Category Archives: Case Law

Farber v. Bay View Terrace Homeowners Association

(2006) 141 Cal.App.4th 1007

[Enforcement; Standing to Sue] A prior owner of a unit within an association does not have standing to enforce the CC&Rs.

Feldsott & Lee and Martin L. Lee for Plaintiff, Cross-complainant and Appellant.
Hickey & Petchul, David E. Hickey, Dirk E. Petchul, J. Stuart Duncan and David M. Gillen, for Defendant, Cross-defendant, and Respondent.

OPINION
BEDSWORTH, Acting P. J.-

Alicia Farber appeals from judgments that dismissed her complaint and cross-complaint against Bay View Homeowners Association (Association) for lack of standing to sue, and from a post-judgment order awarding the Association attorney fees. Farber argues she does have standing and, even if not, the Association was not entitled to fees. We disagree and affirm.

In late 2003, Farber sold a condominium in Bay View Terrace, Costa Mesa, to David Stiffler. The condominium project is subject to a declaration of covenants, conditions, and restrictions (CC&R’s). The Association, whose members are the unit owners, is responsible for enforcing the CC&R’s and maintaining the structures within the condominium project.[1010]

After Stiffler moved into his unit, he discovered the roof leaked extensively and he was facing a $15,000 assessment by the Association to make repairs. Stiffler thought Farber had failed to disclose the leaks and should bear this expense. Farber took the position that it was the Association’s duty to maintain the roof. She made demand on the Association to accept responsibility for the roof, and on Stiffler to agree to look only to the latter for recourse. Both refused and the instant action followed.

The complaint names as defendants Stiffler and the Association, and it recites the facts set out above. There is a single cause of action for declaratory relief. It alleges “[a]n actual controversy . . . now exists between plaintiff and defendants . . . concerning their respective rights and duties pursuant to the DECLARATION [CC&R’s] . . . and duties allegedly owed to defendant STIFFLER by either plaintiff and/or ASSOCIATION . . . .” Farber alleges she did not conceal any material facts from Stiffler, and it is the Association’s duty to fix Stiffler’s roof. The relief requested is a judicial determination of Farber’s rights and duties vis-a-vis Stiffler and the Association. As to the Association, she specifically asks for a declaration that “[i]f defendant STIFFLER is having any problems with the roof . . . it is the duty and obligation of the defendant ASSOCIATION to alleviate same and not the duty and/or obligation of this plaintiff . . . .” ^{[FN. 1]}

The Association demurred to the complaint on the ground that it failed to state a cause of action. The gist of its argument was that there was no actual controversy between Farber and the Association, since she was not a member and it had no duty to her. At oral argument, the Association added a new argument — Farber lacked standing to enforce the CC&R’s because she was not an owner of a condominium unit. In support, it proffered statutory authority and case law not included in the demurrer. The trial court overruled the demurrer, explaining the standing argument had not been fairly raised and it would violate due process to decide on that basis without giving Farber an opportunity to brief the issue.

Prior to this ruling, Farber had filed a cross-complaint against the Association. It incorporated the complaint by reference and set out three causes of action — implied indemnity, comparative indemnity, and declaratory relief. The two indemnity claims alleged the Association is primarily responsible for any damages Stiffler might recover, and it should indemnify Farber for any judgment. The declaratory relief claim requested a determination of Farber’s rights and duties against the Association and a declaration she is entitled to be indemnified for any judgment obtained by Stiffler.[1011]

The Association demurred to the cross-complaint. It argued the indemnity claims failed to state a cause of action under a statute that provides the comparative fault of an association managing a condominium cannot be raised in a cross-complaint or separate action for contribution or implied indemnity, but only as a defense. (Civ. Code, § 1368.4.) The Association argued the declaratory relief claim also failed to state a cause of action, because it sought to enforce the CC&R’s and Farber did not have standing to bring such an action. The trial court sustained the demurrer, without leave to amend, as to all causes of action.

Following this success, the Association moved for judgment on the pleadings of Farber’s original complaint. It contended Farber lacked standing to enforce the CC&R’s, and the ruling sustaining the demurrer to the cross-complaint was res judicata on the issue. The trial court rejected the res judicata argument, but it agreed Farber lacked standing to sue. Judgment was entered for the Association on the complaint, and a subsequent judgment (denominated an order) dismissed the cross-complaint against the Association. On the Association’s motion, it was awarded $24,517.50 in attorney fees and $512 in costs as the prevailing party in an action to enforce the governing documents of the condominium project. (Civ. Code, § 1354, subd. (c).)

Farber argues she has standing because neither the complaint nor the cross-complaint was an action to enforce the CC&R’s. Rather, she says, both sought to establish the Association’s obligations to Stiffler. We do not buy it. The obligations Farber sought to enforce were obligations owed by the Association to Stiffler under the CC&R’s.

[1] Civil Code section 1354, subdivision (a) provides that covenants and restrictions in a condominium declaration are enforceable as equitable servitudes if certain conditions are met. It then continues as follows: “Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or both.” The term “separate interest” means, in a condominium project, an individual unit. (Civ. Code § 1351, subd. (l)(2).) The common law rule is the same. One who no longer owns land in a development subject to reciprocal restrictions cannot enforce them, absent showing the original covenanting parties intended to allow enforcement by one who is not a landowner. (B.C.E. Development, Inc. v. Smith (1989) 215 Cal.App.3d 1142, 1147-1148; see Kent v. Koch (1958) 166 Cal.App.2d 579, 586 [developer who sold all lots in subdivision cannot enforce restrictions that would benefit project on adjacent land].)[1012]

[2] The essence of Farber’s claim is that the CC&R’s require the Association to fix Stiffler’s roof. We cannot regard that as anything but an attempt to enforce the CC&R’s. The language of the complaint and cross-complaint leave no doubt in the matter. The complaint alleges a controversy “between plaintiff and defendants . . . concerning their respective rights and duties pursuant to the DECLARATION [the CC&R’s],” and it seeks a declaration of Farber’s rights against the Association and Stiffler. The cross-complaint requests indemnity, and a declaratory judgment, on the theory the Association had the primary duty to repair the roof under the CC&R’s. Since Farber attempted to enforce the CC&R’s when she no longer owned a unit in condominium, the complaint and cross-complaint were properly dismissed for lack of standing.

Farber’s argument she was only seeking to enforce Stiffler’s rights strains even our credulity. To begin with, that is not what the pleadings say. The complaint unambiguously requests a declaration of Farber’s rights against the Association. The cross-complaint is not as direct, but its import is the same, since Farber claims the Association has a duty to indemnifyherbecause it is primarily liable for fixing Stiffler’s roof. Moreover, whether Stiffler’s rights or her own, this is still an action by Farber that seeks relief under the CC&R’s, and she is not a person entitled to bring such a suit. ^{[FN. 2]}

Salawy v. Ocean Towers Housing Corp.(2004) 121 Cal.App.4th 664 does not help Farber. There, unit owners in a cooperative apartment building sued the cooperative corporation for breach of a promise to reimburse them for costs incurred in temporarily relocating, while repairs were made following an earthquake. The cooperative corporation successfully demurred based on provisions in its bylaws. It then requested attorney fees under a statute that awards fees to the prevailing party in “an action to enforce the governing documents” (Civ. Code, § 1354, subd. (c)), which are those documents that govern the operation of a condominium, among others. (Civ. Code, § 1351, subds. (c), (j).) The court held fees were not recoverable because the action was based on a breach of promise, not the governing documents. (Id. at p. 671.) Here, the essence of Farber’s claim is that the CC&R’s place the obligation to fix Stiffler’s roof on the Association, so she cannot be liable for the cost. There is no promise here, only an obligation she finds in the CC&R’s. That is an action to enforce the CC&R’s, whether framed in terms of Farber’s rights against the Association or Stiffler’s.

Alternatively, Farber contends she only used the CC&R’s defensively, to avoid liability to Stiffler. But that simply is not true. Farber’s claims are[1013]presented in a complaint and cross-complaint, not as defenses in an answer. There is no avoiding the conclusion the complaint and cross-complaint were correctly dismissed for lack of standing.

II.

Farber argues the dismissals violated two rules that prohibit reconsideration of an issue raised and rejected, absent new facts or law. She is mistaken.

[3] A party who moved for an order that was refused may make a subsequent application for the same order only by showing “new or different facts, circumstances, or law,” and its new motion must be accompanied by an affidavit setting out what is new or different. (Code Civ. Proc., § 1008, subd. (a).) A motion for judgment on the pleadings may be brought on the same grounds as an unsuccessful demurrer only if “there has been a material change in applicable case law or statute since the ruling on the demurrer.” (Code Civ. Proc., § 438, subd. (g).)

Farber’s theory is that the demurrer to the cross-complaint, and the motion for judgment on the pleadings against the complaint, presented the same standing argument that was rejected when the trial court overruled the demurrer to the complaint. From this she reasons that both should have been rejected because neither raised new facts or law.

But the trial court did not consider standing when it overruled the demurrer to the complaint. It explained that lack of standing was “not a clearly stated ground in the demurrer,” due process would be violated if the argument was considered without allowing Farber to brief it, and “[w]ithout expressing any opinion on the merits of these [standing] arguments . . . [t]he demurrer is overruled.” It rather clearly refused to consider the standing issue.

Since standing was not an issue on the overruled demurrer, the Association was free to raise it by motion for judgment on the pleadings against the complaint. As for the cross-complaint, the Association’s demurrer was its first challenge to that new pleading, so the rule regarding motions for reconsideration does not apply. There was no procedural error in the judgments dismissing the complaint and cross-complaint.

III.

Farber argues the trial court improperly relied on res judicata in granting the motion judgment on the pleadings. The short answer — which is all that is necessary here — is that it did not. The relevant order states “[t]he court’s[1014]prior ruling on the demurrer to plaintiff’s cross-complaint is not res judicata . . . ,” and it goes on to grant the motion because Farber lacks standing to sue.

IV.

Finally, we turn to the fee award. The fee motion was brought under Civil Code section 1354, subdivision (c), which provides as follows: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” Farber asserts multiple errors in the award. We set out each in turn and conclude none has merit.

Farber contends fees were improper because this is not an action to enforce the CC&R’s. A related argument is that the Association was not the prevailing party entitled to costs of $512 because the complaint and cross-complaint should not have been dismissed. The point here is the same one she made on the standing issue, supported by the same authorities, and it is no more persuasive the second time around. This is an action to enforce the CC&R’s and the case was properly dismissed, so the Association was the prevailing party entitled to fees and costs.

Next, Farber argues the trial court initially denied the fee motion, then granted a second motion that did not state sufficient grounds to permit renewal of the failed effort. We cannot agree.

The Association’s first fee motion was supported by a declaration from counsel that stated the hours spent on the case and his regular billing rate. Farber objected to the supporting evidence as inadequate. The trial court denied the fee motion “without prejudice on the grounds that Moving Party did not supply the court with sufficient information to determine whether the fees were reasonable and necessary.”

The second fee motion attached a detailed bill that itemized the services performed on a day-by-day basis and the time spent on each, with a few entries redacted. Farber argued the second motion did not state sufficient grounds to permit reconsideration under Code of Civil Procedure section 1008. The trial court disagreed, saying Code of Civil Procedure section 1008 did not apply because “the prior motion was denied without prejudice.” It eliminated certain items and awarded the Association fees of $24,517.50.

Code of Civil Procedure section 1008, provides, in relevant part: “(b) A party who originally made an application for an order which was refused in whole or part . . . may make a subsequent application for the same order upon new or different facts, circumstances, or law, in which case it shall be[1015]shown by affidavit what application was made before, when and to what judge, what order or decisions were made, and what new or different facts, circumstances, or law are claimed to be shown. . . . [¶] . . . [¶] (e) This section specifies the court’s jurisdiction . . . and applies to all applications to reconsider any order . . . or for the renewal of a previous motion, whether the order deciding the previous matter or motion is interim or final. No application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.”

[4]Le Francois v. Goel (2005) 35 Cal.4th 1094 holds that Code of Civil Procedure section 1008 prohibits a party from filing repetitive motions for the same relief, but a court may, on its own motion, reconsider a prior interim ruling it believes to be mistaken. (Id. at p. 1107.) “[I]f the court is seriously concerned that one of its prior interim rulings might have been erroneous, and that it might want to reconsider that ruling on its own motion . . . it should inform the parties of this concern, solicit briefing, and hold a hearing.” (Id at p. 1108.)

Here, the trial court indicated it wanted to reconsider the fee issue when it denied the first motion without prejudice, so Code of Civil Procedure section 1008 is inapplicable. Denial of a motion without prejudice impliedly invites the moving party to renew the motion at a later date, when he can correct the deficiency that led to the denial.

In this case, the first motion was denied for want of sufficient evidence. The trial court might have continued the motion to allow the Association to submit a detailed fee bill, but instead it chose to deny the motion with, in effect, leave to renew it upon further evidence. Which route to chose is an administrative matter of calendar management — some might want to streamline a docket and continue a pending motion to allow supplemental filings, while others might prefer to decide the motion on the existing papers and reconsider that decision in a new motion. In any event, the trial court acted within its powers when, essentially on its own motion, it reconsidered fees and made the instant fee award.

Farber also argues the fee award was excessive. In her view, the request should have been reduced by 44.5 hours spent on the first fee motion and two premature bills of cost, and the award was still too high because the case was won on a demurrer and motion with very little discovery. We cannot agree.

The trial court found $24,517.50 was a reasonable fee, and Farber’s disagreement with that figure does not make it wrong. We note that the trial judge reduced the fee requested by approximately 33.6 hours. To prevail on a substantial evidence challenge, an appellant must lay out the contrary evidence and demonstrate why it is lacking. (Foreman & Clark Corp. v. Fallon [1016](1971) 3 Cal.3d 875, 881.) Farber makes no attempt to do this, but rather reargues her own position on both the reduction and the overall value of the services provided by the Association’s lawyer. That is not good enough. Since there is no showing the fee award is unsupported by the evidence, it must be affirmed.

Since Farber does not have standing to sue, the complaint and cross-complaint were properly dismissed. The Association was entitled to reasonable fees and costs as the prevailing party, and no error is shown in making that award. The judgments and post-judgment order appealed from are affirmed. The Association is entitled to costs on appeal. ^{[FN. 3]}

O’Leary, J., and Ikola, J., concurred.

FN 1. Stiffler responded with a cross-complaint against Farber – and not the Association – seeking damages for fraud, negligent misrepresentation, breach of contract, and negligence. Stiffler’s cross-complaint is not in issue on this appeal.

FN 2. We also note that as procedural matter, Farber’s claim to be enforcing Stiffler’s rights runs afoul of the rule that an action must be prosecuted in the name of the real party in interest. (Code Civ. Proc., § 367.) Farber has sued in her own name, not Stiffler’s, which again makes it apparent she is the one seeking to enforce the CC&R’s.

FN 3. Since we affirm the dismissal of the complaint and cross-complaint, we do not reach Farber’s argument that her discovery motions should have been granted.

Posey v. Leavitt

(1991) 229 Cal.App.3d 1236

[Restrictions; Duty to Enforce] A homeowner has the right to sue the HOA to compel the HOA to uphold its duty to enforce the restrictions.

Iwasaki, Thomas & Sheffield and Bruce T. McIntosh for Plaintiff and Appellant.
Honey Kessler Amado for Defendants and Respondents.

OPINION
HOLLENHORST, J.

Plaintiff Posey, owner of a condominium at Lake Arrowhead, filed this action against Mr. and Mrs. Leavitt, owners of another condominium in the same development. Mr. Posey contended that the Leavitts built a deck extension on the side of their condominium that encroached the common area and obstructed his view. Mr. Posey also sued his condominium association for breach of fiduciary duty.

Certain issues were presented to the jury on special interrogatories, and the trial court entered a judgment in favor of the Leavitts and against Mr. Posey. However, the jury awarded Mr. Posey $30,000 damages against the association.

ISSUES

Mr. Posey appeals, contending that the trial court failed to rule on certain equitable issues and misconceived its duty in ruling on the claims for injunctive relief. Specifically, he contends that the trial court erred in submitting all legal and equitable issues to the jury, in failing to consider that the jury’s decision was only advisory on the equitable issues, in failing to make its own factual determinations, and in failing to issue a statement of decision. Secondly, he argues that the stipulation of the parties that the deck encroached on the common area should have led to findings of trespass and nuisance as a matter of law. He also contends that the Leavitts cannot rely on the board’s ratification of its consent to the deck construction. Mr. Posey also raises issues concerning jury instructions.

THE COMPLAINT

In order to understand Mr. Posey’s contentions, we first review the allegations of the complaint and the manner in which they were presented to [1241] the jury. The first three causes of action are against the Leavitts for wilful trespass, negligent trespass, and nuisance. For relief, plaintiff seeks an order requiring removal of the deck extension and damages.

The fourth cause of action is against the homeowners association for breach of fiduciary duty and breach of the covenant of good faith and fair dealing. In that cause of action, Mr. Posey contended that the association breached its fiduciary duties by approving the deck extension, and in not requiring its removal. He sought damages against the association.

TRIAL COURT PROCEEDINGS

At the beginning of trial, the Leavitts made a motion for judgment on the pleadings and argued that the court should decide whether a nuisance existed before submitting the damages issues to the jury.^[FN.1] They urged that there was no nuisance and no trespass. The trial court did not deny the motion at that time, but stated that it felt that the case presented issues that should go to the jury. Subsequently, the trial court denied the motion on grounds that the pleadings stated sufficient causes of action to proceed.

The Leavitts’ counsel also moved at the beginning of the trial to bifurcate the trial so that the issue of nuisance would be first heard by the court. Although the trial court stated that it agreed that it would decide the nuisance issue, it denied the motion.

In his brief, Mr. Posey states that, at the time jury instructions were discussed, the trial court decided that it would not make a preliminary decision on the trespass and nuisance issues, but would submit these issues to the jury. Unfortunately, the court’s reasoning is unknown because this discussion was not reported.

The jury was asked to make 15 special findings. These questions included whether the board of the association had consented and/or ratified the deck improvement, whether the defendants had relied on the statements made to them, and whether the association had violated its fiduciary duties. Mr. Posey specifically objects to the asking of three questions: (1) “8) Was the use of Mr. and Mrs. LEAVITTS [sic] deck extension an interference, substantial and unreasonable, such as would be offensive to a normal person?” (The jury found it was not by a vote of 10-2); (2) “13) Did defendants, DAVID & AILEEN LEAVITT intentionally and willfully trespass on the `Common [1242] Area’?” (The jury found they did not by a vote of 11 to 1); and (3) “14) Did defendants David & Aileen Leavitt negligently trespass on the `Common Area’?” (The jury found they did not by a vote of 9 to 3.) The jury answered these questions as shown and found for the Leavitts generally.

Following the jury’s decision, a hearing was held on December 8, 1987, ostensibly on an equitable indemnity cross-complaint between the Leavitts and the association. At that time, the trial court also ruled on Mr. Posey’s request for injunctive relief, even though his counsel was absent. The court said: “I am prepared to rule on that. And my ruling would be that there is no injunctive relief. Based upon the jury’s finding and the jury’s verdict, there is no justification for any injunctive relief being granted by this court and would deny the plaintiffs’ request in that regard.”

At a subsequent hearing, Mr. Posey’s counsel sought to reargue the request for injunctive relief. The court granted his request, saying “I have to tell you that I’m probably a little bit predisposed in this matter because I had [previously ruled on the matter] and I don’t feel that I was inclined to violate the — or set aside the jury’s verdict as far as their opinion in order to grant any injunctive relief, but I’m willing to listen to your argument.” Mr. Posey’s counsel then requested that “the court try to set aside what it’s previously done and consider the points and authorities I’ve cited. [¶] THE COURT: I intend to do that.” Mr. Posey’s counsel then argued that his understanding was that the court would decide the equitable issues and that the jury would decide the damage claims against the association. Mr. Posey’s counsel argued that it was error for the trial court to submit the equitable issues to the jury, but that “I think that the appropriate thing for the court to do at this time is to consider the evidence that was presented in its own mind and make its own independent determination on the equitable issues involved.” He also argued that the jury was mistaken in the law if it concluded that the Leavitts’ reliance on the association’s alleged consent eliminated the trespass. He urged the court to correct the jury’s alleged mistake of law.

The Leavitts’ counsel responded that the jury was correct if it found that the consent of the association eliminated the trespass.

After further arguments on the merits of the issue, and the cross-complaint for implied indemnity against the association, the trial court said: “It will be under submission. [¶] I would only comment that, if the court really had any equitable power it could use, the best thing it could do would be to put the clock back to the Spring of 1981 and let all these things transpire over again. [¶] If there ever was a classic case of a no-win situation, this is also it.”

[1243] The trial court then issued its ruling on January 21, 1988. Characterizing the motion as a motion for reconsideration of the December 8, 1987, ruling, it denied reconsideration ^[FN.2] Six days later, the Leavitts filed a request for a statement of decision. Twelve days later, Mr. Posey filed a similar request. (1) (See fn. 3.) The trial court denied the requests as being untimely.^[FN.3] Accordingly, we have no record of the reasons for the trial court’s decision other than the comments quoted above.

DISCUSSION

Plaintiff was plainly seeking equitable relief against the Leavitts in the form of an injunction to remove the encroachment. (2) Injunction is a remedy for the torts of trespass and nuisance. (See, generally, Code Civ. Proc., §§ 525, 526, 731; Civ. Code, § 3501; 5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, §§ 604, 607, pp. 704, 706; 11 Witkin, Summary of Cal. Law (9th ed. 1990) Equity, §§ 82, 121, 126, pp. 760-761, 802-803, 807-808; 5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, §§ 773-774, pp. 217-219.) The Leavitts defended on grounds that the consent of the association eliminated any trespass or nuisance.

(3) “Nuisance is distinguishable from trespass in that the mere intentional entry on land may violate the right of exclusive possession and create a right of action for trespass, while conduct or activity cannot amount to a nuisance unless it substantially interferes with the use and enjoyment of the land.” (11 Witkin, Summary of Cal. Law, supra, Equity, § 125, p. 806.) (4) An action to abate a nuisance is an action in equity. (Meek v. DeLatour (1905) 2 Cal. App. 261, 263 [83 P. 300],disapproved on other grounds in Robinson v. Puls (1946) 28 Cal.2d 664, 666 [171 P.2d 430].)

(5) An encroachment is usually both a trespass and a nuisance. (11 Witkin, Summary of Cal. Law, supra, Equity, § 126, pp. 807-808.) The parties here stipulated that an expert witness would testify that all of the areas outside the buildings themselves, including decks and stairs, encroached [1244] on the common area. The issue of encroachment was therefore removed from the case, and did not need to be decided by the court or jury.

(6) Since the action was an equitable action, there was no right to a jury trial on the consent defense.^[FN.4] (Wolford v. Thomas (1987) 190 Cal. App.3d 347, 353-354 [235 Cal. Rptr. 422]; Bank of America v. Greenbach (1950) 98 Cal. App.2d 220, 230 [219 P.2d 814].) (7) “Where a jury trial is not a matter of right, but is nonetheless permitted, the verdict rendered is advisory only. The court may accept or reject it, and, irrespective of the verdict, must make findings to complete the record.” (Estate of Kreher (1951) 107 Cal. App.2d 831, 837 [238 P.2d 150]; Estate of Cazaurang (1946) 75 Cal. App.2d 217, 225 [170 P.2d 694].) If there is no right to a jury trial, a party must file a motion to have any issues tried to the jury, but the jury’s decision is advisory. (Cal. Rules of Court, rules 230, 231.) While our record is incomplete on this issue, it is clear that plaintiff properly pointed out to the trial court that any error in submitting issues to the jury would be cured if the trial court adopted the jury’s findings as its own. (Whiting v. Squeglia (1924) 70 Cal. App. 108, 114 [232 P. 986].) Nevertheless, the trial court did not do so.

Here, the jury decided that the Leavitts did not obtain the required written consent of the board of directors at a meeting on June 25, 1981, but that the board subsequently ratified the deck construction and the chairman of the board led the Leavitts to reasonably believe they had board approval. Somewhat inconsistently, the jury then found that a subsequent letter by a member of the board ratified the prior acts of the board and constituted “a confirmation of `written consent.'”

Assuming that the jury found that consent had been given, and the trial court agreed, the legal question becomes whether the board had the power to consent to a trespass on the common area by a homeowner. The resolution of this question turns on the reconciliation of two different doctrines.

(8a) Mr. Posey contends that, under principles of real estate law, as applied by the condominium documents here, he was a tenant in common [1245] of the common area with the other homeowners, and he therefore had the right to directly enforce the equitable servitudes binding the homeowners. They primarily rely on Civil Code sections 1351 and 1354. Civil Code section 1351, subdivision (f) defines a condominium to consist “of an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit….” Civil Code section 1354 states: “The covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both.”^[FN.5]

The Leavitts contend that, under real estate and corporate law principles, the homeowner’s association owned the common area, and that the board of directors therefore had the power to sell, transfer, or, in this case, authorize an encroachment into the common area. The Leavitts point out that the developers deeded the common area (lot 56) directly to the homeowners association, a nonprofit corporation. They argue that the homeowners association was therefore the owner of the common area and it could consent to the encroachment.

The articles of the association empower it to “sell, lease, transfer, dedicate for public use or otherwise dispose of real or personal property in connection with the affairs of the Association.” The Leavitts contend that the power to sell must include the lesser power to consent to an encroachment.

The bylaws of the association give the board of directors the power to “exercise for the Association all powers, duties and authority vested in or delegated to this Association and not reserved to the membership by other provisions of these By-Laws, the Articles of Incorporation, or the Declaration.”

(9) (See fn. 6.) The declaration also contemplates ownership of the common area by the association, with the owners having easements over the common area.^[FN.6] It therefore provides: “Every Owner shall have a right and [1246] easement of enjoinment [sic, enjoyment] in and to the Common Area which will be appurtenant to and shall pass title to every Lot….”^[FN.7] The declaration also provides that the percentage of ownership of the common area shall not be changed without the consent of all of the owners.

(8b) The parties here focused on a section of the declaration which states: “No Owner shall, without first obtaining written consent of the Board, make or permit to be made any structural alteration or structural improvement in or to his Lot or in or to any other part of the Project. No Owner shall take any action or permit any action to be taken that will impair the structural soundness or integrity or safety or [sic, of] any building or other structure in the Project or impair any easement or right or personal property which is a part of the Project, without the written consent of all Owners.” The Leavitts argued that, having obtained the written consent required by the first sentence, their project met the requirements of the declaration, even though it was not approved by the other homeowners.

We disagree for two reasons. Under the second sentence, an encroachment into the common area impairs the easements of the other owners over the common area, and thus requires the consent of all of the homeowners.^[FN.8]

Secondly, although the Leavitts contended that board approval was sufficient because the board owns the common area, it is not necessary that the plaintiff own the property. All plaintiff needed to do was to show a possessory right superior to the right of the trespassers. (5 Witkin, Cal. Procedure, supra, Pleading, §§ 582, 586, pp. 48-49, 51-52.) Plaintiff clearly had such a right here.^[FN.9]

(10a) Under well-accepted principles of condominium law, a homeowner can sue the association for damages and an injunction to compel the association to enforce the provisions of the declaration. (Cohen v. Kite Hill Community Assn. (1983) 142 Cal. App.3d 642 [191 Cal. Rptr. 209].) (8c) More importantly here, the homeowner can sue directly to enforce the declaration. “The typical declaration provides that the association or any owner has the right to enforce the declaration by any proceeding at law or in equity…. Ordinarily the declaration would be enforced by the association. However, in the event of that body’s failure or inability to act because of divergence of opinion among the members, any one of the unit/lot owners may take legal action to enforce the restrictions against what he considers to be a violation by one or more other unit/lot owners.” (Hanna, Cal. Condominium Handbook (2d ed. 1986) § 14.58, p. 430.)^[FN.10]

(10b) “Any owner who believes that the association is not discharging its duty to enforce the restrictions has an individual cause of action against the association and the person who has violated the restrictions….” (7 Miller & Starr, Cal. Real Estate,supra, § 20:58, pp. 128-131; 4 Witkin, Summary of Cal. Law (9th ed. 1988) § 495, pp. 672-673.)

