[Discrimination; ADA; Disability Accommodations; Smoking Restrictions] An HOA’s obligation to grant a reasonable accommodation does not mandate a fundamental change in policy that would intrude upon the rights of others.
Phyllis Davis, Plaintiff-Appellant, v. Echo Valley Condominium Association; Casa Bella Property Management, Inc., Defendants-Appellee.
OPINION
[486] Murphy, United States Court of Appeals, Sixth Circuit:
Phyllis Davis suffers from asthma but lives in a condominium complex that allows residents to smoke in their condos. Davis asserts that the smell of smoke regularly emanating from a neighbor’s condo aggravated her asthma. Unsatisfied with her condo association’s efforts to address the situation, she sued the association and its property manager. Davis alleged that these defendants, by refusing to ban smoking, discriminated against her under the Fair Housing Amendments Act, violated various condo bylaws, and allowed a tortious nuisance to persist. The district court rejected Davis’s claims on summary judgment. We affirm.
In the 1970s, a developer built the Echo Valley Condominium complex in Farmington Hills, Michigan. The complex is governed by a master deed, bylaws, and the Michigan Condominium Act, Mich. Comp. Laws § 559.101-.276. The bylaws impose many regulations on condo owners. They contain several specific bans, including, for example, a ban on keeping a dog or cat in a condo. They also contain general rules like the following: “No immoral, improper, unlawful or offensive activity shall be carried on in any apartment or upon the common elements, limited or general, nor shall anything be done which may be or [487] become an annoyance or a nuisance to the co-owners of the Condominium.”
The Echo Valley Condominium Association—an association of co-owners organized as a nonprofit corporation that we will call the “Association”—manages the Echo Valley complex. A board of directors made up of volunteer co-owners oversees this Association. The bylaws give the board “all powers and duties necessary for the administration” of the Echo Valley complex, including maintaining the common elements, collecting the assessments, and enforcing the bylaws. The board also must contract with a professional manager to carry out its duties. At most times relevant here, the Association contracted with Casa Bella Property Management, Inc., to help run the complex.
The minutes from the regular meetings of the Association’s board show that condo living can be trying, and board membership a thankless task. The board fields complaints ranging from the need for repairs (“We have had nine A.C. units break down since we last [met]”), to non-residents sneaking into the pool (“I could not believe the condition of the water after the guests left”), to inflamed passions from the pet ban (“another lady is very upset and is considering taking [a board member] to court if she stays on the board with a pet”).
This case concerns another fact of life in Echo Valley: Condo owners regularly detect odors from each other’s condos. Residents, for example, have complained about the smell of their neighbors’ cooking. Some residents also smoke cigarettes in their condos. Michigan law permits smoking in one’s home, cf. Mich. Comp. Laws § 333.12603(1), and the Association has long read the bylaws to permit residents to smoke in their units. (The bylaws say nothing specific about smoking.) Yet neighbors can sometimes smell this smoke, and in-condo smoking has produced complaints to the Board over the years. Some residents have even moved out because of the Association’s policy allowing smoking.
Davis, a cancer survivor with “a history of asthma and multiple chemical sensitivity disorder,” seeks to change the Association’s smoking policy through this suit. In 2004, she bought a condo on the second floor of a four-unit building in the complex. The condos in her building share a common entryway, basement, and attic. A 2015 letter that Davis addressed to “Dear Neighbor” suggests that smells and sounds carry across her building. As for smells, Davis told her neighbor that she “almost had an asthma attack” because “[t]he smell of whatever you were cooking this morning engulfed my condo.” She asked her neighbor to cook with the windows open and exhaust fan on. As for sounds, Davis added: “Also, please stop slamming your door when you come in as it is very loud.”
Davis’s more recent concern has been cigarette smoke. Moisey and Ella Lamnin owned a condo on the first floor of Davis’s building and began renting it to Wanda Rule in 2012. At some point not apparent in the record, the smell of smoke from the Lamnins’ condo (presumably from Wanda Rule and her husband) started entering Davis’s unit and lingering in the building’s common areas. According to Davis, the smoke “has significant adverse effects on [her] ability to breathe comfortably.”
On March 1, 2016, in her first written complaint in the record, Davis emailed a Casa Bella employee to report that the Lamnins’ tenants “do not work, so they are home all day and night chain smoking,” which affected her “breathing, causing constant coughing, and near asthma attacks.” She asked if the board could “make owners accountable for cigarette and other types of smoke seeping through [488] the cracks of their doors and vents.” The Association’s board, which at that time included Davis, discussed her complaint at a March 2016 meeting. The board ultimately directed the Casa Bella employee to send a letter to the Lamnins. The letter noted that the board had received complaints about the smoke and that, “[w]hile there is no rule or regulation that prohibits smoking inside one’s home, it can be considered a nuisance to those who do not smoke.” The letter requested the Lamnins’ “assistance in keeping the smell contained,” such as by asking their tenants to smoke on their balcony or by further insulating their doors.
Minutes from a board meeting in February 2017 memorialize another complaint. Davis urged the board to send a second letter to the Lamnins about “heavy smoking of cigarettes, weed and etc[.], infiltrating common areas and other units.” This time the board chose a different path. It asked Mark Clor, a heating and cooling contractor, to install a $275 fresh-air system on Davis’s ductwork. This system allowed Davis’s furnace to draw in fresh air from outside rather than stale air from the basement. Other board members who had installed a similar system thought that it eliminated a significant portion of the smoke smell infiltrating their condos.
While Davis told Clor that the system “was helping with the smell of smoke,” it did not fully eliminate the odor. In April 2017, her lawyer sent a letter to the Lamnins stating that the smoke pervading her condo affected her health. The letter suggested that the Rules’ smoking breached various bylaws and created a common-law nuisance. It asked the Lamnins either to ensure that smoke did not escape their condo or to order their tenants to stop smoking. It also copied the Association’s board and made “a formal demand that [it] take further action.”
In their response, the Lamnins declined to force the Rules to cease smoking because the bylaws permitted the practice. Yet the Rules, “in the spirit of being good neighbors,” volunteered to “purchase and use an air purifier/ionizer[] to clean the air in their unit of any residual cigarette smoke.” This solution did not appease Davis either. In “logs” that she kept between May and July 2017, she regularly identified times that she could still smell smoke in her condo or the hallways.
Things came to a head in July 2017. Davis sued the Association, Casa Bella, and the Lamnins (and later amended her complaint to add Wanda Rule). Davis alleged that, by refusing to ban smoking in her building, the Association had discriminated against her because of her disability in violation of the Fair Housing Amendments Act, 42 U.S.C. § 3604(f), and a similar Michigan law. (The parties agree that the state law has the same elements as the federal act, so we do not discuss it separately.) Davis also asserted two other state-law claims: a breach-of-covenant claim for violations of various bylaws, and a nuisance claim. She sought damages and an injunction against smoking in her building.
Davis’s suit was apparently the last straw for the Lamnins. They told Wanda Rule that they would terminate her lease effective December 31, 2017. The Rules moved out, and the Lamnins sold their condo. By March 2018, Davis had settled with the Lamnins and dismissed them from this suit.
Even after the primary source of Davis’s complaints had moved out, she continued to litigate the suit against the Association and Casa Bella. In March 2018, she began keeping “logs” again after smelling cigarette and marijuana smoke from a new source. The next month, her lawyer told defense counsel that another resident “in [489] Ms. Davis'[s] building ha[d] started smoking cigarettes and marijuana,” which was “triggering Ms. Davis'[s] asthma, and making it very difficult for her to breathe.” The lawyer asked the Association to grant Davis “a reasonable accommodation and prohibit smoking within her building.” The Association requested more information about the source, but never received a definitive answer (at least not one in the record). Around this time, as a result of this suit, the Association circulated a bylaws-amendment package to condo owners proposing a smoking ban in the complex. The proposal failed to pass.
Following these developments, each side moved for summary judgment. The district court granted the defendants’ motion. Davis v. Echo Valley Condo. Ass’n, 349 F. Supp. 3d 645, 665 (E.D. Mich. 2018). It recognized that the Fair Housing Amendments Act prohibits discrimination based on disability and defines “discrimination” to include the refusal to grant a reasonable accommodation. Id. at 657. The court held, however, that Davis’s requested smoking ban was not a “reasonable accommodation.” Id. at 659. The ban would fundamentally change the Association’s smoking policy by barring residents “from engaging in a lawful activity on their own property.” Id. The court next rejected Davis’s nuisance claim, analogizing to Michigan cases that refused to hold a landlord liable for a tenant’s nuisance. Id. at 660. And it found that Davis’s four breach-of-covenant claims failed for various reasons. Id. at 661-65.
Davis raises eight issues on appeal. She disputes the district court’s resolution of her disability claim, her breach-of-covenant claims, and her nuisance claim. She also asserts evidentiary and discovery challenges. Reviewing the court’s grant of summary judgment de novo, Westfield Ins. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003), and its procedural rulings for an abuse of discretion, United States v. Kelsor, 665 F.3d 684, 696 (6th Cir. 2011); Vance ex rel. Hammons v. United States, 90 F.3d 1145, 1149 (6th Cir. 1996), we affirm on all fronts.
A.
[i]We begin with the disability claim. The Fair Housing Amendments Act of 1988 amended the Fair Housing Act to bar housing discrimination against the handicapped. Pub. L. No. 100-430, § 6, 102 Stat. 1619, 1620-22 (adding 42 U.S.C. § 3604(f)). Section 3604(f) makes it unlawful “[t]o discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap of” that person. 42 U.S.C. § 3604(f)(2). Section 3604(f) then defines “discrimination” “[f]or purposes of this subsection” to include “a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” Id. § 3604(f)(3)(B). Combining these two paragraphs in § 3604(f), Davis argues that the Association and Casa Bella “discriminate[d] against” her “in [their] provision of services or facilities in connection with” her condo by refusing to provide a “reasonable accommodation[]” (a smoking ban in her building) to their general “polic[y]” allowing smoking. Id. § 3604(f)(2)-(3).
Section 3604(f)’s text requires Davis to prove several things. See Hollis v. Chestnut Bend Homeowners Ass’n, 760 F.3d 531, 541 (6th Cir. 2014). To begin with, § 3604(f)(2) prohibits discrimination only “because of a handicap,” so Davis must show that her asthma falls within the definition of “handicap.” See 42 U.S.C. § 3602(h). [490] But Davis offered little evidence that, apart from the smoke-related aggravation, her asthma was otherwise severe enough to “substantially limit[]” a “major life activit[y].” Id. § 3602(h)(1); cf. Milton v. Tex. Dep’t of Criminal Justice, 707 F.3d 570, 573-74 (5th Cir. 2013); Wofsy v. Palmshores Ret. Cmty., 285 F. App’x 631, 634 (11th Cir. 2008) (per curiam); Sebest v. Campbell City Sch. Dist. Bd. of Educ., 94 F. App’x 320, 325-26 (6th Cir. 2004).
In addition, § 3604(f)(3)(B) requires only those accommodations that are “necessary” to give a person with a handicap an “equal opportunity to use and enjoy a dwelling.” But, as the district court noted, Davis’s total smoking ban likely was not necessary (that is, “‘indispensable,’ ‘essential,’ something that ‘cannot be done without'”) to give her the same opportunity to use and enjoy her condo as compared to a non-disabled person who dislikes the smell of smoke. Cinnamon Hills Youth Crisis Ctr. v. St. George City, 685 F.3d 917, 923 (10th Cir. 2012) (Gorsuch, J.) (citation omitted); Vorchheimer v. Philadelphian Owners Ass’n, 903 F.3d 100, 105-09 (3d Cir. 2018); see Davis, 349 F. Supp. 3d at 658-59. In fact, Davis was apparently able to use her condo for “several years” despite the Rules’ smoking, Howard v. City of Beavercreek, 276 F.3d 802, 806 (6th Cir. 2002), and the law “does not require more or better opportunities” for those with handicaps as compared to those without, Cinnamon Hills, 685 F.3d at 923.
Ultimately, though, we find it easiest to resolve Davis’s claim on another ground: She must show that her request qualifies as a “reasonable accommodation” to the Association’s policy of allowing smoking. Davis cannot meet this element.[ii] Text and precedent both show that the phrase “reasonable accommodation” means a moderate adjustment to a challenged policy, not a fundamental change in the policy. Davis’s smoking ban falls in the latter camp.
[iii]Start, as always, with the text. Southeastern Community College v. Davis, 442 U.S. 397, 405, 99 S. Ct. 2361, 60 L. Ed. 2d 980 (1979). The Fair Housing Amendments Act defines discrimination to include “a refusal to make reasonable accommodations in rules, policies, practices, or services.” 42 U.S.C. § 3604(f)(3)(B). In this context, the word “accommodation” means “adjustment.” 1 Oxford English Dictionary 79 (2d ed. 1989); The American Heritage Dictionary of the English Language 11 (3d ed. 1992). Like the word “modification,” therefore, “accommodation” is not an apt word choice if Congress sought to mandate “fundamental changes” to a housing policy. See MCI Telecomms. Corp. v. Am. Tel. & Telegraph Co., 512 U.S. 218, 225, 114 S. Ct. 2223, 129 L. Ed. 2d 182 (1994). Consider two examples: One would naturally say that a blind tenant requests an accommodation from an apartment’s “no pets” policy if the tenant seeks an exemption for a seeing eye dog. 24 C.F.R. § 100.204(b)(1). But one would not naturally say that a tenant with allergies requests an accommodation from an apartment’s “pet friendly” policy if the tenant seeks a total pet ban. The former tenant seeks a one-off adjustment; the latter seeks a complete change. The word “accommodation” includes the first, but not the second, request.
The adjective “reasonable” further narrows the types of accommodations that the text directs property owners to make. Even if a request would qualify as an “adjustment,” the adjustment still must be “moderate,” “not extravagant or excessive.” 13 Oxford English Dictionary, supra, at 291; American Heritage Dictionary, supra, at 1506. Put another way, the word “reasonable” conveys that the adjustment cannot “impose[] ‘undue financial [489] and administrative burdens.'” Smith & Lee Assocs. v. City of Taylor, 102 F.3d 781, 795 (6th Cir. 1996) (citation omitted). The word also indicates the process that courts should undertake when deciding if a proposed adjustment is unduly burdensome. Dating back to the “‘reasonable’ person of tort fame,” a reasonableness inquiry “has long been associated with the balancing of costs and benefits.” See Int’l Union, United Auto., Aerospace & Agr. Implement Workers of Am. v. OSHA, 938 F.2d 1310, 1319, 291 U.S. App. D.C. 51 (D.C. Cir. 1991) (citing United States v. Carroll Towing Co., 159 F.2d 169, 173 (2d Cir. 1947) (Hand, J.)). So an adjustment goes too far if the costs of implementing it exceed any expected benefits it will provide the person requesting it. Smith & Lee Assocs., 102 F.3d at 795.
[iv]The backdrop against which Congress legislated also supports this reading of “reasonable accommodation.” When the Supreme Court has given a phrase a specific meaning, courts assume that Congress intends that meaning to carry over to the “same wording in related statutes.” Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts § 54, at 322 (2012); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71, 85-86, 126 S. Ct. 1503, 164 L. Ed. 2d 179 (2006). Here, when Congress passed the Fair Housing Amendments Act, the Supreme Court had already coined the phrase “reasonable accommodation” to delimit the requirements of the Rehabilitation Act of 1973. Alexander v. Choate, 469 U.S. 287, 300, 301, & n.20, 105 S. Ct. 712, 83 L. Ed. 2d 661 & n.21 (1985). And Choate contrasted the “reasonable accommodations” that the Rehabilitation Act compels with the “fundamental alteration[s]” that it does not. Id. at 300 n.20 (quoting Davis, 442 U.S. at 410). This preexisting view confirms that the Fair Housing Amendments Act requires only moderate adjustments.
