree of success in a Davis-Stirling Act case. We observe that “it is counsel’s duty by argument and citation of authority to show in what respects rulings complained of are erroneous … .” (Wint v. Fidelity & Casualty Co. (1973) 9 Cal.3d 257, 265 [107 Cal. Rptr. 175, 507 P.2d 1383].) Although we will not treat the Carsons’ arguments as waived, we caution that “‘an appellate brief “should contain a legal argument with citation of authorities on the points made. If none is furnished on a particular point, the court may treat it as waived, and pass it without consideration.”’” (Mansell v. Board of Administration (1994) 30 Cal.App.4th 539, 545 [35 Cal. Rptr. 2d 574], quoting In re Marriage of Schroeder (1987) 192 Cal.App.3d 1154, 1164 [238 Cal. Rptr. 12].)
Almanor does not respond to these arguments on appeal, though it argued in its attorney’s fees motion that when an owner’s association seeks to [*778] enforce CC&Rs and attains its litigation objective, based on the mandatory nature of the fee award, “it is irrelevant that the verdict/judgment amount is below $25,000.”
- Discretion to Reduce or Eliminate Fees Under Section 1033
(8) Under section 1033, subdivision (a), if a plaintiff brings an unlimited civil action and recovers a judgment within the $25,000 jurisdictional limit for a limited civil action, the trial court has the discretion to deny, in whole or in part, costs to the plaintiff.10 (Carter v. Cohen (2010) 188 Cal.App.4th 1038, 1052 [116 Cal. Rptr. 3d 303]; Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 982–983 [104 Cal. Rptr. 3d 710, 224 P.3d 41] (Chavez).) Section 1033 relates to the general cost recovery provisions set forth in the Code of Civil Procedure. We briefly consider its applicability to the recovery of attorney’s fees under the Davis-Stirling Act.
In Chavez, the California Supreme Court examined the application of section 1033, subdivision (a) to an action brought under the California Fair Employment and Housing Act (FEHA; Gov. Code, § 12900 et seq.), which grants the trial court discretion to award attorney’s fees to a prevailing party. (Chavez, supra, 47 Cal.4th at pp. 975–976.) The court in Chavez held that by its plain meaning, section 1033, subdivision (a) applies in the FEHA context and gives the trial court discretion to deny attorney’s fees to a plaintiff who prevails under FEHA but recovers an amount that could have been recovered in a limited civil case. (Chavez, at p. 976.) The court explained: “[W]e perceive no irreconcilable conflict between section 1033(a) and the FEHA’s attorney fee provision. In exercising its discretion under section 1033(a) to grant or deny litigation costs, including attorney fees, to a plaintiff who has recovered FEHA damages in an amount that could have been recovered in a limited civil case, the trial court must give due consideration to the policies and objectives of the FEHA and determine whether denying attorney fees, in whole or in part, is consistent with those policies and objectives.” (Chavez, at p. 986.)
(9) The reasoning of Chavez is of limited applicability here. Unlike the fee provision under FEHA, which is discretionary and therefore not irreconcilable with section 1033, subdivision (a), the fee-shifting provision of the Davis-Stirling Act is mandatory. (Civ. Code, § 5975; Salehi, supra, 200 Cal.App.4th at p. 1152.) The circumstances in which a court might deny or reduce a fee award under a permissive statutory provision, like FEHA, such [*779] as because special circumstances “‘“would render such an award unjust,”’” do not apply equally where a statute mandates attorney’s fees to the prevailing party. (Graciano v. Robinson Ford Sales, Inc., supra, 144 Cal.App.4th at p. 160 [principles applicable to permissive attorney’s fee statutory provisions do not apply to mandatory fee-shifting statutory provisions].) Given its uncertain applicability to the recovery of attorneys’ fees under Civil Code section 5975 and counsel’s failure to suggest specific authority for its application, we decline to find an abuse of discretion in this context.
- Discretion to Reduce Fee Award Based on Degree of Success
(10) The Carsons also contend that the trial court could have and should have apportioned the award to those attorney’s fees that Almanor incurred in proving the eight fines on which it succeeded. It is well settled that the trial court has broad authority in determining the reasonableness of an attorney’s fees award. (PLCM Group, supra, 22 Cal.4th at p. 1095.) This determination may, at times, include a reduction or apportionment11 of fees in order to arrive at a reasonable result. “‘After the trial court has performed the calculations [of the lodestar], it shall consider whether the total award so calculated under all of the circumstances of the case is more than a reasonable amount and, if so, shall reduce the … award so that it is a reasonable figure.’” (PLCM Group, at pp. 1095–1096.)