(8d) We therefore conclude that the trial court should have initially decided at least the trespass cause of action in favor of the plaintiff, and that, since the consent of the board of directors was insufficient authorization for the encroachment, the trial court should not have submitted any issues to the jury. The parties initially viewed the jury as the fact-finder on the damage claims against the association. If it had been limited to this role, the trial would have been substantially shortened and error avoided.

(11) Despite this conclusion, we do not find that Mr. Posey should automatically receive the injunction he seeks. As the Leavitts point out, theirs is a small encroachment and the governing principles were long ago summarized in Christensen v. Tucker (1952) 114 Cal. App.2d 554 [250 P.2d 660]: “It is our view that the better reasoned cases hold that in encroachment cases the trier of fact possesses some discretion in determining whether to grant or to deny the mandatory injunction. In exercising that discretion, and in weighing the relative hardships, the court should consider various factors. It starts with the premise that defendant is a wrongdoer, and that plaintiff’s property has been occupied. Thus, doubtful cases should be decided in favor of the plaintiff. In order to deny the injunction, certain factors must be present: 1. Defendant must be innocent — the encroachment must not be the result of defendant’s willful act, and perhaps not the result [1248] of defendant’s negligence. In this same connection the court should weigh plaintiff’s conduct to ascertain if he is in any way responsible for the situation. 2. If plaintiff will suffer irreparable injury by the encroachment, the injunction should be granted regardless of the injury to defendant, except, perhaps, where the rights of the public will be adversely affected. 3. The hardship to defendant by the granting of the injunction must be greatly disproportionate to the hardship caused plaintiff by the continuance of the encroachment and this fact must clearly appear in the evidence and must be proved by the defendant. But where these factors exist, the injunction should be denied, otherwise, the court would lend itself to what practically amounts to extortion.” (Id., at pp. 562-563; see, generally, 4 Witkin, Summary of Cal. Law, supra,Real Property, § 426, pp. 608-609; 11 Witkin, Summary of Cal. Law, supra, Equity, §§ 153-158, pp. 833-840): “Even the early California cases recognized the defense of balancing conveniences where the nuisance consisted of a slight encroachment of buildings on adjoining property.” (11 Witkin, supra, at p. 835.)

After citing this rule, defendants apply it to the facts of this case and conclude that the trial court properly denied injunctive relief. Thus, they contend that they acted in good faith and in reliance on the consent given them by the board of directors of the association.^[FN.11] Secondly, they argue that Mr. Posey will not sustain any irreparable harm if the deck extension is not removed, particularly since he has no enforceable right to a view. Third, they contend that the hardship and cost to them from a removal of the deck extension outweighs the insignificant obstruction of Mr. Posey’s view if the deck extension remains.

The problem with defendants’ argument is that, while the trial court could have made these determinations in their favor, it did not.^[FN.12] The trial court’s comments quoted above show that it did not decide the case under its equitable jurisdiction, did not independently evaluate the evidence, did not specifically adopt the jury’s findings, and did not weigh the relative hardships to decide whether to grant or deny the injunction. Even the cases defendants cite to support their position also support the proposition that [1249] the case will be reversed and remanded if the trial court has failed to weigh the relative hardships and make proper findings. (Brown Derby Hollywood Corp. v. Hatton, supra, 61 Cal.2d 855; D’Andrea v. Pringle (1966) 243 Cal. App.2d 689 [52 Cal. Rptr. 606]; Christensen v. Tucker, supra, 114 Cal. App.2d 554.)

(12) Anticipating this problem, defendants rest on the presumption in favor of the validity of a judgment and contend that a correct decision should be upheld even if it is based on the wrong reasons.^[FN.13] They argue that the judgment is valid on its face, and, since there was no statement of decision, it will be presumed that the trial court found all facts necessary to support the judgment, citing In re Marriage of Ditto(1988) 206 Cal. App.3d 643 [253 Cal. Rptr. 770].

We reject this argument for two reasons. First, unlike Ditto, we have found that the trial court was properly asked for a statement of decision and failed to give it. Second, the judgment here contains the special findings of the jury quoted above, but no reasons for the denial of equitable relief. Because of the inconsistencies in the findings, we cannot presume that the judgment is regular. Since the trial court’s comments quoted above indicate that the trial court did not exercise its discretion, we cannot presume that it did.

Since the trial court failed to exercise its discretion in this regard, the case must be remanded to allow it to do so. However, for its guidance, we briefly discuss some of the other issues raised by the parties, and their effect on the trial court’s future deliberations. (See, generally, 5 Miller & Starr, Cal. Real Estate, supra, § 14:13, pp. 328-334.)

Alleged Right to a View.

(13) In applying the Christensen test, the trial court will generally grant the injunction if it finds that the plaintiff will suffer irreparable injury from the encroachment. To decide whether the plaintiff here will suffer irreparable injury, the trial court must decide the threshold question of whether plaintiff had a right to his view.

Generally, there is no such right. Venuto v. Owens-Corning Fiberglas Corp. (1971) 22 Cal. App.3d 116 [99 Cal. Rptr. 350], states the general rule: “Although, in the light of the foregoing principles, it would appear that an interference with the view from land may amount to a nuisance, the courts have held that a building or structure cannot be complained of as a nuisance [1250] merely because it obstructs the view from neighboring property.” (Id., at pp. 126-127.) The jury was correctly, although unnecessarily, instructed here that, under California law, a landowner has no right to an unobstructed view over adjoining property. (See, also, Wolford v. Thomas, supra,190 Cal. App.3d 347; Pacifica Homeowners’ Assn. v. Wesley Palms Retirement Community (1986) 178 Cal. App.3d 1147, 1152 [224 Cal. Rptr. 380]; Katcher v.Home S. & L. Assn. (1966) 245 Cal. App.2d 425 [53 Cal. Rptr. 923].)

“As a general rule, a landowner has no natural right to air, light or an unobstructed view and the law is reluctant to imply such a right. [Citations.] Such a right may be created by private parties through the granting of an easement [citations] or through the adoption of conditions, covenants and restrictions … or by the Legislature [citations].” (Pacifica Homeowners’ Assn. v. Wesley Palms Retirement Community, supra, 178 Cal. App.3d 1147, 1152, italics added.)

The declaration here does not contain a specific provision giving homeowners a right to existing views. It is also true that, as defendants pointed out at oral argument, the courts are reluctant to imply such a right. Nevertheless, the practical effect of enforcing the provisions of the declaration would be to give protection to plaintiff’s existing view.

For example, plaintiff relied on general language in the declaration to support his contention that a right to a view could be found in the declaration. He pointed out that the declaration refers to an easement of “enjoinment,” which is presumably intended to be the right of quiet enjoyment stated in Civil Code section 1463. (See, generally, Petroleum Collections Inc. v. Swords (1975) 48 Cal. App.3d 841 [122 Cal. Rptr. 114].) Such a right is a running covenant, enforceable as an equitable servitude. (Civ. Code, § 1462; Cal. Condominium and Planned Development Practice (Cont.Ed.Bar 1984) §§ 1.9, pp. 15-16, 8.42-8.44, pp. 666-668.) The declaration also requires owners to adhere to the rules of the association. These rules require the common area to remain unobstructed, and the effect of strictly enforcing the right of quiet enjoyment or these rules would be to remove the alleged obstruction to plaintiff’s view.

On the other hand, as defendants point out, the declaration allows any owner to use the common area “in accordance with the purposes for which it is intended, so long as he does not hinder or encroach upon the lawful rights of the other Owners.” (Declaration, par. 6, pp. 7-8.) Defendants argue that, since a view is not generally a “lawful right,” plaintiff’s only right is the right to be free from an unreasonable interference with the use and enjoyment of his property. Although the jury found no such unreasonable [1251] interference here, the trial court could find that the encroachment itself was an unreasonable interference with the intended uses of the common area.

Accordingly, in determining whether plaintiff has suffered irreparable injury, the trial court should not consider deprivation of a view, per se, as an injury. It should, however, consider the total effect of the encroachment and specifically whether it constitutes an unreasonable interference with plaintiff’s rights under the declaration and rules. In interpreting the documents, the trial court should apply a rule of liberal interpretation to facilitate the operation of the development. (Civ. Code, § 1370; 7 Miller & Starr, Cal. Real Estate, supra, § 20:57, pp. 126-128.)

If the trial court finds that the defendants are innocent and that plaintiff will not suffer irreparable injury, the court should then proceed with evaluating the relative hardships under the third prong of the Christensen test. (Christensen v. Tucker, supra, 114 Cal. App.2d 554.) The considerations discussed in this section would also apply in balancing the relative hardships.

Interference With Use.

(14) In considering irreparable injury and relative hardships, the trial court should not consider the Leavitts’ use of the deck extension.

Defendants contend that there is no nuisance because the jury found that the use of the deck extension by the Leavitts was not “an interference, substantial and unreasonable, such as would be offensive to a normal person.” Thus, they cite cases such as Venuto v. Owens-Corning Fiberglas Corp., supra, 22 Cal. App.3d 116, 126-127, which discuss the noninvasive activities that may constitute a nuisance. Venuto states: “Under the law of nuisances, where personal discomfort is the basis of the complaint the test of liability is the effect of the alleged interference on the comfort of normal persons of ordinary sensibilities in the community.” (Id., at p. 126.) However, these cases are not applicable here because this is not a case of noninvasive activities that constitute a nuisance. The encroachment is an obstruction to the free use of the common area, and is itself the nuisance. (Civ. Code, § 3479; 11 Witkin, Summary of Cal. law, supra, Equity, § 156, pp. 835-837.) The trial court therefore need not consider whether the Leavitts’ use of the deck extension interfered with the Mr. Posey’s use of his deck in applying the balancing test.

Effect of Prior Award of Money Damages.

(15) The trial court can consider injunctive relief despite the fact that the jury awarded Mr. Posey money damages against the association.

[1252] Defendants contend that the trial court cannot award injunctive relief because Mr. Posey was awarded money damages against the association. They argue that the damages were for the diminishment in value of the Posey property, and that, having been awarded such damages, Mr. Posey cannot obtain injunctive relief.

We disagree. The cause of action against the association was for breach of fiduciary duty. (Cf. Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 513-514 [229 Cal. Rptr. 456, 723 P.2d 573, 59 A.L.R.4th 447].) Although Mr. Posey claimed a diminishment in value of approximately $50,000, it is not clear that damages were awarded for that diminishment. The jury may well have awarded the $30,000 to Mr. Posey, payable by the association, to compensate him for the costs of bringing an action that the association should have brought. Damages were the legal remedy for the breach of fiduciary duty, while injunctive relief was the equitable remedy sought for the trespass and nuisance. (Rest.2d, Torts, § 822, com. d.) Defendants’ argument also fails because Code of Civil Procedure section 731 allows a plaintiff to both enjoin or abate a nuisance and also recover damages. The trial court remains free, on remand, to issue the requested injunction, to award damages in lieu of an injunction, or to find for defendants.

DISPOSITION

The judgment is reversed and the case is remanded with instructions to the trial court to exercise its discretion to decide whether or not to issue an injunction by applying the tests stated in Christensen v. Tucker, supra, 114 Cal. App.2d 554. In making this determination, the trial court should consider whether or not the encroachment by the Leavitts was innocently made, whether Mr. Posey will suffer irreparable injury if the injunction is not issued, and the relative hardships to the parties caused by granting or denying the injunction. The trial court should also make and enter a statement of decision in accordance with Code of Civil Procedure section 632. Plaintiff is to recover costs on appeal.

Dabney, Acting P.J., and McKinster, J., concurred.

[FN. 1] The record is not complete because the trial briefs and written motions were not included in the record. The transcript indicates that the parties and the court generally accepted the principle that the trial court would decide the trespass and nuisance issues, and the jury would determine monetary damages.

[FN. 2] Defendants correctly note that plaintiff then filed an improper notice of appeal dated March 18, 1988, from the minute order instead of the judgment. Defendants properly moved to augment the record to include the judgment filed July 25, 1988, and suggest that we must treat the appeal as timely filed pursuant to California Rules of Court, rule 2(c). While such treatment is discretionary, not mandatory, we agree with defendants that we should consider the appeal on its merits. We note, however, that the perfection of the appeal, including obtaining the judgment and including it in the record on appeal, is properly the burden of the appellant, not the respondent.

[FN. 3] The trial court apparently counted the time from its earlier decision in December, despite its statement that it would set aside its previous decision and consider the matter over again. While there is some question as to the timeliness of the plaintiff’s request in February, the Leavitts’ request was clearly filed in time. The trial court therefore erred in denying the request for a statement of decision. (Code Civ. Proc., § 632.)

[FN. 4] The action could also be construed as an action for the recovery of real property, i.e., an ejectment action. If so, factual issues raised by the consent defense would be properly triable by the jury: “In actions for the recovery of … real … property, with or without damages, … an issue of fact must be tried by a jury, unless a jury trial is waived, or a reference is ordered, as provided in this Code. Where in these cases there are issues both of law and fact, the issue of law must be first disposed of.” (Code Civ. Proc., § 592.) In our view, the action was essentially a trespass action, and the third sentence of section 592 applies: “In other cases, issues of fact must be tried by the Court, subject to its power to order any such issue to be tried by a jury….” Since the action against the Leavitts was essentially equitable, the jury’s findings were only advisory.

[FN. 5] The declaration here was recorded in 1973. At that time, similar language was contained in former Civil Code section 1355. In 1985, the statutes were reorganized by the Davis-Stirling Common Interest Development Act (Stats. 1985, ch. 874) and the quoted language was adopted.

[FN. 6] It also inconsistently provides that “Each Owner shall own an undivided interest in the Common Area, including Limited Common Area. No such percentage shall be altered without the consent of all Owners….” Plaintiff, as a member of the association, either owned the common area as a tenant in common with the other homeowners or owned the easement interest discussed in the text. (Civ. Code, § 1351, subd. (l); former Civ. Code, § 1353, subd. (b).) Either interest is sufficient to support his trespass action. (See, generally, 7 Miller & Starr, Cal. Real Estate (2d ed. 1990) § 20:51, p. 117; 5 Miller & Starr, Cal. Real Estate, supra, § 14.10, pp. 323-325.)

[FN. 7] Interestingly enough, this section also provides that the easement is subject to the right of the association to convey the common area to a public agency but that such a conveyance requires a 2/3 vote of the owners. The declaration fails to mention the general right to transfer real property which is contained in the articles of incorporation, and which is unrestricted.

[FN. 8] The declaration also provides that “each Owner may use the Common Area, excepting Limited Common Area, in accordance with the purposes for which it is intended, so long as he does not hinder or encroach upon the lawful rights of the other Owners.” Obviously, as the parties agreed, there was an encroachment here.

[FN. 9] An analogous situation would be where a landlord consents to a third person’s activities on the property that interfere with a tenant’s interests. The tenant can still sue the third person for trespass on the tenant’s estate. (Brown Derby Hollywood Corp. v. Hatton (1964) 61 Cal.2d 855, 858; 5 Miller & Starr, Cal. Real Estate, supra, § 14.10, pp. 323-325.)

[FN. 10] The declaration here provides that: “Each Owner shall comply strictly with the provisions of this Declaration, and the Rules as the same may be lawfully amended from time to time, and with decisions adopted pursuant to said Declaration and Rules, and failure to comply shall be grounds for an action to recover reasonable sums due for damages or for injunctive relief, or both, maintainable by the Board or Manager in behalf of the Owners, or in a proper case, by an aggrieved Owner. …” (Italics added.)

[FN. 11] At oral argument, defendants also argued that there was a past practice of the board approving deck extensions, and that this history was relevant in interpreting the contract created by the recorded declaration. However, the defendants failed to point out that the declaration contains a waiver clause which essentially provides that the failure to insist on strict performance of a provision of the declaration is not a waiver of that provision. (Declaration, par. 15, pp. 18-19.)

[FN. 12] Defendants also rely on the familiar rule that the exercise of the trial court’s discretion will be reversed only upon a showing of abuse of discretion. Again, the problem for defendants is that the record does not show that the trial court did exercise its discretion or did adopt the findings of the jury as its own. (Cf. Lippold v. Hart (1969) 274 Cal. App.2d 24 [78 Cal. Rptr. 833].)

[FN. 13] The most recent case relied on by defendants, Novicke v. Vons Grocery Store (Cal. App.) has been ordered depublished by the Supreme Court.

Rancho Sante Fe Association v. Dolan-King

(2004) 115 Cal.App.4th 28

[Architectural Control; Architectural Standards] A HOA’s architectural standards could be used to define undefined architectural restrictions/terms contained in the CC&Rs.

Law Offices of Robert R. Massey and Robert R. Massey for Defendant and Appellant.
Musick, Peeler & Garrett, Michael J. Hickman; Lucas, Mullany, Boyer & Haverkamp and Richard L. Boyer for Plaintiff and Respondent.

OPINION
HUFFMAN, Acting P. J.-

Patricia Dolan-King, a homeowner in the residential community of Rancho Santa Fe, is the defendant and appellant in this action to enforce a protective covenant, brought by the Rancho Santa Fe Association (the Association). The Association obtained judgment in its favor for injunctive and declaratory relief and an award of attorney fees, based on Dolan-King’s construction of a fence around her property without the appropriate permits or compliance with other Association regulatory criteria for the definition of “major” or “minor” construction. Dolan-King appeals, contending that the trial court erred in directing a partial verdict on the validity of certain land use regulations enforced by the Association, and that the jury verdict resulting after the partial directed verdict is unsupported by the evidence or the law. She also contends that attorney fees should not have been awarded. (Civ. Code, § 1354, subd. (f).) fn. 1

Our examination of the record leads us to conclude that the trial court was correct in finding the challenged Rancho Santa Fe Regulatory Code provisions (the regulatory code) are valid, concerning the definition of the terms major and minor construction, and the subsequent jury verdict is supported by the evidence. We affirm the judgment and order of attorney fees to the Association as the prevailing party.

FACTUAL AND PROCEDURAL BACKGROUND

In 1996, Dolan-King purchased a home on an approximately three-acre lot in Rancho Santa Fe, located at 6840 El Camino Del Norte. Property development in Rancho Santa Fe is subject to the Rancho Santa Fe Protective[33]Covenant (Covenant), adopted and recorded in 1928 and amended at various times over the years. At the time she purchased her property, there was an original three-rail corral-type fence on it. Dolan-King originally proposed extensive remodeling plans (room addition structures) and a reconstructed fence composed of stucco columns joined by horizontal wood beams, and sought the appropriate permits from the Association. The Association reviewed those plans and denied permission to proceed with them. The story of that land use application and its processing by the Association is told in a published opinion, Dolan-King v. Rancho Santa Fe Assn.(2000) 81 Cal.App.4th 965 (referred to as our prior opinion or “Dolan-King I“).

In that prior action, Dolan-King had sought a judicial determination of the validity and enforceability of certain unrecorded guidelines, which provided the criteria and restrictions used by the art jury of the Association to reject her applications as to both the room additions and the proposed fence project. (Dolan-King I, supra,81 Cal.App.4th at p. 973.) Although Dolan-King had prevailed at trial, on appeal, the Association obtained reversal of that judgment. This court concluded that “the relevant provisions of the protective covenant are enforceable equitable servitudes, and, with regard to Dolan-King’s improvement applications, Dolan-King failed to meet her burden to show the Board’s decisions were unreasonable and arbitrary under the circumstances.” (Id. at p. 970.)

While that appeal was pending, Dolan-King caused to be constructed around the perimeter of her property a wrought iron fence approximately five feet in height and 800 feet long, with posts approximately every eight feet. She testified at trial that under her interpretation of paragraph 48 of the Covenant, she thought that this fence constituted minor construction, pursuant to the following Covenant definition: “The building of fences, walls, and similar structures, are divided into two classes: First, major construction; second, minor construction.The property owner may proceed with what he definitely thinks is a minor construction without submitting plansand specifications to the Art Jury as provided above, subject to the continuing jurisdiction of the Association through its Board of Directors to hear complaints against said minor construction . . . .” (Emphasis added.)

The Association, through its manager, sent her a letter June 3, 1999 informing her this fence was major construction under the regulatory code, section 31.0302, and that she should seek a permit or tear down the fence, or be subject to the imposition of a $500 lien for noncompliance with Covenant provisions and the revocation of her privileges to use Association facilities.

When she did not seek a permit or tear down the fence, the Association sent her a notice that a hearing would be held August 5, 1999 before the[34]Board regarding the revoking of her privileges to use Association facilities and the imposition of the $500 assessment. (The lien was released shortly before trial.) That hearing was held and those actions were taken by the Board. The minutes of the Board meetings state that the fence being discussed was not the one involved in the prior litigation, such that there was any approval of it pending that appeal.

The Association then brought this action for injunctive and declaratory relief to have Dolan-King seek the proper permits or remove the fence. Attorney fees were sought under section 1354. She responded with her cross-complaint for breach of contract, breach of fiduciary duty, slander of title, and related relief.

At trial call, various motions in limine were submitted and rulings made. As relevant here, the trial court refused Dolan-King’s offer of proof to provide traffic and safety evidence about the traffic in the area of her property as it pertains to fencing.

At the outset of trial, Dolan-King’s attorney agreed with the trial court that the validity of the regulatory code was subject to a ruling on its validity as a matter of law, based upon the governing documents of the Association. He argued that the Association had exceeded its powers by enacting the portions of the regulatory code dealing with major or minor construction, in contravention of paragraph 48 of the Covenant. Subsequently, the trial court rendered a statement of decision rejecting this argument and upholding the validity of the pertinent provisions of the regulatory code. This resulted in the entry of a partial directed verdict in favor of the Association. In its order, the court explained its reasoning as follows: Based on the relevant documentary evidence associated with this matter and the argument by the parties, the court found that the fence erected on the Dolan-King’s property was “major construction” as that term is used in the Covenant and the regulatory code. Specifically:

“Paragraph 48 of the Rancho Santa Fe Protective Covenant provides:

The building of fences, walls, and similar structures, are divided into two classes: First, major construction; second, minor construction. The property owner may proceed with what he definitely thinks is a minor construction without submitting plans and specifications to the Art Jury as provided above, subject to the continuing jurisdiction of the Association through its Board of Directors to hear complaints against said minor construction and to hear, try and determine the said complaints upon due notice to the defending property owner. Tennis courts and swimming pools are major construction.”

The order continued, “Section 31.0301 of the Rancho Santa Fe Regulatory Code provides: Fences and Walls. All fences and walls shall constitute ‘Major[35]Construction.'” (Although the court clearly intended to cite the fence and wall provisions, it erroneously cited to section 31.0301 in this respect; the actual language involved is not disputed and we may properly cite these provisions as shown in the record, section 31.0302.) The trial court then referred to section 31.0302.01 as specifying that “Wooden split-rail fences not exceeding 36″ in height, and consisting of two or fewer rails, and which observe all set-back requirements established for structures in the Protective Covenant, shall be considered minor construction.”

The trial court then concluded that pursuant to paragraph 48 of the Covenant and section 31.0302.01 of the regulatory code, “the only fence which constitutes ‘minor construction’ is a wood pasture rail fence with two rails, 36″ or less in height. Based on the Court’s review of the evidence and interpretation of Paragraph 48 of the Rancho Santa Fe Protective Covenant in conjunction with Sections 31.0302 and 31.0302.01 of the Rancho Santa Fe Regulatory Code, the subject fence constructed by defendant Patricia Dolan-King constituted ‘major construction.'”

The remaining issues of the complaint and cross-complaint, concerning compliance with the Covenant, were then submitted to the jury. It heard testimony and evidence about the Association’s procedures used to respond to the building of this wrought iron fence, and Dolan-King’s own testimony and expert testimony to support her belief that the fence constituted minor construction. Dolan-King also presented evidence that another landowner (Cloverlane Associates) had received a hearing in 2001 pursuant to paragraph 48 of the Covenant, when objections to a fence it built were raised. She argues that she had been subject to disparate treatment, because the Cloverlane fence issues had been dealt with more formally.

After deliberations, the jury returned a verdict in favor of the Association, finding it had not breached the Covenant provisions as alleged, and against Dolan-King on her cross-complaint. The special verdict provided that the cross-complaint was dismissed, and:

“2. The fence erected by defendant on or about Memorial Day 1999 (‘Subject Fence’) is ‘major construction’ within the meaning of that term in the Rancho Santa Fe Protective Covenant (‘Covenant’) and the Rancho Santa Fe Regulatory Code (‘Regulatory Code’).

“3. The Subject Fence could not be constructed consistent with the Covenant and the Regulatory Code without first obtaining a permit from the Rancho Santa Fe Association in accordance with the procedures set forth in the Covenant and the Regulatory Code.

“4. The Subject Fence was constructed without obtaining a permit from the Rancho Santa Fe Association.[36]

“5. The construction of the Subject Fence without a permit was a violation of the Covenant.

“6. The Subject Fence remains on the property of defendant Patricia Dolan-King as of the date of the jury verdict herein.

“7. In order to comply with the Covenant, defendant Patricia Dolan-King must remove the Subject Fence.”

At further proceedings, the Association submitted a proposed form of judgment in the alternative, that Dolan-King should seek the appropriate permits or remove the fence. She objected that an alternative form of judgment was inappropriate. The judgment signed by the trial court ordered that she was “permanently enjoined from maintaining the Subject Fence on the ‘Property’ . . . . To that end, defendant Patricia Dolan-King is enjoined and ordered to remove the Subject Fence from the Property within 30 days of the date of entry of this Judgment.”

In subsequent proceedings, the Association’s motion for attorney fees was granted in the amount of $318,293.50. The ruling stated that “the overall average hourly rate for the Association’s attorneys in the amount of $221 is reasonable in light of the nature of the litigation, the difficulty of the litigation, the skill required and employed by the Association’s attorneys, and the success of the Association in this litigation.” Also, an award of fees was included to reflect the amount of $12,007 for paralegal time, as necessary for the support of the Association’s attorneys.

Dolan-King appeals the judgment and order.

DISCUSSION

We first discuss the partial directed verdict which upheld the validity of the challenged regulatory code provisions, in light of the standards set out in prior litigation arising under this Covenant. (Pts. I & II, post.) We will then turn to Dolan-King’s arguments that the application of these regulations was unreasonable, as reflected in the jury verdict. We also evaluate the judgment in terms of the injunctive relief ordered and the attorney fees ordered. (Pt. III, post.)

I. APPLICABLE STANDARDS GLEANED FROM PRIOR LITIGATION

Much of the groundwork for this appeal has been laid by our prior opinion, Dolan-King I, which dealt with the validity of parallel provisions enacted by[37]the Association, the unrecorded guidelines followed by the Association’s art jury. Here, the issues concern the unrecorded regulatory code, but much of the same basic analysis is appropriate, as we next explain.

First, however, we must acknowledge the guidance provided by another prior opinion issued by this court, Ticor Title Insurance Co. v. Rancho Santa Fe Assn.(1986) 177 Cal.App.3d 726 (Ticor Title). This case established the principle that the Association’s power to “interpret” the Covenant does not grant its board any power to enact more stringent specific regulations than those expressly contained in the Covenant (e.g., setback regulations), unless appropriate amendment procedures have been followed as set forth in the Covenant: “The power to interpret, however, is not unlimited. The Board’s construction of its interpretation powers leads to an extraordinary and unjust result. Under this construction, the Board is unlimited in its power to interpret the Covenant as it sees fit even if, as in the instant case, it involves ignoring express language in the Covenant and denigrating the voting rights of the property owners. We do not believe the covenanting parties intended the Board to have such unfettered powers by the process of ‘interpretation.'” (Id. at pp. 733-734.)

Also in Ticor Title, supra, 177 Cal.App.3d 726, this court rejected the Association’s argument that because paragraph 14 granted authority to the Association to adopt regulations for the “general welfare,” a more extensive action, such as “a change or modification of existing provisions in the Covenant,” could be accomplished outside of the amendment provisions set forth in the Covenant, paragraph 165. In that case, the setback restriction was not one of the basic restrictions contained in the Covenant, and hence the amendment provisions of paragraph 165 applied. (In our case, a basic restriction found in paragraph 48 is involved, hence the amendment provisions of paragraph 164 would apply if an “amendment, change, modification or termination” of a restriction is to be accomplished, by a required two-thirds vote of property owners.) Dolan-King is claiming the limits outlined inTicor Titleon the Association’s power were exceeded when the Board adopted and enforced these portions of the regulatory code.