[v]One last textual point. The prepositional phrase “in rules, policies, practices, or services” modifies the noun “accommodation” and provides the benchmark against which to assess whether a request qualifies as a “reasonable accommodation.” See 42 U.S.C. § 3604(f)(3)(B). In other words, the phrase tells courts that they should not ask whether the request is a moderate adjustment or a fundamental change in some abstract sense. Rather, they should ask whether the request is a modest adjustment or fundamental change of the “rule, policy, practice, or service” that the plaintiff challenges.
[vi]Now turn to precedent. Whether under the Rehabilitation Act, the Fair Housing Accommodations Act, or the Americans with Disabilities Act of 1990, caselaw interpreting the phrase “reasonable accommodation” has long distinguished the types of moderate adjustments that are required from the fundamental changes that are not. See, e.g., Davis, 442 U.S. at 409-10; Groner v. Golden Gate Gardens Apts., 250 F.3d 1039, 1046-47 (6th Cir. 2001); McPherson v. Mich. High Sch. Athletic Ass’n, 119 F.3d 453, 461-63 (6th Cir. 1997) (en banc).
Two lines of cases—one focused on the nature of a housing facility’s policy, the other on an accommodation’s effects on third parties—reveal the types of changes that are “fundamental.”
A request works a fundamental change if it turns the challenged policy into something else entirely. In Davis, for example, a nursing-school applicant with a hearing impairment asked a college to adjust its curriculum to accommodate her disability. 442 U.S. at 407-08. But her proposed changes—such as allowing the applicant to skip certain [492] courses—would have transformed the nursing degree that the college offered into an altogether different degree. Id. at 409-10. Similarly, in the employment context, a party may not ask for changes to a job’s duties that would alter the job’s “essential functions.” Jasany v. U.S. Postal Serv., 755 F.2d 1244, 1250 (6th Cir. 1985). So, when a job’s primary task was operating a mail-sorting machine, a post-office employee did not propose a reasonable accommodation by asking not to use the machine. Id.
[vii]Apart from changes to a policy, courts also reject requested changes that interfere with the rights of third parties. As we said in Groner, a third party’s “rights [do] not have to be sacrificed on the altar of reasonable accommodation.” 250 F.3d at 1046 (quoting Temple v. Gunsalus, No. 95-3175, 1996 U.S. App. LEXIS 24994, 1996 WL 536710, at *2 (6th Cir. Sept. 20, 1996) (per curiam)). There, the plaintiff’s mental illness caused him to disturb a neighbor by screaming at all hours of the night. 250 F.3d at 1041. As one of his proposed accommodations, the plaintiff asked his apartment complex to force the neighbor out in violation of its lease. Id. at 1046. We held that landlords need not breach their contracts with neighboring tenants on account of a handicapped person’s needs. Id.; see also Temple, 1996 U.S. App. LEXIS 24994, 1996 WL 536710, at *2. The same is generally true in the employment context. An employer need not “bump another employee from a position in order to accommodate a disabled employee.” Lucas v. W.W. Grainger, Inc., 257 F.3d 1249, 1256 (11th Cir. 2001); see also US Airways, Inc. v. Barnett, 535 U.S. 391, 406, 122 S. Ct. 1516, 152 L. Ed. 2d 589 (2002).
Both lines of precedent should foreshadow the outcome here. Davis’s proposed smoking ban amounts to a “fundamental alteration” of the Association’s smoking policy. Howard, 276 F.3d at 806 (citation omitted). No one would describe a change from a smoking-permitted policy to a smoking-prohibited policy as an “accommodation” in the policy. It is more rewrite than adjustment. Cf. Falchenberg v. N.Y. State Dep’t of Educ., 338 F. App’x 11, 13-14 (2d Cir. 2009) (summary order); Sandison v. Mich. High Sch. Athletic Ass’n, 64 F.3d 1026, 1035 (6th Cir. 1995). Not only that, Davis’s proposal would intrude on the rights of third parties. Neighbors who smoke may well have bought their condos because of the Association’s policy permitting smoking. So, unlike the blind applicant asking to keep a seeing eye dog in an apartment building that bans pets, Davis is like the person with allergies seeking to expel all dogs from a building that allows pets. Here, as in Groner, a third party’s “rights [do] not have to be sacrificed on the altar of reasonable accommodation.” 250 F.3d at 1046 (citation omitted).
B.
We next turn to Davis’s breach-of-covenant claims.[viii] Under Michigan law, the complex’s bylaws are “in the nature of a contract” between the condo owners and the Association. Sawgrass Ridge Condo. Ass’n v. Alarie, No. 335144, 2018 Mich. App. LEXIS 38, 2018 WL 340944, at *2 (Mich. Ct. App. Jan. 9, 2018) (per curiam); Stadler v. Fontainebleau Condos. Ass’n, No. 343303, 2019 Mich. App. LEXIS 788, 2019 WL 1574776, at *2 (Mich. Ct. App. April 11, 2019) (per curiam). Davis seeks to enforce four of the bylaws. The first requires owners to maintain their “apartment[s]” and certain “appurtenant” spaces “in a safe, clean and sanitary condition.” The second tells them: “nor shall anything be done which may be or become an annoyance or a nuisance to the co-owners of the Condominium.” The third says: “No co-owner shall do . . . in his apartment . . . anything that will increase the rate of insurance on the Condominium.” And the last notes that [493] no “unlawful or offensive activity shall be carried on in any apartment.”
For three general reasons, all of Davis’s claims face significant headwinds.[ix] Reason One: These provisions are restrictive covenants on the use of property. See Vill. of Hickory Pointe Homeowners Ass’n v. Smyk, 262 Mich. App. 512, 686 N.W.2d 506, 508 (Mich. Ct. App. 2004). Because of the “bedrock principle in [Michigan] law that a landowner’s bundle of rights includes the broad freedom to make legal use of her property,” Thiel v. Goyings, 939 N.W.2d 152, 504 Mich. 484, 504 Mich. 484, 2019 Mich. LEXIS 1287, 2019 WL 3331810, at *6 (Mich. July 24, 2019), Michigan courts construe restrictive covenants “strictly against those claiming to enforce them, and all doubts [are] resolved in favor of the free use of the property,” Moore v. Kimball, 291 Mich. 455, 289 N.W. 213, 215 (Mich. 1939); Millpointe of Hartland Condo. Ass’n v. Cipolla, No. 289668, 2010 Mich. App. LEXIS 832, 2010 WL 1873085, at *1 (Mich. Ct. App. May 11, 2010) (per curiam). Unless the bylaws plainly cover the challenged in-condo smoking, therefore, Davis must lose.
Reason Two: Nowhere do the Association’s bylaws specifically prohibit (or even regulate) smoking. The record shows instead that the Association has long read the bylaws to permit smoking and that Echo Valley residents have long smoked in their homes. The bylaws do, by comparison, specifically prohibit many activities, ranging from keeping a dog or cat in a condo, to drying one’s clothes in common areas, to shooting a BB gun, to displaying a sign. If these bylaws meant to ban smoking, they would have done so with similarly specific language. They would not have hidden a smoking ban in, for example, a bylaw requiring owners to keep their apartments “in a safe, clean and sanitary condition.” Davis thus cannot rely on any theory of “breach” that compels the Association to impose a categorical ban on smoking.
Reason Three: Davis does not sue the purported violators. The Lamnins sold their condo, their tenants moved out, and Davis does not name any other resident whose smoking affects her condo. Instead, she sues the condo association (the Association) and its former property manager (Casa Bella) for failing to enforce the bylaws. The bylaws do say that the Association’s board “shall be responsible” for the bylaws’ “enforce[ment].” See also Mich. Comp. Laws § 559.207. But this secondary-liability theory means that Davis must show more than that she has a breach-of-covenant claim against the Lamnins. She must show that she has a failure-to-enforce claim against the Association and Casa Bella despite their efforts to accommodate her.
Against this backdrop, Davis’s four breach-of-covenant claims fall short.
- Safe and Clean. Davis argues that the Association and Casa Bella failed to enforce the bylaw requiring owners to keep their condos in a “safe” and “clean” “condition.” As generally understood, “safe” means “free from danger,” 14 Oxford English Dictionary, supra, at 355, whereas “clean” means “free from pollution,” The Random House Dictionary of the English Language 383 (2d ed. 1987). But these words must be construed in their context rather than in a vacuum. Thiel, 504 Mich. 484, 504 Mich. 484, 939 N.W.2d 152, 2019 Mich. LEXIS 1287, 2019 WL 3331810, at *6. And, notably, they are part of a bylaws package that allows smoking. Id.So ordinary levels of “smoke” cannot be considered a “danger” or “pollution”; otherwise, this provision would ban a practice that the bylaws permit.
Davis’s claim fails under this reading. We need not decide whether unusual amounts or types of smoking might violate this provision, because her theory of [494] “breach” is far more expansive. Based on a combination of common knowledge and board-member admissions, she argues that any smoke makes condos unsafe and unclean because smoking is harmful to health. This interpretation would incorrectly compel the Association to ban smoking, which we view as inconsistent with the bylaws when read as a whole.
- Annoyance or Nuisance. Davis next contends that smoking falls within the bylaw prohibiting activities “which may be or become an annoyance or a nuisance to the co-owners of the Condominium.” The bylaw does not define these terms.[x]A “nuisance” is, however, a well-known common-law concept. See Weimer v. Bunbury, 30 Mich. 201, 211 (1874) (Cooley, J.). Under Michigan law, a private nuisance is an “unreasonable interference with the use or enjoyment of property” that results in “significant harm.” Adams v. Cleveland-Cliffs Iron Co., 237 Mich. App. 51, 602 N.W.2d 215, 222 (Mich. Ct. App. 1999) (emphasis omitted); Adkins v. Thomas Solvent Co., 440 Mich. 293, 487 N.W.2d 715, 720-21 (Mich. 1992). And, in this context, “annoyance” is synonymous with “nuisance.” An “annoyance” is “[a]nything annoying or causing trouble, a nuisance.” 1 Oxford English Dictionary, supra, at 486 (emphasis added); see also Random House Dictionary, supra, at 84 (same); cf. Black’s Law Dictionary 82 (5th ed. 1979) (cross-referencing “Nuisance”).
To be sure, this reading renders these terms largely duplicative. But that is inevitable.[xi] Any reading of “annoyance” (even one that reduces the required interference with property) swallows up the term “nuisance.” And “[s]ometimes drafters do repeat themselves and do include words that add nothing of substance, either out of a flawed sense of style or to engage in the ill-conceived but lamentably common belt-and-suspenders approach.” Scalia & Garner, supra, § 26, at 176-77 (listing “peace and quiet” as an example). We must also consider the restriction’s context. Thiel, 2019 Mich. LEXIS 1287, 2019 WL 3331810, at *8, *10. It regulates neighbors who have opted to live relatively close to each other, making it unlikely that an owner’s slight irritation would trigger a bylaw permitting the owner to bring an “action to recover sums due for damages” against a co-owner. Context compels limiting this bylaw’s coverage to activities that most residents would reasonably find significantly bothersome—in contrast to the activities that can be “generally expected” in a condo complex. Cf. Bedows v. Hoffman, 2016 IL App (4th) 160146-U, 2016 WL 6906744, at *11 (Ill. Ct. App. 2016).
We agree with the district court that Davis did not create a genuine issue of material fact that the Board violated its duty to enforce this nuisance bylaw. Davis, 349 F. Supp. 3d at 662-65. Davis chose to live in a condo complex whose bylaws do not restrict smoking.[xii] As other courts have found, while even a small amount of smoke might be a nuisance in a complex that bans smoking, the same cannot be said for a complex that allows it. See Schuman v. Greenbelt Homes, Inc., 212 Md. App. 451, 69 A.3d 512, 520 (Md. Ct. Spec. App. 2013). Indeed, other courts reviewing these claims “have almost uniformly found no right to relief” on nuisance theories. Nuncio v. Rock Knoll Townhome Vill., Inc., 2016 OK CIV APP 83, 389 P.3d 370, 374-75 (Okla. Civ. App. 2016); see Ewen v. Maccherone, 32 Misc. 3d 12, 927 N.Y.S.2d 274, 276-77 (N.Y. App. Div. 2011) (per curiam); Boffoli v. Orton, No. 63457-7-I, 2010 Wash. App. LEXIS 807, 2010 WL 1533397, at *3 (Wash. Ct. App. Apr. 19, 2010); DeNardo v. Corneloup, 163 P.3d 956, 961 (Alaska 2007). These cases identify a (clear) default rule around which parties may bargain by, for example, adopting restrictive covenants imposing a specific ban (or limit) on smoking in their communities. Cf. R.H. Coase, [495] The Problem of Social Cost, 3 J.L. & Econ. 1 (1960).
In addition, while smoking affects Davis more than other residents given her unique sensitivities, that fact undercuts her breach-of-covenant claim. As another court has noted, “nuisance is not subjective.” Schuman, 69 A.3d at 525. This bylaw ties the standard of liability to an ordinary resident, not a resident with unique needs.
Lastly, the Association and Casa Bella did not simply ignore Davis’s concerns. They sought to facilitate a compromise. The Association’s board initially authorized a letter asking the Lamnins to assist in keeping the smoke smell contained to their condo. At the Association’s expense, the board then contracted for a $275 fresh-air system for Davis’s condo, a system that Davis said helped to reduce the smell of smoke. The Rules also agreed to use an air purifier in their unit. And the board ultimately put the issue to the condo owners by holding a vote on whether to ban smoking. After the Rules left, moreover, Davis never identified for the board any other specific resident that allegedly violated a bylaw. These efforts undermine any claim that the board failed to enforce the bylaw. Cf. America v. Sunspray Condo. Ass’n, 2013 ME 19, 61 A.3d 1249, 1255-56 (Me. 2013).
In response, Davis argues that a relaxed standard of annoyance applies because the bylaw covers activities that “may be or become” an annoyance. “As used here,” we read “the auxiliary verb ‘may’ [to] signal[] a hazard that is yet to come”; it does not lower the level of hazard that must be shown. Russell v. Citigroup, Inc., 748 F.3d 677, 680 (6th Cir. 2014) (citing a definition of “may” in Oxford English Dictionary (3d ed. 2012)). Indeed, when asked at oral argument why this lower level of annoyance would not ban a resident from cooking if a neighbor found the smell annoying (as Davis has found it previously), her counsel responded that “cooking is necessary.” We see no textual basis for that distinction; instead, we think the standard of annoyance must be set at a sufficiently high level to permit activities that are “generally expected” in a condo complex. Bedows, 2016 IL App (4th) 160146-U, 2016 WL 6906744, at *11. And in the Echo Valley complex, those expected activities include both cooking and smoking in one’s condo.
Davis also points to evidence suggesting that the amount of smoke infiltrating her condo and her hallways is “strong,” at times even leaving the smell on clothes and towels. Like the district court, though, we do not think this evidence suffices to take this case outside the default rule that smoking cannot be considered a nuisance in a condo complex that allows it. Indeed, Davis presented no evidence that her neighbors had “unique” “smoking habits.” Davis, 349 F. Supp. 3d at 664.
- Rate of Insurance. Davis next invokes the bylaw that bars condo owners from doing anything “that will increase the rate of insurance on the Condominium.” She alleges that smoking increases that rate because it is a “fire hazard.” Like her first theory, this claim fails because it ignores the overall context of permissible smoking at Echo Valley. We can no more read this provision to ban smoking than we can read it to ban other fire hazards like cooking. Even if we accepted the theory, Davis’s sole evidence in support—a board member’s personal opinion that smoking raises insurance rates—does not suffice to withstand summary judgment. Davis does not explain why this board member may competently opine on actuarial science.