We look to a few cases that address the justifications for reducing a fee award. In a case involving a mandatory fee-shifting statute similar to that under the Davis-Stirling Act, the appellate court upheld an attorney’s fees award of $89,489.60 for the defendant borrower and cross-complainant even though she recovered only a nominal $1 in statutory damages on her consumer debt-collection based claims. (Monroy, supra, 215 Cal.App.4th at p. 986.) The court deemed the borrower the prevailing party and found she was entitled to her full attorney’s fees relating to her successful cross-complaint based on the Fair Debt Collection Practices Act (FDCPA; 15 U.S.C. [*780] § 1681 et seq.),12 as well as to her defense of the plaintiff’s complaint. (Monroy at p. 987.) The Monroy court rejected the financial institution’s argument that the award should have been reduced to reflect the borrower’s limited degree of success. (Id. at pp. 1004–1005.)
Citing United States Supreme Court13 and California precedent in various statutory fee-shifting contexts for the proposition that “the degree or extent of the plaintiff’s success must be considered when determining reasonable attorney fees,” the Monroy court concluded that the circumstances of the case did not warrant a reversal of the fee award for abuse of discretion. (Monroy, supra, 215 Cal.App.4th at pp. 1005–1006.) The court based its decision on factors including the borrower’s position as defendant and cross-complainant, her choice not to allege actual damages but to request only statutory damages under the FDCPA, the fact that the nominal award still represented a complete success and could prompt the financial institution “to cease unlawful conduct against other consumers.” (Monroy, at p. 1007.)
Reductions to the award of attorney’s fees also arise in cases applying California’s private attorney general statute.14 One such case, Sokolow, supra, 213 Cal.App.3d 231, involved alleged sex discrimination by a county sheriff’s department and a closely affiliated private mounted patrol that maintained a male-only policy. On cross-motions for summary judgment, the court ruled for the plaintiffs as to certain equal protection violations and imposed permanent injunctions on the patrol and the sheriff’s department directed at terminating their working relationship and any appearance of partnership. (Id. at pp. 241–242.) Yet the court denied the plaintiffs’ request for attorney’s fees under the applicable federal and state statutory fee provisions. (Id. at p. 242.)
The Court of Appeal reversed the attorney’s fees decision because the plaintiffs were the prevailing parties, but remanded to the trial court for a [*781] determination of the amount of reasonable fees. (Sokolow, supra, 213 Cal.App.3d at pp. 244, 251.) With respect to the fees under section 1021.5, the court noted that “a reduced fee award is appropriate when a claimant achieves only limited success.” (Sokolow, at p. 249.) The court offered specific examples of results that the plaintiffs had sought and failed to obtain through the injunction, such as “obtaining admission for women into the Patrol” or “entirely eliminating the County’s training and use of the Patrol for search and rescue missions.” (Id. at p. 250.) The court indicated that these “were important goals of appellants’ lawsuit which they failed to obtain.” (Ibid.) Thus, in arriving at an award of reasonable attorney’s fees, the court directed the trial court to “take into consideration the limited success achieved by appellants.” (Ibid.)
Similarly, in Environmental Protection Information Center v. Department of Forestry & Fire Protection (2010) 190 Cal.App.4th 217, 222–224 [118 Cal. Rptr. 3d 352] (Environmental Protection), the court addressed attorney’s fees after the plaintiff environmental and labor groups had succeeded in part in challenging the validity of regulatory approvals related to a logging plan affecting California old-growth forests. With regard to the defendants’ arguments that any fee award should be reduced based on the plaintiffs’ limited success on the merits, the appellate court conducted a two-part inquiry.15 (Environmental Protection, at p. 239.) It first determined that the environmental group plaintiffs’ unsuccessful claims were related to the successful claims, such that attorney’s work spent on both sets of claims were not practicably divisible. (Id. at p. 238.) The court explained that because the successful and unsuccessful claims were related, the trial court on remand would need to assess the level of success or “‘“significance of the overall relief obtained by the plaintiff[s] in relation to the hours reasonably expended on the litigation.”’” (Id. at p. 239, quoting Harman v. City and County of San Francisco (2007) 158 Cal.App.4th 407, 414 [69 Cal. Rptr. 3d 750].)