In order to examine this argument, we turn to the extensive guidance provided by the Supreme Court regarding the standards that apply in evaluating the validity of the challenged land use regulations, in this context of a governing land use covenant and subsequent, related regulations. In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 264 (Lamden), the Supreme Court discussed its prior opinion, Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361 (Nahrstedt), which set forth the general rule, “When an association determines that a [38] unit owner has violated a use restriction, the association must do so in good faith, not in an arbitrary or capricious manner, and its enforcement procedures must be fair and applied uniformly.” (Id.at p. 383.) Restrictions found in a governing land use covenant “are evaluated for reasonableness in light of ‘the restriction’s effect on the project as a whole,’ not from the perspective of the individual homeowner. [Citations.] Accordingly, courts do not conduct a case-by-case analysis of the restrictions to determine the effect on an individual homeowner; we must consider the reasonableness of the restrictions by looking at the goals and concerns of the entire development.” (Dolan-King I, supra, 81 Cal.App.4th at p. 975.)

To expand upon the nature of the various rules that may be used to create use restrictions in such developments, the Supreme Court sought in Lamden, supra,to clarify the “distinction between originating CC&R’s and subsequently promulgated use restrictions. Specifically, we reasoned in Nahrstedt that giving deference to a development’s originating CC&R’s ‘protects the general expectations of condominium owners “that restrictions in place at the time they purchase their units will be enforceable.”‘ [Citations.] Thus, our conclusion that judicial review of a common interest development’s founding CC&R’s should proceed under a deferential standard was, as plaintiff points out, at least partly derived from our understanding . . . that the factors justifying such deference will not necessarily be present when a court considers subsequent, unrecorded community association board decisions.” (Lamden, supra, 21 Cal.4th at p. 264.)

Accordingly, in Dolan-King I, this court applied the rules developed in Nahrstedt, supra,8 Cal.4th 361 and Lamden, supra,21 Cal.4th 249, to such “subsequently promulgated use restrictions” that have not been recorded as running with the land. (Id.at p. 264.) In Dolan-King I, this court was concerned with the unrecorded guidelines followed by the Association’s art jury, as opposed to here, the issues concerning the unrecorded regulatory code. In either case, “such unrecorded restrictions are not accorded a presumption of reasonableness, but are viewed under a straight reasonableness test ‘so as to “somewhat fetter the discretion of the board of directors.”‘ [Citations.] We understand this distinction to primarily impact the respective burdens of proof at trial.” (Dolan-King I, supra, 81 Cal.App.4th at p. 977.) fn. 2[39]

Before we examine the decision of the trial court to uphold the validity of the subject regulatory code provisions dealing with major versus minor construction, as applied to fence work, it is useful to compare the nature of the guidelines analyzed in Dolan-King Ito the regulations at issue here. We noted previously that “[t]he Guidelines themselves do not purport to be strict restrictions on improvements or land use. They are intended to ‘disseminate[] the site and design standards which the community holds as necessary to preserve community character; articulate[] the policies and goals by which the Association judges and regulates land use; and give[] a clear indication of those site and design principles which increase the probability of the issuance of Association permits.'” (Dolan-King I, supra, 81 Cal.App.4th at p. 978.) Accordingly, even though the guidelines were not formalized as recorded equitable servitudes, we found there was “nothing inherently unreasonable about the Guidelines in and of themselves. They are the Association’s attempt to give property owners guidance, by way of detailed examples and explanation, on the criteria used by the Art Jury and Board in reviewing proposed improvements and exercising their broad discretion under the Covenant. The Board’s desire to give property owners more concrete examples of how the Art Jury is likely to exercise its broad discretion is entirely legitimate and fair, even though the Guidelines are not binding restrictions. That Dolan-King lacked notice of the Guidelines does not affect their reasonableness, but may influence our determination of whether the Board fairly and reasonably relied upon them to deny Dolan-King’s fence application . . . .” (Ibid.)

In this case, by comparison, section 31.03 of the regulatory code provides examples of various structures, improvements and grading that substantially affect community character and that therefore are deemed to constitute major construction. Section 31.0302 generally provides, “All fences and walls shall constitute “Major Construction.” However, section 31.0302.01 of the code specifically provides: “Exception: Split-Rail Fences. Wooden, unpainted split-rail fences not exceeding 36″ in height, and consisting of two or fewer rails shall be considered minor construction.” Another exception is provided for, i.e., garden walls that do not exceed 32 inches in height and that are composed of dry-laid materials, and which observe all set-back requirements established for structures in the protective Covenant, are considered to be minor construction. (§ 31.0302.02 of the regulatory code.)

For all practical purposes, the regulatory code is similar to the guidelines with respect to its unrecorded character, but its undisputed availability to interested Association homeowners for purposes of putting them on notice of the standards to be applied in evaluating development proposals. [1] The same straight reasonableness test should be applied to the code as to the guidelines, with attention to whether any basic restrictions of the Covenant are actually amended, changed, modified or terminated by the code, within the meaning of the amendment provisions of paragraph 164. The question[40]here is whether the code accomplishes such a substantive amendment, etc., of basic restrictions, as opposed to defining any terms left undefined by the Covenant, such as major and minor construction. (Para. 48.)

II. VALIDITY OF REGULATIONS: PARTIAL DIRECTED VERDICT

Following the above-described approach, we examine the trial court’s grant of the partial directed verdict upholding the subject regulatory code provisions to decide if the court correctly applied the “straight reasonableness test [designed] ‘to “somewhat fetter the discretion of the board of directors.”‘ [Citations.]” (Dolan-King I, supra, 81 Cal.App.4th at p. 977.) Where, as here, the decisive underlying facts (the nature of the fence and the actions taken by the Association), are undisputed, then the validity of the subject regulatory code provisions may be decided as a matter of law: “In such a case, in reviewing the propriety of the trial court’s decision, we are confronted with questions of law. [Citations.] Moreover, to the extent our review of the court’s declaratory judgment involves an interpretation of the Covenant’s provisions, that too is a question of law we address de novo.” (Dolan-King I, supra, 81 Cal.App.4th 965, 974.)

Dolan-King challenges the ruling in the Association’s favor chiefly by contending that the regulatory code effectively modifies, changes, or amends the controlling Covenant provision, paragraph 48, but without the necessary compliance with paragraph 164, to submit the matter to a vote of homeowners. She is arguing that the Covenant expressly protects a subjective right of the property owner to have a belief that a subject fence is minor construction, and to act accordingly by having it installed without the need for any permits or Association approval. (“The building of fences, walls, and similar structures, are divided into two classes: First, major construction; second, minor construction. The property owner may proceed with what he definitely thinks is a minor construction without submitting plans and specifications to the Art Jury as provided above, subject to the continuing jurisdiction of the Association through its Board of Directors to hear complaints against said minor construction . . . .” (Para. 48, emphasis added.)) Although paragraph 49 provides a procedure for the homeowner to submit plans to the art jury in case there is doubt about whether the contemplated work is a major or minor construction, she had no such doubt.

Further, Dolan-King argues that the powers of the Association and its board under the Covenant are primarily limited to promoting the general welfare of the community, and that this power should not allow aesthetic[41]considerations to override safety and traffic control considerations. (Para. 14.) She contends that the trial court erroneously read the Association’s articles of incorporation and bylaws, together with the Covenant language, as allowing the code to define these terms with such specificity, when paragraph 48 of the Covenant is more general in nature.

The Association is granted the power in its governing documents to adopt regulations. The articles of incorporation, article II, section 1, and the bylaws, article IV, section 6(e) allow regulations to be enacted as authorized by the Covenant and the articles of incorporation and bylaws. Paragraph 37 of the Covenant gives the Association regulatory power to carry out the provisions of the Covenant and governing documents. Paragraph 14 of the Covenant authorizes the Association to adopt rules and regulations promoting the health, safety and general welfare of the residents.

The fallacy of Dolan-King’s argument is that it focuses mainly upon her subjective beliefs as a homeowner, while failing to account for the well-accepted power of an association operating under the land use covenant to clarify and define its terms, so long as it is operating within the straight reasonableness standard. Both as to the governing Covenant and subsequently enacted restrictions, the inquiry should be whether their provisions are reasonable “in light of ‘the restriction’s effect on the project as a whole,’ not from the perspective of the individual homeowner. [Citations.] Accordingly, courts do not conduct a case-by-case analysis of the restrictions to determine the effect on an individual homeowner; we must consider the reasonableness of the restrictions by looking at the goals and concerns of the entire development.” (Dolan-King I, supra, 81 Cal.App.4th at p. 975.)

We disagree with Dolan-King that sections 31.03 et seq. effectively amend or modify paragraph 48 of the Covenant. Rather, these code sections operate to define the terms major and minor construction, with respect to fencing. They preserve the right of a homeowner to proceed with minor construction without seeking permits, while permissibly defining the parameters of what should reasonably be considered minor construction. The Covenant section is properly subject to objective clarification of its terms, which are not defined in that document. [2] It is not unreasonable for the Association to refer to the historical nature of low-lying split rail fences in the area as minor construction, thus preserving that category of the Covenant definition, while defining other types of fencing as major construction. So long as some fences may still constitute minor construction, the Covenant provision referring to minor construction has not been substantively modified or amended, changed, or terminated by this regulatory code. (Para. 164.)

Moreover, paragraph 48 itself reserves power to the Association, through its board of directors, “to hear complaints against said minor construction and[42]to hear, try and determine the said complaints upon due notice to the defending property owner,” even when the property owner proceeded with what he definitely thought was “minor construction,” without submitting plans and specifications. (Ibid.) This presupposes Association control to some extent over the definitions of those terms. Also, paragraph 49 provides a procedure for the homeowner to submit plans to the art jury in case there is doubt about whether the contemplated work is major or minor construction. [3] Based upon this reserved power in the Association to hear, try and determine complaints about any construction, it is not unreasonable for the Association and its board to enact regulations that seek to define such terms as minor construction in order to give notice to homeowners of readily discoverable, objective standards for interpretation of the Covenant. The trial court correctly granted the partial directed verdict on this basis.

Because Dolan-King is primarily relying upon her subjective understanding of what constitutes minor construction, the main thrust of her challenge to the regulatory code is found in the application of those provisions to her, in an allegedly unreasonable manner. We now turn to those arguments.

III. APPLICATION OF REGULATIONS AT TRIAL: JURY VERDICT

Dolan-King has two main challenges to the jury verdict in the Association’s favor that determined it had not breached the terms of the Covenant through its dealings with her fence construction. She first argues that even assuming the regulatory code is valid, as discussed above, the evidence nevertheless demonstrates that the Association did not follow its own procedures in dealing with her construction, and she was subject to disparate treatment in light of the more specifically referenced hearing that the Cloverlane Associates homeowners received, concerning paragraph 48. Thus, she claims the Association waived its right to enforce these regulations and they are unreasonable as applied to her.

Alternatively, she appears to be arguing that the trial court erroneously excluded her evidence about traffic and safety concerns surrounding her property, and that the judgment should be reversed because she was not allowed to fully present her case that this was minor construction. She mainly relies on case authority as follows: “‘A judgment may not be reversed on appeal, . . . unless “after an examination of the entire cause, including the evidence,” it appears the error caused a “miscarriage of justice.” [Citation.] . . . [W]here the error results in denial of a fair hearing, the error is reversible[43]per se. Denying a party the right to testify or to offer evidence is reversible per se. [Citations.]'” (Kelly v. New West Federal Savings (1996) 49 Cal.App.4th 659, 677.)

A. Reasonableness Of Procedures

[4] Because this issue was resolved upon disputed evidence, including challenges to the credibility of the Association witnesses, a substantial evidence standard of review should apply. (Toigo v. Town of Ross (1999) 70 Cal.App.4th 309, 317.) We accordingly disagree with appellant that this portion of the analysis must be conducted de novo, as pure documentary interpretation, in light of the parties’ submission to the jury of disputed facts. (See Davies Machinery Co. v. Pine Mountain Club Inc. (1974) 39 Cal.App.3d 18, 23.)

[5] In ruling for the Association, the trial court impliedly made findings that the letters that the Association sent to Dolan-King in June 1999 referred to the regulatory code and therefore gave her adequate notice that a hearing would be held regarding whether there was noncompliance with the Covenant building restrictions and related regulations, and whether her membership privileges should be suspended and a lien recorded against her property as a consequence. It was not disputed that the only basis that existed for considering the suspension of her membership privileges was the subject fence construction without appropriate permits.

Dolan-King argues that proper procedures were not followed, because the record does not contain any homeowner complaints against her, as contemplated by paragraph 48 of the Covenant, and that therefore the Association should not have proceeded to enforce the regulatory code. However, the trial court could reasonably conclude that the June 3, 1999 [6] Association manager’s letter referring to the code and notifying her of her noncompliance constituted a “complaint” within the Covenant definitions. [7] The trial court also determined that the notice given of the upcoming hearing was appropriate, even though the Association did not label the proposed hearing to be one held specifically under paragraph 48. Again, this was a reasonable interpretation of the documentary evidence. When Dolan-King was notified that a hearing would be held August 5, 1999 before the Board regarding the revoking of her privileges to use Association facilities and the imposition of a $500 lien assessment, she had already been placed on notice that the stated basis of that proposed action was noncompliance with the Covenant regarding the subject fence. Accordingly, the fact that the hearing was not labeled to be a proceeding under paragraph 48 was not dispositive. Dolan-King failed to make any convincing showing that the Association’s dealings with her in[44]1999 in that manner were measurably unfair when compared to the Association’s dealings in 2001 with another homeowner, Cloverlane, whose fence construction was opposed as not in compliance with Covenant standards, and where paragraph 48 was more expressly invoked.

The record also demonstrates that the subject fence was constructed while an appeal was pending from the earlier judgment arising from the original application for a fence permit and its denial, and that Dolan-King was knowledgeable about permit requirements for fences and had the advice of an attorney on the subject. She clearly understood the distinction between her original application to build the fence, and her claim that no application was necessary to build this fence. Accordingly, she has failed to show any impropriety in the notice and hearing given on the minor construction issue.

Dolan-King’s backup position is that under any definition, the fence she built should be considered minor construction, because it was installed in a few days, was of relatively low cost, and was of a type that was relatively easy to install and remove. However, she has not shown that these criteria necessarily led to an objective conclusion that this fence was minor construction. The trial court had in evidence photographs and measurements about the subject fence and the original fence it replaced, along with testimony presented by Dolan-King’s construction expert that some definitions were necessary as to major and minor construction, because those terms were not universally used one way or the other in the construction industry. It was not a foregone conclusion that only minor construction was involved here, when all the evidence was considered.

On the whole record, we cannot say that the trial court erred in deciding that the Association had not breached the Covenant through its utilization of the complaint and hearing procedure, nor had it waived its right to enforce these regulations. Dolan-King failed to show that she met any accepted standards about what was minor construction of a fence, such that any different result was required.

B. Fairness of Trial Proceedings

To evaluate the claims that the traffic and safety evidence was erroneously excluded, we refer to well-established authority that “an appellate court applies the abuse of discretion standard of review to any ruling by a trial [45] court on the admissibility of evidence. [Citations.] Speaking more particularly, it examines for abuse of discretion a decision on admissibility that turns on the relevance of the evidence in question. [Citations.] That is because it so examines the underlying determination as to relevance itself. [Citation.] Evidence is relevant if it has any tendency in reason to prove a disputed material fact. [Citation.]” (People v. Waidla (2000) 22 Cal.4th 690, 717.)

Dolan-King’s argument in this respect appears to be a claim that there should be a traffic and safety exception to the requirement that a permit be obtained for other than minor construction. She bases this argument upon public policy concerns, such as a right to privacy and to protect her home and family, and a theory that the burden of these regulations outweighs any benefit that is received from them.

While these arguments are appealing in the abstract, we cannot say that Dolan-King’s efforts to present this evidence had any support in the language of the Covenant, its subsequently enacted regulations, or the Association’s governing documents, in light of our conclusions above that the validity of the regulatory code could be addressed as a question of law, as agreed to in the trial proceedings. [8] There is no express traffic or safety exception to the permit requirement. The Covenant includes concerns about the general welfare of the homeowners in the area, and the Association is given regulatory powers to promote them. [9] Moreover, the same traffic concerns were addressed in the previous litigation that lead to the Dolan-King I opinion, and the trial court here was of the belief that to allow traffic evidence to be introduced would be to retry that previous case. Under all the circumstances, we can find no abuse of discretion in the in limine rulings that excluded traffic and safety evidence about this particular property.

Finally, although Dolan-King now argues there was no adequate showing of irreparable harm to the Association to support the issuance of injunctive relief, she cannot be heard to complain about the form of relief ordered. This is because she objected to an alternative form of judgment, which would have allowed her to apply for a permit for the fence, or tear it down. The fence had been in place approximately three years by the time of trial, and she had never sought a permit due to her argument that none was required for minor construction. [10] Once that issue was determined against her, and based upon her objection to allowing the permit procedure to be further pursued, any error in the issuance of the injunctive relief was either invited error or harmless. (7 Witkin, Cal. Procedure (4th ed. 1997) Judgment, § 22, p. 558.)[46]

On the record before us, we cannot find Dolan-King showed that the Association’s procedures as applied to her were unreasonable, nor that the trial proceedings were unfair.

IV. ATTORNEY FEE AWARD

Dolan-King appeals the trial court’s order granting an award of attorney fees to the Association under section 1354, subdivision (f). The order authorized an award in the amount of $318,293.50, based on an overall average hourly rate for the Association’s attorneys in the amount of $221, and an award for paralegal time.

Although Dolan-King has provided a copy of the order, she has not provided the moving and opposing papers on the fees matter. The only argument made in the opening brief is that this large award will have a chilling effect on discouraging legitimate opposition to the Association’s business practices, which she labels as questionable. (Blue Lagoon Community Association v. Mitchell (1997) 55 Cal.App.4th 472, 476-478.)

The party seeking to challenge an order on appeal has the burden to provide an adequate record to assess error. (Maria P. v. Riles (1987) 43 Cal.3d 1281, 1295-1296.) Where the party fails to furnish an adequate record of the challenged proceedings, his claim on appeal must be resolved against him. (Ibid.; also see Ketchum v. Moses(2001) 24 Cal.4th 1122, 1140-1141.)

[11] Ordinarily, an award of attorney fees under a statutory provision, such as section 1354, subdivision (f), is reviewed for abuse of discretion. The Association remains the prevailing party here. We have been presented with no support for Dolan-King’s claims of abuse of discretion with respect to the time expended, the hourly rate billed, or the nature of the costs assessed after the motion to tax was ruled upon. Accordingly, the proper course is to uphold the award. (Vo v. Las Virgenes Municipal Water District(2000) 79 Cal.App.4th 440, 447.) The respondent’s brief does not seek an award of attorney fees on appeal. The ordinary costs on appeal will be awarded to the Association, however.[47]

DISPOSITION

The judgment and order are affirmed. Costs on appeal to the Association.

Nares, J., and O’Rourke, J., concurred.

FN 1. All further statutory references are to the Civil Code unless noted.

FN 2. The Supreme Court has granted review in a case further examining the standards which govern the validity of a land use restriction in a common interest development, i.e., one that was adopted and recorded by an association after the purchase of the unit in the development. (Villa de Las Palmas Homeowners Association v. Terifaj, review granted Sept. 25, 2002, S109123.) That case is fully briefed but has not been set for oral argument. It is factually distinguishable because the challenged regulations in our case are unrecorded (the regulatory code).

Bear Creek Planning Committee v. Ferwerda

(2011) 193 Cal.App.4th 1178

[Architectural Control; Architectural Standards] A HOA had the authority to adopt architectural standards beyond those set forth in the CC&Rs based upon empowering language in the CC&Rs governing the same.

Thomas & Associates and Michael W. Thomas for Appellant Robert Ferwerda.
Law Offices of Samuel G. Grader, Christian B. Green; Porter & Simon, James E. Simon; Lewis Brisbois Bisgaard & Smith, Jeffry A. Miller, Judith M. Tishkoff and Matthew B. Stucky for Respondent Bear Creek Planning Committee.
Porter Scott, Timothy M. Blaine and John F. Doyle for Respondents David Bordon, Richard E. Irving, Peter M. Turner, Irene Wertheim, Ronald Scoglio, Carole Lynn Keller and Bear Creek Valley Board.
Louis A. Basile for Respondents James Ware and Cindy Ware.

CERTIFIED FOR PARTIAL PUBLICATION^{[FN *]}

OPINION

ROBIE, J.—

This appeal follows a trial by reference^{[FN. 1]} of three consolidated cases. The trial court entered judgment against plaintiff Robert Ferwerda, who had been trying to build a home on his vacant lot. He had sued the Bear Creek Planning Committee (the committee) and the individuals who comprised the Bear Creek Valley Board (the board) who he contended inappropriately blocked construction on his lot. He had also sued his next-door neighbors, James and Cindy Ware (the Wares), contending they had violated the covenants, conditions, and restrictions (CC&R’s) in building and remodeling their house. Ferwerda appeals from a judgment entered in favor of the committee, the board, and the Wares, which included awards of attorney fees to the committee and the Wares. We affirm the judgment as to the committee and the Wares, except as it relates to the attorney fees. As to those orders, we reverse. Finally, as to the board, we dismiss as moot the appeal relating to it.

[1181] FACTUAL AND PROCEDURAL BACKGROUND

A. Introduction

Robert Ferwerda owns lot No. 134 in Alpine Meadows Estates subdivision unit No. 4 (subdivision No. 4). Since 2001, he has been trying to obtain approval to build a house on his lot. This litigation surrounds events related to securing that approval, interpretation of the CC&R’s and related restrictions on the lots in subdivision No. 4, and the resolution of the three cases consolidated in the trial court.

B. The CC&R’s, the Green Book, and the 2002 Architectural Review Manual

The CC&R’s that govern subdivision No. 4 were recorded in 1964 and establish “a general plan for the improvement and development” of the property. The guiding principle is “that it is to the best interest of the area that it be developed into an attractive ski area, alpine in character and appearance, with as little damage to the natural beauty of the land and trees as is possible.” To that end, the CC&R’s contain several restrictions on the subdivision. Among other things, owners are not permitted to cut down trees over five inches in diameter on their lots without approval from the committee. More generally, owners are required to receive approval from the committee before constructing or excavating on their lots. The owners’ plans and specifications and the committee’s approval must be “in accordance with the procedures and standards set forth in the Bear Creek Planning Committee Restrictions.” The “Bear Creek Planning Committee Restrictions” were incorporated into the CC&R’s as exhibit A in 1964.

The committee incorporated in 1978. The articles of incorporation describe the committee’s primary purpose as “promoting the social welfare of the community of Alpine Meadows, California and for the mutual benefit of all property owners in that community through supervision and enforcement of the [CC&R’s].” Among its powers and duties as articulated in its bylaws are “[t]o review and approve or disapprove plans and specifications for improvements in the Bear Creek Valley pursuant to the CC&R’s,” “conduct, manage and control the affairs of the corporation and to make such rules and regulations thereof as they may deem appropriate,” and “maintain, issue, and revise at its discretion” a procedures, regulations, and standards manual.

[1182] In 1990, the committee published the so-called green book that contains procedures, regulations, and standards. The “green book” notes the observance of objective criteria for plan approval and of subjective criteria guided by a proposed plan’s “harmony with the environment in which the structure is placed and harmony with its surroundings.” The restriction on tree removal is continued. It recommends use of fire-retardant composition shingles. Finally, it includes the following attorney fees provision: “In the event that it is necessary for the Committee to initiate litigation to enforce the provisions of these Provisions, Regulations, and Standards, then the Committee shall be entitled to recover its reasonable attorneys’ fees and costs.”

The green book was revised in 2002 and that revision became known as the 2002 architectural review manual. The manual states, among other things, “[t]he design of each structure must bear a harmonious relationship to the land and its neighbors” and live trees cannot be removed without board approval. Similar to the green book, it contains the following attorney fees provision: “In the event that it is necessary for the [committee] to enforce the provisions of the [2002 architectural review manual] by obtaining legal advice to clarify issues, initiate litigation, filing and/or preparing legal documents or filing and preparing a Cease and Desist Order, then [the committee] shall be entitled to recover its reasonable attorney fees and costs from the Performance Deposit or other means as may be deemed necessary. Legal expenses above the performance deposit may be recovered by fines assessed.”

C. Ferwerda’s Activities and Resulting Litigation^[*]

DISCUSSION

The Committee Has the Power to Adopt Standards Beyond Those Set Forth in the CC&R’s

Section 6 of the CC&R’s states the committee may act on applications, “all in accordance with the procedures and standards set forth in the Bear Creek Planning Committee Restrictions, a copy of which is attached hereto as [1184] Exhibit A and by this reference is made a part hereof. Except as to set-backs (Paragraph 13 hereof),in the event of a conflict between the standards required by said Committee and those contained herein, the standards of said Committee shall govern.” (Italics added.)

The trial court found this italicized language “empowers the [committee] to adopt new conditions on an ongoing basis.” As we explain below on our de novo review (Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1121 [86 Cal.Rptr.3d 145]), the trial court was correct to the extent this language allows the committee to adopt new design standards related to the improvement or development of lots in subdivision No. 4.

(1) The interpretation of CC&R’s is governed by the rules for interpreting contracts. (Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 575 [71 Cal.Rptr.3d 299].) (2) It is a long-standing rule that “[a]ll parts of a [contract] must be applied so as to give effect and meaning to every part, if possible . . . .” (Burnett v. Piercy (1906) 149 Cal. 178, 189 [86 P. 603]; see Civ. Code, § 1641 [“[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other”].)

(3) The plain language of section 6 of the CC&R’s contemplates the committee may adopt standards beyond those contained in exhibit A as it existed when the CC&R’s were adopted. This is evidenced by the acknowledgment in section 6 that if there is a conflict between the standards set forth in that section and the “standards required by [the] [c]ommittee,” the standards of the committee govern. If the committee had no power to adopt standards beyond those in the CC&R’s, there would be no need for this language. We must read the CC&R’s as a whole and adopt the construction that gives effect to every part of the CC&R’s. (Ezer v. Fuchsloch (1979) 99 Cal.App.3d 849, 861 [160 Cal.Rptr. 486] [“[a] cardinal principle of document construction is that a document must be `construed as a whole’ so as `to give effect to every part thereof . . .'”].)

The question then becomes what is meant by “standards” as that term is used in the CC&R’s. That term is used in section 6 in reference to the “procedures and standards set forth in the Bear Creek Planning Committee Restrictions” that are attached to the CC&R’s. In those restrictions, there is a “standards” section. The first paragraph entitled, “GENERAL” explains in part that “[t]he design of each structure must bear a harmonious relationship to the land and its neighbors, in terms of lot coverage, mass and degree of individual expression.” The remaining 13 paragraphs (with the exception of the last one, which addresses variances) detail architectural design standards, [1184] i.e., standards for such things as floorspace, decks, roofs, exterior walls, windows, colors and finishes, and parking places. In the context of the CC&R’s, then, the term “standards” refers to architectural design standards.

Ferwerda offers no interpretation of this language in section 6 of the CC&R’s. Instead, he points to case law and testimony from the committee’s expert witness, which he claims negate our interpretation of the CC&R’s. Neither helps him.

The cases relied on by Ferwerda, Werner v. Graham (1919) 181 Cal. 174 [183 P. 945] and Riley v. Bear Creek Planning Committee (1976) 17 Cal.3d 500 [131 Cal.Rptr. 381, 551 P.2d 1213], are distinguishable.

In Werner, a developer subdivided a tract and recorded a map of the tract that “showed no building lines or anything else to indicate any purpose of restricting in any way . . . .” (Werner v. Graham, supra, 181 Cal. at p. 177.) He then sold the lots. (Id. at pp. 177-178.) The early deeds contained “restrictive provisions” that were “so uniform and consistent in character as to indicate unmistakably that [the developer] had in mind a general and common plan which he was following.” (Id. at p. 177.) The developer told the purchasers, “he was exacting the same restrictive provisions from all purchasers.” (Id. at pp. 178-179.) The developer later quitclaimed the property eventually purchased by the plaintiff, but the deed to this property contained no restrictions. (Id. at p. 179.) The court held restrictions placed in the earlier deeds to the other properties were not binding on the plaintiff. (Id. at pp. 184-186.)

In Riley, the developer sold a property via a deed that contained no restrictions. (Riley v. Bear Creek Planning Committee, supra, 17 Cal.3d at pp. 503-504.) Nine months later, the developer recorded a document purporting to impose uniform restrictions on a number of lots, including the one in dispute. (Id. at p. 504.) The court held these restrictions did not apply to the lot sold earlier. (Id. at pp. 506-507.)