- Unlawful or Offensive Activity. Davis last contends that the Association failed to enforce the bylaw provision prohibiting “unlawful or offensive activities.” Her argument turns on the fact that marijuana is [496] unlawful, and on board-member opinions that marijuana and cigarette smoke are offensive. This claim fails for a procedural reason: Davis did not allege it in her complaint, and she did not properly move to amend her complaint to include it. Davis, 349 F. Supp. 3d at 661.
[xiii]Parties who seek to raise new claims at the summary-judgment stage must first move to amend their pleadings under Federal Rule of Civil Procedure 15(a) before asserting the claims in summary-judgment briefing. See Rafferty v. Trumbull County, 758 F. App’x 425, 429 (6th Cir. 2018); Carter v. Ford Motor Co., 561 F.3d 562, 567-69 (6th Cir. 2009); Tucker v. Union of Needletrades, Indus., & Textile Emps., 407 F.3d 784, 788 (6th Cir. 2005). By that point, “a plaintiff has conducted discovery and has had the opportunity to amend the complaint and raise additional theories.” West v. Wayne County, 672 F. App’x 535, 541 (6th Cir. 2016). But if the plaintiff raises the new claims for the first time in the summary-judgment briefing, it generally “subjects a defendant to ‘unfair surprise,’ because the defendant has no opportunity to investigate the claim during discovery.” M.D. ex rel. Deweese v. Bowling Green Indep. Sch. Dist., 709 F. App’x 775, 778 (6th Cir. 2017) (citation omitted).
Davis’s failure to follow this rule dooms her claim. Davis’s unlawful-or-offensive claim relies on a different substance, different smokers, a different time period, and a different bylaw. Her complaint did not mention marijuana or this specific bylaw. Nor did it challenge smoking other than from the Lamnins’ condo. The complaint instead alleged that other condos in Davis’s building had “been designated non-smoking by their respective owners.” It was not until April 2018—after Davis had filed her amended complaint and after the Lamnins had terminated Rule’s lease—that Davis’s lawyer informed the Association that someone else “in Ms. Davis’ building has started smoking cigarettes and marijuana.” In short, Davis never notified the Association and Casa Bella in the correct way that she sought to bring this new claim into the case.
Davis responds by framing her “claim” at a high level of generality, suggesting that her “breach of covenant” claim encompasses any violation of any bylaw by any source. This expansive theory does not suffice at the motion-to-dismiss stage, cf. Northampton Rest. Grp. v. FirstMerit Bank, N.A., 492 F. App’x 518, 521-22 (6th Cir. 2012), let alone at the summary-judgment stage, Tucker, 407 F.3d at 788. Davis also argues that, unlike in the cases we cite, she raised her new claim in her own summary-judgment motion, not just in her opposition to the other side’s motion. She does not explain why that distinction matters. In both contexts, a defendant has “no opportunity to investigate the claim during discovery.” Deweese, 709 F. App’x at 778. Davis finally suggests that the district court should have granted her leave to amend. But she “buried” her request for leave in a perfunctory footnote in a summary-judgment brief that did not cite Rule 15 or the relevant caselaw. See Pulte Homes, Inc. v. Laborers’ Int’l Union of N. Am., 648 F.3d 295, 305 (6th Cir. 2011). The district court did not abuse its discretion by finding this approach inadequate. See id.
Up next is Davis’s tort claim for nuisance.[xiv] In Michigan, as noted, a nuisance is an “unreasonable interference with the use or enjoyment of . . . property.” Adams, 602 N.W.2d at 222. To be liable, a party must have “possession and control over the property” causing the nuisance. Sholberg v. Truman, 496 Mich. 1, [497] 852 N.W.2d 89, 93 (Mich. 2014) (quoting Merritt v. Nickelson, 407 Mich. 544, 287 N.W.2d 178, 181 (Mich. 1980)). A landlord, for example, generally does not face liability for a tenant’s actions that create a nuisance because the landlord does not possess or control the tenant’s property. See Samuelson v. Cleveland Iron Mining Co., 49 Mich. 164, 13 N.W. 499, 502 (Mich. 1882) (Cooley, J.). This principle bars Davis’s nuisance claim against the Association and Casa Bella because they did not possess or control the condo units in Davis’s building. As the district court noted, “a condominium association is even farther removed” from the conduct of its condo owners than is a landlord from the conduct of its tenants. Davis, 349 F. Supp. 3d at 660.
Davis responds that this principle applies only in “the absence of a contract duty on the part of the” defendant and that the Association undertook the contractual duty to enforce the bylaws. See Sholberg, 852 N.W.2d at 93-97. But we have already found that her breach-of-covenant claims fail. Because Davis did not establish a contract breach, she could not show that Echo Valley or Casa Bella had any contractual ability to prevent the challenged conduct.
D.
We end with two procedural claims. Davis argues that the district court should have excluded a “sham affidavit” from Mark Clor—the heating-and-cooling contractor who noted that Davis’s unit does not share a ventilation system with other units—because Clor did not meet expert-witness requirements. See Fed. R. Evid. 702. But the district court did not abuse its discretion in concluding that Clor testified as a lay witness, not an expert, based on his personal observations of the basement’s open ductwork. Kelsor, 665 F.3d at 696. And his testimony fell comfortably within the rules for lay opinions because it was “rationally based on [his] perception,” “helpful,” and “not based on scientific, technical, or other specialized knowledge.” Fed. R. Evid. 701; United States v. Manzano, F. App’x , 793 Fed. Appx. 360, 2019 U.S. App. LEXIS 32357, 2019 WL 5561389, at *3 (6th Cir. Oct. 29, 2019). Contrary to Davis’s claim that Clor’s opinion would require the “supernatural” ability to see through walls, “[i]t took no special knowledge for Clor to describe what was there in the basement to be seen.” Davis, 349 F. Supp. 3d at 654. And Davis’s remaining arguments—that Clor’s testimony was contradicted by other evidence or based on limited knowledge—go to weight, not admissibility.
Davis also says that the district court did not give her an adequate opportunity to prove her claims because it dismissed two of her discovery motions as moot when it ruled for the Association and Casa Bella.[xv] Davis is correct in one respect: “The general rule is that summary judgment is improper if the non-movant is not afforded a sufficient opportunity for discovery.” Vance, 90 F.3d at 1148. But she is wrong in another: She did not lack a sufficient opportunity for discovery. The parties engaged in extensive discovery, and her single paragraph on this issue fails to tell us what information she needed or why it was relevant. Her conclusory claim falls well short of establishing an abuse of discretion.
We affirm.
[i] Protected Classes, Disability Discrimination: The Fair Housing Amendments Act of 1988 amended the Fair Housing Act to bar housing discrimination against the handicapped. 42 U.S.C.S. § 3604(f) makes it unlawful to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection with such dwelling, because of a handicap of that person. 42 U.S.C.S. § 3604(f)(2). Section 3604(f) then defines discrimination for purposes of this subsection to include a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling. § 3604(f)(3)(B).
[ii] Protected Classes, Disability Discrimination: “Reasonable accommodation,” in the context of the Fair Housing Amendments Act, means a moderate adjustment to a challenged policy, not a fundamental change in the policy.
[iii] Protected Classes, Disability Discrimination: The Fair Housing Amendments Act defines discrimination to include a refusal to make reasonable accommodations in rules, policies, practices, or services. 42 U.S.C.S. § 3604(f)(3)(B). In this context, the word “accommodation” means adjustment. Like the word “modification,” therefore, “accommodation” is not an apt word choice if Congress sought to mandate fundamental changes to a housing policy. The adjective “reasonable” further narrows the types of accommodations that the text directs property owners to make. Even if a request would qualify as an adjustment, the adjustment still must be moderate, not extravagant or excessive. Put another way, the word “reasonable” conveys that the adjustment cannot impose undue financial and administrative burdens. The word also indicates the process that courts should undertake when deciding if a proposed adjustment is unduly burdensome. Dating back to the “reasonable” person of tort fame, a reasonableness inquiry has long been associated with the balancing of costs and benefits. So an adjustment goes too far if the costs of implementing it exceed any expected benefits it will provide the person requesting it.
[iv] Legislation, Interpretation: When the Supreme Court has given a phrase a specific meaning, courts assume that Congress intends that meaning to carry over to the same wording in related statutes.
[v] Protected Classes, Disability Discrimination: The prepositional phrase “in rules, policies, practices, or services” modifies the noun “accommodation” and provides the benchmark against which to assess whether a request qualifies as a “reasonable accommodation.” 42 U.S.C.S. § 3604(f)(3)(B). In other words, the phrase tells courts that they should not ask whether the request is a moderate adjustment or a fundamental change in some abstract sense. Rather, they should ask whether the request is a modest adjustment or fundamental change of the rule, policy, practice, or service that the plaintiff challenges.
[vi] Americans with Disabilities Act, Accommodations: Whether under the Rehabilitation Act, the Fair Housing Accommodations Act, or the Americans with Disabilities Act of 1990, caselaw interpreting the phrase “reasonable accommodation” has long distinguished the types of moderate adjustments that are required from the fundamental changes that are not. A request works a fundamental change if it turns the challenged policy into something else entirely.
[vii] Protected Classes, Disability Discrimination: For purposes of the Fair Housing Amendment Act, third party’s rights do not have to be sacrificed on the altar of “reasonable accommodation.”
[viii] Common Interest Communities, Condominiums: Under Michigan law, condominium bylaws are in the nature of a contract between the condo owners and the Association.
[ix] Restrictive Covenants, Enforcement of Restrictive Covenants: Because of the bedrock principle in Michigan law that a landowner’s bundle of rights includes the broad freedom to make legal use of her property, Michigan courts construe restrictive covenants strictly against those claiming to enforce them, and all doubts are resolved in favor of the free use of the property.
[x] Nuisance, Elements: A “nuisance” is a well-known common-law concept. Under Michigan law, a private nuisance is an unreasonable interference with the use or enjoyment of property that results in significant harm. And, in this context, annoyance is synonymous with nuisance. An annoyance is anything annoying or causing trouble, a nuisance.
[xi] Nuisance, Elements: Any reading of annoyance (even one that reduces the required interference with property) swallows up the term nuisance. And sometimes drafters do repeat themselves and do include words that add nothing of substance, either out of a flawed sense of style or to engage in the ill-conceived but lamentably common belt-and-suspenders approach.
[xii] Types of Nuisance, Private Nuisances: While even a small amount of smoke might be a nuisance in a complex that bans smoking, the same cannot be said for a complex that allows it. Indeed, other courts reviewing these claims have almost uniformly found no right to relief on nuisance theories.
[xiii] Amendment of Pleadings, Leave of Court: Parties who seek to raise new claims at the summary-judgment stage must first move to amend their pleadings under Fed. R. Civ. P. 15(a) before asserting the claims in summary-judgment briefing. By that point, a plaintiff has conducted discovery and has had the opportunity to amend the complaint and raise additional theories. But if the plaintiff raises the new claims for the first time in the summary-judgment briefing, it generally subjects a defendant to unfair surprise, because the defendant has no opportunity to investigate the claim during discovery.
[xiv] Common Interest Communities, Condominiums: In Michigan, a nuisance is an unreasonable interference with the use or enjoyment of property. To be liable, a party must have possession and control over the property causing the nuisance. A landlord, for example, generally does not face liability for a tenant’s actions that create a nuisance because the landlord does not possess or control the tenant’s property. A condominium association is even farther removed from the conduct of its condo owners than is a landlord from the conduct of its tenants.
[xv] Entitlement as Matter of Law, Appropriateness: The general rule is that summary judgment is improper if the non-movant is not afforded a sufficient opportunity for discovery.
Related Links
Disabled Residents and the Law
“The Legal Obligations of an Association in Accommodating Disabled Residents”
Educational article published by HOA attorneys of Tinnelly Law Group.
Highland Greens Homeowners Ass’n v. De Guillen (In re De Guillen)
[Assessment Liens; Continuing Lien; Foreclosure] The BAP held that the Davis-Stirling Act does not allow for continuing assessment liens and imposes an affirmative duty on Associations to provide additional pre-lien notices to delinquent homeowners before recording any subsequent assessment lien.
In re: Maria A. Basave De Guillen, Debtor. Highland Greens Homeowners Association of Buena Park, Appellant, v. Maria A. Basave De Guillen, Appellee.
OPINION
[829] LAFFERTY, Bankruptcy Judge:
INTRODUCTION
Highland Greens Homeowners Association (“Highland Greens”) appeals the bankruptcy court’s order sustaining in part Debtor Maria Basave de Guillen’s objection to Highland Greens’ proof of claim. The bankruptcy court found that, under California law, Highland Greens’ recorded notice of lien for delinquent homeowners assessments on Debtor’s condominium did not secure amounts accruing after the recordation of the lien. Accordingly, the bankruptcy court limited Highland Greens’ secured claim to the amount of its recorded pre-petition state court judgment, classifying the remainder of the claim as unsecured.
We AFFIRM.
FACTUAL BACKGROUND
Pre-petition, Debtor fell behind on the homeowners association (“HOA”) dues on her condominium in Buena Park, California (the “Property”). As a consequence, Highland Greens recorded a Notice of Delinquent Assessment Lien (the “Notice”) against the Property on December 1, 2008.[i] Highland Greens recorded an amendment to the Notice in April 2011 (the “2011 Amendment”). Both the Notice and the 2011 Amendment purported to include, in the amount subject to the lien, unpaid assessments and charges accruing after the date of the notice.
In August 2011, Highland Greens sued Debtor in state court to enforce its lien and, in April 2012, obtained a default judgment for foreclosure and a money judgment of $21,398.02 (consisting of $10,140 principal, attorney’s fees of $10,273.12, and collection costs of $2,885, minus a $1,900.10 payment). The money judgment was subsequently recorded, and Highland Greens began the foreclosure process, but no sale was ever conducted.
Debtor filed a chapter 13[ii] case on February 28, 2018.[iii] On Schedule D, she listed two debts to Highland Greens secured by the Property, one for $8,000, described as “interest on claim,” and another for $40,000, described as “assessments and attorney’s fees.” Her proposed plan provided for payment of both claims in full, with interest at ten percent on the $40,000 claim.
Highland Greens then filed a proof of claim for $64,137.20, purportedly secured by the Property, with interest at twelve [830] percent. The itemization attached to the proof of claim indicated that it consisted of: (1) the April 2012 money judgment of $21,398.02; (2) $8,572.63 in interest on the judgment; (3) post-judgment assessments through February 1, 2018 of $14,060; (4) late charges of $690; (5) post-judgment interest of $7,207.44; (6) post-judgment attorney’s fees and costs of $13,729.11; less (7) a payment credit of $1,520. The attachment to the proof of claim explained that the post-judgment assessments were secured by the Property pursuant to the Declaration of Covenants, Conditions and Restrictions (“CC&Rs”) recorded in 1964 against the Property. Highland Greens also asserted that it was entitled to twelve percent interest on any delinquent amounts pursuant to California Civil Code § 5650(b)(3).
Highland Greens attached eight pages of the CC&Rs to its proof of claim. The relevant provision (paragraph 12(b)) provides, among other things, that if a delinquency in assessments is not paid within ten days after delivery of a notice of default, the Board of Governors may file a claim of lien; the provision then lists the information that must be included in such claim of lien. The paragraph continues, “[u]pon recordation of a duly executed original or duly executed copy of such claim of lien by the Recorder of the County of Orange the lien claimed therein shall immediately attach and become effective, subject only to the limitations hereinafter set forth. Each default shall constitute a separate basis for a claim of lien or a lien.”