(11) We draw a few general conclusions from these cases. As we noted earlier, it is within the province and expertise of the trial court to assess reasonableness of attorney’s fees. Especially in certain contexts, such as in litigation seeking to enforce “‘an important right affecting the public interest,’” there is no question that degree of success is a “crucial factor” for that determination. (Environmental Protection, supra, 190 Cal.App.4th at pp. 225, fn. 2, 238.) Indeed, we find no indication that “degree of success” may not be considered, alongside other appropriate factors, in determining reasonable attorney’s fees in other contexts, including under Civil Code section 5975. “To the extent a trial court is concerned that a particular award is excessive, it has broad [*782] discretion to adjust the fee downward … .” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1138 [104 Cal. Rptr. 2d 377, 17 P.3d 735].)
It does not follow from these generalizations, or from the record the Carsons have provided, that the trial court committed a manifest abuse of discretion by awarding the full attorney’s fees sought. Though the order granting Almanor’s motion for attorney’s fees is silent as to the court’s reasoning, the moving papers and declarations of each side, as well as the hearing transcript, reflect that the court thoroughly considered the briefing and argument of the parties.16 Also, the Carsons did not request a statement of decision with regard to the fee award. Under this circumstance, “‘“[a]ll intendments and presumptions are indulged to support [the judgment] on matters as to which the record is silent, and error must be affirmatively shown.”’” (Ketchum v. Moses, supra, at p. 1140, quoting Denham v. Superior Court (1970) 2 Cal.3d 557, 564 [86 Cal. Rptr. 65, 468 P.2d 193].)
(12) Although the court in its discretion could have reduced the amount of the award to reflect the incomplete success of Almanor’s action, as in Monroy, supra, 215 Cal.App.4th at pages 1005–1006, there are ample factors to support the trial court’s decision. Almanor prevailed on only a minor subset of the fines that formed the basis for the monetary award requested, but that subset was sufficient to satisfy the statutory criteria of an action to enforce the governing documents. (Civ. Code, § 5975, subdivision (c).) In practical effect, Almanor’s limited success established a baseline from which it can continue to adopt and enforce reasonable use restrictions under the CC&Rs. Unlike the important goals of the sex discrimination civil rights lawsuit that the appellants failed to obtain in Sokolow, the objectives that Almanor failed to attain were primarily monetary. With respect to the time spent on the successful and unsuccessful aspects of Almanor’s suit (Environmental Protection, supra, 190 Cal.App.4th at p. 239), we note that the various fines do not represent different causes of action or legal theories dependent on different facts, but different instances of attempted enforcement based on the CC&Rs and a shared set of facts. Almanor’s fees, as established in its moving papers and supporting declarations, also accounted for its defense against the [*783] Carsons’ cross-complaint, which included the Carsons’ use of testifying expert witnesses. For these reasons, we do not find that the award of attorney’s fees, compared to the “‘“overall relief obtained”’” by Almanor, was so disproportionate as to constitute an abuse of discretion. (Ibid.)
III. DISPOSITION
The judgment on the Carsons’ cross-complaint and the award of attorney’s fees and costs to Almanor are affirmed. Respondent is entitled to its costs on appeal.
Rushing, P. J., and Márquez, J., concurred.
1 The venue of the underlying action is Santa Clara County, where the Carsons reside.
2 We need not resolve Almanor’s suggestion that the alleged damages be viewed as an offset because, as we will explain, we do not find support in the record for the Carsons’ claim that uncontroverted evidence established that fines paid were damages resulting from Almanor’s alleged breach of the CC&Rs.
3 Undesignated statutory references are to the Code of Civil Procedure.
4 A litigant who wishes to preserve a claim of error and avoid the application of inferences in favor of the judgment must follow the two-step process set by sections 632 and 634. First, when the court announces a tentative decision, “a party must request a statement of decision as to specific issues to obtain an explanation of the trial court’s tentative decision.” (Arceneaux, supra, 51 Cal.3d at p. 1134; see § 632.) Second, when the trial court issues its statement of decision, a party claiming deficiencies must raise any objection “to avoid implied findings on appeal favorable to the judgment.” (Arceneaux, at p. 1134; see § 634.)
5 The Carsons had offered trial testimony of a longtime renter who chose not to return after 2012 because she and her group felt uncomfortable and scrutinized by certain Almanor homeowners and board members during their stay. The court found the testimony insufficient to establish a breach of the CC&Rs. On the subject of damages the Carsons asked the court to explain its decision on the evidence related to the renter who had decided not to return. The trial court’s proposed statement of decision addressed that evidence but did not address the $1,160 on which basis the Carsons now appeal. The Carsons did not object to the proposed statement of decision. (Cal. Rules of Court, rule 3.1590(g) [parties have 15 days from service of proposed statement of decision to serve and file any objections].)