Both of these cases are distinguishable because the CC&R’s here specifically acknowledge the possibility of a conflict between the standards set forth therein and the “standards required by [the] [c]ommittee” and assert that if such a conflict arises, the standards required by the committee govern. Ferwerda signed that he “read and approved” the CC&R’s.

The expert testimony to which Ferwerda points also does not help him. That testimony consisted of the opinion of the committee’s expert that section 6 does not expressly authorize the committee to create new or different standards than those attached in exhibit A (as other CC&R’s he had worked [1185] on did) but that by implication, the committee had such authority. This testimony undercuts Ferwerda’s position because it supports a reading of section 6 (if only by implication) that gives the committee such authority.

Based on the plain language of section 6 of the CC&R’s, we hold the committee had the power to adopt standards beyond those set forth in the CC&R’s, which are reflected in the green book and the 2002 architectural review manual.

The Trial Court Erred in Awarding Attorney Fees to the Committee and to the Wares

Ferwerda contends the court erred in requiring him to pay the committee’s and the Wares’ attorney fees. In his view, the green book and the 2002 architectural review manual cannot be the bases for authorizing the attorney fees because they are unrecorded and were enacted by an unelected committee without approval of the property owners.

The committee and the Wares take the position adopted by the trial court, i.e., the attorney fees were permissible because the green book and the 2002 architectural review manual provide for the recovery of attorney fees for prevailing parties such as themselves. And, in any event, Ferwerda asked for attorney fees if he prevailed and since he lost in the trial court, he was liable for the other side’s attorney fees.

(4) A prevailing party is entitled to attorney fees when authorized by statute or contract. (Code Civ. Proc., §§ 1032, 1033.5, subd. (a)(10).) Here, the CC&R’s contain no attorney fees provision. Rather, the green book and the 2002 architectural review manual provide for recovery of attorney fees by the committee. In reviewing these publications in part I of the Discussion, we explained that the CC&R’s give the committee power to adopt new design standards relating to the improvement or development of lots in subdivision No. 4. The question is whether that power allows the committee to adopt attorney fees provisions not contained in the CC&R’s.

The committee contends it had such broad power because the CC&R’s and its own bylaws give it the authority to “expand upon and describe the provisions of the CC&Rs” and “[s]o long as such rules and guidelines are reasonable and do not conflict with the CC&R’s, they will be held to be enforceable.” In support, they cite MaJor v. Miraverde Homeowners Assn. (1992) 7 Cal.App.4th 618 [9 Cal.Rptr.2d 237] and Rancho Santa Fe Assn. v. [1186] Dolan-King (2004) 115 Cal.App.4th 28 [8 Cal.Rptr.3d 614] (Rancho Santa Fe). Neither case helps the committee.

In MaJor, the court addressed whether the homeowners association was authorized to discriminate between resident members and nonresident members in the use and enjoyment of common areas. (MaJor v. Miraverde Homeowners Assn., supra, 7 Cal.App.4th at p. 625.) The CC&R’s granted every member a right and easement of enjoyment in and to the common areas within the property, subject only to the right of the association to establish uniform rules and regulations pertaining to a member’s use of the common areas and recreational facilities. (Ibid.) Nonresident members asserted the association acted without authority in restricting the use of common areas by nonresident members. (Ibid.) The court agreed, explaining as follows: “an association may not exceed the authority granted to it by the CC&R’s. Where the association exceeds its scope of authority, any rule or decision resulting from such an ultra vires act is invalid whether or not it is a `reasonable’ response to a particular circumstance. Where a circumstance arises which is not adequately covered by the CC&R’s, the remedy is to amend the CC&R’s. The courts have held homeowners are subject to any reasonable amendment of the CC&R’s properly adopted . . . .” (Id.at p. 628.)

In Rancho Santa Fe, the court addressed whether a homeowners association could apply a regulation adopted subsequent to the enactment of land use covenants that clarified the terms of one of those covenants permitting a homeowner to undertake “minor” (as opposed to “major”) construction without the art jury’s approval. (Rancho Santa Fe, supra, 115 Cal.App.4th at p. 40.) In holding the association could, the court explained the governing documents granted to the association power to adopt regulations and further explained an association operating under a land use covenant had the “well-accepted power” to clarify and define the covenant’s terms, so long as it did so reasonably. (Id. at p. 41.)

These cases do not support the authority of the committee to enact the attorney fees provisions here. In MaJor, the court limited the association’s authority to that granted to it in the CC&R’s. It is not enough, as the committee argues, that the attorney fees provisions are reasonable. MaJor rejected this argument, noting that if a circumstance arises that is not adequately covered by the CC&R’s, the remedy is to amend the CC&R’s, regardless of whether the association’s actions are reasonable. (MaJor v. Miraverde Homeowners Assn., supra, 7 Cal.App.4th at p. 628.) Here, the CC&R’s are silent on attorney fees. It is a situation, therefore, “not adequately covered by the CC&R’s,” requiring amendment of the CC&R’s to insert such a provision. (Ibid.) Similarly, in Rancho Santa Fe, the court’s holding that the regulation was enforceable turned on the fact the governing [1187] documents granted the association power to adopt regulations and the fact the at-issue regulation served only to reasonably clarify terms already in the land use covenant. (Rancho Santa Fe, supra, 115 Cal.App.4th at p. 41.) Here, the attorney fees provisions do not seek to clarify existing language in the CC&R’s. Rather, they are an attempt by the committee to insert a new provision that binds homeowners without their approval.

Undaunted, the committee continues to argue that the CC&R’s, the green book, and the 2002 architectural review manual “must be construed together as one contract, as the rules and standards in the Greenbook and [the 2002 architectural review manual] give effect to the CC&Rs.” In support, it cites Huntington Landmark Adult Community Assn. v. Ross (1989) 213 Cal.App.3d 1012 [261 Cal.Rptr. 875].) There, the defendants challenged an attorney fees award, contending there was no provision for attorney fees in the CC&R’s. (Id. at p. 1023.) The court held the defendants were “mistaken” because the supplemental declaration of easements, covenants, conditions and restrictions contained an attorney fees provision. (Ibid.) Huntington is unhelpful here. To the extent the green book and the 2002 architectural review manual deal with topics already covered by the CC&R’s and simply serve to reasonably clarify their meaning (see Rancho Santa Fe, supra, 115 Cal.App.4th at p. 41) or to the extent they adopt new or different standards (which as we have explained in pt. I of the Discussion the CC&R’s give the committee the power to do), those documents are a legitimate exercise of the committee’s power granted to it under the CC&R’s. They therefore bind the homeowners whether we view them as separate or supplemental to the CC&R’s. The same reasoning does not apply to the attorney fees provisions. Nothing in the CC&R’s gives the committee the power to insert into the green book and the 2002 architectural review manual an attorney fees provision that was never in the CC&R’s or contemplated therein. Huntington simply does not cover this situation.

We turn then to the other basis on which the committee and the Wares seek to uphold the attorney fees awards: Ferwerda asked for attorney fees if he prevailed and since he lost in the trial court, he was liable for the other side’s attorney fees. The problem with this argument is that it relies on an incomplete statement of the law.

(5) Pursuant to Civil Code section 1717, “a prevailing party is entitled to attorney fees only if it can prove it would have been liable for attorney fees had the opponent prevailed.” (M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One (2003) 111 Cal.App.4th 456, 467 [3 Cal.Rptr.3d 563].) In Perez, we disapproved dictum in our earlier opinion in International Billing Services, Inc. v. Emigh (2000) 84 Cal.App.4th 1175 [101 Cal.Rptr.2d 532], which said, “Where a party claims a contract allows fees and prevails, it gets [1188] fees. Where it claims a contract allows fees and loses, it must pay fees.” (International Billing Services, at p. 1190.) We explained in Perez: “The fallacy of the rule stated in International Billing Servicesis the assumption that if the party who claims that a contract allows fees prevails in the underlying litigation, it gets attorney fees. In truth, the party must still prove that the contract allows attorney fees. The mere allegation is not enough.” (Perez, at p. 468.) The same applies for a losing plaintiff. For a losing plaintiff to be required to pay attorney fees, the plaintiff’s “bare allegation that [h]e is entitled to receive attorney’s fees [is] not . . . sufficient”; he also had to have established the attorney fees clauses “actually entitled” him to recover fees. (Leach v. Home Savings & Loan Assn. (1986) 185 Cal.App.3d 1295, 1307 [230 Cal.Rptr. 553].) Here, Ferwerda never so established, and as we have explained, he could not so establish because the attorney fees provisions in the green book and the 2002 architectural manual did not legitimately serve to add an attorney fees provision to the CC&R’s.^{[FN. 2]} Therefore, the committee and the Wares could not claim the right to attorney fees simply because Ferwerda had asked for those fees in his complaint.^{[FN. 3]}

(6) In sum, there was no basis, either contractual or statutory on which to award attorney fees to the committee or the Wares.^{[FN. 4]} The fees awards must be reversed.

III-VI^{[FN *]}

[1189] DISPOSITION

The orders for attorney fees are reversed. In all other respects, the judgment as to the committee and the Wares is affirmed. The appeal as to the board is dismissed. The board is entitled to its costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).) Ferwerda, the committee, and the Wares shall bear their own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)

The stay issued by this court on December 29, 2010, is vacated upon finality of this opinion.

Nicholson, Acting P. J., and Butz, J., concurred.

[*] Pursuant to California Rules of Court, rule 8.1110, this opinion is certified for publication with the exception of part C of the Factual and Procedural Background and parts III, IV, V, and VI of the Discussion.

[1] A trial by reference is a proceeding under Code of Civil Procedure section 638, subdivision (a), which provides that a referee may be appointed by agreement of the parties to “hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision.” That “statement of decision . . . is the equivalent of a statement of decision rendered by a superior court under Code of Civil Procedure section 632.” (Central Valley General Hospital v. Smith (2008) 162 Cal.App.4th 501, 513 [75 Cal.Rptr.3d 771].) As such, a referee’s statement of decision is subject to appellate review using the same rules that apply to a trial court’s statement of decision. (Ibid.) For simplicity, here we refer to the referee as the trial court.

[*] See footnote, ante, page 1178.

[2] Ferwerda also claimed attorney fees under the private attorney general fee statute (Code Civ. Proc., § 1021.5) in his first amended cross-complaint. The provisions of Civil Code section 1717 are distinct from and have no application to the private attorney general fee statute. Section 1717’s right to attorney fees is based on the notion of reciprocal contractual attorney fees.

[3] We note also the attorney fees provisions in the green book and the 2002 architectural review manual were unilateral, in favor of the committee. “Section 1717 of the Civil Code, however, which governs enforcement of contractual attorney fees provisions, provides that any contractual attorney fees provision must be applied mutually and equally to all parties to the contract, even if it is written otherwise.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1106 [86 Cal.Rptr.2d 614, 979 P.2d 974].)

[4] The above analysis applies to the Wares’ claims of attorney fees as well. The Wares’ argument that they are entitled to attorney fees is based on the attorney fees provision in the green book, which they claim Ferwerda relied upon throughout the litigation here. Whether that is true is irrelevant. Because we hold the committee had no power to insert the attorney fee provision into the green book, the Wares cannot rely on that provision to claim they are entitled to attorney fees.

[*] See footnote, ante, page 1178.

Duffey v. Superior Court

(1992) 3 Cal.App.4th 425

[Declaration; Enforcement] HOAs may file declaratory relief actions for an authoritative interpretation of the governing documents; An owner need not be a defendant in any lawsuit brought by a HOA to discharge its own duty to enforce the CC&Rs simply because that owner complains about a neighbor’s proposed construction.

Darryl J. Paul for Petitioners.
No appearance for Respondent.
Durst & Landeros, Lee H. Durst and Jose G. Landeros for Real Parties in Interest.

OPINION

SILLS, P.J.

This case presents a different twist on a common situation in California. A property owner proposes to build an improvement which neighbors claim will obstruct their view and violate the “CC&Rs”^[FN.1] to which the property is subject. If the homeowner association charged with enforcing the CC&Rs does not take action against the owner, the offended neighbors often take matters into their own hands and sue both the property owner and the homeowner association to prevent the improvement. (See e.g., Posey v. Leavitt (1991) 229 Cal. App.3d 1236 [280 Cal. Rptr. 568] [deck encroaching on common area]; Cohen v. Kite Hill Community Assn. (1983) 142 Cal. App.3d 642 [191 Cal. Rptr. 209] [fence obstructing adjoining landowner’s view]; Beehan v. Lido Isle Community Assn. (1977) 70 Cal. App.3d 858 [137 Cal. Rptr. 528][construction of house in arguable contravention of setback restrictions].)

In this case it is the homeowner association which has initiated the litigation, in particular, a request for declaratory relief concerning whether the CC&Rs prohibit a proposed improvement. The twist is that the homeowner association has named not only the property owner as a defendant, but the complaining neighbors as well.

The neighbors brought a motion for judgment on the pleadings to extricate themselves from the case. The trial court denied the motion and the neighbors have now petitioned this court for a peremptory writ of mandate commanding the trial court to grant the motion. We grant the petition.

As this matter comes to us by way of a thwarted motion for judgment on the pleadings, the following facts are taken from the first amended complaint of the plaintiff, the Coast Homeowners Association (the homeowner association), filed in January 1988: The Bertrams, Duffeys, and Mehrenses each own homes in San Clemente subject to certain CC&Rs. The Bertrams have [428] submitted a set of plans to the homeowner association for the construction of a patio cover. The homeowner association is organized as a corporation under the laws of California. The Duffeys and the Mehrenses are next-door neighbors of the Bertrams, and have objected^[FN.2] to the proposed patio cover because it will block their ocean views. The Bertrams contend the CC&Rs do not prohibit the patio cover; the Duffeys and the Mehrenses contend they do. The homeowner association requests a judicial declaration whether the CC&Rs do, indeed, prohibit the proposed patio cover and whether it should deny or approve the Bertrams’ proposed construction.

In October 1991, the Duffeys and the Mehrenses brought a motion for judgment on the pleadings on the grounds there is no controversy between them and the homeowner association and no relief is being sought against them by the homeowner association. The Bertrams did not oppose the motion. The homeowner association did oppose it, contending, in essence, it was enough to allege that there is a controversy between the Bertrams on the one hand, and the Duffeys and the Mehrenses on the other, to establish a cause of action on the part of the homeowner association for declaratory relief.

The trial court denied the motion and the Duffeys and the Mehrenses filed this proceeding. We invited informal responses. The homeowner association makes two arguments. One, if the Duffeys and the Mehrenses had not voiced their objections to the Bertrams’ patio cover in writing, the homeowner association would not have had to file this lawsuit. Two, if the Duffeys and the Mehrenses were dismissed from the case before the resolution of the dispute over the CC&Rs, they could sue the homeowner association if they did not approve of the outcome; the Duffeys and the Mehrenses must be kept in this litigation to avoid subjecting it to a “no-win” situation.

(1) Before we address the homeowner association’s arguments, we note the obvious. The homeowner association seeks no relief against the Duffeys or the Mehrenses. This is the dispositive fact in the petition before us.

Courts analyze homeowner associations in different ways, depending on the function the association is fulfilling under the facts of each case. Courts have treated associations as landlords (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 499-501 [229 Cal. Rptr. 456, 723 P.2d 573, 59 [429] A.L.R.4th 447][association could be held liable for rape and robbery of individual owner who was not allowed to install additional lighting at time of crime wave]), minigovernments (Laguna Publishing Co. v. Golden Rain Foundation (1982) 131 Cal. App.3d 816, 844 [182 Cal. Rptr. 813] [gated community could not discriminate among give-away newspapers]; businesses (O’Connor v. Village Green Owners Assn. (1983) 33 Cal.3d 790, 796 [191 Cal. Rptr. 320, 662 P.2d 427] [condominium project with age restrictions in CC&Rs was “business” within meaning of Unruh Civil Rights Act]) and corporations (Beehan v. Lido Isle Community Assn., supra, 70 Cal. App.3d 858, 865-867 [board of directors’ good faith refusal to take action against construction of house in arguable contravention of setback restrictions was protected by corporate business judgment rule]).

The nature of the present case invokes the “corporate” function of the association. Of the four cases just cited, Beehan, which applied corporate law, is the one most similar to this, involving, as it did, a dispute between two neighbors over what sort of construction was allowable under recorded land use restrictions. Moreover, corporate principles also make the most sense in this case. The homeowner association is not acting as a business seeking a profit, a landlord exercising management over tangible property, or a minigovernment physically controlling access to its “citizen’s” property. The homeowner association here is incorporated, but is torn between competing factions as to what collective action to take. Corporate law provides a ready framework for this problem.

Under corporate principles, the homeowner association has no cause of action against the Duffeys and Mehrenses, as demonstrated in Weisman v. Odell (1970) 3 Cal. App.3d 494 [83 Cal. Rptr. 563]. In Weisman, minority shareholders sued a corporation and its majority shareholders seeking to dissolve the corporation because the majority shareholders had operated the entity for their own benefit at the expense of the minority. No direct relief or damages, however, were requested against the majority shareholders.

The majority shareholders successfully demurred to the complaint, and the decision was affirmed on appeal. The appellate court reasoned the majority shareholders could not be joined as defendants against their will because “[i]t is fundamental that a person should not be compelled to defend himself in a lawsuit when no relief is sought against him.” (3 Cal. App.3d at p. 498.) Because the “sole relief” was the dissolution of the corporation, the majority shareholders could “not be compelled to be parties defendant under the pleadings.” (3 Cal. App.3d at p. 499.)

Here, it is undisputed that no relief is sought against the Duffeys or the Mehrenses. While they, like the majority shareholders in Weisman, may be [430] affected by the trial court’s ultimate decision, nothing will happen to them directly as a result of that decision.

The case law on the subject of indispensable parties^[FN.3] also supports our conclusion. In Lushing v. Riviera Estates Assn. (1961) 196 Cal. App.2d 687 [16 Cal. Rptr. 763], a property owner submitted plans to a homeowner association to build a second house on a particular lot. The association refused to pass on or consider the plans, contending that the lot in question was not a “building site” within the meaning of the declarations governing the property. The property owner sued the association and the trial court decided the issue in favor of the owner. The association appealed, contending, among other things, that the property owner should have joined the other lot owners as indispensable or conditionally necessary parties to the action. (196 Cal. App.2d at p. 690.) The appellate court rejected the contention, reasoning there was no need to join the other lot owners because they were not necessary to a “complete determination of the controversy.” (Ibid.)

The impact of land use litigation on the rights of neighbors was also touched on in Leonard Corp. v. City of San Diego (1962) 210 Cal. App.2d 547 [26 Cal. Rptr. 730]. In Leonard Corp., a developer sued a city for declaratory relief concerning the correct zoning for a particular tract of land. Adjacent landowners sought to intervene, claiming they purchased their own property in reliance on the developer’s statements that the tract in question would be restrictively zoned. They argued they were indispensable parties to the dispute. The trial court denied the request and the court of appeal affirmed the decision.

The Leonard Corp. court, in essence, reasoned that the adjacent landowners were not indispensable parties because there was no logical demarcation between them and any other person who might be somehow affected by the developer’s plans: “If interveners were indispensable parties, then it might well be said that every home owner on adjacent subdivisions in Point Loma was an indispensable party who might claim some injury or loss by reason of the zoning ordinance.” (210 Cal. App.2d at p. 550.) It was enough that the trial court could make a “complete determination” of the zoning controversy with just the parties already before it. (Ibid.)

Lushing and Leonard Corp. articulate principles applicable to the instant case. The only parties the trial court needs to make a “complete determination” about the applicability of the CC&Rs to the Bertrams’ proposed patio cover are the Bertrams and the homeowner association.

[431] Moreover, as in Leonard Corp., there is no principled demarcation to distinguish some of the Bertrams’ neighbors (the Duffeys and the Mehrenses) from others who have not been joined in the litigation. Not only will the Duffeys and the Mehrenses be affected by this litigation, but so will all owners subject to the disputed CC&Rs. Patios as yet unbuilt by owners in the tract now blissfully unaware of the Bertrams’ plans may be affected by the outcome of this case. But as the Leonard Corp. court perceived, it is unreasonable to join every nearby landowner who might conceivably be affected by the litigation. It is enough that the homeowner association, charged with the enforcement of the CC&Rs (see discussion below), and the arguably offending property owners, are in it.

III

We now turn to the homeowner association’s two arguments in favor of keeping the unwilling Duffeys and Mehrenses in the case. The first is that but for the Duffeys and the Mehrenses, the homeowner association would not have needed to file this action in the first place.

It does not follow, however, that the individual owner must be a defendant in any lawsuit brought by a homeowner association to discharge its own duty to enforce the CC&Rs simply because that owner complains about a neighbor’s proposed construction. Homeowner associations have the responsibility of enforcing a development’s declaration of restrictions. (Cohen v. Kite Hill Community Assn., supra, 142 Cal. App.3d 642 [association could be held liable for failing to enforce architectural standards in CC]; see also Sproul and Rosenberry, § 1.2, p. 5.) This duty exists independently of what any given group of owners, such as the complaining neighbors in this case, might think or assert. The Duffeys’ and the Mehrenses’ written objection to the Bertrams’ proposed construction is thus quite irrelevant to the question of what the association must do about that construction. If the Bertrams’ construction is, indeed, contrary to the CC&Rs, the association would still have the responsibility of trying to prevent it even if the Duffeys and the Mehrenses favored it.^[FN.4^]

[432] B

(2) The homeowner association also argues the Duffeys and the Mehrenses must remain in the case lest they sue the association if they are unhappy with the outcome. This argument is similarly unpersuasive.

If, after this litigation is over, the Duffeys and the Mehrenses are unhappy because the court has rejected their interpretation of the CC&Rs on the merits, they will have only themselves to blame. Civil Code section 1354 gives them the right to join the litigation to enforce the CC&Rs if they so desire.^[FN.5] If they are at all concerned that the homeowner association will not vigorously press their interpretation of the CC&Rs to the trial court, now is the time for them to exercise their rights under Civil Code section 1354 and do so.

The association, for its part, need only make a good faith effort to obtain a judicial declaration on the merits of the dispute. Code of Civil Procedure section 374 gives an association standing to pursue “matters pertaining” to the “[e]nforcement of the governing documents” of a “common interest development.” Enforcement is impossible when governing documents are unclear as applied in a given context. Interpretation of governing documents is undoubtedly a “matter pertaining” to their enforcement. Accordingly, we conclude Code of Civil Procedure section 374 authorizes homeowner associations to file declaratory relief actions such as this one where there is a need for an authoritative interpretation of governing documents.

At the same time, however, Code of Civil Procedure section 374 specifically relieves homeowner associations from the need to join “the individual owners of the common interest development.”^[FN.6] When read in conjunction with Civil Code section 1354, an important implication emerges from this aspect of the statute: if there is a good faith dispute concerning the interpretation [433] of the CC&Rs, a homeowner association need not vigorously advocate any particular interpretation — individual owners can do that if they want to under Civil Code section 1354. As long as the “matters” relate to the enforcement of the CC&Rs (which would entail joining the parties against whom they are to be enforced), the association has standing to litigate them without joining the neighboring owners with their various viewpoints. If those owners want to press their own interpretations, Civil Code section 1354 allows them to jump into the fray directly. Otherwise, they are free to stay on the sidelines.

This aspect of the statute makes sense in light of the conflicts to which homeowner associations are inevitably subject. The instant case is a good example. If the Bertrams are correct in their interpretation of the CC&Rs, then the association must allow the construction of the patio cover. The rights of not only the Bertrams are involved, but of every other homeowner who would like to exercise the right to construct a patio cover in the development. If the Duffeys and the Mehrenses are correct, then the association must seek to prevent the construction of the Bertrams’ patio cover to protect the rights of the Duffeys, the Mehrenses, and every other homeowner who does not want a neighbor’s patio cover to block their view. Given this “no-win” position, it is enough for the association to seek a determination of the controversy joining only the arguably offending property owners.

On the other hand, if the association, for some reason, lets the case go by default and be disposed of on some purely procedural basis, it will be as if the association had done nothing to enforce the CC&Rs. Worse, the Duffeys and the Mehrenses (or other neighbors of like mind) may have foregone their own rights to enforce the declarations under Civil Code section 1354 on the assumption that the association would obtain a judicial declaration on the issue, one way or the other. If the homeowner association did allow the case to go by default and for that reason alone the Bertrams were able to build their patio cover, then the Duffeys and the Mehrenses ought to be able to sue the association for failing to enforce the CC&Rs. (See Cohen v. Kite Hill Community Assn., supra, 142 Cal. App.3d 642 [duty of homeowner association to enforce architectural standards set forth in declarations].) Either way — whether there is a decision on the merits or not — there is no reason now to keep the Duffeys and the Mehrenses in this case involuntarily.

Even though the Duffeys and the Mehrenses need not be joined as parties, there is no question as to the binding effect of this litigation on them. The policy behind Code of Civil Procedure section 374 requires that declaratory [434] judgments brought in litigation authorized under the statute be res judicata, and binding on the individual owners, including all those who do not participate in the litigation. Unless an association’s litigation is binding, the benefits of section 374 will vanish. (See Comment, Homeowner Association Standing in California: A Proposal to Expand the Role of the Unit Owner (1986) 26 Santa Clara L.Rev. 619, 627.)

Homeowner associations play an increasingly important role in the daily lives of Californians. It is common knowledge that much of the new housing developed in recent years — including single-family detached dwellings — is subject to CC&Rs enforceable by such associations. Some large homeowner associations have budgets which put them on a par with small cities and towns. In many areas of our state homeowner associations have practically become a “quasibranch” of municipal government. (Cf. Sproul and Rosenberry, supra, § 6.5, p. 252 [noting both associations and local governments can “be responsible for providing services such as road maintenance, street lighting, parks, recreation, and utilities”]; see also Cohenv. Kite Hill Community Assn., supra, 142 Cal. App.3d 642, 652 [“approval of a fence not in conformity with the Declaration is analogous to the administrative award of a zoning variance”].)

Given this role, it would be incongruous indeed if the expression of opinion to a homeowner association by one neighbor about another neighbor’s proposed construction were cause to name the objecting neighbor in a lawsuit. Merely standing up at a homeowners’ or board of directors’ meeting to argue that one’s neighbors’ plan to paint their garage door Day-Glo orange with magenta polka dots is prohibited by the CC&Rs should not land one in a lawsuit. Even a “small” lawsuit for declaratory relief can be expensive.

The tactic employed by this homeowner association of naming objecting neighbors in a declaratory relief lawsuit only sows the seeds of destruction of its own declarations. If every neighbor who demands enforcement of the CC&Rs winds ups in court, no one will demand enforcement, and landscape and construction standards will effectively cease to exist. It is difficult to imagine a denser pall cast over association governance than the prospect of being named in a lawsuit for simply insisting the association do its job.

In this case, for instance, the Duffeys and the Mehrenses have presumably had to incur legal expenses for more than four years, if only to “monitor” the case. Those expenses have functioned, in essence, as a penalty for their having objected to the Bertrams’ plans.

[435] Enough is enough. Having invited and received a response from the homeowner association, issuance of an alternative writ would not assist our resolution of this matter. Indeed, it would only increase the fees the petition seeks to alleviate,^[FN.7] as well as cause unnecessary delay. A peremptory writ in the first instance is therefore appropriate. (See Palma v. U.S. Industrial Fasteners, Inc. (1984) 36 Cal.3d 171, 178 [203 Cal. Rptr. 626, 681 P.2d 893].) Let a peremptory writ of mandate issue directing the trial court to vacate its denial of the motion for judgment on the pleadings brought by the Duffeys and the Mehrenses and enter a new judgment in their favor.

Wallin, J., and Sonenshone, J., concurred.

[FN. 1] “CC&Rs” stands for “covenants, conditions, and restrictions.” The term is technically inaccurate because declarations typically do not include conditions, which, if breached, would cause the property to revert to the developer. (Sproul & Rosenberry, Advising Cal. Condominium and Homeowners Associations (Cont.Ed.Bar 1991) § 7.1, pp. 300-301 [hereafter Sproul and Rosenberry].)

[FN. 2] In its response to the petition for writ of mandate, the homeowner association states that the Duffeys and the Mehrenses “voiced their objections in writing.” The complaint, however, makes no mention of written, as distinct from oral, objections.