Debtor filed an objection to Highland Greens’ claim. She argued: (1) the claim should be disallowed in its entirety for lack of supporting documentation; (2) most of the claim should be reclassified as unsecured because Highland Greens did not comply with the procedures set forth in the Davis-Stirling Common Interest Development Act (“Davis-Stirling Act” or the “Act”), specifically, California Civil Code §§ 5660 and 5675, and there was no basis to find an equitable lien; (3) only the portion of the debt representing the amount owing under the judgment may be classified as secured; (4) the attorney’s fee portion of the claim should be disallowed as unreasonable and unsupported; and (5) the claim should not include future assessments because Debtor was current postpetition on those obligations.
Highland Greens filed an opposition in which it asserted: (1) the Notice recorded in 2008 complied with all procedural requirements and in any event had been adjudicated valid by the state court in the foreclosure lawsuit; (2) Debtor was barred by issue preclusion from challenging the validity of the lien; (3) Highland Greens was entitled under California Civil Code § 5650(b)(3) to twelve percent interest on the post-judgment assessments and related fees and costs; (4) Highland Greens was entitled to submit cost bills for its judgment enforcement activities, which increased the judgment amount; and (5) the assessment lien was a “continuing lien”; thus, assessments that became delinquent after the recordation of the lien were appropriately included in the amount secured by the lien, citing Bear Creek Master Ass’n v. Edwards, 130 Cal. App. 4th 1470, 1489, 31 Cal. Rptr. 3d 337 (2005).
Debtor filed a reply in which she argued that the Davis-Stirling Act prohibited Highland Greens from asserting a continuing lien. She contended that Bear Creek was not binding on the bankruptcy court and that federal courts in California had held to the contrary, citing In re Warren, No. 15-CV-03655-YGR, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844 (N.D. Cal. Apr. 13, 2016), and In re Guajardo, No. 15-31452 DM, 2016 Bankr. LEXIS 769, 2016 WL 943613 (Bankr. N.D. Cal. Mar. 11, 2016).
[831] At the initial hearing on Debtor’s objection, counsel for Highland Greens stated that the HOA was relying on the assessment lien rather than the judgment lien as the basis for its security interest. The bankruptcy court requested further detail as to how the different components of the claim amount were calculated and continued the matter for further briefing, which the parties submitted.
At the final hearing on the claim objection, the bankruptcy court did not rule on the reasonableness of the attorney’s fees or any of the other arguments raised by Debtor. But it ruled that under applicable law there was no continuing lien based on the Notice. As such, the only basis for Highland Greens’ security interest was its judgment lien.[iv] Accordingly, the court sustained Debtor’s objection in part, allowing Highland Greens’ claim in full but reclassifying it as $29,970.65 secured (principal of $21,398.02 plus pre-petition interest of $8,572.63) and the $34,166.55 balance as unsecured. Shortly thereafter, the court entered its order on the Debtor’s claim objection, and Highland Greens timely appealed.[v]
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court err in sustaining in part Debtor’s objection to Highland Greens’ claim?
STANDARD OF REVIEW
This appeal involves issues of statutory and contract interpretation, which we review de novo. See Veal v. Am. Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897, 918 (9th Cir. BAP 2011) (citations omitted) an order sustaining or overruling a claim objection “can raise legal issues (such as the proper construction of statutes and rules) which we review de novo . . . .”); Renwick v. Bennett (In re Bennett), 298 F.3d 1059, 1064 (9th Cir. 2002) (“Under California law, the interpretation of a contract is a question of law which the court reviews de novo.”).
DISCUSSION
This appeal requires us to determine whether, under California law, Highland Greens’ assessment lien was a continuing lien on the Property such that it secured amounts that became delinquent after Highland Greens recorded its Notice. This is a question of first impression for this Panel, and it presents some challenges. First, the statute in question does not expressly address the issue of an HOA’s right to a continuing lien. Second, the statute references the governing documents (the CC&Rs), which may or may not create a contractual basis for a continuing lien. Third, California Courts of Appeal have differed significantly in their assessment of the policy to be enhanced by the Davis-Stirling Act, i.e., is the purpose of the Act to facilitate the expeditious collection of HOA assessments or to safeguard the notice rights of homeowners?
[832] These variables and complexities notwithstanding, we do not write on a blank judicial slate: as discussed below, two federal courts have opined that the Davis-Stirling Act does not provide for the continuing lien that Highland Greens seeks. Highland Greens relies principally on Bear Creek, an older California Court of Appeal decision to the contrary. But that decision, as discussed below, did not address the matter of continuing liens as the primary issue on appeal nor did it consider the Act’s notice provisions. The court of appeal instead focused on what it plausibly believed to be the policy underlying the Act—to facilitate HOAs’ collection of delinquent assessments. But its view is not supported by the legislative history or other California cases. The decision’s rationale was, at least indirectly, called into question by a more recent California Court of Appeal decision, Diamond v. Superior Court, 217 Cal. App. 4th 1172, 159 Cal. Rptr. 3d 110, as modified on denial of reh’g (July 12, 2013), confirming that the most fundamental and important purpose of the statute is to protect homeowners (not associations), and that the statutory requirements for precision in the notice of lien provided to homeowners must override any goals of expedition or convenience to associations.
As discussed below, we conclude that there are two independent bases on which to affirm the bankruptcy court’s order sustaining Debtor’s objection in part. First, the language of the Notice and 2011 Amendment conflicts with the applicable CC&Rs, which do not authorize a continuing lien. Second, the Davis-Stirling Act does not authorize a continuing lien. In reaching this latter conclusion, we agree with the reasoning of the other federal courts to consider this issue that a continuing lien is inconsistent with the Act’s notice provisions and the expressed legislative purpose of the Act.
A. The Davis-Stirling Act
We begin, as we must, with the language of the relevant statutes. See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S. Ct. 1026, 103 L. Ed. 2d 290 (1989); Lee v. Hanley, 61 Cal. 4th 1225, 1232-33, 191 Cal. Rptr. 3d 536, 354 P.3d 334 (2015). The Davis-Stirling Act, enacted in 1985, authorizes condominium homeowners associations to levy assessments. Subject to certain limitations, a homeowners association “shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this act.” Cal. Civ. Code § 5600.[vi] The Act also sets forth procedures for collecting delinquent assessments:
(a) A regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, if any, as determined in accordance with subdivision (b), shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied.
(b) Regular and special assessments levied pursuant to the governing documents are delinquent 15 days after they become due, unless the declaration provides a longer time period, in which case the longer time period shall apply.
Cal. Civ. Code § 5650. In addition, it authorizes HOAs to recover reasonable collection costs, including attorney’s fees, late charges, and interest not to exceed twelve percent. Id. at § 5650(b)(1)-(3).
California Civil Code § 5675 provides for the placing of a lien on the owner’s interest in the condominium to secure delinquent assessments:
(a) The amount of the assessment, plus any costs of collection, late charges, and [833] interest assessed in accordance with subdivision (b) of Section 5650, shall be a lien on the owner’s separate interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment, which shall state the amount of the assessment and other sums imposed in accordance with subdivision (b) of Section 5650, a legal description of the owner’s separate interest in the common interest development against which the assessment and other sums are levied, and the name of the record owner of the separate interest in the common interest development against which the lien is imposed.
Cal. Civ. Code § 5675. This section further requires that the notice of delinquent assessment must be signed by a designated person and include an itemized statement of charges; it also requires a copy of the notice to be mailed by certified mail to the record owner(s). Cal. Civ. Code § 5675(b)-(e). These notice requirements are to be strictly construed. Diamond, 217 Cal. App. 4th at 1189.
In applying these statutes, we are guided by (1) the plain language of the Davis-Stirling Act as interpreted by California federal and state courts; (2) the public policy behind the Act; and (3) principles of statutory construction. And, given that the Act references the “governing documents,” we also consider the terms of the applicable CC&Rs.
B. California Federal Cases Interpreting the Davis-Stirling Act
The Davis-Stirling Act itself does not provide for a continuing lien, and case law is scant regarding whether the Act may be fairly interpreted as so providing. Two federal courts in the Northern District of California have held that adding future assessments to a recorded lien securing delinquent assessments without recording a new lien is impermissible under the Davis-Stirling Act. In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844; In re Guajardo, 2016 Bankr. LEXIS 769, 2016 WL 943613.
In Guajardo, the bankruptcy court was tasked with determining the priorities between an HOA’s assessment lien and a federal tax lien for purposes of distributing the proceeds of a sale of property of the estate. The notice of delinquent assessment at issue in that case provided, “Additional monies shall accrue under this claim at the rate of the claimant’s regular monthly or special assessments, plus permissible late charges, costs of collection and interest, accruing subsequent to the date of this notice.” 2016 Bankr. LEXIS 769, 2016 WL 943613, at *1. The court held that this language was ineffective under both California contract law and the Davis-Stirling Act, for two reasons.
First, the CC&Rs at issue in that case provided that each “lienable default shall constitute a separate basis for a lien.” 2016 Bankr. LEXIS 769, [WL] at *3. The court found that the language of the notice that provided for the lien to include subsequent assessments and related charges was inconsistent with this provision. 2016 Bankr. LEXIS 769, [WL] at *3.[vii]
Second, and importantly, the court interpreted the language of California Civil Code § 5675 as limiting an assessment lien to the amount stated in the notice of delinquent assessment. Specifically, the statute [834] provides that the amount of the assessment (plus costs, late charges, and interest) shall be a lien on the owner’s separate interest. The statute further requires that the notice state the amount of the delinquent assessment and other sums. As such, the court found that adding future assessments to an existing lien would be “inconsistent with the portions of the Davis-Stirling Act requiring the unpaid amounts to be specifically set forth in the notice and in an attached accounting.” 2016 Bankr. LEXIS 769, [WL] at *3.
The bankruptcy court distinguished Bear Creek. As discussed below, in that case, the California Court of Appeal held that homeowners assessments that became due after the recordation of a lien notice were properly included in a judgment for lien foreclosure and breach of contract, based on the applicable CC&Rs and the provisions of the Davis-Stirling Act that, in turn, referenced the HOA’s governing documents. The Guajardo court noted that the CC&Rs in Bear Creek were much more specific as to future accruals than those at issue in the case before it, but the court also held that “the general imposition of a ‘present’ lien at the time of and by operation of the CCRs with respect to all future and potentially unknown assessments does not satisfy the notice and lien provisions of the Civil Code.” Id.
In Warren, the district court affirmed the bankruptcy court’s order sustaining a debtor’s objection to the secured claim of an HOA on grounds that the HOA’s lien was limited to the amounts stated in its notice of lien assessment. 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844 at *1. As in Guajardo, the lien notice in that case contained language that purported to constitute a prospective charge for future assessments and related costs. And like the bankruptcy court in Guajardo, the district court held that this language was impermissible under the Davis-Stirling Act. The court noted that the procedural notice requirements of the Davis-Stirling Act are to be strictly construed, citing Diamond, 217 Cal. App. 4th at 1191, and found that “[t]he Davis-Stirling Act limits the lien to the amount specified in the notice . . . .” 2016 U.S. Dist. LEXIS 49917, [WL] at *3-*4. The court went on: “Claimant should have filed additional liens to secure its interest in future unpaid assessments. To hold otherwise would offend the comprehensive notice scheme and homeowners’ rights to contest delinquent assessments as established in the Davis-Stirling Act.” 2016 U.S. Dist. LEXIS 49917, [WL] at *4.
C. California State Cases Interpreting the Davis-Stirling Act
In Bear Creek, the California Fourth District Court of Appeal affirmed a judgment for lien foreclosure and breach of contract based on a condominium owner’s failure to pay assessments. 130 Cal. App. 4th at 1472. The primary issue before the court of appeal was whether an HOA may charge an owner assessments for lots on which condominium units were planned but had not yet been built. Id. In affirming the trial court’s foreclosure judgment, the court of appeal held that the definition of “condominium” in the Davis-Stirling Act included unbuilt lots in a qualifying condominium plan. Id. at 1481-82. The court of appeal also affirmed the trial court’s finding that the HOA had properly served lien notices on the owner. Id. at 1488. Finally, the court of appeal considered the appellant’s argument that the trial court had improperly determined the amount of the lien assessments because it included amounts that came due after the recordation of the lien notice; it found that those amounts were properly included. Id. at 1489.
[835] The court of appeal rejected the owner’s argument that no “recurring liens” were authorized under the relevant statutes such that the amount of the assessments secured by the lien was limited to the amount initially stated in the lien notice. The court noted that former California Civil Code § 1367 (recodified at § 5675), in describing the amounts to be secured by the lien, referenced former California Civil Code § 1366 (recodified at § 5600), which in turn referenced the homeowners association’s “governing documents.” Id. at 1488.
Specifically, California Civil Code § 1367(b) provided: “[t]he amount of the assessment, plus any costs of collection, late charges, and interest assessed in accordance with Section 1366, shall be a lien on the owner’s interest in the common interest development from and after the time the association causes to be recorded with the county recorder of the county in which the separate interest is located, a notice of delinquent assessment. . . .” Id. at 1488. The cross-referenced statute, former California Civil Code § 1366, provided, in relevant part: “the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title.”[viii]
The court next looked to the governing documents, specifically, the CC&R’s. The CC&Rs provided that “any demand or claim of lien or lien on account of prior delinquencies shall be deemed to include subsequent delinquencies and amounts due on account thereof.” Id. Further, the recorded lien notices provided that “[a]dditional monies shall accrue under this claim at the rate of the claimants’ regular monthly or special assessments, plus permissible late charges, costs of collection and interest, accruing subsequent to the date of this notice.” Id. Based on this language, the court of appeal held that “all of the sums included on the liens and lien notices are authorized by the CC & R’s and statutory law. The amounts here determined by the court to be owing as liens are no more than the amounts authorized by the governing documents and statutes.” Id.
The court of appeal opined that its holding was consistent with the legislative purpose of providing homeowners associations a quick and efficient means of seeking relief against a nonpaying owner:
Were the relevant provisions to be construed as [the owner] suggests, the described statutory purpose of providing for a quick and efficient means of enforcing the CC & R’s would be seriously undermined; each month, or at such other intervals as the assessments are charged under a given set of CC&R’s, the association would be required to record successive liens. A successive recordation requirement would impose a heavy—and needless—burden upon homeowners’ associations, fraught with risk to the association, and undue windfall to the delinquent homeowner, should any installment be overlooked. We are unwilling to construe Civil Code section 1367 to require such an oppressive burden. Both delinquent homeowners and the public at large are placed on notice, with the recordation of the initial assessment lien, that subsequent regularly and specially levied assessments, if they continue unpaid, will accrue in due course. The purpose of the lien notice and recordation will have been served, and the [836] association’s remedy justly preserved, by the initial recordation of lien.
Id. at 1489.
Two years after the decision in Bear Creek, the California Sixth District Court of Appeal held that the notice provisions of the Davis-Stirling Act are to be strictly construed. Diamond, 217 Cal. App. 4th at 1189. The issue in Diamond was whether “substantial compliance” with the pre-lien and pre-foreclosure notice requirements of the Davis-Stirling Act was sufficient to permit an HOA to proceed with foreclosure. The court of appeal held that it was not. In its opinion, the court of appeal examined the legislative history of the Act and concluded that it was intended to “protect the interest of a homeowner who has failed to timely pay an assessment levied by a homeowners association.” Id. at 1190-91. As such, the notice requirements were intended to be mandatory. Id.
The court of appeal noted that its conclusion was supported by California Supreme Court precedent, including Li v. Yellow Cab Co., 13 Cal. 3d 804, 815, 119 Cal. Rptr. 858, 532 P.2d 1226 (1975) (“If a provision of the [Civil] [C]ode is plain and unambiguous, it is the duty of the court to enforce it as it is written.”); Chase v. Putnam, 117 Cal. 364, 367-368, 49 P. 204 (1897) (“a lien which is the creature of statute can be enforced only in the manner prescribed by the statute.”). Diamond, 217 Cal. App. 4th at 1192-93.