6 Out of 88 fines that Almanor sought to enforce at trial, the trial court upheld only eight. Almanor admits that it did not attain all of its litigation objectives and that a total victory would have resulted in a higher monetary recovery had the court found that all of the fines imposed were reasonable and enforceable.
7 We do not find support in the record for the Carsons’ contention that until the motion for attorney’s fees, Almanor’s sole litigation objective had been to collect a monetary award. From the inception of the litigation, Almanor’s ability to collect a monetary award depended on the court finding that it was authorized to impose those rules and to fine for violations. Throughout the trial record, including in Almanor’s trial brief, opening and closing remarks, and supplemental closing argument, Almanor emphasized that it sought to enforce the CC&Rs and disabuse the Carsons of their belief that the commercial zoning of their property immunized them from the use restrictions.
8 In support of this point, the Carsons cite to the Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.), which holds a debt collector liable to a debtor for violating the debt collection practices act (Civ. Code, § 1788.30).
9 The Carsons do not raise on appeal the trial court’s methodology or computation of time spent on the case.
10 Section 1033, subdivision (a) states that “[c]osts or any portion of claimed costs shall be as determined by the court in its discretion in a case other than a limited civil case in accordance with Section 1034 where the prevailing party recovers a judgment that could have been rendered in a limited civil case.”
11 The Carsons’ use of the term “apportion” is not entirely accurate. In the context of attorney’s fees awards, apportionment generally refers to divvying fees as between meritorious or paying parties in a multiparty case (see, e.g., Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 250 [261 Cal. Rptr. 520] (Sokolow) [fees statute did not address apportioning attorney’s fees between defendants, but court opined it would be “appropriate for the trial court to assess a greater percentage of the attorney fees award against the County rather than making an equal assessment between the County and the Patrol”]), or as between causes of action wherein a party has alleged multiple causes of action, only some of which are eligible for a statutory fee award (see, e.g., Chee v. Amanda Goldt Property Management (2006) 143 Cal.App.4th 1360, 1367–1368 [50 Cal. Rptr. 3d 40] [court granted in part defendants’ motions for attorney’s fees and apportioned the amount of fees requested to only those causes of action that “fell within the purview of Civil Code section 1354”]).
12 As with an attorney’s fees award under section 5975, part of the Davis-Stirling Act, the federal FDCPA provides for mandatory attorney fees to be awarded to the prevailing party, although courts have discretion in calculating the reasonable amount. (Monroy, supra, 215 Cal.App.4th at p. 1003.)
13 In Hensley v. Eckerhart (1983) 461 U.S. 424, 434–435 [76 L. Ed. 2d 40, 103 S. Ct. 1933], the Supreme Court addressed application of a fee-shifting statute in civil rights litigation (42 U.S.C. § 1988) when the plaintiffs had achieved only partial success. The fee provision in Hensley was permissive and provided that the court “may” in its discretion award the prevailing party a reasonable attorney’s fee. (Hensley, at p. 426.) Noting that when “a plaintiff has achieved only partial or limited success, the product of hours reasonably expended on the litigation as a whole times a reasonable hourly rate may be an excessive amount,” the court held that the district court “may attempt to identify specific hours that should be eliminated, or it may simply reduce the award to account for the limited success.” (Id. at pp. 436–437.)
14 The fee recovery provision under this statute provides that a court “may award attorney’s fees to a successful party … in any action which has resulted in the enforcement of an important right affecting the public interest.” (§ 1021.5.)
15 The test articulated in Environmental Protection comes from a line of state court cases that refer to the approach set by the United States Supreme Court in Hensley, supra, 461 U.S. at page 434.
16 The court’s comments during the hearing on the motions for attorney’s fees at one point seem to indicate that the court did not believe that it could take into account the degree of success at trial. In a colloquy with counsel for Almanor, the court asked: “[O]nce the Court makes a determination of prevailing party, the only discretion the Court has with respect to the fee award is reasonableness of them, and that is not a function of how well they did at trial. There’s a threshold question, who’s the prevailing party, and then the next question, which is, are the fees reasonable?” We do not find this comment determinative because it reflects only part of an extended discussion at hearing, not the court’s final reasoning, after it heard from counsel for the Carsons and took the motions under submission. Even if the court had ascertained that it could consider degree of success, there were enough factors, as we have discussed, to support a full fees award.
Related Links
Clarifying When a HOA may be Deemed the ‘Prevailing Party’ in an Enforcement Suit – Published on HOA Lawyer Blog (January, 2017)