[FN. 3] Under Code of Civil Procedure section 389, a person who claims an interest in the subject matter of an action and is so situated as to leave any party already in the case subject to substantial risk of inconsistent obligations “shall be joined” as a party to the action. As we are about to show, Code of Civil Procedure section 389 is not applicable here.

[FN. 4] To use a farfetched example, if the Bertrams sought to turn their backyard into a toxic waste dump, and their neighbors failed to oppose the idea, would this relieve the association from the obligation to enforce the CC&Rs, which, we presume, would forbid such a use? If not, as is obviously the case, then the fact of neighbor opposition is similarly independent of the association’s obligation.

[FN. 5] The text of Civil Code section 1354 is: “The covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both. In any action to enforce the declaration, the prevailing party shall be awarded reasonable attorney’s fees and costs.”

[FN. 6] Code of Civil Procedure section 374 provides:

“An association established to manage a common interest development shall have standing to institute, defend, settle, or intervene in litigation, arbitration, mediation, or administrative proceedings in its own name as the real party in interest and without joining with it the individual owners of the common interest development, in matters pertaining to the following:

“(a) Enforcement of the governing documents.

“(b) Damage to the common areas.

“(c) Damage to the separate interests which the association is obligated to maintain or repair.

“(d) Damage to the separate interests which 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.” (Italics added.)

[FN. 7] We express no opinion on what right, if any, the Duffeys and the Mehrenses may have to recoup their fees under Civil Code section 1354.

Seahaus La Jolla Owners Association v. Superior Court

(2014) 224 Cal.App.4th 754

[Attorney-client privilege; Homeowners] Attorney-client privilege applies to communication between association’s attorney and homeowners.

Epsten Grinnell & Howell, Anne L. Rauch; Rockwood & Noziska, Brant Noziska, Neal Rockwood; Law Offices of William A. Bramley and William A. Bramley for Petitioner.
Simpson Delmore & Greene, Paul J. Delmore, Elizabeth A. Donovan and Brook T. Barnes for Real Parties in Interest CLB Partners Ltd. and La Jolla View Ltd., LLC.
Gordon & Rees, Sandy M. Kaplan, R. Scott Sokol and Matthew G. Kleiner for Real Parties in Interest Webcor Development, Inc., Webcor Builders, Inc., and Webcor Construction, L.P.
Bryan Cave, Robert E. Boone III, Edward M. Rosenfeld, Tony Tootell and David Harford for Real Parties in Interest Bank of America Corporation, Bank of America, N.A., and Countrywide Home Loans, Inc.

OPINION

HUFFMAN, J. —

Petitioner Seahaus La Jolla Owners Association (Association) is the plaintiff in a construction defect action alleging water and other damage to the common areas of a common interest development. The Association sued the developers and builders of the complex, La Jolla View Ltd., LLC, and Webcor Construction L.P. (Defendants), who, among others, are the real parties in interest in this mandamus proceeding. The Association contends the trial court erred and abused its discretion in overruling the Association’s claim of attorney-client privilege in this discovery dispute over Defendants’ efforts to depose individual homeowners regarding disclosures made at informational meetings about the litigation.

The record shows that counsel for the Association’s board of directors (the Board) gave notice to the individual homeowners in June 2009 that the Board was pursuing mediation but was also contemplating filing construction defect [760] litigation. (Civ. Code, former § 1368.5, now § 6150.)^{[FN. 1]} Such litigation was filed in July of 2009, and the Board and its counsel subsequently conducted meetings with many individual homeowners of the 140 units to apprise them of the status and goals of the litigation. Pursuant to the provisions of the governing documents, at one such litigation update meeting, the Board sought and obtained majority approval by the homeowners for pursuing the action. (Civ. Code, § 6150, subd. (b); Association’s Declaration of Covenants, Conditions and Restrictions (CCRs), § 4.4.11, “Members’ Approval of Certain Actions.”)

By the time of the later litigation update meetings, a subgroup of individual homeowners had filed its own companion action in which they seek damages for construction defects in their private individual units, and their action was coordinated for discovery purposes with the Association’s action. (Sarnecky v. La Jolla View Ltd., LLC (Super. Ct. San Diego County, No. 37-2010-00092634-CU-OR-CTL) (Sarnecky action).)^{[FN. 2]}

Defendants’ contested discovery requests were made during depositions of many individual homeowners, and seek to inquire into the content and disclosures made at those informational litigation update meetings, which were conducted by the Association’s counsel. The Association objected, invoking the attorney-client privilege under Evidence Code^[^{FN. 3]} section 952 and the “common interest” doctrine. (See OXY Resources California LLC v. Superior Court (2004) 115 Cal.App.4th 874, 887-888 [9 Cal.Rptr.3d 621] (OXY Resources) [parties who possess common legal interests may share privileged information without losing the protection afforded by the privilege].) However, several rulings by the trial court have declined to allow such a privilege to be asserted by the Association, or have concluded any privilege was waived, regarding the communications received at the meetings by [761] individual homeowners who are not the actual clients of the Association’s retained counsel. This petition ensued.

“Confidential communications” between client and lawyer are defined in section 952 as meaning “information transmitted between a client and his or her lawyer in the course of that relationship and in confidence by a means which, so far as the client is aware, discloses the information to no third persons other than those who are present to further the interest of the client in the consultation or those to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted, and includes a legal opinion formed and the advice given by the lawyer in the course of that relationship.” (Italics & underscoring added.)

(1) We evaluate this discovery dispute in the context of the usual first principles, that parties may obtain discovery regarding any unprivileged matter that is relevant to the subject of the pending action or motions, but subject to the rule that “the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” (Code Civ. Proc., § 2017.010, italics added.) Defendants’ claim to entitlement to information about the litigation update meetings is apparently based upon the claim of some of the individual plaintiffs to stigma damages for their units (apparently in the Sarnecky action). Defendants argue that in the Association’s common area action, they should be able to inquire into the beliefs of the individual homeowner plaintiffs about damages and the source of their beliefs (such as any perceptions gained from information given to them by the Association’s attorneys at the Board’s litigation update meetings).

To the extent this record reveals anything about the purpose of the requested discovery, it shows that counsel for Defendants is seeking to develop information about the litigation strategy of the Association’s counsel, including the legal opinions formed and the advice given by the lawyers in the course of that relationship, and such disclosures would not likely lead to the discovery of admissible evidence. (§ 952; Code Civ. Proc., § 2017.010; Mitchell v. Superior Court (1984) 37 Cal.3d 591, 609-610 [208 Cal.Rptr. 886, 691 P.2d 642] (Mitchell) [public policy concerns outlined against unwarranted invasions of privilege].)

(2) In the Act governing common interest developments, the Legislature placed certain obligations on homeowners association governing boards to communicate with individual owners about proposed construction defect litigation by the association regarding the common areas. (Civ. Code, § 6150, subd. (a).) The association may sue developers over common area defects and [762] also over alleged damage to the separate interests that the association must maintain or repair, or damage to the separate interests that is integrally related to damage to the common areas. (Ibid.; Civ. Code, § 5980.) By the same token, individual owners have economic interests in the value of not only their own individual units, but also in the state of the development as a whole. (Ostayan v. Nordhoff Townhomes Homeowners Assn., Inc. (2003) 110 Cal.App.4th 120, 126-127 [1 Cal.Rptr.3d 528] (Ostayan).)

As we will show, the challenged orders in the Association’s action represent an overly technical definition of the attorney-client privilege, and do not account for the protection of client confidentiality as it operates through the common interest doctrine, in this factual and legal context surrounding common interest developments. We grant relief on the petition to allow the attorney-client privilege to be asserted under these circumstances.

FACTUAL AND PROCEDURAL SUMMARY

A. Nature of Meetings Held by Board for Individual Homeowners; Legal Representation

The Board hired the Epsten Grinnell & Howell law firm to represent it in pursuing mediation with the developer and general contractor of the development. On June 23, 2009, the Association’s counsel sent a letter to all homeowners notifying them that mediation was pending, no lawsuit had been filed, and a preliminary list of defects was enclosed, reflecting that the Association was currently investigating the nature, extent and severity of the defects at the site. The letter stated that if an owner was selling or refinancing a unit, “you may be required to provide this document to escrow, buyer, or a lending institution.”

The next letter from the Association’s attorneys was dated August 17, 2009, and provided homeowners with an update regarding the status of the construction defect claims involving the common areas of the development. This letter notified homeowners that (1) the Association had just filed its lawsuit on July 31, 2009, due to limitations concerns and bankruptcy of one defendant, and (2) the homeowners might be required to disclose that filing in connection with any pending sale or refinance of a unit. Mediation was continuing, but the legal action filing had been deemed to be essential to preserve the claims. Counsel stated that members of the firm would be present at the Association’s annual meeting on September 16, 2009, to answer questions and discuss the Association’s legal options and the status of the investigation and mediation efforts.

On January 13, 2010, the Board and its mediation and litigation committee sent out a notice of an informational meeting to all homeowners, at which [763] counsel for the Association would be present to provide owners with information about the status of the claims against the developers and builders of the complex. The meeting was scheduled for January 26, 2010, for presentations by the attorneys and some of the consultants retained to assist in connection with pursuing the claims.

Next, counsel for the Association sent all homeowners another status update on the claims against the developers and builders dated March 1, 2010. This letter referenced the homeowner meeting held January 26, 2010, and stated that additional defects had been identified and were being investigated. The homeowners were told that additional meetings would be scheduled when the results of the current investigation were obtained.

On March 20, 2012, counsel for the Association notified the individual homeowners that an upcoming open forum meeting was scheduled for March 24, 2012, to answer individual homeowners’ questions regarding the litigation, particularly its relationship to the separate Sarnecky individual homeowners’ action. Only some of the individual homeowners were parties to the separate action, and they were represented by their own attorneys (the Aguirre firm). The letter also stated that the Association’s structural engineer would be attending the meeting to answer questions.

B. Discovery Dispute; Referee

Defendants pursued discovery in the Association’s action, requesting that several individual homeowners be produced for deposition and questioned about the litigation meetings’ content, and any basis they might have learned there about any stigma damages being claimed for their units. Defendants argued that the meetings were not held in a confidential context and any applicable privileges had been waived.

The Association objected to the questions and asserted that the information was protected from disclosure by the attorney-client privilege. The Association did not claim that the individual homeowners were also clients of its counsel, but rather that they were “third persons … to whom disclosure is reasonably necessary for the … accomplishment of the purpose for which the lawyer is consulted.” (§ 952.) Thus, it claimed the individual homeowners were present to further the interests of the Association, as client, in the consultation.

When Defendants continued to seek information about the content of the meetings, the Association brought the issue before the appointed discovery referee, James A. Roberts. After a tentative ruling and hearing, the referee issued a report and recommendations for a protective order to be issued by [764] the court. The referee concluded that the information requested about the content of the meetings was not subject to discovery because it was neither directly relevant to the action nor reasonably likely to lead to relevant evidence. In his June 4, 2012 letter decision, he stated his opinion that the Association had the better argument as to why such communications should be determined to be privileged. In his formal recommendation dated July 13, 2012, issued after a request for reconsideration, the referee stated that even though some of the letters from the Association’s counsel to the homeowners, about the status of the litigation and the claims being made, were stated on their face not to be confidential and thus could be shown to lenders or prospective purchasers, the public content of those letters was different from the content of the confidential information being discussed at the homeowner litigation meetings.

C. Court Proceedings on Referee’s Recommendation

Defendants brought their objections to the referee’s recommendations to the trial court (Judge Vargas), who held several hearings. In a series of proposed orders and rulings, Judge Vargas stated he “sustains defendant’s objection” to the recommendation, but also stated “[t]he court overrules all other objections.” Although the order granted the protective order proposed by the referee, it was stamped “granted with modifications” (which were unclear), and the same order was stamped as “Rejected — Defective (Courtesy Copy Not Received by Court).” Meanwhile, some of the individual homeowners’ depositions were proceeding, out of over 30 that were set.

At the end of 2012, Judge Vargas retired and the case was reassigned to Judge Meyer. In July 2013, Defendants moved to compel further answers, claiming that the information sought about the meetings at the individual homeowners’ depositions was not protected by the attorney-client privilege, since there were no attorney-client relationships between the Association’s counsel and the individual homeowners.

The Association responded that there was not any attorney-client relationship between its own counsel and the individual homeowners, but that nevertheless, its counsel’s disclosures to those homeowners were privileged under section 952, as reasonably necessary for “the accomplishment of the purpose” for which the Association’s lawyer was consulted.

At the hearing on the motion to compel, Judge Meyer stated that he could not understand Judge Vargas’s orders, which were ambiguous and contradictory. The matter was taken under submission and the motion to compel granted on September 4, 2013: “This court cannot change Judge Vargas’s order [765] reversing the Discovery Referee’s determination regarding an attorney-client relationship between the Association’s counsel and individual homeowners.”

This petition followed, asserting that the court erred in granting the motion to compel solely on the ground that it had to follow Judge Vargas’s earlier order, which was ambiguous. Petitioner seeks orders compelling the trial court to vacate its orders allowing the requested discovery, and asks that we direct the trial court to order adoption of the referee’s report. The Association contends this privilege question is one of first impression that should be considered by this court before the Association or witnesses are required to disclose information it claims is privileged.^{[FN. 4]}

We issued a stay, received additional briefing, and issued an order to show cause. Oral argument was held and the matter submitted.

DISCUSSION

In this context of Association litigation seeking recovery for construction defects in the common areas, we are asked to decide whether attorney-client privileges extend to communications, for which confidentiality was intended or preserved, between the Association’s counsel and third party nonclients (individual homeowners), at Association update meetings about the common area litigation, which were held for the individual homeowners. Although there may be some differences between the procedural posture of some of these third party nonclients (i.e., only some of the individual homeowners have filed the separate Sarnecky action seeking damages to their private units), we will treat the Association and its litigation counsel’s communications to individual homeowners at the meetings as raising the same legal issue. Were such communications sufficiently confidential, and “reasonably necessary for the accomplishment of the purpose for which the [Association’s] lawyer is consulted,” based on common interests in the subject matter of the Association’s litigation updates? (See §§ 912, 952.)

[766]I

APPLICABLE STANDARDS

A. Review of Privilege Rulings

“Extraordinary review of a discovery order will be granted when a ruling threatens immediate harm, such as loss of a privilege against disclosure, for which there is no other adequate remedy. [Citation.] `”We review discovery orders under the abuse of discretion standard, and where the petitioner seeks relief from a discovery order that may undermine a privilege, we review the trial court’s order by way of extraordinary writ. [Citation.]”‘” (Zurich American Ins. Co. v. Superior Court (2007) 155 Cal.App.4th 1485, 1493 [66 Cal.Rptr.3d 833] (Zurich).) Each challenged discovery ruling concerning the recognition of a privilege is considered on a “`case-by-case'” basis, and we decide only the issues before us. (Upjohn Co. v. United States (1981) 449 U.S. 383, 396-397 [66 L.Ed.2d 584, 101 S.Ct. 677].)

In this context, “`[t]he trial court’s determination will be set aside only when it has been demonstrated that there was “no legal justification” for the order granting or denying the discovery in question.'” (OXY Resources, supra, 115 Cal.App.4th 874, 887.) A trial court has abused its discretion in determining the applicability of a privilege when it utilizes the wrong legal standards to resolve the particular issue presented. (Zurich, supra, 155 Cal.App.4th 1485, 1493-1494.)

(3) The party claiming privilege has the burden of establishing the preliminary fact that the communications were made during the course of an attorney-client relationship. (D. I. Chadbourne, Inc. v. Superior Court (1964) 60 Cal.2d 723, 729 [36 Cal.Rptr. 468, 388 P.2d 700]; Costco Wholesale Corp. v. Superior Court (2009) 47 Cal.4th 725, 740 [101 Cal.Rptr.3d 758, 219 P.3d 736].)

(4) The overarching standards for the scope and applicability of a privilege are statutory in nature. (§ 911.) “The privileges set out in the Evidence Code are legislative creations; the courts of this state have no power to expand them or to recognize implied exceptions.” (Wells Fargo Bank v. Superior Court (2000) 22 Cal.4th 201, 206 [91 Cal.Rptr.2d 716, 990 P.2d 591] (Wells Fargo); see Roberts v. City of Palmdale (1993) 5 Cal.4th 363, 373 [20 Cal.Rptr.2d 330, 853 P.2d 496];Zurich, supra, 155 Cal.App.4th 1485, 1494.) Public policy supports the proper scope of application of attorney-client privileges, to ensure “`the right of every person to freely and fully confer and confide in one having knowledge of the law, and skilled in [767] its practice, in order that the former may have adequate advice and a proper defense.'” (Mitchell, supra, 37 Cal.3d 591, 599.)

(5) The proper purposes of discovery are to obtain information on unprivileged matters that are relevant to the subject of the pending action, “if the matter either is itself admissible in evidence or appears reasonably calculated to lead to the discovery of admissible evidence.” (Code Civ. Proc., § 2017.010.) “For discovery purposes, information is relevant if it `might reasonably assist a party in evaluating the case, preparing for trial, or facilitating settlement.’ [Citation.] Admissibility is not the test and information, unless privileged, is discoverable if it might reasonably lead to admissible evidence. [Citation.] … [T]he scope of discovery extends to any information that reasonably might lead to other evidence that would be admissible at trial. `Thus, the scope of permissible discovery is one of reason, logic and common sense.'” (Lipton v. Superior Court (1996) 48 Cal.App.4th 1599, 1611-1612 [56 Cal.Rptr.2d 341] (Lipton); italics omitted.)

B. Procedural Status: No Reliance on Laches

Before analyzing the record in light of the above legal principles, we acknowledge that the sequence of discovery referee recommendations and two sets of superior court rulings have created some confusion on the basis for the rulings and the exact issues to be resolved. Defendants complain that the Association could have sought mandamus relief earlier, but did not do so until well into the discovery and litigation process, and thus, the petition arguably should be barred by laches. (See, e.g.,Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68 [99 Cal.Rptr.2d 316, 5 P.3d 874]; Planned Parenthood Golden Gate v. Superior Court (2000) 83 Cal.App.4th 347, 356 [99 Cal.Rptr.2d 627].)

Writ review on the merits is appropriate to evaluate the rulings granting the motion to compel brought by Defendants, since they effectively disallowed the claims of attorney-client privilege raised by the Association with respect to the proposed questioning of individual homeowners. It is not necessary to enter into the debate about what Judge Vargas meant in the rulings he made before he retired in 2012, or about Judge Meyer’s subsequent interpretation of what Judge Vargas must have meant, when Judge Meyer found it determinative that there was no attorney-client relationship between the Association’s counsel and individual homeowners. In light of the novel and important issues raised by the petition on the interpretation of section 952, we decline to take the route of relying on principles of laches to resolve this matter. (See Lipton, supra, 48 Cal.App.4th 1599, 1612.)

Moreover, the Association has requested in its petition that this court direct the trial court to order adoption of the referee’s report. Such an intermediate [768] step is not necessary, and instead we exercise our discretion to reach the merits of the privilege questions presented.

ELIGIBILITY FOR PRIVILEGE COVERAGE

A. Basic Statutory Criteria: Evidence Code

(6) Two basic situations arise under section 952 for determining whether a “confidential communication” between a client and lawyer will retain its privileged character. Most importantly to the case before us, section 952 provides that confidentiality is retained if such an attorney-client communication is transmitted in confidence “to no third persons other than those who are present to further the interest of the client in the consultation ….” (§ 952, italics added.) Together, sections 912 and 952 will “permit sharing of privileged information when it furthers the attorney-client relationship; not simply when two or more parties might have overlapping interests.” (McKesson HBOC, Inc. v. Superior Court (2004) 115 Cal.App.4th 1229, 1237 [9 Cal.Rptr.3d 812], italics added, citing Raytheon Co. v. Superior Court (1989) 208 Cal.App.3d 683 [256 Cal.Rptr. 425].)

In general, section 912, subdivision (a) provides guidance for when disclosures operate to waive a privilege. One of its exceptions, section 912, subdivision (d) expressly clarifies it is not a waiver of privilege under the following circumstances: “`A disclosure in confidence of a communication that is protected by a privilege provided by [attorney-client privilege, section 954], when disclosure is reasonably necessary for the accomplishment of the purpose for which the lawyer … was consulted, is not a waiver of the privilege.'” (OXY Resources, supra, 115 Cal.App.4th at p. 890, italics added; see First Pacific Networks, Inc. v. Atlantic Mutual Ins. Co.(N.D.Cal. 1995) 163 F.R.D. 574, 581 [both §§ 912 and 952 contain the same concept, i.e., whether there is a reasonable necessity for disclosure to a third party, in order to accomplish the purpose of consulting the lawyer].)

(7) Accordingly, section 952 allows privileges to be preserved when a family member, business associate or joint client (and/or the attorney for same) meets with the client and attorney who claim privilege, in regard to a matter of joint concern, “`when disclosure of the communication is reasonably necessary to further the interest of the [claimant/litigant].'” (Insurance Co. of North America v. Superior Court(1980) 108 Cal.App.3d 758, 767 [166 [769] Cal.Rptr. 880], italics added; see 2 Witkin, Cal. Evidence (5th ed. 2012) Witnesses, § 124, pp. 423-424.)^[^{FN. 5]}

In a related situation, public policy considerations were enunciated to assist in defining the proper scope of statutory protections of attorney-client confidential communications. The Supreme Court in Mitchell, supra, 37 Cal.3d 591, 611, was confronted with a defendant’s discovery requests that were nominally intended to produce evidence relating to a plaintiff’s claimed damages, in the form of questioning of the plaintiff about the nature and content of any warnings or information she had received from her attorney about the potential damages she was asserting. (Id. at p. 597.) In that case, the plaintiff was claiming injury from the defendants’ wrongful environmental contamination, including her emotional distress stemming from fears of future physical harm that might be caused from the contamination. (Id. at p. 595.)

In the requested discovery in Mitchell, defense counsel arguably was seeking to inquire into whether the plaintiff and her counsel had discussed any potential physical harm to her from the contamination, “and if so, whether that discussion had contributed to plaintiff’s distress.” (Mitchell, supra, 37 Cal.3d 591, 610.) In considering privilege, the Supreme Court balanced the respective interests and concluded that such questioning went too far, because it “might very well reveal much of plaintiff’s investigative efforts and trial strategy.” (Ibid.) The plaintiff’s attorney-client privilege should protect against any such investigation by opposing counsel into confidential client communications about injury and damages. (Id. at pp. 610-611.)

Moreover, allowing such proposed discovery into attorney-client discussions would “potentially uphold a harassment tactic whereby defendants … are able to shift the focus of the case from damages caused by [their actions] to damages caused by allegedly inflammatory or false information provided by self-serving attorneys…. [T]his technique not only obfuscates many of the substantive issues in a case but also frequently places the wrong `defendant’ on trial.” (Mitchell, supra, 37 Cal.3d 591, 610-611.) Permitting such discovery would constitute “an unwarranted abrogation of the attorney-client privilege,” that would unjustifiably undermine the proper functioning of the judicial system. (Id. at p. 611.)

[770] Having set forth these basic principles and policy limitations regarding the protected scope of the attorney-client privilege, we turn to the more specific questions presented about the application of the common interest doctrine in this situation.

B. Common Interest Doctrine Definition

(8) “Although the protection of the attorney-client privilege is absolute, the protection afforded by the common interest doctrine is qualified, because it depends on the content of the communication…. [T]here is `no absolute brightline [sic] test which distinguishes between the parties [sic] “adversarial” interests and their “common” interests.'” (OXY Resources, supra, 115 Cal.App.4th 874, 896.)

Not only the content of the communication must be considered, but also the circumstances of the communication. “Applying these waiver principles in the context of communications among parties with common interests, it is essential that participants in an exchange have a reasonable expectation that information disclosed will remain confidential. If a disclosing party does not have a reasonable expectation that a third party will preserve the confidentiality of the information, then any applicable privileges are waived. An expectation of confidentiality, however, is not enough to avoid waiver. In addition, disclosure of the information must be reasonably necessary for the accomplishment of the purpose for which the lawyer was consulted. (Evid. Code, § 912, subd. (d).) Thus, `[f]or the common interest doctrine to attach, most courts seem to insist that the two parties have in common an interest in securing legal advice related to the same matter — and that the communications be made to advance their shared interest in securing legal advice on that common matter.’ [Citations.]” (OXY Resources, supra, 115 Cal.App.4th at p. 891, italics added.)

(9) In Citizens for Ceres v. Superior Court (2013) 217 Cal.App.4th 889, 915 [159 Cal.Rptr.3d 789], the court expounded on the rules regarding the nonwaiver principles of sections 912 and 952. A communication to a lawyer, even when made in the presence of another person (e.g., a business associate or joint client, who is present to further the interest of the client in the consultation), and on a matter of joint concern, may retain a privileged character, within the existing scope of the privilege statutes. “Evidence Code sections 912 and 952, however, make no reference to common interests or joint concerns; they refer instead to a reasonable necessity of disclosure. Those two sections give rise to the common-interest doctrine…. [T]he alignment of the parties’ common interests may mean disclosures between [771] them are reasonably necessary to accomplish the purposes for which they are consulting counsel.” (Citizens for Ceres, supra, at p. 916.)^[^{FN. 6]}

(10) In Smith v. Laguna Sur Villas Community Assn. (2000) 79 Cal.App.4th 639, 642 [94 Cal.Rptr.2d 321] (Smith), the court analyzed discovery demands for attorney-client privileged information that were made by appellants as condominium owners and members of their Association, regarding litigation materials created by the Association. Those owners were not individually named as plaintiffs in the Association’s construction defect litigation against the developers, so that the owners were not equivalent to the Association client that had retained the attorney to bring the lawsuit, and thus the owners could not be allowed to access the privileged information. The court explained, “Like closely held corporations and private trusts, the client [(association)] is the entity that retained the attorney to act on its behalf.” (Ibid.; see id. at p. 643 [§ 951 defines “`client'” as the “`person'” who “`directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer ….'”].) Thus, “[w]here the association sues in its own name without joining with it the individual unit owners, the association, not the unit owners, holds the attorney-client privilege.” (9 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 25B:110, p. 25B-233 (rel. 10/2007).)

In reaching its conclusions, the court in Smith, supra, 79 Cal.App.4th 639, relied on Wells Fargo, supra, 22 Cal.4th 201, 209, in which no “fiduciary” exception to the attorney-client privilege was allowed on behalf of beneficiaries of a trust, who had sought to discover confidential communications between their trustee and the outside trust counsel hired by the trustee. It was immaterial that the trust had paid the attorney; such payments “do not suffice to create an attorney-client relationship.” (Smith, supra, at p. 645.) Courts “do not enjoy the freedom to restrict California’s statutory attorney-client privilege based on notions of policy or ad hoc justification.” (Wells Fargo, supra, at p. 209.)

[772] In Smith, supra, 79 Cal.App.4th 639, the court colorfully addressed concerns about group client confidentiality and potentially conflicting loyalties of association counsel, by stating: “It is no secret that crowds cannot keep them. Unlike directors, the residents owed no fiduciary duties to one another and may have been willing to waive or breach the attorney-client privilege for reasons unrelated to the best interests of the association. Some residents may have had no defects in their units or may have had familial, personal or professional relationships with the defendants. Indeed, it is likely that the developer in the underlying litigation itself may have owned one or more unsold units within the complex. As [association] points out, `[o]ne can only imagine the sleepless nights an attorney and the Board of Directors may incur if privileged information is placed in the hands of hundreds of homeowners who may not all have the same goals in mind.’ With the privilege restricted to an association’s board of directors, this is one worry, at least, that their lawyers can put to rest.” (Id. at p. 645.)

C. Homeowners Associations’ Obligations: Civil Code Criteria

(11) For purposes of evaluating the proper scope of the attorney-client privilege, we turn to the statutes governing the Association’s obligations to its members. In Civil Code former section 1368.3 (now Civ. Code, § 5980), an association that was established to manage a common interest development is granted standing to sue in its own name on matters concerning damage to the common area, or damage to separate interests that are affected by damage to the common areas, etc. (Civ. Code, § 5980; former § 1368.3, repealed by Stats. 2012, ch. 180, § 1, operative Jan. 1, 2014.)^{[FN. 7]} As previously explained, after the Association filed its construction defect action in 2009 alleging damage to the common areas, individual homeowners hired their own attorneys to file a separate but coordinated action for damage to individual units (the Samecky action). However, the Association can seek redress for damage to separate interests that are affected by damage to the common areas, etc. (Civ. Code, § 5980.)