D. Bear Creek does not control the outcome of this appeal.
Highland Greens argues that we must follow Bear Creek because there are no other California state court decisions on point. It points out that in the absence of a state supreme court decision on the issue, a federal court is obligated to follow a decision of an intermediate court of appeal unless there is convincing evidence that the highest court of the state would decide differently. Sec. Pac. Nat’l Bank v. Kirkland (In re Kirkland), 915 F.2d 1236, 1238-39 (9th Cir. 1990) (citing American Triticale, Inc. v. Nytco Services, Inc., 664 F.2d 1136, 1143 (9th Cir. 1981); Stoner v. New York Life Ins. Co., 311 U.S. 464, 467, 61 S. Ct. 336, 85 L. Ed. 284 (1940)).
In predicting how the state’s highest court would decide the issue, we look to “intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance.” In re Kirkland, 915 F.2d at 1239 (citations omitted). Bear Creek appears to be the only California intermediate appellate decision addressing the propriety of continuing liens under the Davis Stirling Act. Nevertheless, for the reasons discussed below, we conclude that Bear Creek is factually distinguishable and that the California Supreme Court would not likely decide the issue in accord with Bear Creek.
In determining that delinquent HOA assessments which came due after the recordation of the lien notices were properly included in the amount secured by the lien, the court of appeal in Bear Creek relied primarily on the language of the CC&Rs and the lien notices, all of which provided that any lien for delinquent HOA assessments would be deemed to include subsequent delinquencies. Because certain provisions of the Act referred to the HOA’s governing documents, and those documents provided for a continuing lien, the Bear Creek court concluded that the continuing lien was consistent with the Act.
Here, however, the CC&Rs do not provide for a continuing lien; as such, Bear Creek is factually distinguishable in a critical respect, and we may ignore it. Further and importantly, relevant [837] to our anticipation of the California Supreme Court’s eventual view, the Bear Creek court of appeal did not take into account the Act’s notice provisions as they pertained to the issue of a continuing lien and failed to consider that, although one purpose of the Act may be to facilitate an HOA’s collection of delinquent assessments, see Bear Creek, 130 Cal. App. 4th at at 1489,[ix] the cases citing directly to legislative history emphasize that the purpose of the Davis-Stirling Act is to protect homeowners. See Diamond, 217 Cal. App. 4th at 1190 (“This bill goes to the heart of home owner rights, touching upon the key issue of when, if ever, a homeowners’ association should have the right to force the sale of a member’s home when the home owner falls behind on paying overdue assessments or dues.”) (quoting Assem. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) as amended Apr. 5, 2005, pp. 1-2); Huntington Continental Townhouse Ass’n, Inc. v. Miner, 230 Cal. App. 4th 590, 603-04, 179 Cal. Rptr. 3d 47 (2014) (same).
Although Diamond did not involve the identical issue raised here, the opinion’s thorough analysis of the legislative history and citations to precedent all supported its determination that the requirements of the Davis-Stirling Act must be strictly construed, and support the conclusion that the California Supreme Court would not follow Bear Creek. This conclusion is bolstered by the analysis in Guajardo and Warren. As noted by the District Court for the Northern District of California:
The Davis-Stirling Act reflects the legislature’s intent to impose and rigorously enforce its procedural requirements to protect the interest of the homeowner. See Diamond v. Superior Court, 217 Cal. App. 4th 1172, 1191, 159 Cal. Rptr. 3d 110 (2013) (the procedural notice requirements prescribed in the Davis-Stirling Act must be “strictly construed” such that “substantial compliance is insufficient”). Accordingly, the Court finds that the language of the 2008 Lien purporting to secure future assessments is not permissible under the Davis-Stirling Act.
In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844, at *4.
Applying these principles to the matter before us, we conclude that here, the Notice and 2011 Amendment, which purported to secure future assessments, were (1) inconsistent with the applicable CC&Rs; and (2) impermissible under the Davis-Stirling Act, which limits the lien to the amount specified in the notice, see Cal. Civ. Code § 5675(a); in turn, the notice must include an itemized statement showing the delinquent assessments (and related fees and costs) owing at the time of the notice. See Cal. Civ. Code § 5660(b); See also In re Guajardo, 2016 Bankr. LEXIS 769, 2016 WL 943613, at *2-*3.
E. Highland Greens’ arguments in support of its interpretation of the Davis Stirling Act are inconsistent with established principles of statutory construction.
In the absence of evidence of contrary legislative intent, courts are to follow [838] the principle of statutory construction, expressio unius est exclusio alterius, or “the expression of one thing in a statute ordinarily implies the exclusion of other things.” In re J.W., 29 Cal. 4th 200, 209, 126 Cal. Rptr. 2d 897, 57 P.3d 363 (2002). See also People v. Guzman, 35 Cal. 4th 577, 587, 25 Cal. Rptr. 3d 761, 107 P.3d 860 (2005) (“[I]nsert[ing] additional language into a statute violate[s] the cardinal rule of statutory construction that courts must not add provisions to statutes.”)(second and third alterations in original)(quoting Sec. Pac. Nat’l Bank v. Wozab, 51 Cal. 3d 991, 998, 275 Cal. Rptr. 201, 800 P.2d 557 (1990)); Cal. Civ. Proc. Code § 1858 (“In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, or to omit what has been inserted; and where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.”).
Highland Greens argues that certain provisions of the Davis-Stirling Act support its contention that a continuing lien is permitted under that Act. First, it notes that California Civil Code § 5650 permits collection costs to be added to the amount secured by the lien, when those costs are generally incurred after the lien is recorded.[x] But this provision does not support Highland Greens’ position. To the contrary, the legislature’s omission of subsequent delinquent assessments from the list of charges authorized strongly indicates that it did not intend those amounts to be added.
Despite the above argument, Highland Greens also contends that, if we affirm the bankruptcy court’s ruling, it would mean that a delinquent owner would be able to stop a foreclosure sale by paying only the face amount of the lien without paying the costs of enforcing the lien, apparently assuming an HOA would need to record separate liens to secure collection costs. But, as Highland Greens points out, the statute explicitly provides that the lien may include collection costs.
Second, Highland Greens cites California Civil Code § 5720(b)(2), which permits an HOA to record a lien for less than $1,800 but requires the HOA to wait to foreclose until the amount of delinquent assessments exceeds that amount (or the assessments secured by the lien become more than twelve months delinquent).[xi] Highland Greens argues that, because this provision apparently allows for the addition of subsequent delinquent assessments to the lien amount, any lien may include such assessments without requiring a new [839] notice. But the fact that this provision applies only to liens securing amounts less than $1,800 supports the conclusion that it excludes liens securing higher amounts. In other words, the provision may fairly be interpreted as an exception to the general rule prohibiting addition of delinquencies without specific notice. Additionally, this provision, as written, promotes the purpose of protecting “owners’ equity in their homes when they fail to pay relatively small assessments to their common interest development associations.” Diamond, 217 Cal. App. 4th at 1190 (quoting Sen. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) Mar. 29, 2005, p. 1.). As stated by the district court in Warren:
Section 5720(b)(2) simply provides an association with the option to wait to record the lien until delinquent assessments exceed $1,800. Alternatively, the association may record the lien and wait a year to foreclose thereon… Section 5720(b)(2) does not allow an association to bypass the notice and recording requirements in Sections 5660, 5670, and [5675] merely because the initial lien secures an amount below the $1,800 threshold to initiate foreclosure proceedings.
In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844, at *4 (footnote omitted).
F. Highland Greens’ policy arguments are contradicted by the California Court of Appeal’s holding in Diamond.
Finally, Highland Greens, (joined by amicus curiae Community Associations Institute), urges us to follow Bear Creek and reverse the bankruptcy court because to do otherwise would negatively impact all California HOAs and their members. Highland Greens contends that HOAs would have to record liens for delinquent assessments on a monthly basis to secure all amounts owed, and that doing so would result in higher collection costs that would then be passed on to the delinquent owner.
This argument is certainly consistent with the court of appeal’s comments in Bear Creek, 130 Cal. App. 4th at 1489. But it ignores the fact that the Davis-Stirling Act “reflects the legislature’s intent to impose and rigorously enforce its procedural requirements to protect the interest of the homeowner.” In re Warren, 2016 U.S. Dist. LEXIS 49917, 2016 WL 1460844, at *4 (citing Diamond, 217 Cal. App. 4th at 1191). While we acknowledge that requiring HOAs to file “successive liens” imposes a burden, that is an issue for the legislature to address.
CONCLUSION
Because we find no error in the bankruptcy court’s interpretation of California law, we AFFIRM.
i Under California law, the recordation of such a notice, if it complies with certain statutory requirements, creates a lien against the owner’s interest in the subject property. Cal. Civ. Code § 5675.
[ii] Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
[iii] Debtor had filed a previous chapter 13 petition in July 2017. That case was dismissed pre-confirmation on February 16, 2018.
[iv] Under California law, the assessment lien merged into the judgment. Diamond Heights Village Ass’n, Inc. v. Financial Freedom Senior Funding Corp., 196 Cal. App. 4th 290, 301-02, 126 Cal. Rptr. 3d 673 (2011).
[v] Highland Greens filed its notice of appeal on September 4, 2018. It filed an amended notice of appeal six days later. Two appeal numbers were assigned due to administrative error. The appeals were thus consolidated, with all papers to be filed under BAP No. CC-18-1248.
[vi] The Davis-Stirling Act was renumbered in 2014. It is currently codified at sections 4000-6150 of the California Civil Code; it was formerly found at sections 1350-1378.
[vii] The CC&Rs, Notice, and 2011 Amendment contain language that is substantially similar to the documents at issue in Guajardo.
[viii] That section was recodified at California Civil Code § 5600(a) and contains substantively identical language.
[ix] In concluding that the purpose of the Act was to facilitate collection of delinquent assessments, the court of appeal in Bear Creek relied on quoted language from Park Place Estates Homeowners Ass’n v. Naber, 29 Cal. App. 4th 427, 432, 35 Cal. Rptr. 2d 51 (1994) (“Because homeowners associations would cease to exist without regular payment of assessment fees, the Legislature has created procedures for associations to quickly and efficiently seek relief against a non-paying owner.”). But the court of appeal in Park Place Estates did not support its conclusion by any citation to legislative history.
[x] California Civil Code § 5650 merely lists the types of costs that may be added to the amount of delinquent assessments. California Civil Code § 5675 provides that the assessed costs and interest will be part of the lien.
[xi] hat statute provides, in relevant part: An association that seeks to collect delinquent regular or special assessments of an amount less than one thousand eight hundred dollars ($1,800), not including any accelerated assessments, late charges, fees and costs of collection, attorney’s fees, or interest, may not collect that debt through judicial or nonjudicial foreclosure, but may attempt to collect or secure that debt in any of the following ways:… (2) By recording a lien on the owner’s separate interest upon which the association may not foreclose until the amount of the delinquent assessments secured by the lien, exclusive of any accelerated assessments, late charges, fees and costs of collection, attorney’s fees, or interest, equals or exceeds one thousand eight hundred dollars ($1,800) or the assessments secured by the lien are more than 12 months delinquent… Cal. Civ. Code § 5720(b)(2).
Eith v. Ketelhut
[Commercial Use; Board Deference] A Board’s determination of whether a business or commercial activity affects the residential character of a HOA was entitled to judicial deference.
[Certified for Partial Publication]
OPINION
In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden), our Supreme Court cautioned courts to give judicial deference to certain discretionary decisions of duly constituted homeowners association boards. The judicial deference rule does not encompass legal questions that may involve the interpretation of the covenants, conditions, and restrictions (CC&Rs) of a homeowners association. Courts decide legal questions.
Here, homeowners cultivated a vineyard for the purpose of making wine to be sold to the public. The CC&Rs did not prohibit the cultivation of a vineyard for this purpose, but they did prohibit “any business or commercial activity.” The operation of the vineyard may have constituted “business or commercial activity” in the literal sense of that term. But a literal interpretation in the present case would elevate form over substance and lead to absurd results. (See SDC/Pullman Partners v. Tolo Inc. (1997) 60 Cal.App.4th 37, 46 [70 Cal.Rptr.2d 62] [“literal language of a contract does not control if it leads to absurdity”].) Because the wine was made, bottled, and sold commercially offsite, and the activity at the vineyard did not affect the residential character of the community, we conclude there was no business or commercial activity within the meaning of the CC&Rs. The homeowners association board acted within its discretion in allowing the continued operation of the vineyard, and its decision is entitled to judicial deference.
This appeal is from a judgment and a postjudgment award of attorney fees and costs in favor of Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) and other parties. The Ketelhuts cross-appeal from the award of attorney fees and costs. In the appeal from the judgment, the central issue is whether the Ketelhuts, homeowners in a residential common interest development, violated a restrictive covenant requiring that they not use their property for any business or commercial activity. The Ketelhuts operated a vineyard on their property. After harvesting the grapes, they sent them to a winery to be made into wine. They sold the wine over the Internet.
Other homeowners objected to the operation of what they considered to be a commercial vineyard in violation of the prohibition against any business or commercial activity. The board of directors (Board) of the homeowners association — Los Robles Hills Estates Homeowners Association (HOA) — decided that the vineyard was not being used for business or commercial activity.
Plaintiffs/homeowners Felipa Richland Eith and Jeffrey Eith (the Eiths), Thomasine Mitchell and John Mitchell (the Mitchells), Stacy Wasserman, [5] Philip Chang, Morrey Wasserman, and Eileen Gabler (hereafter collectively referred to as plaintiffs) brought an action against the Ketelhuts, HOA, and Board members Michael Daily, Jeanne Yen, and Frank Niesner (hereafter collectively referred to as defendants). The court conducted a lengthy bifurcated trial on the eighth and ninth causes of action. The eighth cause of action concerned whether the operation of the vineyard was a prohibited business or commercial activity. The ninth cause of action sought to quiet title to a common area.
The trial court did not decide whether the operation of the vineyard was a prohibited business or commercial activity. Instead, it invoked the judicial deference rule of Lamden, supra, 21 Cal.4th 249. Pursuant to this rule, the trial court deferred to the Board’s decision that the vineyard was not being used for business or commercial activity. The court entered judgment in favor of defendants on both the eighth and ninth causes of action. The resolution of these two causes of action rendered the remaining causes of action moot.
The trial court correctly applied the Lamden judicial deference rule to the Board’s decision that the Ketelhuts’ operation of the vineyard was not a prohibited business or commercial use. We further conclude that, as a matter of law, it is not a prohibited business or commercial use. In addition, we reject plaintiffs’ claim that the judgment is void because the trial judge did not disclose contributions made by defendants’ counsel to his campaign for re-election to the superior court. We affirm the judgment as well as the postjudgment award of attorney fees and costs.
Factual Background
In 1966, the Janss Corporation (Janss) developed a 28-lot residential subdivision (Los Robles Hills Estates) in the City of Thousand Oaks. The subdivision is a common interest development subject to the Davis-Stirling Common Interest Development Act. (Civ. Code, § 4000 et seq.) “Common interest developments are required to be managed by a homeowners association [citation], defined as `a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development’ [citation], which homeowners are generally mandated to join [citation].” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81 [14 Cal.Rptr.3d 67, 90 P.3d 1223].)
Janss created HOA to manage the development. It deeded to HOA an 18.56-acre parcel that the trial court and parties referred to as a “common area.” The deed provides, “This conveyance is made on condition that said property shall be used solely for purposes of recreation or decoration or both, and in the event that said property is otherwise used, it shall automatically revert to grantor herein.”
[6] The development is subject to a recorded declaration of the CC&Rs. Paragraph 1.01 of the CC&Rs provides, “No lot shall be used for any purpose (including any business or commercial activity) other than for the residence of one family and its domestic servants ….” Subparagraph 3 of paragraph 2.03 provides that “[f]or good cause shown … deviations from the applicable deed restrictions” may be allowed “to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use.” Paragraph 5.07 provides, “Every person acquiring a lot … covenants to observe, perform and be bound by this Declaration of Restrictions.”
In June 2003, the Ketelhuts purchased in the development a 1.75-acre lot on Pinecrest Drive (the Property). In 2005, they planted a vineyard consisting of 600 plants. The plants extended “just under .4 acres” into the 18.56-acre common area. In their brief, defendants acknowledge, “Unbeknownst to the Ketelhuts and [HOA], some of the grape plants encroached on the [common area].” In 2011, when HOA learned of the encroachment, its counsel wrote a letter to the Ketelhuts’ counsel “demanding that [the Ketelhuts] immediately remove the vines from the common area, as well as any other items that may be located upon the Association’s common area.”
Before planting the grape vines, the Ketelhuts submitted a landscape plan (exhibit 244) to the Board. It was approved by the Board’s architectural committee (the Committee). The plan divided the Property into three separate vineyards. One would grow grapes for Cabernet Sauvignon, the second for Sangiovese, and the third for Merlot. The plan did not indicate the number of grape vines that would be planted. The Ketelhuts did not inform the Board or the Committee that the grapes grown on the Property would be used to make wine that would be offered for sale to the public.
Pranas Raulinaitis, who served on the Committee in 2005, testified that the Committee members “viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood.” It “never entered into [his] mind” that “the vineyard was being planted for commercial sale of wine to the public.”
The first harvest was in 2008. At that time, Jeffrey Ketelhut “harvested the grapes … with the intention of bottling them for sale.” He “commenc[ed the] wine business in 2009.” Jeffrey Ketelhut admitted that “the sale[] of wine is a business” and that the vineyard “operates like a business.” But he characterized the vineyard “as a hobby where I do it in my spare time.” “[M]y purpose in getting involved wasn’t to generate a profit and this become a livelihood. This was a hobby. I enjoy gardening …. [T]hat was therapy for me.” The Ketelhuts never determined whether, excluding attorney fees, the vineyard generated a profit. Including attorney fees, it has not generated a profit in any year.
[7] Although the Ketelhuts’ tax returns were not produced, Jeffrey Ketelhut testified that he had filed Internal Revenue Service schedule C (form 1040) for the vineyard. Pursuant to Evidence Code sections 459 and 452, subdivision (h), we take judicial notice that schedule C is entitled “Profit or Loss From Business (Sole Proprietorship).” We also take judicial notice that, since 2009, page 1 of the instructions for schedule C has provided, “Use Schedule C (Form 1040) to report income or (loss) from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business.” (Italics added.)
In 2009, the Ketelhuts filed in Ventura County a fictitious business name statement showing that they were doing business at the Property as “Los Robles Hills Winery” and “Puerta del Cielo Vineyards.” They applied for and obtained a “Type 17 and Type 20 license [from the Department of Alcoholic Beverage Control], which [permits] retail and wholesale [sales] over the internet only.” They also obtained “a Thousand Oaks business license.” The licenses showed that the business was located at the Property. But in 2012, the location of the business was changed to a Camarillo address.
The Ketelhuts began selling wine in May 2010. With one exception, they have sold only wine made from grapes grown on the Property. The exception occurred in 2011, when they made wine from sauvignon blanc grapes that they had purchased. In 2015, the Ketelhuts harvested 2,000 pounds of grapes. They invited family, friends, and neighbors to participate in the harvesting. Jeffrey Ketelhut testified, “[I]t took us an hour-and-a-half to pull down all the grapes.”
After the grapes are harvested, they are transported to “Camarillo Custom Crush [in Camarillo], where all the winemaking takes place.” Camarillo Custom Crush puts the wine into bottles that bear the Ketelhuts’ personal label. The Ketelhuts do not store wine on the Property. They have a storage facility in Malibu. They do not ship bottles of wine from the Property.
“In a typical year,” the Ketelhuts are “fortunate” to produce two barrels of wine. “[A] single barrel can hold up to 30 cases.” Each case contains 12 bottles. Thus, the maximum typical annual production is 720 bottles of wine. But in 2009, the Ketelhuts “produced 132 cases,” which is 1,584 bottles of wine.
At the time of trial in November 2015, the wine production was “dwindling” because they had “los[t] vines [due] to drought.” The original 600 [8] plants had been reduced to about 400. Jeffrey Ketelhut estimated that production for 2014 and 2015 would be 50 cases per year. The wine for these years was still being stored in barrels.
The Ketelhuts retain ownership of the bottled wine. They advertise on Facebook, Twitter, their personal website, “and through [their] wholesale accounts.” The logo “Los Robles Hills Winery” and their website address are displayed on the exterior of their truck, which they park in the driveway of the Property. “[T]hey keep the truck covered” while it is on the Property.
The Ketelhuts “sold wine to a number of restaurants and hotels in the local area.” But because of plaintiffs’ lawsuit, they “let those [local sales] lapse.” At the time of trial, they were “still offer[ing] retail sales and wholesale sales,” but were probably giving “at least 60 percent” of their wine to “charity.” For the last two years, their retail sales have been “zero.” Their wines appear on the menu at “a few” restaurants.
Exhibit No. 35 contains copies of pages from the Ketelhuts’ website. The pages are dated May 22, 2014. The wines for sale range in price from $27 to $42 per bottle.
In January 2011, the Ventura County Star published an article about the Ketelhuts’ “winery.” The article said that they “were hosting wine tastings by appointment at [their] home tasting room.” In March 2011, the Department of Alcoholic Beverage Control informed the Ketelhuts that someone had complained about the wine tastings. The Ketelhuts denied hosting wine tastings on the Property.
In its statement of decision, the trial court found: “There was … no retail traffic to the premises or tasting room on the premises at [the Property]. What was accomplished [there] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo.”
Some homeowners complained about the vineyard. In August 2011 counsel for plaintiffs Felipa Eith and Stacy Wasserman wrote a letter to the Ketelhuts “indicating that the commercial vineyard was a violation of the CC&Rs and that [they] should stop that aspect of [their] business.” The letter did not demand that the Ketelhuts stop growing grapes on the Property. It demanded that they “[c]ease operating a commercial vineyard.” The letter also demanded that the Ketelhuts “[r]emove all encroaching plants, irrigation and any other vineyard materials … from the … common area.”
The Board, which consisted of five homeowners, investigated the Ketelhuts’ operation of the vineyard. It interviewed other homeowners. In [9] June 2011, it conducted a meeting that was open to all of the homeowners. The Ketelhuts appeared and answered questions. After the meeting, three of the five board members — defendants Daily, Yen, and Niesner — concluded that the Ketelhuts were not using the Property for a nonresidential purpose in violation of paragraph 1.01 of the CC&Rs. They found that there was no prohibited business or commercial activity on the Property.
Board member Daily considered the vineyard to be “landscaping” rather than a business. He explained: “They were growing grape vines just like I grow fruit trees and Mr. Krupnick [a homeowner] grows avocado trees, and people grow grass in their yard. It was landscape.” “[T]herefore I wasn’t going to, as a board member, try to restrict them from growing grapes. Like I wouldn’t restrict anybody else from growing fruit or whatever.” “Their growing grapes was part of their landscape plan.”
On the other hand, Daily understood that “the growing phase of their winery was part of the business.” “You have to have grapes in order to make wine.” Daily continued: “I believe that aspect to their business [growing grapes] is acceptable because it’s their landscape.” “The growing of grapes is certainly not something prohibited by the CC&R’S and if somebody takes those grapes in a very limited way without impact on the community, then I don’t really care what they do with them. They can make jelly and sell it. That’s fine with me.” “I considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable.”
Daily did not “know how to define the difference between business and commercial” activity. He said: “[W]hen I think of commercial activity, I think of something, you know, in a building, you know, off site. That’s what I think of as commercial activity.”
Board member Yen testified that “commercial activity” within the meaning of the CC&Rs “is something that would cause a stress in the community, whether it be traffic, whether it be individuals, that it’s something that disrupts our quality in our community and impacts your neighbors. That’s commercial activity.” Yen did “not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community.”
Procedural Background
Plaintiffs filed a complaint consisting of nine causes of action. The trial court bifurcated the eighth and ninth causes of action and tried them first. The trial began in July 2015 and ended in November 2015.
[10] The eighth cause of action is against HOA and the Ketelhuts. It seeks declaratory and injunctive relief. It requests “a judicial determination and decree that the CC&Rs and Grant Deed prohibit” the Ketelhuts from (1) operating their “Business” and “commercial enterprise,” including the vineyard, on the Property and the common area, and (2) encroaching on the common area. The eighth cause of action also requests the issuance of a permanent injunction prohibiting the Ketelhuts from operating their business on the Property and encroaching on the common area.
The ninth cause of action is against all defendants. It seeks to quiet title to the common area. It claims that each of the 28 lot owners has an undivided 1/28th ownership interest in the common area and is “entitled to the non-exclusive possession” of that area. The ninth cause of action sought a judicial declaration that HOA has “no estate, right, title or interest” in the common area.
The remaining seven causes of action are for nuisance; trespass; breach of the CC&Rs; breach of HOA’s fiduciary duty; breach of fiduciary duty by Board members; and “willful, wanton misfeasance and gross negligence.” In its statement of decision, the trial court said it had ordered that “[t]he remaining causes of action, for which a jury had been demanded, would be set for trial as may be necessary following determination of the Declaratory Relief and Quiet Title causes of actions.”
Prior to trial on the eighth and ninth causes of action, all plaintiffs except Felipa Eith dismissed the entire action against HOA and Board members.
Statement of Decision
On the eighth cause of action for declaratory and injunctive relief, in its statement of decision, the trial court said that it was “faced with … whether or not to exercise its independent analysis of whether or not what the Ketelhuts were doing is a business or commercial activity, or to determine if the HOA had the discretionary authority to allow the Ketelhuts to do what they did under what is commonly known as the business judgment rule.” The court applied the “deferential business judgment standard adopted by [Lamden, supra, 21 Cal.4th 249].”
The trial court ruled: “The Court finds here that the defendant HOA and its individual directors acted in good faith in addressing the activities of the defendants Ketelhut, and that this decision should not be re-examined within the context of this litigation…. As noted in Beehan v. Lido Isle [Community Assn.] (1977) 70 Cal.App.3d 858 @ 865 [137 Cal.Rptr. 528], `The board of directors may make incorrect decisions, as well as correct ones, so long as it [11] is faithful to the corporation and uses its best judgment.’ … The Court finds that this board of directors used it[s] best judgment and acted in a reasonable manner under the circumstances presented to it. As such, the Court does not grant the relief that plaintiffs seek, but finds in favor of the defendants on the cause of action for declaratory relief.” (Italics added.)
On the ninth cause of action to quiet title to the common area, the trial court found that the area was deeded to HOA in 1966. “[N]o fractional interest in the property was deeded to any homeowners. Since that time, there have been no other documents, recorded or otherwise, that purport[] to grant to the homeowners the 1/28 fractional interest that they are seeking in this action.” Therefore, “title to the 18.5 acre common area is confirmed and quieted to [HOA].”
Judgment
On the eighth and ninth causes of action, the trial court entered judgment in favor of defendants. The judgment does not mention the remaining seven causes of action. In its statement of decision, the trial court said, “The rulings here made moot plaintiffs[‘] remaining causes of action. The case is therefore not set for further trial on those issues.”
Thus, the judgment disposed of all nine causes of action and is appealable under the one final judgment rule of Code of Civil Procedure section 904.1, subdivision (a). “Judgments that leave nothing to be decided between one or more parties and their adversaries … have the finality required by section 904.1, subdivision (a). A judgment that disposes of fewer than all of the causes of action framed by the pleadings, however, is necessarily `interlocutory’ (Code Civ. Proc., § 904.1, subd. (a)), and not yet final, as to any parties between whom another cause of action remains pending.” (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 741 [29 Cal.Rptr.2d 804, 872 P.2d 143].)
PLAINTIFFS’ APPEAL
The Judgment Is Not Void Because of the Trial Judge’s Alleged Disqualification
A. Factual and Procedural Background
The complaint was filed on August 31, 2011. The case was assigned to Judge Henry J. Walsh.
[12] After a contested judicial election, Judge Walsh was reelected in 2012. On February 10, 2016, the Commission on Judicial Performance admonished Judge Walsh for failing to disclose contributions made to his 2012 campaign by attorneys who had appeared before him after the election. The Commission noted, “In 2010, effective January 1, 2011, subdivision (a)(9)(C) was added to Code of Civil Procedure section 170.1 to require judges to disclose campaign contributions of $100 or more.”
On the same day that Judge Walsh was admonished, he signed the judgment in the instant case.[1] The next day, plaintiff Felipa Eith filed a request for a stay of all further action by Judge Walsh pending a hearing on a not yet filed motion to disqualify him.
On March 2, 2016, Felipa Eith filed a motion to disqualify Judge Walsh for cause pursuant to Code of Civil Procedure section 170.1. The ground for the motion was that the judge had received campaign contributions from defendants’ counsel and had not disclosed them to plaintiffs. Eith alleged, “Recent inspection of recorded and filed election documents (Form 460) establishes that during the pendency of the instant action Judge Walsh solicited, accepted and kept secret from Plaintiffs and plaintiffs’ counsel, monetary contributions to his campaign from defense counsel [firm, partners, or staff attorneys] in the amount of $2,600.00 ….” (Original brackets.) A minute order entered nine days later on March 11, 2016, states: “Without conceding the merit of allegations of prejudice made by Ms. Eith, the court recuses itself from the case, and refers it to the supervising civil judge for re-assignment.”
Plaintiffs filed a motion for a new trial. They argued that Judge Walsh’s failure to disclose the campaign contributions denied them their right to a fair trial. Plaintiffs claimed that, if Judge Walsh had made a timely disclosure, they “would certainly have sought his disqualification in 2012 to preclude the possibility that he would preside at trial.”
Judge John Nho Trong Nguyen denied the motion for a new trial. He ruled, “When the facts are viewed as a whole they show that no person aware of them might reasonably entertain a doubt that Judge Walsh would be able to be impartial.”
[13]
B. Analysis
Plaintiffs argue that the judgment is void because Judge Walsh was disqualified years before the trial when he failed to disclose contributions made by defendants’ counsel. If Judge Walsh were so disqualified, the judgment would be void. In Christie v. City of El Centro (2006) 135 Cal.App.4th 767, 776 [37 Cal.Rptr.3d 718], the court “conclude[d] that because [the trial judge] was disqualified at the time he granted the City’s motion for nonsuit, that ruling was null and void and must be vacated regardless of a showing of prejudice.” The court rejected the city’s claim “that the grant of nonsuit need not be overturned because [the judge] was not disqualified until later” when a motion to disqualify him was granted: “[D]isqualification occurs when the facts creating disqualification arise, not when disqualification is established. [Citations.] The acts of a judge subject to disqualification are void or, according to some authorities, voidable. [Citations.] Relief is available to a party who, with due diligence, discovers the grounds for disqualification only after judgment is entered or appeal filed. [Citations.] Although a party has an obligation to act diligently, he or she is not required to launch a search to discover information that a judicial officer should have disclosed. [Citations.]” (Id. at pp. 776-777.)