[773] (12) “The duties and powers of a homeowners association are controlled both by statute and by the association’s governing documents.” (Ostayan, supra, 110 Cal.App.4th 120, 126-127.) In that case, the appellate court observed that the “complex” relationship between the individual owners and the managing association of a common interest development may “`”depend[] on the function the association is fulfilling under the facts of each case.”‘” (Id. at p. 126.) Although the individual owner “`has an economic interest in the proper business management of the development as a whole for the sake of maximizing the value of his or her investment,'” in other ways, “`each individual owner, at least while residing in the development, has a personal, not strictly economic, interest in the appropriate management of the development….'” (Id. at pp. 126-127, quoting Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 266-267 [87 Cal.Rptr.2d 237, 980 P.2d 940].)

(13) As explained already, the Act places certain obligations on an association to communicate with individual owners about any proposed construction defect litigation. Civil Code section 6150, subdivision (a), part of the Act, requires the board of an association to provide a written notice to each current member of the association, 30 days prior to the filing of any civil action by the association against the developer, “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.” Such a notice shall specify (1) a meeting will take place to discuss problems that may lead to the filing of a civil action; (2) what are the options available to address the problems; and (3) the time and place of the meeting. (Ibid.) (If there are potential statute of limitations problems imminent, the association may give such notice within 30 days after the filing of the action (Civ. Code, § 6150, subd. (b)); this method was evidently used here.)

In the CCRs applicable to this property, the Association is required not only to give such written notice of intended litigation to Association members, but also to obtain a vote of approval by more than 50 percent of the members, before filing the action. (CCRs, § 4.4.11.) This provision implements the protections of the individual homeowners’ economic interests in the value of not only their own individual units, but also the development as a whole. (Ostayan, supra, 110 Cal.App.4th 120, 126-127.) It anticipates that investigation of common area defects could require individual homeowners to permit access and testing that affect their units.

[774] III

ANALYSIS; NO WAIVER FOUND

In light of the above principles of law, we turn to the record and request for relief in this case.

A. Was Confidentiality of Communications Maintained at Meetings?

(14) The common interest doctrine is properly characterized under California law “as a nonwaiver doctrine, analyzed under standard waiver principles applicable to the attorney-client privilege and the work product doctrine.” (OXY Resources, supra, 115 Cal.App.4th at p. 889, fn. omitted.) “`[F]or the common interest doctrine to attach, most courts seem to insist that the two parties have in common an interest in securing legal advice related to the same matter — and that the communications be made to advance their shared interest in securing legal advice on that common matter.’ [Citations.]” (Id. at p. 891.)

Defendants argue that any confidentiality of communications at the meetings was initially waived through several different sets of circumstances. First, persons employed by or affiliated with Defendants, and who were also individual homeowners, were allowed to attend, and expert consultants attended and spoke at the meetings. (But see fn. 5, ante.) Second, a few homeowners later discussed issues raised at the meetings with their relatives and friends. Third, the letters announcing the meetings stated that the letters could be shared with potential buyers or lenders. Also, the Association had not kept confidential, but had made available to others, the numerous e-mails its counsel had received from individual homeowners about the defects they were experiencing in their units.

In response, the Association provided the declaration of its managing agent, Nina McCarthy, stating that the Association and its counsel gave instructions that attendance at the litigation meetings was to be restricted to Seahaus owners only, not tenants, prospective buyers, real estate agents or other such third parties.

The concerns expressed in Smith, supra, 79 Cal.App.4th 639, about the difficulty of preserving confidentiality when a large crowd of homeowners is involved were outlined by the court in that case, in response to the individual homeowners’ efforts to access privileged material created by the association’s lawyers. Such access was not necessarily intended to further the purpose of the association’s lawyers’ job, but was adverse to it. (Id. at p. 645.) Our [775] situation is the converse, in which the Association and its Board and lawyers perceive that the Board has a duty to keep all the individual homeowners informed about common area litigation that might affect the value of the individual units.

Likewise, in Wells Fargo, supra, 22 Cal.4th 201, the individual beneficiaries were seeking to force disclosure of the trustee’s privileged information, for their own dissident reasons. Again, our situation is the converse, in which the corporate entity is attempting to offer confidential legal information to other interested persons about matters in which the entity (the Association) and its members (individual homeowners) have some common interests, and which the attorneys for the Association are attempting to protect. Concededly, the interests of the Association and the individuals will not always be aligned, and it can be difficult to draw a line between their allied interests and their adverse interests. (See OXY Resources, supra, 115 Cal.App.4th at p. 896.) However, the Association was seeking to share its privileged information with homeowners, to the extent that it believes that they “`all have the same goals in mind.'” (Smith, supra, 79 Cal.App.4th at p. 645.)

(15) To determine the scope of the privilege, we look to the content of the subject communications, as well as the circumstances, for indications on whether the meetings will advance the common interests in the representation by counsel. (OXY Resources, supra, 115 Cal.App.4th at p. 891.) In considering the Civil Code sections listed above about the initiation of construction defect litigation, together with the Association’s governing documents, we conclude that the Association’s duties and powers include communicating with those parties who have closely aligned common interests, and the individual homeowners at the development have such common interests in this particular context. On balance, these circumstances show that the Association and its counsel, and the individual homeowners who participated in the litigation meetings, maintained a reasonable expectation that information to be disclosed about the status of the litigation was confidential in nature. “Clearly, the fundamental purpose behind the privilege is to safeguard the confidential relationship between clients and their attorneys so as to promote full and open discussion of the facts and tactics surrounding individual legal matters.” (Mitchell, supra, 37 Cal.3d 591, 599.) In the role of client, the Association could properly take into account not only its own goals of protecting the common areas, but also the interests of its individual member homeowners in their units, as related to the common areas that the Association was seeking to repair. The relationship of the two construction defect actions was close enough so that the individual homeowners had common interests in the legal status of the Association’s action. (See Civ. Code, § 6150, subd. (a).) Moreover, the presence of some homeowners who may have had conflicting loyalties (homeowners who were affiliated with Defendants) did not destroy all other common interests.

[776] We conclude that the subject litigation meetings were held to accomplish the purpose for which the Association’s lawyers were consulted. (§ 912, subd. (d); OXY Resources, supra, 115 Cal.App.4th at p. 891.) The common interest doctrine and its protection of confidentiality of these communications apply as a matter of law to these circumstances.

B. Was “Reasonable Necessity” Shown for Disclosures at Meetings?

We turn to the related question of whether the record supports the conclusion that it was “reasonably” necessary to the purpose of the Association’s attorney retention for such disclosures to be made at the subject meetings, to the individual homeowners. (§§ 952, 912, subd. (d).) Defendants appear to argue that even if the original meeting, seeking individual voter approval of the Board’s decision to pursue the litigation, was required by the CCRs and therefore was reasonably necessary, any subsequent meetings lost that protected status. We disagree. Both the content and the circumstances of each set of communications made about the Association’s legal strategy or advice support conclusions that each stage of these disclosures was intended to carry out the purpose of pursuing the Association’s lawsuit (to recover for asserted damage to the common areas) in such a way that would be consistent with and not interfere with the rights of the individual homeowners.

Although the two sets of plaintiffs involved here have some common interests in obtaining legal advice about their respective and distinct property rights, those rights will ultimately differ and are being resolved in separate lawsuits. Nevertheless, the Association’s attorney was attempting to communicate in the subject meetings with other stakeholders, the individual homeowners, in a manner that would advance their shared interests in securing advice on similar legal and factual issues. (OXY Resources, supra, 115 Cal.App.4th at pp. 887-888.) These circumstances were enough to connect the disclosure of the litigation update information with the statutorily required “reasonably necessary” steps toward accomplishing the purpose for which the lawyers were consulted. (§ 912, subd. (d).)

If we agree with the position taken by Defendants, which is that the Association’s attorneys’ communications to individual homeowners were not confidential and merely served to create inflated expectations of individualized stigma damages, we run the risk of offending the public policy considerations set out in Mitchell, supra, 37 Cal.3d at pages 609 through 610. Even if discovery into privileged discussions between attorneys and clients would nominally be intended to produce some evidence relating to the issues about damages, “it might very well reveal much of plaintiff’s investigative efforts and trial strategy.” (Id. at p. 610.) Such discovery about attorney-client [777] communications regarding potential damage evaluations or items “would potentially uphold a harassment tactic whereby defendants … are able to shift the focus of the case from damages caused by [their actions] to damages caused by allegedly inflammatory or false information provided by self-serving attorneys…. [T]his technique not only obfuscates many of the substantive issues in a case but also frequently places the wrong `defendant’ on trial.” (Id. at pp. 610-611.)

(16) In reaching this conclusion and granting the petition, we do not expand the scope of statutory privileges, but instead apply recognized rules to an unusual set of facts. (Wells Fargo, supra, 22 Cal.4th 201, 206.) The trial court erred in granting Defendants’ motion to compel deposition answers from individual homeowners about the content and strategies disclosed to them by the Association or its counsel at the litigation update meetings, and the trial court must deny the motion and issue a protective order concerning the attorney-client privilege in light of the common interest doctrine.

DISPOSITION

Let a peremptory writ of mandate issue directing the superior court to vacate its September 4, 2013 order denying assertion of the attorney-client privilege and compelling discovery, and enter a new order issuing a protective order and denying the motion to compel. The stay issued on September 17, 2013 is vacated. Petitioner is entitled to costs in the writ proceeding.

McConnell, P. J., and Irion, J., concurred.

[FN. 1] Both Civil Code former section 1368.5 and current Civil Code section 6150 are provisions contained in the Davis-Stirling Common Interest Development Act (the Act), which was recently repealed, reenacted and renumbered by Statutes 2012, chapter 180, section 1, operative January 1, 2014; see Civil Code section 4000 et seq. on residential properties, and Civil Code section 6500 et seq. for commercial and industrial properties. We utilize the current Civil Code section designations. The Association is a nonprofit mutual benefit corporation managing the common interest development.

[FN. 2] The Sarnecky action was brought by a group of approximately 30 unit homeowners against not only the developers and builders, but also the lenders and escrow holders. One real party in interest here, defendant Bank of America, was never sued in this Association action, but only in the individual homeowners’ coordinated action. Bank of America recently obtained summary judgment in theSarnecky action and has notified this court that it is no longer a real party in interest and will not be filing a return. However, its previous filings were properly before this court, and have been relied on by the other real parties in interest, and may be considered here.

[FN. 3] All further statutory references are to the Evidence Code unless noted.

[FN. 4] We assume that only those individual homeowners who are litigants in the Sarnecky action could be seeking stigma damages, and that the Association is not doing so regarding the common areas. In any case, the parties each assume that the same privilege questions apply to the Association and each individual homeowner deponent.

[FN. 5] Parenthetically, we need not discuss at length the other statutory concept in section 952, that privileges remain when confidences are disclosed to persons “to whom disclosure is reasonably necessary for the transmission of the information or the accomplishment of the purpose for which the lawyer is consulted.” (§ 952, italics added; see 2 Witkin, Cal. Evidence, supra, Witnesses, § 125, pp. 424-425 [rule covers various kinds of agents and intermediaries, e.g., secretary, accountant, other expert, etc.].) The expert consultants who attended the litigation update meetings would fall into this category.

[FN. 6] In Citizens for Ceres v. Superior Court, supra, 217 Cal.App.4th 889, the appellate court was addressing an arcane question under the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.), about whether a developer and a municipality have any “common interest” in the creation of a legally defensible environmental impact report about the developer’s application. The appellate court was analyzing whether those two entities had waived the attorney-client and other privileges, with respect to the communications they disclosed to each other before the project was approved. This required interpretation of the terms of Public Resources Code section 21167.6, subdivision (e) (governing the preparation of the administrative record). The court held that the administrative record statute does not impliedly abrogate the lead agency’s attorney-client privilege, but any privilege is nevertheless waived as to any documents shared with the developer’s counsel before the project is approved. (See 9 Miller & Starr, Cal. Real Estate (2013-2014 supp.) § 25A:6, pp. 100-101.) That case is factually distinguishable. Its general statement of the common interest doctrine is useful, although the court’s application of it has been criticized by commentators. (Ibid.)

[FN. 7] Cf. Wardleigh v. Second Judicial Dist. Court In & For County of Washoe (1995) 111 Nev. 345 [891 P.2d 1180, 1185], applying Nevada law that a homeowners association lacks standing to file an action, but when it “acts as an agent or facilitator for homeowners who have retained counsel, Association officials so acting on behalf of the Association would be drawn into the privilege enjoyed by the homeowner clients,” despite a lack of a direct attorney-client relationship with the homeowners in litigation sponsored by the association. Further, “such representation by the Association will be privileged only to the extent that the Association acts on behalf of the homeowner clients in a setting where it is clear that the communications with the homeowners’ counsel were intended to be privileged and confidential.” (Ibid.) We need not rely on out-of-state law, as California law is sufficient.

Talega Maintenance Corporation v. Standard Pacific Corporation

(2014) 225 Cal.App.4th 722

[Board meetings; Protected Speech & Anti-SLAPP] Statements made at HOA Board meetings are not matters of “public interest” nor “official proceedings” that are entitled to constitutional protection under anti-SLAPP statutes.

Newmeyer & Dillion, James S. Hultz and Uliana A. Kozeychuk for Defendants and Appellants.
The Law Offices of Jeri E. Tabback and Jeri E. Tabback for Plaintiff and Respondent.

OPINION

IKOLA, J. —

Plaintiff Talega Maintenance Corporation (HOA), a homeowners association, sued two developers for construction defects. The developers, who developed the residential community itself, also developed certain trails adjacent to the housing community. The trails were badly damaged during rains and flooding in 2005 and again in 2010, allegedly as a result of construction defects.

The HOA also sued three former employees of the developers. The employees were appointed by the developers to be members of the HOA’s board of directors at various times since 2003.^{[FN. 1]}

The HOA alleges the employee defendants committed fraud, negligence, and breached fiduciary duties in performing their duties as board members. In particular, the HOA contends it is not financially responsible for repairing the trails; the developers are. Yet the developer board members, who comprised a majority of the board, represented that the HOA was responsible and expended HOA funds to investigate and repair the trails.

[726] Defendants filed an anti-SLAPP motion ^{[FN. 2]} pursuant to Code of Civil Procedure section 425.16 ^{[FN. 3]} to strike the fraud, negligence, and fiduciary duty claims, contending they arise from protected statements made at the HOA board meetings. The trial court denied the motion and defendants appeal from that denial. We affirm.

FACTS

The following facts are taken from the complaint and the declarations filed in connection with the anti-SLAPP motion.

Defendant Talega Associates, LLC, purchased land for what became a 3,900-acre master planned community in San Clemente known as the “Talega Project.” Ultimately, more than 3,500 homes housing more than 9,000 residents were built. Plaintiff is the homeowners association for the Talega Project. Defendant Standard Pacific Corporation (collectively with Talega Associates referred to as Developers) was a “Guest Builder” that purchased unimproved lots and built separate communities within the Talega Project. The complaint alleges the Developers planned and constructed the Prima Deshecha and Cristianitos regional riding and hiking trails (the Trails), which are the trails at issue here. Defendants Patrick Hayes, Jerome Miyahara, and James B. Yates (collectively, Developer Board Members) were employees of Talega Associates who were appointed to represent Talega Associates on the HOA’s board of directors. At all relevant times, the Developer Board Members comprised a majority of the HOA’s board of directors.

In approximately 2005, the Trails suffered a partial slope failure as a result of severe rains. By that time, title to a portion of the damaged property had already transferred to the HOA. The Developer Board Members represented that the HOA was responsible to pay for repairs to the property it owned — the allegedly fraudulent statement — and to that end expended over $500,000 of HOA funds. According to the complaint, however, the Developer Board Members knew, but failed to disclose, that under the relevant controlling documents, the Developers were responsible for the cost of repairs. Further, the Developer Board Members knew, but failed to disclose, that the damages were the result of the Developers’ improper construction of the Trails, as explicitly pointed out to them by agents of Orange County.

In 2010 rains again damaged the Trails. This time, however, the independent board members had formed an executive committee — with no Developer [727] Board Members — that hired its own consultants to investigate the cause of the damages. From the consultants, the independent board members learned for the first time that the Developers were bound forever to provide repairs to the Trails, that the Trails were not actually completed, and that the Trails’ failures were likely the result of construction defects.

The HOA filed suit in September of 2012, alleging causes of action for breach of fiduciary duty, fraud, constructive fraud, construction defect, negligence, and declaratory relief. Each of the defendants filed anti-SLAPP motions targeting the causes of action for breach of fiduciary duty, fraud, constructive fraud, and negligence. At the hearing on the motions the court recognized it was a close call, stating, “I don’t think it’s a slam dunk. It could go either way. And I just want to give it some more thought as to the extent to which it might operate to strike some but not all of the allegations; or whether it is an all or a nothing.” Ultimately, the court denied the motions in their entirety, stating, “[Defendants] failed to establish that any statements were an exercise of free speech. Additionally, [defendants] failed to establish that statements at issue were made before, or in connection with, an official proceeding authorized by law. Moreover, even if the statements were made in a public forum via a [homeowners association] open board meeting, [defendants] have not demonstrated that they involved a matter of sufficient public interest or an exercise of a free speech right.” Defendants timely appealed.

DISCUSSION

I. Legal Principles

Section 425.16, subdivision (b)(1), the anti-SLAPP statute, states, “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 shall be subject to a special motion to strike, unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.”

(1) The anti-SLAPP statute “requires the court to engage in a two-step process. First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one arising from protected activity…. [Citation.] If the court finds such a showing has been made, it then determines whether the plaintiff has demonstrated a probability of prevailing on the claim.” (Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67 [124 Cal.Rptr.2d 507, 52 P.3d 685].)

“The sole inquiry under the first prong of the anti-SLAPP statute is whether the plaintiff’s claims arise from protected speech or petitioning [728] activity. [Citation.] Our focus is on the principal thrust or gravamen of the causes of action, i.e., the allegedly wrongful and injury-producing conduct that provides the foundation for the claims. [Citations.] We review the parties’ pleadings, declarations, and other supporting documents at this stage of the analysis only `to determine what conduct is actually being challenged, not to determine whether the conduct is actionable.'” (Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490-491 [156 Cal.Rptr.3d 492] (Castleman).)

As used in the anti-SLAPP statute, “`act in furtherance of a person’s right of petition or free speech … in connection with a public issue’ includes: (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 on an issue of public interest.” (§ 425.16, subd. (e).)

(2) “An order denying a special motion to strike under section 425.16 is immediately appealable. [Citations.] Our review is de novo; we engage in the same two-step process as the trial court to determine if the parties have satisfied their respective burdens. [Citations.] If the defendant fails to show that the lawsuit arises from protected activity, we affirm the trial court’s ruling and need not address the merits of the case under the second prong of the statute.” (Castleman, supra, 216 Cal.App.4th at p. 490.)

II. The Constructive Fraud, Breach of Fiduciary Duty, and Negligence Causes of Action Are Not Subject to the Anti-SLAPP Statute

(3) Of the four causes of action subject to the anti-SLAPP motions, we can immediately rule out all but the fraud cause of action. Section 425.16, subdivision (e)(1), (2) and (3) apply to “any written or oral statement.” ^{[FN. 4]} The breach of fiduciary duty, constructive fraud, and negligence claims are principally based on the Developer Board Members withholding information and improperly directing the expenditure of funds. These are not “written or oral statements.” Accordingly, those subdivisions do not apply.

The only possible application would be subdivision (e)(4), which pertains to “any other conduct in furtherance of the exercise of the constitutional right [729] of petition or the constitutional right of free speech….” (See, e.g., Lieberman v. KCOP Television, Inc. (2003) 110 Cal.App.4th 156 [1 Cal.Rptr.3d 536] [television station’s gathering of information to be used in broadcast was protected conduct]; No Doubt v. Activision Publishing, Inc. (2011) 192 Cal.App.4th 1018 [122 Cal.Rptr.3d 397][creation of a video game featuring the likeness of members of a famous rock band was expressive work constituting protected conduct].) Although defendants have paid lip service to the application of subdivision (e)(4), they make no effort to explain how withholding information they had a fiduciary duty to divulge, or expending funds to investigate and repair the Trails, is constitutionally protected conduct.

(4) Instead, defendants insist that these causes of action are in fact based on express statements made at board meetings, and thus should be treated the same as the fraud cause of action. Defendants recount that plaintiff’s attorney admitted at oral argument in the trial court that “[t]he fraud allegation is based on a statement that was made at a board meeting.” They then leap to the following conclusion: “In fact, allof the causes of action are based upon the allegation that the Defendants controlled, directed, and/or voted for certain actions taken by the HOA in connection with the Regional Trails. [Citation.] Therefore, the HOA’s admission … extends to all of the subject causes of action.” But that is a non sequitur. Controlling, directing, and voting for certain actions are not statements.

We recognize, nonetheless, that voting can constitute protected activity. (See Schroeder v. Irvine City Council (2002) 97 Cal.App.4th 174, 183, fn. 3 [118 Cal.Rptr.2d 330] [stating in dicta, with respect to city council member votes, “voting is conduct qualifying for the protections afforded by the First Amendment”].) Nonetheless, voting is not per se protected activity. (See Donovan v. Dan Murphy Foundation (2012) 204 Cal.App.4th 1500, 1506 [140 Cal.Rptr.3d 71] (Donovan)[stating, with respect to the vote of a nonprofit organization board member, “The mere act of voting, however, is insufficient to demonstrate that conduct challenged in a cause of action arose from protected activity.”].) Here, the HOA’s claim arises from the act of spending money in violation of the Developer Board Members’ fiduciary duties. The allegations in the complaint concerning the breach of fiduciary duty cause of action, for example, include no mention of voting. While the expenditure of money may have been precipitated by a vote, “the fact that protected activity may have triggered a cause of action does not necessarily mean the cause of action arose from the protected activity.” (Id. at p. 1507; see Graffiti Protective Coatings, Inc. v. City of Pico Rivera (2010) 181 Cal.App.4th 1207, 1218 [104 Cal.Rptr.3d 692][conduct challenged in action alleging city failed to comply with competitive bidding requirement was not officials’ communications or deliberations, but their failure to obey state and local laws].) The vote [730] was merely incidental. Thus the anti-SLAPP statute does not apply to the HOA’s causes of action for breach of fiduciary duty, constructive fraud, and negligence.

III. The Fraud Cause of Action Is Not Subject to the Anti-SLAPP Statute

The fraud cause of action presents a closer question. The HOA alleges the Developer Board Members fraudulently misrepresented that the HOA was financially liable for repairing the Trails. The HOA’s counsel conceded this representation was made at a HOA board meeting. Defendants contend subdivisions (e)(1), (2) and (3) apply.

A. Homeowners Association Board Meetings Are Not Official Proceedings

Subdivision (e)(1) applies to statements “made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law.” (Italics added.) Defendants contend homeowners association meetings are official proceedings authorized by law. In support of their contention they note that courts have described a homeowners association as a “quasi-governmental entity” (Silk v. Feldman (2012) 208 Cal.App.4th 547, 553 [145 Cal.Rptr.3d 484] (Silk)), and that the meetings and activities of homeowners associations are heavily regulated under the Davis-Stirling Common Interest Development Act (Civ. Code, § 4000 et seq.). Neither party cited, nor have we found, any case directly addressing the issue of whether a homeowners association meetings is an “official proceeding” for purposes of subdivision (e)(1).

We begin our analysis with two cases that found the proceeding before it was an official proceeding authorized by law. The first is the seminal case analyzing “official proceeding,” Kibler v. Northern Inyo County Local Hospital Dist. (2006) 39 Cal.4th 192 [46 Cal.Rptr.3d 41, 138 P.3d 193] (Kibler). The issue in Kibler was whether a hospital’s peer review disciplinary proceedings were “`official proceeding[s]'” for purposes of the anti-SLAPP statute. (Kibler, at p. 197.) The plaintiff was a doctor who had been disciplined. He sued the hospital based on statements made during the proceedings and the hospital brought an anti-SLAPP motion. (Id. at pp. 196-197.) In concluding the hospital peer review proceedings are official proceedings, the court relied on three considerations. First, peer review proceedings are required of hospitals and heavily regulated. (Id. at pp. 199-200.) Second, because hospitals are required to report the results of peer review proceedings to the Medical Board of California, peer review proceedings play a “significant role” in “`aid[ing] the appropriate state licensing boards in their responsibility to regulate and discipline errant [731] healing arts practitioners.'” (Id. at p. 200.) Third, “[a] hospital’s decisions resulting from peer review proceedings are subject to judicial review by administrative mandate. [Citation.] Thus, the Legislature has accorded a hospital’s peer review decisions a status comparable to that of quasi-judicial public agencies whose decisions likewise are reviewable by administrative mandate.” (Ibid.)

The second case reaching a similar result is Fontani v. Wells Fargo Investments, LLC (2005) 129 Cal.App.4th 719 [28 Cal.Rptr.3d 833], disapproved on other grounds in Kibler, supra, 39 Cal.4th at page 203, footnote 5. In Fontani a former securities broker-dealer sued his former employer based on statements the latter made to the National Association of Securities Dealers (NASD) concerning the reasons for the plaintiff’s termination. (Fontani, at p. 725.) The issue was whether the proceeding before the NASD was an “official proceeding” for purposes of subdivision (e)(1). (Fontani, at p. 728.) In answering in the affirmative, the court relied on the following observations: “In its capacity here, the NASD exercises governmental power because `it is the primary regulatory body for the broker-dealer industry’ and thus performs uniquely regulatory functions typically performed by a governmental regulatory agency. [Citations.] More specifically, while the NASD may perform some private functions, … it stands as a regulatory surrogate for the [Securities and Exchange Commission]. The federal securities laws `”delegate[] government power” to [self-regulatory organizations] such as the New York Stock Exchange … and the NASD “to enforce … compliance by members of the industry with both the legal requirements laid down in the Exchange Act and ethical standards going beyond those requirements.”‘” (Id. at p. 729; see Vergos v. McNeal (2007) 146 Cal.App.4th 1387, 1396 [53 Cal.Rptr.3d 647] [administrative grievance procedure set up by Regents of the University of California, “a constitutional entity having quasi-judicial powers,” deemed official proceeding].)

Next we turn to two cases holding the proceeding at issue was not an official proceeding.

In Garretson v. Post (2007) 156 Cal.App.4th 1508 [68 Cal.Rptr.3d 230], “[t]he key issue” was “whether defendant’s act of noticing a nonjudicial foreclosure sale of plaintiff’s property constitutes protected activity under the anti-SLAPP statute.” (Id. at p. 1515.) The court noted that nonjudicial foreclosure sales are governed by a comprehensive statutory framework and that the end result is a “final adjudication of the rights of the borrower and lender.” (Id. at p. 1516.) The court also noted that nonjudicial foreclosure activity is protected by the litigation privilege. (Id. at p. 1518.) Nonetheless, the court concluded a nonjudicial foreclosure is fundamentally a “`private, contractual proceeding, rather than an official, governmental proceeding or [732] action.'” (Id. at p. 1520.) The court distinguished Kibler on the basis that nonjudicial foreclosures “are not closely linked to any governmental, administrative, or judicial proceedings or regulation, such as the state licensing and regulation of physicians in Kibler.” (Garretson, at p. 1521.)

In Donovan, supra, 204 Cal.App.4th 1500, the plaintiff was a former member of the board of directors of a nonprofit charitable organization who sued the organization and current board members for wrongful removal. (Id. at pp. 1502-1503.) The defendants contended the board meeting at which the plaintiff was removed was an official proceeding because “board of directors meetings and majority voting are authorized under the Corporations Code, and the issue whether to retain [the plaintiff] was an issue of consideration before the [board of directors].” (Id. at p. 1508.) The court rejected that contention and distinguished Kibler on the basis that board decisions are not subject to review by administrative mandate and because, though meetings of the board of directors were authorized by statute, “the actual procedures are left to the private organizations.” (Donovan, at p. 1508; see Olaes v. Nationwide Mutual Ins. Co. (2006) 135 Cal.App.4th 1501, 1508 [38 Cal.Rptr.3d 467] [private company’s sexual harassment grievance protocol not an official proceeding].)