The relevant statute is Code of Civil Procedure section 170.1, subdivision (a)(9), which provides: “A judge shall be disqualified” if: “(A) The judge has received a contribution in excess of one thousand five hundred dollars ($1500) from a party or lawyer in the proceeding, and either of the following applies: [¶] (i) The contribution was received in support of the judge’s last election, if the last election was within the last six years. [¶] (ii) The contribution was received in anticipation of an upcoming election. [¶] (B) Notwithstanding subparagraph (A), the judge shall be disqualified based on a contribution of a lesser amount if subparagraph (A) of paragraph (6) applies.” (Italics added.) Subparagraph (A) of paragraph (6) of subdivision (a) provides that a judge shall be disqualified if “[f]or any reason: [¶] (i) The judge believes his or her recusal would further the interests of justice. [¶] (ii) The judge believes there is a substantial doubt as to his or her capacity to be impartial. [¶] (iii) A person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial.” (Italics added.)
(1) The California Supreme Court Committee on Judicial Ethics Opinions (CJEO) issued an opinion on mandatory disqualification based on a contribution of more than $1,500: CJEO Formal Opinion 2013-003 (). CJEO concluded, and we agree, that the $1,500 disqualification threshhold “applies to the individual lawyer appearing in the matter.” (Id. at p. 11.) “[T]he Legislature did not intend the $1,500 threshold for disqualification to apply to aggregated contributions from multiple individuals from the [14] same law firm, nor to all individuals practicing law in a contributing law firm. A judge receiving such contributions however, is also required to make a determination as to whether disqualification is called for under section 170.1, subdivision (a)(6)[A](iii) and (9)(B).” (Ibid.) “[M]andatory disqualification for individual attorney contributions over the $1,500 threshold, together with discretionary disqualification for aggregated and law firm contributions, sufficiently ensures the public trust in an impartial and honorable judiciary.” (Ibid.)
In their opening briefs, plaintiffs list the contributions of all of the lawyers who allegedly represented defendants during the five years of litigation. No lawyer contributed more than $1,500 to Judge Walsh’s campaign. Thus, the mandatory disqualification provision is inapplicable. (Code Civ. Proc., § 170.1, subd. (a)(9)(A).)
(2) Plaintiffs have failed to show that Judge Walsh was disqualified because “[a] person aware of the facts might reasonably entertain a doubt that [he] would be able to be impartial.” (Code Civ. Proc., § 170.1, subd. (a)(6)(A)(iii).) Thus, we reject plaintiffs’ claim that Judge Nguyen abused his discretion in denying their motion for a new trial. (See Garcia v. Rehrig Internat., Inc. (2002) 99 Cal.App.4th 869, 874 [121 Cal.Rptr.2d 723] [“`”`The determination of a motion for a new trial rests so completely within the court’s discretion that its action will not be disturbed unless a manifest and unmistakable abuse of discretion clearly appears'”‘”]; Boyle v. CertainTeed Corp. (2006) 137 Cal.App.4th 645, 649-650 [40 Cal.Rptr.3d 501] [“an appealed judgment is presumed correct, and plaintiff bears the burden of overcoming the presumption of correctness”].)
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The Trial Court Properly Applied the Judicial Deference Rule Adopted by Our Supreme Court in Lamden
(3) In its statement of decision, the trial court applied the rule of judicial deference adopted by our Supreme Court in Lamden, supra, 21 Cal.4th 249. The plaintiff homeowner in Lamden complained that a condominium development’s community association had wrongly decided to treat a termite infestation “locally (`spot-treat’).” (Id. at p. 252.) The plaintiff wanted the association to fumigate the building. The Supreme Court stated, “[W]e adopt [15] today for California courts a rule of judicial deference to community association board decisionmaking that applies … when owners in common interest developments seek to litigate ordinary maintenance decisions entrusted to the discretion of their associations’ boards of directors. [Citation.]” (Id. at p. 253.) The rule is as follows: “Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Ibid.)
The Supreme Court explained: “The formulation we have articulated affords homeowners, community associations, courts and advocates a clear standard for judicial review of discretionary economic decisions by community association boards, mandating a degree of deference to the latter’s business judgments sufficient to discourage meritless litigation …. [¶] Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations’ discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.)
Some courts have narrowly construed the Lamden rule. In Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 940 [117 Cal.Rptr.3d 481], the court observed: “It is important to note the narrow scope of the Lamden rule. It is a rule of deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance…. The Supreme Court’s precise articulation of the rule makes clear that the rule of deference applies only when a homeowner sues an association over a maintenance decision that meets the enumerated criteria. [Citations.]” (See also Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Assn. (2008) 166 Cal.App.4th 103, 122 [82 Cal.Rptr.3d 389].)
Most courts have broadly construed the Lamden rule. In Haley v. Casa Del Rey Homeowners Assn. (2007) 153 Cal.App.4th 863, 875 [63 Cal.Rptr.3d 514], the court concluded that Lamden “reasonably stands for the proposition that the Association had discretion to select among means for remedying violations of the CC&R’s without resorting to expensive and time-consuming litigation, and the courts should defer to that discretion.”
[16] In Harvey v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 820 [76 Cal.Rptr.3d 41] (Harvey), the CC&Rs allowed the board “to designate storage areas in the common area.” They also gave the board “the exclusive right to manage, operate and control the common areas.” (Ibid.) The court held, “Under the `rule of judicial deference’ adopted by the court in Lamden, we defer to the Board’s authority and presumed expertise regarding its sole and exclusive right to maintain, control and manage the common areas when it granted the fourth floor homeowners the right, under certain conditions, to use up to 120 square feet of inaccessible attic space common area for rough storage.” (Id. at p. 821.)
In Watts v. Oak Shores Community Assn. (2015) 235 Cal.App.4th 466, 473 [185 Cal.Rptr.3d 376] (Watts), this court rejected the plaintiffs’ claim “that the rule applying judicial deference to association decisions applies only to ordinary maintenance decisions.” We reasoned: “It is true the facts in Lamden involve the association board’s decision to treat termites locally rather than fumigate. But nothing in Lamden limits judicial deference to maintenance decisions.” (Ibid.) “[T]here is no reason to read Lamden so narrowly.” (Ibid.) “Common interest developments are best operated by the board of directors, not the courts.” (Ibid.) We applied the judicial deference rule to the board’s adoption of rules and imposition of fees relating to short-term rentals of condominium units. We noted that, in Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [97 Cal.Rptr.2d 280] (Dolan-King), “the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.” (Watts, supra, 235 Cal.App.4th at p. 473.)
Based on Lamden, Haley, Harvey, Watts, and Dolan-King, the judicial deference rule applies to an association board’s discretionary decisions concerning the operation of the common interest development, e.g., the board’s maintenance and repair decisions (Lamden), its selection of the appropriate means to remedy a violation of the CC&Rs (Haley), its designation of storage space in a common area (Harvey), its adoption of rules relating to short-term rentals (Watts), or its approval or rejection of a homeowner’s improvement plan (Dolan-King). As we observed in Watts, “Common interest developments are best operated by the board of directors, not the courts.” (Watts, supra, 235 Cal.App.4th at p. 473.)
Here, the Board made a decision concerning the operation of the common interest development. The Board decided whether the Ketelhuts violated the CC&Rs’ prohibition against the use of the Property for business or commercial activity. The Board reasoned that the CC&Rs’ prohibition did not encompass the operation of the vineyard because it did not affect the residential character of the community. Board member Daily testified, “I [17] considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable.” Board member Yen did “not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community.”
(4) We do not defer to the Board’s interpretation of the CC&Rs. The interpretation of CC&R’s is a legal question to be decided by the courts, not the Board. “CC&R’s are interpreted according to the usual rules for the interpretation of contracts generally, with a view toward enforcing the reasonable intent of the parties. [Citations.]” (Harvey, supra, 162 Cal.App.4th at p. 817.) “`”[N]ormally the meaning of contract language … is a legal question.” [Citation.] “Where, as here, no conflicting parol evidence is introduced concerning the interpretation of the document, `construction of the instrument is a question of law, and the appellate court will independently construe the writing.'” [Citation.]'” (Cohen v. Five Brooks Stable (2008) 159 Cal.App.4th 1476, 1483 [72 Cal.Rptr.3d 471]; see also Legendary Investors Group No. 1, LLC v. Niemann (2014) 224 Cal.App.4th 1407, 1413 [169 Cal.Rptr.3d 787] [“contract interpretation is a legal question for the court”].)
(5) In our review of the CC&Rs, we conclude that the Board correctly interpreted the prohibition of business or commercial activity. The prohibition does not encompass activity that has no effect on the community’s residential character. The purpose of the prohibition is to preserve the community’s residential character.
The trial court properly deferred to the Board’s discretionary decision that the Ketelhuts’ operation of the vineyard did not violate the prohibition against business or commercial activity because it did not affect the community’s residential character. The Board made its decision “upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members.” (Lamden, supra, 21 Cal.4th at p. 253.) The Board interviewed homeowners and conducted a public hearing at which the Ketelhuts answered questions. Yen testified that the Board’s decision was “based on our looking at it from the scope of the community: Is it creating any stress for the community, is it impairing the community’s functioning, is it invasive to the community, and have we received any complaints regarding what is happening.” “Our decision and focus of discussion was on the impact o[n] the community.”
“Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments ….” (Lamden, supra, 21 Cal.4th at pp. 270-271.) The Board members lived in the community and had discussed the Ketelhuts’ vineyard with other homeowners. They [18] were in a much better position than the courts to evaluate the vineyard’s effect on the community. We “should defer to the [B]oard’s authority and presumed expertise.” (Id. at p. 265.)
The Board Correctly Decided That the Operation of the Vineyard Is Not Prohibited Business or Commercial Activity
As an alternative holding, we conclude that as a matter of law, the Ketelhuts’ operation of the vineyard is not prohibited business or commercial activity because it does not affect the community’s residential character.
No signs advertising wine sales are posted on the Property. Although the Ketelhuts’ logo “Los Robles Hills Winery” and their website address are displayed on the exterior of their truck, “they keep the truck covered” while it is on the Property. The wine is made and bottled in Camarillo. The bottled wine is stored in Malibu. It is not shipped from the Property. The trial court found that there is “no retail traffic” to the Property, which does not have a wine-tasting room. The court said, “What was accomplished [on the Property] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo.”
Had the Ketelhuts retained the wine for their personal use or given it away to friends or charity, there would have been no basis for finding business or commercial activity. All activities relating to the vineyard would have been permissible. That the Ketelhuts offered the wine for sale over the Internet did not transform their use of the Property into prohibited business or commercial activity. At all times the operation of the vineyard was fully consistent with residential use. No homeowner familiar with the vineyard’s operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public. The business or commercial activity of making and selling the wine did not occur on the Property. Board member Daily testified, “They were growing grape vines just like I grow fruit trees and Mr. Krupnick grows avocado trees, and people grow grass in their yard.” Moreover, instead of being a blight on the community, the vineyard was an aesthetic enhancement. Pranas Raulinaitis, who served on the Committee that approved the Ketelhut’s landscape plan in 2005, testified that the Committee members “viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood.”
We recognize that the growing of grapes on the Property is an integral part of the Ketelhuts’ winemaking business. As Daily testified, “You have to have grapes in order to make wine.” But absurd consequences would flow from construing the CC&Rs as prohibiting any business or commercial activity whatsoever irrespective of its effect on the residential character of the community.
[19] For example, some appellate attorneys work at home, reading records, doing research, and writing briefs, but meet with clients elsewhere. Although these attorneys are engaged in the business of practicing appellate law at their home offices, their business activities do not affect the residential character of their communities.
It would be absurd to construe the CC&Rs as prohibiting such harmless conduct, just as it would be absurd to construe them as prohibiting the Ketelhuts from operating their vineyard. “`In construing a contract the court … should adopt that construction which will make the contract reasonable, fair and just [citation]; … [and] should avoid an interpretation which will make the contract … harsh, unjust or inequitable [citations], or which would result in an absurdity [citations] …'” (Wright v. Coberly-West Co. (1967) 250 Cal.App.2d 31, 35-36 [58 Cal.Rptr. 213].)
There will be instances, of course, where a homeowner’s activity constitutes prohibited business activity even though the business is primarily conducted off the residential premises. For example, if a homeowner conducted a trucking business off the premises except that the trucks were stored on the premises when not in use, the homeowner might be in violation of the business prohibition. The presence of the commercial trucks would detract from the community’s residential character. (See Smart v. Carpenter (2006) 2006-NMCA-056 [139 N.M. 524, 134 P.3d 811].)
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Disposition
The judgment and postjudgment award of attorney fees and costs are affirmed. The parties shall bear their own costs on appeal.
Perren, J., concurred.
PERREN, J., Concurring. —
I concur.
In a vain effort to “define what may be indefinable,” Justice Potter Stewart opined, “I know it when I see it ….”[1] In like manner, the dissent “know[s] unfairness when [it] sees it” — when it sees how the Ketelhuts harvest their [20] grapes and make and sell their wine. (Dis. opn. post, at p. 20.) The majority sees it otherwise. In my opinion this is not a matter for such subjectivity. Rather, we should defer to the good faith exercise of discretion and “`the board’s authority and presumed expertise.'” (Maj. opn. ante, at p. 15, quoting Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 [87 Cal.Rptr.2d 237, 980 P.2d 940].)
Both the majority and the dissent appeal to “`Common sense.'” (Maj. opn. ante, at p. 15; dis. opn. post, at p. 22.) In doing so they quote from Lamden: I join with them and set forth the full closing of that opinion: “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations’ discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments. Beneficial corollaries include enhancement of the incentives for essential voluntary owner participation in common interest development governance and conservation of scarce judicial resources.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn., supra, 21 Cal.4th at pp. 270-271, italics added.)
This dispute and the resulting expense and acrimony are strong testament to the wisdom of such deference.
YEGAN, J., Dissenting. —
I know unfairness when I see it. The judgment should be reversed because plaintiffs are entitled to a ruling from the trial court that Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) were conducting a business in violation of the Covenants, Conditions, and Restrictions running with the land. (CC&Rs.) It does not matter whether the Ketelhuts could win an award for having the most beautiful vineyard in the world. It does not matter whether the wine from the grapes rivals the finest wines of the Napa Viticulture. As I shall explain, the facts unerringly point to the conclusion that the Ketelhuts were conducting a vineyard business on their property (the Property).
There will, of course, be situations in which the conducting of a business at a residence in violation of the CC&Rs will be so trivial to the neighborhood that it will be deemed not to be in violation of the CC&Rs. There is no reason to list them and one is only limited by imagination. As Colonel Stonehill said, “I do not entertain hypotheticals. The world, as it is, is vexing enough.” (True Grit (Paramount Pictures 2010).) So here, we need only decide whether the maintenance of the vineyard as a business is in violation of the CC&Rs.
[21]
Judicial Deference Rule
The judicial deference rule applies where an association board “exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265 [87 Cal.Rptr.2d 237, 980 P.2d 940] (Lamden).) In Lamden our Supreme Court concluded that the courts should defer to the board’s treatment of a termite problem because it was “a matter entrusted to [the board’s] discretion under the [CC&Rs] and [now repealed] Civil Code section 1364 ….” (Id. at pp. 264-265.) Here, there is no statute or provision in the CC&Rs entrusting to the discretion of the Los Robles Hills Estates Homeowners Association Board of Directors (Board) whether a homeowner is engaging in prohibited business or commercial activity within the meaning of the CC&Rs. This is a straightforward legal question to be decided by the courts, not members of the Board who lack legal expertise. (See Smart v. Carpenter (2006) 2006-NMCA-056 [139 N.M. 524, 134 P.3d 811, 814] [it “is a question of law” whether homeowner violated covenant prohibiting “`commercial activity or business’ on any tract in the Subdivision”].)