(5) In this spectrum of cases, homeowners association meetings fall outside the scope of official proceedings. Although the word “official” in subdivision (e)(1) is not coextensive with “governmental” (Kibler, supra, 39 Cal.4th at p. 203), the case law demonstrates that nongovernmental proceedings must have a strong connection to governmental proceedings to qualify as “official.” Thus, although courts have recognized the similarities between a homeowners association and a local government, even going so far as to describe a homeowners association as a “quasi-governmental entity, paralleling the powers and duties of a municipal government” (Silk, supra, 208 Cal.App.4th at p. 553), a homeowners association is not performing or assisting in the performance of the actual government’s duties, as was the case in Kibler and Fontani. Further, unlike the hospital peer review board decision in Kibler, decisions by the board of a homeowners association are not reviewable by administrative mandate. Thus they have not been delegated government functions to the same extent. Finally we note that although no case has directly addressed this issue, multiple cases have addressed anti-SLAPP motions arising from statements at homeowners association board meetings, and all such cases have analyzed the case under the rubric of subdivision (e)(3) or (4). (See, e.g., Silk, at p. 553; Cabrera v. Alam (2011) 197 Cal.App.4th 1077, 1086-1087 [129 Cal.Rptr.3d 74]; Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 474 [102 Cal.Rptr.2d 205] (Damon).) Our holding is consistent with the approach taken in those cases.

[733] B. Whether the HOA or the Developers Were Liable to Pay for Repairs to the Trails Was Not an Issue Under Consideration by a Governmental Body

Subdivision (e)(2) applies to statements “made in connection with an issue under consideration or review by a legislative, executive, or judicial body.” Citing allegations in the complaint that the Developers worked closely with the County of Orange and City of San Clemente in the construction of the Trails, defendants contend “there can be no dispute that the construction and condition of the trails were issues under consideration and review by governmental agencies, and alleged statements regarding these issues were protected speech.”

The problem is, the relevant issue is not the general construction and condition of the Trails. Rather, the allegedly fraudulent statement concerns who has to pay for repairing the Trails. There is nothing in the record suggesting the County of Orange or City of San Clemente was considering that issue.

(6) Courts have generally rejected attempts to abstractly generalize an issue in order to bring it within the scope of the anti-SLAPP statute. For example, in the context of subdivision (e)(3), where the statement must concern an issue of public interest, the court in World Financial Group, Inc. v. HBW Ins. & Financial Services, Inc. (2009) 172 Cal.App.4th 1561, 1570 [92 Cal.Rptr.3d 227], stated, “While employee mobility and competition are undoubtedly issues of public interest when considered in the abstract, one could arguably identify a strong public interest in the vindication of any right for which there is a legal remedy. `The fact that “a broad and amorphous public interest” can be connected to a specific dispute is not sufficient to meet the statutory requirements’ of the anti-SLAPP statute. [Citation.] By focusing 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, defendants resort to the oft-rejected, so-called `synecdoche theory of public issue in the anti-SLAPP statute,’ where `[t]he part [is considered] synonymous with the greater whole.’ [Citation.] In evaluating the first prong of the anti-SLAPP statute, we must focus on `the specific nature of the speechrather than the generalities that might be abstracted from it.'” (Italics added.) Similarly, here, our focus is not on some general abstraction that may be of concern to a governmental body, but instead on the specific issue implicated by the challenged statement and whether a governmental entity is reviewing that particular issue. On the record before us, this requirement is not satisfied.

[734] C. Who Was to Pay For Repairing the Trail Was Not an Issue of Public Interest

Subdivision (e)(3) applies to statements “made in a place open to the public or a public forum in connection with an issue of public interest….” Plaintiff concedes homeowners association meetings constitute a public forum, and thus the issue boils down to whether the alleged fraudulent statements were in connection with an issue of public interest.

(7) “The definition of `public interest’ within the meaning of the anti-SLAPP statute has been broadly construed to include not only governmental matters, but also 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.” (Damon, supra, 85 Cal.App.4th at p. 479.) “Although matters of public interest include legislative and governmental activities, they may also include activities that involve private persons and entities, especially when a large, powerful organization may impact the lives of many individuals.” (Church of Scientology v. Wollersheim (1996) 42 Cal.App.4th 628, 650 [49 Cal.Rptr.2d 620], disapproved on other grounds in Equilon Enterprises v. Consumer Cause, Inc., supra, 29 Cal.4th at p. 68, fn. 5.) However, “in 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 v. International Brotherhood of Electrical Workers (2003) 110 Cal.App.4th 107, 119 [1 Cal.Rptr.3d 501].)

It is the latter requirement that is absent with respect to the fraud cause of action here. There is no indication in the record that there was any controversy, dispute, or discussion surrounding the Developer Board Members’ representation that the HOA was liable to pay the repair costs. To the contrary, a declaration submitted by an independent board member states, “I believed [the Developer Board Members’] representations, as I had no reason to believe at the time that they were not telling me the truth or acting in the best interest of the Association.” This suggests there was no controversy about the issue, and nothing in the record contradicts that inference. The Developer Board Members made their statements and others believed them without dispute. Given the absence of any controversy, dispute, or discussion, the issue of who was to pay for the repairs, which was of interest to only a narrow sliver of society, was not a public issue.

By contrast, in cases involving statements made at public homeowners association forums where the court found there was a public issue, the [735] requirement of an ongoing controversy was satisfied. In Damon, for example, “each of the alleged defamatory statements concerned (1) the decision whether to continue to be self-governed or to switch to a professional management company; and/or (2) [the general manager’s] competency to manage the Association.” (Damon, supra, 85 Cal.App.4th at p. 479.) “Moreover, the statements were made in connection with the Board elections and recall campaigns.” (Ibid.) Indeed, “[b]y the end of 1997, the senior citizen residents of Ocean Hills were largely split into two camps: those who favored [the general manager’s] continued service and those who wanted [him] terminated as general manager.” (Id. at p. 472.) In Cabrera v. Alam, supra, 197 Cal.App.4th at page 1082, the statement at issue was an accusation in the midst of an election campaign that a past president had stolen money from and defrauded the homeowners association. In Silk, supra, 208 Cal.App.4th at page 551, the challenged statement was again in the context of a board election and implied an incumbent board member had engaged in selfdealing. In contrast to these cases, the total absence of controversy in the present case is plain. Accordingly, the allegedly fraudulent statement here did not concern a public issue.

(8) Because defendants failed to meet their burden to show the challenged causes of action arose from protected activity, “we affirm the trial court’s ruling and need not address the merits of the case under the second prong of the statute.” (Castleman, supra, 216 Cal.App.4th at p. 490.)

DISPOSITION

The order is affirmed. Plaintiff shall recover its costs incurred on appeal.

Moore, Acting P. J., and Thompson, J., concurred.

[FN. 1] The complaint also listed the County of Orange as a defendant solely because it has an easement on the trails at issue and is a party to one of the agreements subject to the declaratory relief action. Any reference to “defendants” in this opinion excludes the County of Orange.

[FN. 2] SLAPP is an acronym for “`strategic lawsuit against public participation.'” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 815, fn. 1 [124 Cal.Rptr.3d 256, 250 P.3d 1115].)

[FN. 3] All statutory references are to the Code of Civil Procedure unless otherwise stated.

[FN. 4] “References to “subdivisions (e)(1),” “subdivision (e)(2),” “subdivision (e)(3),” and “subdivision (e)(4)” are to section 425.16.

Market Lofts Community Association v. 9th Market Lofts, LLC

(2014) 222 Cal.App.4th 924

[Association Standing to Sue] Right of association to challenge developer agreements; right to bring suit as representative of association’s members.

COUNSEL

Freeman, Freeman & Smiley, Todd M. Lander and Tracy R. Daub for Plaintiff and Appellant.

Law Offices of Stephen D. Marks, Stephen D. Marks; Katten Muchin Rosenman, Gregory S. Korman, Andrew J. Demko and Johanna R. Bloomfield for Defendants and Respondents.

[927] OPINION

ASHMANN-GERST, J. —

A homeowners association appeals from the judgment of dismissal following the sustaining of a demurrer without leave to amend its second amended complaint (SAC). The trial court sustained the demurrer on the ground that the association lacked standing both on its own behalf and as a representative of the homeowners to assert claims against the developers relating to contractual parking rights. We reverse the judgment of dismissal.

FACTUAL AND PROCEDURAL BACKGROUND

The Parties

Appellant is Market Lofts Community Association (HOA), which is the homeowners association for the condominium owners at a mixed-use upscale development called Market Lofts, located at the corner of 9th and Flower Streets in downtown Los Angeles, adjacent to the Staples Center. Retail spaces are located on the street level and 267 residential condominium units are located above. Respondents are essentially two sets of developers — the developer of Market Lofts (referred to as 9th Street) and the developer of an adjacent parking structure that contains 319 parking spaces for the Market Lofts condominium owners (referred to as CIM).^{[FN. 1]}

Allegations of the SAC

The SAC alleges the following: On May 11, 2006, the Developers entered into a “PARKING LICENSE AGREEMENT” (License Agreement). At this time, construction of Market Lofts had not been completed and the HOA had not been formed. Pursuant to section D of the License Agreement, which is attached to the SAC, CIM agreed to grant to 9th Street “for the benefit of the residential homeowner’s association (the `HOA‘) to be formed in connection with the sale of residential condominium units in the Market Lofts Project and the owners and occupants of the residential units … a license to use the Market Lofts Parking Spaces, which shall be appurtenant to the Market Lofts Property.” (Italics & underscoring added.)

Section 2.1 of the License Agreement specifies that the license granted is “perpetual” for the exclusive use of the 319 parking spaces, and that the [928] license “shall be at no cost” to 9th Street, except for the obligation to pay its proportionate share of “CAM Charges” (common area maintenance) to CIM. Section 2.5 provides that the license is “irrevocable.” Section 13 states that “Upon the First Closing [(defined as the close of escrow for the first residential unit sold)], [9th Street] shall assign or sub-license its rights and obligations under this Agreement to the HOA…. [T]he terms and conditions of this Agreement shall be covenants that run with the land….”

The HOA was formally incorporated on January 10, 2007, and the first sale of a Market Lofts condominium occurred later that year.

On January 24, 2007, the HOA and 9th Street entered into a “Parking Sub-License Agreement” (Sub-License), which is also attached to the SAC. At that time, respondents Lee, Adler and Magdych comprised a “controlling majority” of the HOA’s board of directors and “each was simultaneously serving as an agent, employee, partner and/or member of the 9th Street and/or CIM defendants.” According to the SAC, rather than sublicensing its rights under the License Agreement to the HOA, 9th Street and the other respondents engaged in self-dealing by using the Sub-License “to strip the Association of many of the rights afforded it under the License Agreement and concurrently impose on it financial and other obligations in direct contravention of the terms of [the License Agreement].”

For example, while 9th Street granted to the HOA a sublicense for the exclusive use of the 319 parking spaces pursuant to section 2.1 of the Sub-License, section 3.1 provides that the HOA will pay 9th Street a monthly fee of $75 for each parking space, to be increased annually by 5 percent, and to be adjusted every 10 years to the prevailing market rate for similar parking. Section 4 provides that the term of the Sub-License is the earlier of the date of termination of the covenants, conditions, restrictions and reservation of easements for the Market Lofts project (CC&R’s) or 49 years from the date of the Sub-License with the HOA being permitted to renew the Sub-License no more than five successive 10-year periods. Section 17.6 provides a late fee of 18 percent for any late payment. The SAC details numerous other provisions in the Sub-License that differ from the License Agreement and that “limit the rights of the Association and its members in various respects, all of which contravene the License Agreement.”

The CC&R’s were signed by respondent Lee as both developer and declarant, and were recorded in the Los Angeles County Recorder’s Office on May 23, 2007. According to the SAC, the CC&R’s “are notable not for the information provided in their 80 pages, but rather for what they fail to disclose,” namely, that “the License Agreement plainly extended a perpetual and irrevocable license to the Association and the homeowners.” The SAC [929] alleges that at paragraph 3 of the CC&R’s, which is attached to the original and first amended complaints but not to the SAC, “the Sub-License is identified as the governing document by which `Declarant has granted a sublicense to the Association for the benefit of the Owners and other “Permitted Users” to use the parking spaces.'” The CC&R’s were distributed to prospective purchasers in advance of their acquisition of the residential units. The Sub-License and License Agreement were buried in a “massive package” of documents submitted to prospective purchasers of the Market Lofts units, and there was no identification or specific disclosure of the existence of the two agreements or “the critical distinctions in their terms.”

It was not until January 2011 that “the developer dominated Association Board gave way to one controlled by homeowners with no ties to the Defendants,” and “only then, was the [HOA] able to investigate these circumstances comprehensively and initiate ameliorative steps necessary to restore the rights intended by and set forth in the License Agreement.”

The HOA and its members have been damaged in excess of $1 million in paid parking fees. The SAC further alleges that in the event a homeowner refuses to pay the monthly parking fee, the HOA is obligated to do so.

Causes of Action

The HOA first sued the Developers on November 1, 2011. On August 22, 2012, the HOA filed the SAC, which contains two causes of action for declaratory relief, plus causes of action for breach of fiduciary duty, breach of the License Agreement, concealment, unfair business practices, and rescission of the Sub-License. The SAC alleges in both declaratory relief causes of action that the HOA and the Developers dispute their rights under the License Agreement and the Sub-License, and that the HOA seeks a declaration that the Sub-License is void and of no force and effect to the extent that it conflicts with the License Agreement. The HOA brings all other causes of action on its own behalf and as a representative of the condominium owners.

The Demurrer Pleadings and Ruling

The Developers filed a consolidated demurrer to each cause of action in the SAC. The HOA opposed the demurrer, which the trial court sustained without leave to amend on the sole ground that the HOA lacked standing to sue. The trial court concluded that “because the individual homeowners here paid the alleged illegal parking fees and Plaintiff only collected them, Plaintiff has not shown that it suffered an injury such that it has standing.” The HOA then filed this appeal.

[930] DISCUSSION

Standard of Review

We review de novo a trial court’s sustaining of a demurrer without leave to amend, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300 [58 Cal.Rptr.2d 855, 926 P.2d 1042]; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 [271 Cal.Rptr. 146, 793 P.2d 479].) We assume the truth of properly pleaded allegations in the complaint and give the complaint a reasonable interpretation, reading it as a whole and with all its parts in their context. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558 [71 Cal.Rptr.2d 731, 950 P.2d 1086]; People ex rel. Lungren v. Superior Court, supra, at p. 300.) We may disregard allegations which are contrary to law or to judicially noticed facts. (Wolfe v. State Farm Fire & Casualty Ins. Co. (1996) 46 Cal.App.4th 554, 559-560 [53 Cal.Rptr.2d 878].) “On appeal, we do not review the validity of the trial court’s reasoning but only the propriety of the ruling itself.” (Rodas v. Spiegel(2001) 87 Cal.App.4th 513, 517 [104 Cal.Rptr.2d 439].) Thus, the judgment of dismissal will be affirmed if it is proper on any of the grounds raised in the demurrer, even if the trial court did not rely on those grounds. (Jackson v. Doe (2011) 192 Cal.App.4th 742, 750-751 [121 Cal.Rptr.3d 685].) We apply the abuse of discretion standard in reviewing a trial court’s denial of leave to amend. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58]; Hernandez v. City of Pomona(1996) 49 Cal.App.4th 1492, 1497-1498 [57 Cal.Rptr.2d 406].)

The Trial Court Erred in Sustaining the Demurrer on the Lack of Standing
Declaratory Relief Causes of Action

The first and second causes of action in the SAC seek declaratory relief with respect to the License Agreement and the Sub-License. We agree with the HOA that it has standing to bring these two causes of action on its own behalf.

Code of Civil Procedure section 1060 provides in part that “[a]ny person interested under a written instrument … or under a contract … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.”

[931] (1) As the court explained in Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606 [98 Cal.Rptr.2d 277]: “All that Code of Civil Procedure section 1060 requires is that there be [an] `actual controversy relating to the legal rights and duties of the respective parties.’ … A cardinal rule of pleading is that only the ultimate facts need be alleged. [Citation.] In a declaratory relief action, the ultimate facts are those facts establishing the existence of an actual controversy. (Code Civ. Proc., § 1060.) … However, to be entitled to declaratory relief, a party need not establish that it is also entitled to a favorable judgment…. `A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. [Citations.] If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to [a] favorable declaration. [Citations.]'” (See Alameda County Land Use Assn. v. City of Hayward (1995) 38 Cal.App.4th 1716, 1722 [45 Cal.Rptr.2d 752] [If the pleaded “facts reveal an actual controversy exists between the parties, the complaint is legally sufficient for declaratory relief”].)

The HOA is an interested party because it is a directly named beneficiary of the License Agreement and is a direct contracting party to the Sub-License. Thus, if the HOA has alleged an actual controversy, it is entitled to seek a declaration of the rights imposed and duties afforded under the License Agreement and the Sub-License. Contrary to the Developers’ assertion, the SAC alleges an actual controversy. The SAC details the material differences in the two agreements, and alleges: “At present, the Association is not enjoying the full benefits of the License Agreement and cannot confer on its member owners the perpetual parking rights prescribed by that agreement.” The SAC also alleges: “There is currently a dispute regarding the efficacy of the License Agreement and the Sub-License, and of the Association’s and its members’ rights under these agreements. The Association alleges that it is entitled to the rights set forth in the License Agreement, and that to the extent the Sub-License conflicts with those rights, it is ineffective. The Association is informed and believes, and on that basis alleges, that the Defendants, and each of them, contest the Association’s claims and allege otherwise.” The HOA seeks numerous declarations regarding the two agreements, including a declaration that the Sub-License is of no force and effect to the extent it conflicts with the License Agreement.

(2) The trial court adopted the Developers’ argument that the HOA lacks standing to bring the declaratory relief claims because the HOA is actually seeking a declaration of its members’ rights, rather than its own, since the members pay the parking fees. But this argument overlooks that the HOA is a [932] direct beneficiary of the License Agreement and is a contracting party to the Sub-License. If the Developers’ argument were correct, then the HOA would be powerless to seek a determination of its own rights under either contract. The law allows any party with an interest in a contract to pursue a declaration of rights as to that instrument when an actual controversy exists. (Code Civ. Proc., § 1060.)

The Developers’ additional argument that there is no actual controversy is also without merit. The Developers essentially ignore the License Agreement and focus on the Sub-License, asserting that the HOA understands its obligations under the Sub-License, i.e., to collect parking charges from its members and disburse them to 9th Street. But this argument takes an overly simplistic view of the SAC. The HOA is not asking the trial court to merely interpret the terms of the Sub-License. Rather, the HOA is asking the trial court to resolve the interplay between the two agreements. In other words, the HOA contends that the License Agreement must govern the parking arrangements and that the Sub-License is invalid, while the Developers dispute this contention.

(3) In our opinion, the SAC alleges an actionable dispute between the HOA and the Developers, and the HOA has standing to seek a resolution of this dispute. The trial court therefore erred in sustaining the demurrer to the two declaratory relief causes of action.

Remaining Causes of Action

The HOA contends that it has standing to bring the remaining causes of action for breach of fiduciary duty, breach of the License Agreement, concealment, unfair business practices, and rescission of the Sub-License either by itself or as a representative of the homeowners. We agree.

(4) With respect to the contract causes of action, it goes without saying that a party to a contract or one for whom the contract was intended to benefit may bring actions related to such contracts. Thus, the HOA is the real party in interest entitled to bring contract claims relating to the License Agreement and the Sub-License. The Developers’ reliance on the argument that the HOA is not the real party in interest because it is seeking to enforce rights that belong to its members, not itself, is of no import. The SAC alleges that the HOA is directly obligated to pay the parking fees and that “in the event a homeowner refused to pay the monthly fee, the Association is obligated to do so.” For purposes of the demurrer, we must accept this allegation as true.

(5) With respect to the other causes of action, the HOA has standing to sue as a representative of the individual homeowners. Code of Civil Procedure section 382 provides in part that “when the question is one of a common [933] or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” While this statute is sometimes referred to as the “class action statute,” it also sanctions representative, nonclass actions. “`It may also be true that while all class suits are representative in nature, all representative suits are not necessarily class actions.‘” (Raven’s Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 794 [171 Cal.Rptr. 334] (Raven’s Cove).) Thus, California courts have routinely allowed homeowners associations to sue solely as the representatives of their members. (See, e.g., id. at p. 795; Property Owners of Whispering Palms, Inc. v. Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 672-673 [33 Cal.Rptr.3d 845] [“`[e]ven in the absence of injury to itself, an association may have standing solely as the representative of its members'”]; Salton City etc. Owners Assn. v. M. Penn Phillips Co. (1977) 75 Cal.App.3d 184, 189 [141 Cal.Rptr. 895].)

The two requirements that must be satisfied for a representative action are an ascertainable class and a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented. (Raven’s Cove, supra, 114 Cal.App.3d at p. 795, citing Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704 [63 Cal.Rptr. 724, 433 P.2d 732].) Here, there is plainly an ascertainable class — the homeowners. There is also a well-defined community of interest concerning the relevant questions of law and fact. Each homeowner is subject to the same parking charges and any invalidity of the Sub-License would affect the homeowners in the same manner. The homeowners are also the victims of the Developers’ alleged self-dealing. Additionally, questions of necessity, convenience and justice likewise support the HOA’s standing, because otherwise 267 homeowners would individually have to prosecute their claims. (See Tenants Assn. of Park Santa Anita v. Southers(1990) 222 Cal.App.3d 1293, 1304 [272 Cal.Rptr. 361] [“we conclude that considerations of necessity, convenience and justice provide justification for the use of the representative procedural device”].)

The Developers argue that the HOA cannot be allowed to proceed as a representative of the homeowners because the Developers would be deprived of defenses they would have against individual homeowners, such as the statute of limitations, notice, reliance, causation, waiver and estoppel. But these factual defenses pertain to the merits of the causes of action, an issue we are not concerned with at this initial pleading stage. Moreover, the Developers have not demonstrated why they would be precluded from pursuing these defenses or conducting discovery in this regard.

Additionally, even if individualized assessments are made, that does not destroy the commonality requirement. In Raven’s Cove, supra, 114 [934] Cal.App.3d 783, the homeowners association sued to redress defects in common area landscaping and for damage to the exterior walls of individual units. Despite the fact that the damage to each unit would necessarily be individualized, the reviewing court found a sufficient commonality of interest because each owner had a similar beneficial interest in the outcome of the case. (Id. at p. 795.) The same is true here, where each homeowner would receive restoration of the parking rights provided in the License Agreement, if the HOA prevails.

(6) To the extent the Developers also argue that the HOA lacks standing to sue because it is not claiming damage to a common area under Civil Code former section 1368.3, such argument is without merit. This statute dealt with the standing of a homeowners association to sue “in its own name as the real party in interest” in specific matters, including damage to the common area and enforcement of the governing documents. (Civ. Code, former § 1368.3.) This statute had nothing to do with a homeowners association’s standing to sue in a representative capacity.

III. The Developers’ Argument Regarding the CC&R’s

The Developers spend much of their brief arguing that, apart from the issue of standing, the causes of action in the SAC are barred because the Sub-License is part of the governing CC&R’s, a recorded document which is presumptively enforceable, and which was provided to each prospective homeowner. Because a judgment of dismissal can be upheld on any ground raised in the demurrer, even when the trial court did not rely on that ground, we address the merits.

(7) Under the Davis-Stirling Common Interest Development Act (Civ. Code, former § 1350 et seq.) (Davis-Stirling Act), “covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development.” (Civ. Code, former § 1354, subd. (a).) “This statutory presumption of reasonableness requires that recorded covenants and restrictions be enforced `”unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.”‘ [Citation.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 239 [145 Cal.Rptr.3d 514, 282 P.3d 1217]; see Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th, 361, 382 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) The Developers argue that the HOA failed to meet its “burden” of showing that the Sub-License parking fee, of which each homeowner had constructive, if not actual, notice was unreasonable.

[935] The Developers’ argument shows that they are trying to impose their own vision of what this case is about. This lawsuit is not a formal challenge to the CC&R’s or an attempt to formally amend the CC&R’s, for which the Davis-Stirling Act provides the procedural amendment requirements. (Civ. Code, former §§ 1354, 1355.) As the HOA noted in its opposition to the demurrer, “[t]his litigation is centered around the efficacy of the License Agreement and Defendants’ actions to unwind the Association’s rights related to that contract.”

(8) The HOA acknowledges that the Sub-License is identified in the CC&R’s, and that the homeowners had at least constructive notice of the existence of the Sub-License. What the HOA complains about is that neither the rights embodied in the License Agreement and how those rights differed from what the Sub-License provided nor the Developers’ alleged self-dealing in systematically unraveling the rights in the License Agreement by way of the Sub-License were disclosed to either the original HOA or to subsequent homeowners. As the HOA noted below, the Developers have conflated two separate and unrelated concepts: Notice and invalidity of the Sub-License. The HOA therefore alleges causes of action for breach of the License Agreement and breach of fiduciary duties. In Raven’s Cove, supra,114 Cal.App.3d 783, the appellate court stated that a “developer and his agents and employees who also serve as directors of an association [in its initial period], like the instant one, may not make decisions for the Association that benefit their own interests at the expense of the association and its members…,” and may therefore be sued for breach of fiduciary duty. (Id. at p. 799.)

Even assuming the Davis-Stirling Act applies here, it does not provide a basis for sustaining the demurrer without leave to amend. We are not prepared to say that the alleged self-dealing by fiduciaries of the HOA that violates the fundamental public policy of the need for trust and accountability with respect to certain special relationships is reasonable as a matter of law. (See Raven’s Cove, supra, 114 Cal.App.3d at pp. 800-801 [“the initial directors and 40officers of the Association had a fiduciary relationship to the homeowner members analogous to that of a corporate promoter to the shareholders. These duties take on a greater magnitude in view of the mandatory association membership required of the homeowner. We conclude that since the Association’s original directors (comprised of the owners of the Developer and the Developer’s employees) admittedly failed to exercise their supervisory and managerial responsibilities … and acted with a conflict of interest, they abdicated their obligation as initial directors of the Association …”].)

[936] DISPOSITION

The judgment of dismissal following the sustaining of the demurrer to the SAC is reversed. The HOA is entitled to recover its costs on appeal.

Boren, P. J., and Ferns, J.,^[*] concurred.

[FN. 1] Respondents shall be referred to collectively as “the Developers.” 9th Street consists of respondents 9th Street Market Lofts, LLC; 645 9th Street, LLC; and the Lee Group, Inc. CIM consists of CIM/830 S. Flower, LLC; CIM Market at 9th & Flower, LLC; CIM/8th & Hope, LLC; and CIM Group, L.P. Respondents also include Jeffrey Lee (Lee); Michael Adler (Adler); and David Magdych (Magdych).

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

Beacon Residential Community Association v. Skidmore

(2014) 59 Cal. 4th 568

[Construction Defect; Architect Liability] An architect who functions as the principal architect on a residential construction project owes a duty of care to future homeowners.

COUNSEL

Law Offices of Ann Rankin, Ann Rankin, Terry L. Wilkens; Katzoff & Riggs, Kenneth S. Katzoff, Robert R. Riggs, Sung E. Shim and Stephen G. Preonas for Plaintiff and Appellant; Berding & Weil and Matt J. Malone for Consumer Attorneys of California and Executive Council of Homeowners as Amici Curiae on behalf of Plaintiff and Appellant; Horvitz & Levy, Peder K. Batalden and Peter Abrahams for Defendants and Respondents Skidmore, Owings & Merrill LLP and HKS, Inc; Robles, Castles & Meredith and Richard C. Young for Defendant and Respondent Skidmore, Owings & Merrill LLP; Schwartz & Janzen, Noel E. Macaulay and Steven H. Schwartz for Defendant and Respondent HKS, Inc; Fred J. Hiestand for the Civil Justice Association of California as Amicus Curiae on behalf of Defendants and Respondents; Shannon B. Jones Law Group, Kathleen F. Carpenter, Jessica M. Takano and Amy R. Gowan for California Building Industry Association as Amicus Curiae on behalf of Defendants and Respondents; Collins Collins Muir + Stewart, David E. Barker and Melinda W. Ebelhar for The American Institute of Architects California Council and The American Institute of Architects as Amici Curiae on behalf of Defendants and Respondents.