The inapplicability of the judicial deference rule is supported by Dover Village Assn. v. Jennison (2010) 191 Cal.App.4th 123 [119 Cal.Rptr.3d 175] (Dover Village). There, the issue was whether a sewer pipe was ordinary “common area to be maintained and repaired by the Association” or “`[an] exclusive use common area'” designed to serve a particular homeowner who would be responsible for its maintenance. (Id. at pp. 126, 127.) The association decided that the sewer pipe was the defendant homeowner’s responsibility because it exclusively serviced his condominium. The appellate court concluded that the sewer pipe was not an exclusive use common area. It rejected the association’s argument that, under Lamden, it should defer to the association’s decision: “The argument fails because it confuses a legal issue governed by statutory and contract text with matters that genuinely do lend themselves to board discretion. [¶] … [¶] There is an obvious difference between a legal issue over who precisely has the responsibility for a sewer line [or whether a homeowner is engaged in prohibited business or commercial activity within the meaning of the CC&Rs] and how a board should go about making a repair that is clearly within its responsibility…. [W]e know of no provision in the Davis-St[e]rling Act or the CC&R’s that makes the Association or its board the ultimate judge of legal issues affecting the development.” (Id. at p. 130.)
The court considered Lamden to be “a nice illustration of matters genuinely within a board’s discretion.” (Dover Village, supra, 191 Cal.App.4th at [22] p. 130.) Unlike Lamden, the legal issue here is not genuinely within the Board’s discretion. In Lamden the Supreme Court noted, “Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Lamden, supra, 21 Cal.4th at pp. 270-271.) In contrast to Lamden, the Board is not equipped to determine whether the Ketelhuts were engaged in business or commercial activity in violation of the CC&Rs.
If the judicial deference rule applied here, there would be few board decisions to which it did not apply. The judicial deference rule “does not create a blanket immunity for all the decisions and actions of a homeowners association.” (Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, 940 [117 Cal.Rptr.3d 481].)
The Vineyard Is Business or Commercial Activity Within the Meaning of the CC&Rs
The majority opinion concludes that, as a matter of law, the Ketelhuts’ operation of the vineyard is not a prohibited business or commercial activity because it does not affect the residential character of the community. But paragraph 1.01 of the CC&Rs does not say, “No lot shall be used for any purpose (including any business or commercial activity [that does not affect the residential character of the community]) other than for the residence of one family and its domestic servants ….” (Italics added.) “`”In construing a contract which purports on its face to be a complete expression of the entire agreement, courts will not add thereto another term, about which the agreement is silent. [Citation.]”‘ [Citation.]” (Ratcliff Architects v. Vanir Construction Management, Inc. (2001) 88 Cal.App.4th 595, 602 [106 Cal.Rptr.2d 1].) On its face paragraph 1.01 prohibits any business or commercial activity without qualification or exception. Subparagraph 3 of paragraph 2.03 of the CC&Rs provides that “[f]or good cause shown … deviations from the applicable deed restrictions” may be allowed “to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use.” (Italics added.) How can the operation of a commercial vineyard not qualify as commercial use?
There may be cases where business or commercial activity is so de minimis or concealed that it does not violate the CC&Rs, such as the example given in the majority opinion of an appellate attorney with a home office who sees no clients on the premises. But the Ketelhuts’ operation of their commercial vineyard was neither de minimis nor concealed. They filed a fictitious business name statement and were issued both a business license [23] and an alcoholic beverage sales license. The licenses originally indicated that the business was located at the Property. Board member Yen testified: “[A] notice of intent to sell [alcoholic beverages] … was posted on their front where their mailbox was, and it needed to be posted elsewhere because you’re not supposed to be advertising a business in the community. So they were advised not to post it there.” The Ketelhuts advertised on Facebook, Twitter, their personal website, “and through [their] wholesale accounts.” They filed an Internal Revenue Service schedule C (form 1040) to report their business income or loss. The logo “Los Robles Hills Winery” and their website address were displayed on the exterior of their truck. Although the Ketelhuts covered the truck while it was parked on the Property, the logo and website address were openly displayed when they drove the truck to and from the Property.
The Ketelhuts sought and obtained publicity for their winery by giving an interview to the local newspaper, the Ventura County Star. In January 2011 the newspaper published an article about the winery. Until he read the article, plaintiff John Mitchell was not aware that the Ketelhuts were growing grapes for a commercial purpose. Mitchell “knew that they weren’t supposed to be doing an activity like that because of the CC&Rs,” which “exclude any business activity.”
A copy of the newspaper article was marked as exhibit 54, but it was neither offered nor received into evidence. I quote from the article because it was before the trial court, witnesses testified as to its content, Felipa Eith quoted from the article during her examination of Jeffrey Ketelhut, and the article arguably is judicially noticeable not to prove the truth of the facts reported, but to prove the extent to which the commercial nature of the vineyard was publicized. (Evid. Code, §§ 452, subd. (h), 459.)
The article takes up the entire front page of the newspaper’s Sunday “Business” section (“Section E”). It is entitled, “GRAPE expectations[:] T.O. [Thousand Oaks] couple’s home vineyard about to pay off.” The article includes photographs of the vineyard, the Ketelhuts, and bottles of wine produced from grapes grown at the vineyard. The bottles are labeled, “Los Robles Hills.” One of the photographs of the Ketelhuts is captioned, “Jeff and Marcella Ketelhut, owners of the commercial vineyard in the Conejo Valley, enjoy discussing the challenges of wine production.” (Italics added.) The article includes the website address of the Ketelhuts’ winery.
The article states in part: “For Jeff and Marcella Ketelhut, the dream of owning a winery has come to fruition on the slopes near their Thousand Oaks home.” “The Ketelhuts are not yet making a profit but said they are selling their wine, at $35 a bottle, through their website, by word of mouth and by [24] hosting wine tastings by appointment at their home tasting room. [¶] … The couple also has planted a selection of olive trees on the property and hopes to begin producing cured olives and olive oil for sale in the near future. [¶] They said they are exploring ways to expand their commercial enterprise, given the potential they believe exists in the Conejo Valley. [¶] `We wanted to try it for a few years, and initially it was more of a fun thing, but now we’re barely doing any marketing and the stuff is flying off the shelves,’ said Marcella.” The article observes that “the Ketelhuts’ Los Robles Hills Winery [is] on the list of 15 [wineries] that make up the Ventura County Wine Trail.” Jeffrey Ketelhut testified that in 2010 the Ketelhuts had become “members of the Ventura County Wine Trail.”
Through the newspaper article, the Ketelhuts proclaimed to Ventura County residents that they were operating a commercial vineyard on the Property. It is understandable that homeowners, such as John Mitchell, would be alarmed by this development, which appeared to be a blatant violation of the CC&Rs’ prohibition against “any business or commercial activity.” Homeowners could view the article as a public flaunting by the Ketelhuts of their violation.
The majority opinion states, “No homeowner familiar with the vineyard’s operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public.” (Maj. opn., ante at p. 18.) But the newspaper article put the entire community on notice that the Ketelhuts were operating a commercial vineyard.
Moreover, the vineyard was in plain view of the homeowners. Richard Monson testified that, “[w]hen [he] drove past the Ketelhuts’ home,” he “noticed the grapevines on the hillside.” Because the grapevines were visible to everyone, they would be a continual source of aggravation to homeowners who objected to a commercial agricultural operation in their community. The majority opinion says that the vineyard was an “aesthetic enhancement.” (Maj. opn., ante at p. 18.) But to the homeowners who objected to its presence, it was an eyesore.
The Ketelhuts’ commercial vineyard was not permissible because, as Board member Daily testified, “Their growing grapes was part of their landscape plan.” The landscape plan, which was approved in 2005 by the Board’s architectural committee (the Committee), did not indicate that the vineyard would be used to grow grapes to make wine that would be offered for sale to the public. In 2005 the Ketelhuts did not inform the Committee of this future commercial use. Had it been so informed, the Committee probably would not have approved the landscape plan.
Difficulties may arise in applying the majority opinion’s standard of whether business or commercial activity affects the residential character of [25] the community. With such a vague standard, where does one draw the line between activity that affects and activity that does not affect residential character? This is a purely subjective determination.
A New Meaning for CC&Rs
Traditionally, CC&Rs are restrictions and limitations on land use. Now at the whim of the Board, CC&Rs mean “choices, creativity, and recommendations.” A homeowner has a choice and may be creative in the use of property. The traditional CC&Rs have been transformed into recommendations that the Board may elect not to enforce. Rather than having the force of law, the CC&Rs have the backbone of a chocolate éclair. And, of course, the Board’s composition may change and there will be inconsistency in just how much business or commercial activity will be allowed.
CC&Rs play a vital role in protecting the reasonable expectations of parties when they purchase land. This concept is lost in the majority opinion. Future buyers in the development should be expressly advised that business or commercial activity is allowed at the discretion of the Board. This may actually devalue the land.
Finally, to monetarily punish plaintiffs with attorneys’ fees is not only unfair, it is unconscionable. The Ketelhuts were the “first movers.” They created the entire problem by operating a commercial vineyard and publicizing it in the local newspaper. They are at fault and they should pay for it.
[*] Pursuant to California Rules of Court, rules 8.1100 and 8.1110, this opinion is certified for partial publication. The portions of this opinion to be deleted from publication are identified as those portions between double brackets, e.g., [[/]].
[1] The Eiths “posit that the 2/10/16 handwritten date appearing adjacent [to] the signature line [on the judgment] is suspect” and “therefore unreliable.” The Eiths contend that the handwritten date “was likely backdated.” (Capitalization & boldface omitted.) We reject the contention because it is based on speculation. There is a “presumption that judicial duty is properly performed.” (People v. Coddington (2000) 23 Cal.4th 529, 644 [97 Cal.Rptr.2d 528, 2 P.3d 1081], overruled on another ground in Price v. Superior Court (2001) 25 Cal.4th 1046, 1069, fn. 13 [108 Cal.Rptr.2d 409, 25 P.3d 618].) The Eiths have not overcome this presumption.
[*] See footnote, ante, page 1.
[*] See footnote, ante, page 1.
[1] Jacobellis v. Ohio (1964) 378 U.S. 184, 197 [12 L.Ed.2d 793, 84 S.Ct. 1676] (conc. opn. of Stewart, J.).
Related Links
Courts Will Defer to the Decisions of Boards Based on Good Faith and Regard for the Best Interests of the Community
– Published on HOA Lawyer Blog (March 2019)
Sands v. Walnut Gardens Condominium Association Inc.
[Maintenance; Board Deference] No independent tort liability for failing to maintain common areas; Rule of Judicial Deference does not protect failure to perform inspections or preventative maintenance.
Law Office of Jeff A. Lesser and Jeff A. Lesser for Plaintiffs and Appellants.
Slaughter, Reagan & Cole, Barry J. Reagan and Gabriele M. Lashly for Defendant and Respondent.
[175]
OPINION
WILEY, J.—
This case is about whether condominium owners can make their homeowners association pay for a water leak. Monique Sands and her parents sued and went to trial against the Walnut Gardens Condominium Association Inc. and its property manager for breach of contract and negligence. The trial court granted a nonsuit. The Sandses settled with the property manager but have appealed against the association. The Sandses argue the trial court erred by granting the nonsuit, by excluding certain evidence, and by denying their motion for a new trial. We reverse and remand the contract nonsuit and affirm the tort nonsuit. We do not reach other issues.
[176] I
We summarize the facts. When reviewing a nonsuit, we view facts in the plaintiff’s favor and disregard conflicting evidence. (O’Neil v. Crane Co. (2012) 53 Cal.4th 335, 347 [135 Cal.Rptr.3d 288, 266 P.3d 987].)
The Sandses owned a unit in the Walnut Gardens development. A pipe on the roof broke and water entered the Sandses’ bedroom. The association’s agent hired people to repair the pipe and roof. The association had responsibility to maintain its common areas, including this piping and roof. The Sandses sued the association for breach of contract and negligence. The trial court selected a jury, heard the Sandses’ two witnesses in their case-in-chief, and granted a nonsuit.
II
We reverse the nonsuit on the breach of contract claim.
(1) Our review of nonsuit judgments is limited. To allow the opposing party to cure defects in proof, we may affirm only on logic stated in the motion for nonsuit, unless the defect would have been impossible to cure. (Lawless v. Calaway (1944) 24 Cal.2d 81, 94 [147 P.2d 604] (Lawless).)
(2) The Sandses claimed a breach of contract. The contract, they say, was the association’s covenants, conditions, and restrictions, one part of which required the association to keep the project in “a first class condition.” The Sandses’ first witness, however, testified the association was performing no preventive maintenance at all, even though preventive maintenance was desirable. The roof and pipes over the Sandses’ unit had not been inspected or maintained in years.
The association’s oral motion for nonsuit was concise to a fault. It first argued there was “a complete absence of evidence” to show a breach of contract. This first argument was incorrect. Reasonable jurors could have concluded a total failure to maintain common areas breached a promise to keep these areas in first class condition.
The association next argued no evidence showed the association was “on notice that it needed to make repairs or do something to the roof or the pipes.” This argument too was incorrect. The property manager testified “[m]aintenance wasn’t happening. It was a very sad situation for the homeowners.” A jury could find buildings need maintenance to remain in first class condition. The association knew “[m]aintenance wasn’t happening.” As a prima facie matter, no more was needed.
[177] In the course of granting the motion, the trial court added oral reasoning beyond the contents of the nonsuit motion. The court said the Sandses’ lack of expert testimony would force the jury to “speculate” about how a pipe broke and the roof leaked. By suggesting expert testimony was essential, this contract analysis erred. A complete lack of preventive maintenance is evidence the association did not keep the roof or pipes in first class condition. The jury would not need experts to grasp this.
(3) Neither the motion nor the court’s rationale challenged the idea that covenants, conditions, and restrictions comprise a contract between the association and individual owners. (See Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 240 [145 Cal.Rptr.3d 514, 282 P.3d 1217].) Nor did the motion or rationale hint at the rule of deference governing owner suits against homeowner associations. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 253 [87 Cal.Rptr.2d 237, 980 P.2d 940].) The nonsuit argument did not consider these points. Therefore neither do we. Defects unspecified in a nonsuit motion will be considered on appeal only if the plaintiff could not have cured the defects at trial. (See Lawless, supra, 24 Cal.2d at p. 94.)
We reverse and remand the nonsuit judgment about the contract.
III
We affirm the nonsuit tort judgment.
The association argued there was no evidence “as far as negligence [was] concerned” showing the association “was on notice of any condition that required repair.” The trial court rightly decried this effort to “tortify” a creature of private ordering. (See Erlich v. Menezes (1999) 21 Cal.4th 543, 554 [87 Cal.Rptr.2d 886, 981 P.2d 978] [“If every negligent breach of a contract gives rise to tort damages the limitation [that `breach of contract is tortious only when some independent duty arising from tort law is violated’] would be meaningless, as would the statutory distinction between tort and contract remedies.”].)
Outside the covenants, conditions, and restrictions, the association had no independent duty as to the pipes and roof arising from tort law. The Sandses’ trial counsel conceded the evidence for their negligence claim was “pretty much the same, under the same thing as a contract….” The Sandses give us no authority for a cause of action in tort. They state: “As with the Cause of Action for Contract, the duties and obligations for which the HOA, Walnut Gardens, was responsible, are found in the [covenants, conditions, and restrictions]….”
[178] Even had the association omitted this issue in its nonsuit motion, nothing the Sandses could have done at trial would have summoned into existence a tort claim barred by law. (See Lawless, supra, 24 Cal.2d at p. 94.)
DISPOSITION
We affirm the nonsuit of the tort claim and reverse and remand the nonsuit on the contract claim. The parties will bear their own costs.
Bigelow, P. J., and Stratton, J., concurred.
Related Links
Limitation on HOA Tort Liability for Maintenance Failures
– Published on HOA Lawyer Blog (January 2020)
Orchard Estate Homes, Inc. v. The Orchard Homeowner Alliance
[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.)
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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
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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)