[571] OPINION

LIU, J. —

A homeowners association on behalf of its members sued a condominium developer and various other parties over construction design defects that allegedly make the homes unsafe and uninhabitable for significant portions of the year. Two defendants were architectural firms, which allegedly designed the homes in a negligent manner but did not make the final decisions regarding how the homes would be built. Applying our decision in Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370 [11 Cal.Rptr.2d 51, 834 P.2d 745] (Bily) and relying on Weseloh Family Ltd. Partnership v. K.L. Wessel Construction Co., Inc. (2004) 125 Cal.App.4th 152 [22 Cal.Rptr.3d 660] (Weseloh), the trial court sustained a demurrer in favor of defendant architectural firms, reasoning that an architect who makes recommendations but not final decisions on construction owes no duty of care to future homeowners with whom it has no contractual relationship. The Court of Appeal reversed, concluding that an architect owes a duty of care to homeowners in these circumstances, both under the common law and under the Right to Repair Act (Civ. Code, § 895 et seq.).

Building on substantial case law and the common law principles on which it is based, we hold that an architect owes a duty of care to future homeowners in the design of a residential building where, as here, the architect is a principal architect on the project — that is, the architect, in providing professional design services, is not subordinate to other design professionals. The duty of care extends to such architects even when they do not actually build the project or exercise ultimate control over construction. Accordingly, we affirm the judgment of the Court of Appeal.

In considering whether a demurrer should have been sustained, “we accept as true the well-pleaded facts in the operative complaint….” (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1189, fn. 1 [151 Cal.Rptr.3d 827, 292 P.3d 871].) The facts alleged in plaintiffs’ third amended complaint (the complaint) are as follows.

Skidmore, Owings & Merrill LLP (SOM) and HKS, Inc. (individually and doing business as HKS Architects, Inc.; hereafter HKS), are design professionals. SOM and HKS (collectively defendants) provided architectural and engineering services for The Beacon residential condominiums, a collection of 595 condominium units and associated common areas located in San Francisco (the Project). Although the units were initially rented out for two years after construction, defendants provided their services knowing that the finished construction would be sold as condominiums. A condominium [572] association was formed, and the condominium’s conditions, covenants, and restrictions were recorded, before construction commenced.

The homeowners association, plaintiff Beacon Residential CommunityAssociation (Association), sued several parties involved in the construction of those condominiums, including several business entities designated as the original owners and developers of the condominium, as well as SOM and HKS, with whom the owners and developers contracted for architectural services. SOM and HKS were the only architects on the Project. Plaintiff alleged that negligent architectural design work performed by defendants resulted in several defects, including extensive water infiltration, inadequate fire separations, structural cracks, and other safety hazards. One of the principal defects is “solar heat gain,” which made the condominium units uninhabitable and unsafe during certain periods due to high temperatures. Plaintiff alleged that the solar heat gain is due to defendants’ approval, contrary to state and local building codes, of less expensive, substandard windows and a building design that lacked adequate ventilation. Defendants are named in the first cause of action (“Civil Code Title 7 — Violation of Statutory Building Standards for Original Construction”), the second cause of action (“Negligence Per Se in Violation of Statute”), and the fifth cause of action (“Negligence of Design Professionals and Contractors”).

According to the complaint, defendants “provided architectural and engineering services” for the Project that “included, but were not limited to, architecture, landscape architecture, civil engineering, mechanical engineering, structural engineering, soils engineering and electrical engineering, as well as construction administration and construction contract management.” Defendants were paid more than $5 million for their work on the Project. In addition to “providing original design services at the outset”, of the Project, defendants played an active role throughout the construction process, coordinating efforts of the design and construction teams, conducting weekly site visits and inspections, recommending design revisions as needed, and monitoring compliance with design plans.

Defendants demurred, contending they owed no duty of care to the Association or its members under the facts alleged. The trial court agreed: “The allegations do not show that either of the architects went beyond the typical role of an architect, which is to make recommendations to the owner. Even if the architect initiated the substitutions, changes, and other elements of design that Plaintiff alleges to be the cause of serious defects, so long as the final decision rested with the owner, there is no duty owed by the architect to the future condominium owners, in the Court’s view. The owner made the final decision according to the third amended complaint.” The trial court granted plaintiff leave to amend the complaint to allege that defendants [573] “actually dictated and controlled the decision to eliminate [ventilation] ducts, acting in a manner that was contrary to the directions of the owner, or that ignored the owner’s directions,” but plaintiff declined.

The Court of Appeal reversed. It applied the factors set forth by this court in Biakanja v. Irving (1958) 49 Cal.2d 647, 650 [320 P.2d 16] (Biakanja) for determining whether a party owes a duty of care to a third party and concluded that the defendants owed a duty of care to the Association in this case. The court distinguished Weseloh, supra, 125 Cal.App.4th 152, a case that found no duty of care owed by a design engineer to a commercial property owner, on the grounds that Weseloh was decided on summary judgment rather than demurrer and that Weseloh had expressly limited its holding to its facts. The Court of Appeal further concluded that Bily, supra, 3 Cal.4th 370, did not support defendants’ position. Finally, the court concluded that the Right to Repair Act expressed a legislative intent to impose on design professionals a duty of care to future homeowners. (See Civ. Code, § 895 et seq.)

We granted review.

II.

(1) “Actionable negligence involves a legal duty to use due care, a breach of such legal duty, and the breach as the proximate or legal cause of the resulting injury.” (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 594 [83 Cal.Rptr. 418, 463 P.2d 770].) This case is concerned solely with the first element of negligence, the duty of care. Whether a duty of care exists “in a particular case is a question of law to be resolved by the court. [Citation.] [¶] A judicial conclusion that a duty is present or absent is merely `”a shorthand statement … rather than an aid to analysis …. `[D]uty,’ is not sacrosanct in itself, but only an expression of the sum total of those considerations of policy which lead the law to say that the particular plaintiff is entitled to protection.”‘ [Citation.] `Courts, however, have invoked the concept of duty to limit generally “the otherwise potentially infinite liability which would follow from every negligent act….”‘” (Bily, supra, 3 Cal.4th at p. 397.)

Here we consider whether design professionals owe a duty of care to a homeowners association and its members in the absence of privity. Although the issue presented in this case has not been decided by this court, we do not write on a blank slate. As explained below, courts have found in a variety of circumstances that builders, contractors, and architects owe a duty of care to third parties.

[574] A.

(2) Although liability for the supply of goods and services historically required privity of contract between the supplier and the injured party, the significance of privity has been greatly eroded over the past century. As we noted more than 50 years ago, “[l]iability has been imposed, in the absence of privity, upon suppliers of goods and services which, if negligently made or rendered, are `reasonably certain to place life and limb in peril.’ [Citations.] There is also authority for the imposition of liability where there is no privity and where the only foreseeable risk is of damage to tangible property. [Citations.]” (Biakanja, supra, 49 Cal.2d at p. 649.) In Biakanja, we held that a notary public who negligently drafted a will was liable to the intended beneficiary of the will. (Id. at pp. 650-651.) We explained that “[t]he determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.” (Id. at p. 650.)

The declining significance of privity has found its way into construction law. We described the evolution in Aas v. Superior Court (2000) 24 Cal.4th 627 [101 Cal.Rptr.2d 718, 12 P.3d 1125] (Aas): “Formerly, after a builder had completed a structure and the purchaser had accepted it, the builder was not liable to a third party for damages suffered because of the work’s condition, even though the builder was negligent. (E.g., Fanjoy v. Seales (1865) 29 Cal. 243, 249-250; see also Hale v. Depaoli [(1948)] 33 Cal.2d 228, 230 [201 P.2d 1] [reviewing the former law].) The purchaser, of course, had remedies against the builder in contract and warranty. But injured third parties had no clear remedy until we, following the trend that began with MacPherson v. Buick Motor Co. (1916) 217 N.Y 382 [111 N.E. 1050], qualified the general rule exonerating manufacturers from third party claims with an exception applicable whenever `”the nature of a [manufactured] thing is such that it is reasonably certain to place life and limb in peril when negligently made….”‘ (Kalash v. Los Angeles Ladder Co. (1934) 1 Cal.2d 229, 231-232 [34 P.2d 481], quoting MacPherson v. Buick Motor Co., supra, 111 N.E. 1050, 1053.) Having already held that the manufacturers of defective ladders [citation], elevators [citation], and tires [citation] could be liable to persons not in contractual privity with them yet foreseeably injured by their products, we easily applied the same rule to someone responsible for part of a house, i.e., a defective railing (Hale v. Depaoli, at pp. 230-232).

[575] “We first recognized a remedy in the law of negligence for construction defects causing property damage, as opposed to personal injury, in Stewart v. Cox [(1961)] 55 Cal.2d 857 [13 Cal.Rptr. 521, 362 P.2d 345]. There, we upheld a homeowner’s judgment against a subcontractor who had negligently applied concrete to the inside of a swimming pool, thereby causing the release of water that damaged the pool, lot and house. In our opinion we noted, and seemingly were influenced by, the `”decisions … plac[ing] building contractors on the same footing as sellers of goods, and … [holding] them to the general standard of reasonable care for the protection of anyone who may foreseeably be endangered by the negligence, even after acceptance of the work.”‘ (Id. at p. 862, quoting Prosser, Torts (2d ed. 1955) pp. 517-519.)” (Aas, supra, 24 Cal.4th at p. 637.)

The court in Stewart applied the Biakanja factors to determine the scope of the duty of care: “Here it was obvious that the pool for which Cox provided the gunite work was intended for the plaintiffs and that property damage to them — and possibly to some of their neighbors — was foreseeable in the event the work was so negligently done as to permit water to escape. It is clear that the transaction between [the pool subcontractor] and Cox was intended to specially affect plaintiffs. There is no doubt that plaintiffs suffered serious damage, and the court found, supported by ample evidence, that the injury was caused by Cox’s negligence. Under all the circumstances Cox should not be exempted from liability if negligence on his part was the proximate cause of the damage to plaintiffs.” (Stewart v. Cox, supra, 55 Cal.2d at p. 863 (Stewart).)

Soon after, in Sabella v. Wisler (1963) 59 Cal.2d 21 [27 Cal.Rptr. 689, 377 P.2d 889], we held that a contractor was liable to a homeowner, although the homeowner’s identity was unknown at the time of construction. The contractor had built a house on inadequately compacted soil, causing major subsidence and property damage. Applying the Biakanja factors, we said that although “it appears that… this house was not constructed with the intention of ownership passing to these particular plaintiffs, the Sabellas are members of the class of prospective home buyers for which Wisler admittedly built the dwelling. Thus as a matter of legal effect the home may be considered to have been intended for the plaintiffs, and Wisler owed them a duty of care in construction. (See Prosser, Torts (2d ed. 1955) § 36, pp. 166-168.) It is apparent that harm was foreseeable to prospective owners when the home was constructed upon the inadequately compacted earth in the lot, and it is undisputed that the Sabellas’ home was seriously damaged. Also, there was found to be a close connection between the negligent elements of workmanship for which defendant contractor must be held responsible … and the injury suffered.” (Sabella, at p. 28.)

[576] Courts have applied these third party liability principles to architects. In Montijo v. Swift (1963) 219 Cal.App.2d 351 [33 Cal.Rptr. 133], the plaintiff sued an architect after falling and injuring herself on a stairway at a bus depot that she alleged had been negligently designed with an inadequate handrail. Relying in part on Stewart, supra, 55 Cal.2d 857, and Hale v. Depaoli, supra, 33 Cal.3d 228, the court said: “Under the existing status of the law, an architect who plans and supervises construction work, as an independent contractor, is under a duty to exercise ordinary care in the course thereof for the protection of any person who foreseeably and with reasonable certainty may be injured by his failure to do so, even though such injury may occur after his work has been accepted by the person engaging his services.” (Montijo, at p. 353.) Similarly, in Mallow v. Tucker, Sadler & Bennett, Architects etc., Inc. (1966) 245 Cal.App.2d 700 [54 Cal.Rptr. 174], the court upheld an architect’s liability to a construction worker where the architect’s plans negligently failed to indicate the location of underground high-voltage transmission lines, resulting in the worker’s electrocution. (Id. at pp. 702-703.)

Architect liability to third parties has not been confined to personal injury; it also extends to property damage. The Court of Appeal in Cooper v. Jevne (1976) 56 Cal.App.3d 860 [128 Cal.Rptr. 724], perhaps the case most similar to the one before us, recognized such liability to condominium purchasers where an architectural firm “prepared and furnished to the builder-seller … architectural drawings and plans and specifications for the construction and other improvements within the … project and acted as supervising architects in the construction of the buildings within the project.” (Id. at p. 867.) Applying the Biakanja factors, Cooper held on demurrer that “the architects’ duty of reasonable care in the performance of their professional services is logically owed to those who purchased the allegedly defectively designed and built condominiums…. The architects must have known that the condominiums they designed and whose construction they supervised were built by [the builder-seller] for sale to the public and that purchasers of these condominiums would be the ones who would suffer economically, if not bodily, from any negligence by the architects in the performance of their professional services.” (Id. at p. 869.)

Similarly, in Huang v. Garner (1984) 157 Cal.App.3d 404 [203 Cal.Rptr. 800], the Court of Appeal overturned a nonsuit in an action by a property owner against a building designer and civil engineer for defective design, including insufficient fire retardation walls, that violated building code standards. (Id. at pp. 411-415.) The court took as a given that design professionals could be held liable to third parties for defective designs causing property damage and economic loss; the only issue was whether negligence had to be proven by expert testimony or could be established by showing departure from then Uniform Building Code requirements as negligence per se. (Huang [577] at pp. 411-414.) In Huber, Hunt & Nichols, Inc. v. Moore (1977) 67 Cal.App.3d 278 [136 Cal.Rptr. 603], the court said it is “now well settled that … the architect may be sued for negligence in the preparations of plans and specifications either by his client or by third persons….” (Id. at p. 299.)

(3) The Association argues that the general principle that an architect may be sued in negligence by a future homeowner absent privity is also recognized by statute. The Right to Repair Act establishes a set of building standards for new residential construction and provides that builders and other entities “shall … be liable for” violation of those standards “[i]n any action seeking recovery of damages arising out of” such construction. (Civ. Code, § 896; see id., § 936; all undesignated subsequent statutory references are to this code.) Section 896 states that the deficiencies for which builders and other entities are liable include “the residential construction, design, specifications, surveying, planning, supervision, testing, or observation of construction” of a dwelling unit. The Association points to section 936, which provides in part: “Each and every provision of the other chapters of this title apply to general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals to the extent that the general contractors, subcontractors, material suppliers, individual product manufacturers, and design professionals caused, in whole or in part, a violation of a particular standard as the result of a negligent act or omission or a breach of contract. In addition to the affirmative defenses set forth in Section 945.5, a general contractor, subcontractor, material supplier, design professional, individual product manufacturer, or other entity may also offer common law and contractual defenses as applicable to any claimed violation of a standard.” (Italics added.) Section 937 makes clear that the term “design professionals” includes “architects and architectural firms.”

The Court of Appeal, relying on legislative history, concluded that the Right to Repair Act is “dispositive of the scope of duty” owed by defendants to the homeowners in this case. Defendants make several arguments against this position. First, they observe that whereas the act applies to “new residential units,” the residential units in the Project were initially rented as apartments. Second, defendants contend that even if the Right to Repair Act applies to this case, it does not support imposing a duty of care toward the Association’s members greater than the duty imposed at common law. Highlighting the portion of section 936 that preserves “common law … defenses,” defendants argue that under common law principles of duty articulated by this court, a design professional owes no duty of care to homeowners in the circumstances of this case. Defendants further rely on the established principle that “`”[a] statute will be construed in light of common [578] law decisions, unless its language `”clearly and unequivocally discloses an intention to depart from, alter, or abrogate the common-law rule concerning a particular subject matter….”‘”‘” (California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 297 [65 Cal.Rptr.2d 872, 940 P.2d 323].) According to defendants, the Legislature’s limited purpose in enacting the Right to Repair Act in 2002 was to abrogate the “economic loss rule” affirmed in Aas, supra, 24 Cal.4th 627, 636 (see Greystone Homes, Inc. v. Midtec, Inc. (2008) 168 Cal.App.4th 1194, 1202 [86 Cal.Rptr.3d 196] (Greystone)), not to otherwise create new tort duties.

We need not decide whether the Right to Repair Act is itself dispositive of the issue before us. Assuming defendants are correct that the existence of a common law duty of care is required to maintain a negligence action under the statute, such a duty exists under the facts alleged here. This conclusion follows from an application ofBiakanja and Bily, as we now explain.

III.

As noted, Biakanja set forth a list of factors that inform whether a duty of care exists between a plaintiff and a defendant in the absence of privity: “the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant’s conduct and the injury suffered, the moral blame attached to the defendant’s conduct, and the policy of preventing future harm.” (Biakanja, supra,49 Cal.2d at p. 650.) Although the application of these factors necessarily depends on the circumstances of each case, it is possible to derive general rules that govern common scenarios. An example is our decision in Bily limiting the duty of care owed by auditing firms to nonclient third parties. We begin here with a review of Bily, whose reasoning provides a useful point of comparison. We then discuss the key considerations that counsel in favor of recognizing a duty of care that design professionals owe to future homeowners in circumstances like those alleged in plaintiff’s complaint.

Bily involved a suit brought by investors in a computer company against the accounting firm that the company had hired to conduct an audit and issue audit reports and financial statements. The plaintiffs claimed that the accounting firm, Arthur Young & Company, had committed negligence in conducting the audit and reporting a $69,000 operating profit rather than the company’s actual loss of more than $3 million. The computer company eventually filed for bankruptcy, and its investors lost money. They sued, claiming injury from reliance on Arthur Young’s allegedly negligent audit. (Bily, supra, 3 Cal.4th at pp. 377-379.)

[579] We held that an auditor generally owes no duty of care to its client’s investors. (Bily, supra, 3 Cal.4th at p. 407.) In so holding, we recognized the important “`”public watchdog” function'” of auditors (id. at p. 383) but sought to set a reasonable limit on their potential liability for professional negligence given the vast range of foreseeable third party users of audit reports. “Viewing the problem … in light of the [Biakanja] factors,” the court in Bily focused on “three central concerns.” (Id. at p. 398.)

First, “[g]iven the secondary `watchdog’ role of the auditor, the complexity of the professional opinions rendered in audit reports, and the difficult and potentially tenuous causal relationships between audit reports and economic losses from investment and credit decisions, the auditor exposed to negligence claims from all foreseeable third parties faces potential liability far out of proportion to its fault….” (Bily, supra, 3 Cal.4th at p. 398.) In elaborating on this concern, the court observed that “audits are performed in a client-controlled environment.” (Id. at p. 399.) The client “necessarily furnishes the information base for the audit,” “has interests in the audit that may not be consonant with those of the public,” and “predominates in the dissemination of the audit report.” (Id. at pp. 399-400.) “Thus, regardless of the efforts of the auditor, the client retains effective primary control of the financial reporting process.” (Id. at p. 400.)

In addition, the court noted a mismatch between the auditor’s “secondary” role in the financial reporting process and the “primary” role attributed to the auditor as the cause of economic loss in a negligence suit by a third party. (Bily, supra, 3 Cal.4th at p. 400.) Because “the auditor may never have been aware of the existence, let alone the nature or scope, of the third party transaction that resulted in the claim” (ibid.), and because “the ultimate decision to lend or invest is often based on numerous business factors that have little to do with the audit report,” the auditor’s conduct lacks a sufficiently “`close connection'” to the loss of loaned or invested funds to justify recognition of a duty of care to third parties (id. at p. 401). In this context, “the spectre of multibillion-dollar professional liability … is distinctly out of proportion to: (1) the fault of the auditor …; and (2) the connection between the auditor’s conduct and the third party’s injury….” (Bily, at p. 402.)

Second, Bily emphasized that unlike ordinary consumers in product liability cases, “the generally more sophisticated class of plaintiffs in auditor liability cases (e.g., business lenders and investors) permits the effective use of contract rather than tort liability to control and adjust the relevant risks through `private ordering’….” (Bily, supra, 3 Cal.4th at p. 398.) “For example, a third party might expend its own resources to verify the client’s financial statements or selected portions of them that were particularly [580] material to its transaction with the client. Or it might commission its own audit or investigation, thus establishing privity between itself and an auditor or investigator to whom it could look for protection. In addition, it might bargain with the client for special security or improved terms in a credit or investment transaction. Finally, the third party could … insist[] that an audit be conducted on its behalf or establish[] direct communications with the auditor with respect to its transaction with the client.” (Id. at p. 403.) “As a matter of economic and social policy, third parties should be encouraged to rely on their own prudence, diligence, and contracting power, as well as other informational tools. This kind of self-reliance promotes sound investment and credit practices and discourages the careless use of monetary resources. If, instead, third parties are simply permitted to recover from the auditor for mistakes in the client’s financial statements, the auditor becomes, in effect, an insurer of not only the financial statements, but of bad loans and investments in general.” (Ibid.)

Third, Bily expressed skepticism that exposing auditors to third party negligence suits would improve the quality of the audits. (Bily, supra, 3 Cal.4th at pp. 404-405.) “In view of the inherent dependence of the auditor on the client and the labor-intensive nature of auditing, we doubt whether audits can be done in ways that would yield significantly greater accuracy without disadvantages. [Citation.] Auditors may rationally respond to increased liability by simply reducing audit services in fledgling industries where the business failure rate is high, reasoning that they will inevitably be singled out and sued when their client goes into bankruptcy regardless of the care or detail of their audits.” (Id. at p. 404.)

Notably, Bily did not categorically hold that auditors never owe a duty of care to third parties. Instead, Bily limited the duty to a “narrow class of persons who, although not clients, may reasonably come to receive and rely on an audit report and whose existence constitutes a risk of audit reporting that may fairly be imposed on the auditor. Such persons are specifically intended beneficiaries of the audit report who are known to the auditor and for whose benefit it renders the audit report.” (Bily, supra, 3 Cal.4th at pp. 406-407.) In situations where an auditor “clearly intended to undertake the responsibility of influencing particular business transactions involving third persons” with “sufficiently specific economic parameters to permit the [auditor] to assess the risk of moving forward,” liability for negligent misrepresentation may extend to persons “to whom or for whom the misrepresentations were made” so long as those persons have actually and justifiably relied on the auditor’s report. (Id. at pp. 408-409.)

[581] B.

(4) In many ways, the circumstances of the present case stand in contrast to the concerns in Bily that counseled against general recognition of an auditor’s duty of care to third parties. Here we focus on three considerations that drive the analysis and distinguish this case from Bily: (1) the closeness of the connection between defendants’ conduct and plaintiff’s injury; (2) the limited and wholly evident class of persons and transactions that defendants’ conduct was intended to affect; and (3) the absence of private ordering options that would more efficiently protect homeowners from design defects and their resulting harms. We then summarize this analysis in terms of the Biakanja factors, and we distinguish Weseloh, supra, 125 Cal.App.4th 152, the principal case on which defendants rely. As explained below, we hold that an architect owes a duty of care to future homeowners where the architect is a principal architect on the project — that is, the architect, in providing professional design services, is not subordinate to any other design professional — even if the architect does not actually build the project or exercise ultimate control over construction decisions.

First, unlike the secondary role played by the auditor in the financial reporting process, defendants’ primary role in the design of the Project bears a “`close connection'” to the injury alleged by plaintiff. (Bily, supra, 3 Cal.4th at p. 401.) According to the complaint, defendants were the only architects on the Project. In that capacity, defendants “reviewed and approved the course of action where the specifications for the exterior windows … were changed to a design that inadequately prevented heat gain, which causes a seriously defective and nonfunctional condition that is also unhealthy.” Defendants also “recommended that the number of Z ducts [(ventilation ducts)] be reduced by a significant quantity, which is a major factor in the nonfunctional, unhealthy condition [of] the interior of the units.” The complaint alleges that these professional judgments were negligent and rendered the residential units unsafe and uninhabitable during certain periods of the year. Compared to “the connection between the auditor’s conduct and the third party’s injury (which will often be attenuated by unrelated business factors that underlie investment and credit decisions)” (Bily, at p. 402), the connection between defendants’ unique role as the design professionals on the Project and plaintiff’s damages resulting from negligent design is far more direct and immediate.

The trial court assigned dispositive significance to the fact that defendants did not go “beyond the typical role of an architect, which is to make recommendations to the owner,” and that “the final decision rested with the [582] owner….” Similarly, defendants contend that “they had no role in the actual construction. Instead, the developer, contractors, and subcontractors retained primary control over the construction process, as well as final say on how the plans were implemented.”

However, even if an architect does not actually build the project or make final decisions on construction, a property owner typically employs an architect in order to rely on the architect’s specialized training, technical expertise, and professional judgment. The Business and Professions Code defines “[t]he practice of architecture” as “offering or performing, or being in responsible control of, professional services which require the skills of an architect in the planning of sites, and the design, in whole or in part, of buildings, or groups of buildings and structures.” (Bus. & Prof. Code, § 5500.1, subd. (a); see id., § 5500.1, subd. (b) [providing a nonexhaustive list of “[a]rchitects’ professional services”].) The profession is licensed and regulated by the California Architects Board (id., §§ 5510, 5510.1, 5510.15, 5526), and the unlicensed or unauthorized practice of architecture is punishable as a misdemeanor (id., §§ 5536, 5536.1). In order to practice architecture, an applicant must pass two specialized exams, must demonstrate eight years of training and educational experience in architectural work, and must complete an internship program. (Id., §§ 5550, 5551, 5552, subd. (a); Cal. Code Regs., tit. 16, §§ 116-117.)

In this case, defendants were the principal architects on the Project. Among all the entities involved in the Project, defendants uniquely possessed architectural expertise. There is no suggestion that the owner or anyone else had special competence or exercised professional judgment on architectural issues such as adequate ventilation or code-compliant windows. Just as a lawyer cannot escape negligence liability to clearly intended third party beneficiaries on the ground that the client has the ultimate authority to follow or reject the lawyer’s advice (see, e.g.,Heyer v. Flaig (1969) 70 Cal.2d 223, 226 [74 Cal.Rptr. 225, 449 P.2d 161]; Lucas v. Hamm (1961) 56 Cal.2d 583, 588 [15 Cal.Rptr. 821, 364 P.2d 685]), so too an architect cannot escape such liability on the ground that the client makes the final decisions. An architect providing professional design services to a developer does not operate in a “client-controlled environment” comparable to the relationship between an auditor and its client. (Bily, supra, 3 Cal.4th at p. 399.) Whereas an auditor’s “client, of course, has interests in the audit that may not be consonant with those of the public” (ibid.), it would be patently inconsistent with public policy to hold that an architect’s failure to exercise due care in designing a building can be justified by client interests at odds with the interest of prospective homeowners in safety and habitability.

Were there any doubt as to defendants’ principal role in the design of the Project, it is dispelled by additional facts alleged here. According to the [583] complaint, defendants not only provided design services at the outset of the Project but also brought their expertise to bear on the implementation of their plans and specifications by doing weekly inspections at the construction site, monitoring contractor compliance with design plans, altering design requirements as issues arose, and advising the owner of any nonconforming work that should be rejected — all for a fee of more than $5 million. In other words, defendants applied their specialized skill and professional judgment throughout the construction process to ensure that it would proceed according to approved designs. The work defendants performed does not resemble “a broadly phrased professional opinion based on a necessarily confined examination” of client-provided information (Bily, supra, 3 Cal.4th at p. 403), nor did defendants act merely as “suppliers of information and evaluations for the use and benefit of others” (id. at p. 410). Instead, defendants played a lead role not only in designing the Project but also in implementing the Project design.

Nor do we find persuasive defendants’ claim that the connection between their conduct and plaintiff’s injury is “attenuated because … when the developer sold the units two years after construction, it was aware of, and concealed, the alleged defects.” This specific allegation, if true, may inform whether defendants’ conduct was the proximate cause of plaintiff’s injury. (See, e.g., Gonzalez v. Derrington(1961) 56 Cal.2d 130, 134 [14 Cal.Rptr. 1, 363 P.2d 1] [“independent, intervening cause” may preclude finding of proximate cause]; 6 Witkin, Summary of Cal. Law (10th ed. 2005) Torts, § 1214, pp. 590-591.) It also may give rise to a claim of equitable indemnity by defendants against the developer. (See Evangelatos v. Superior Court (1988) 44 Cal.3d 1188, 1197-1198 [246 Cal.Rptr. 629, 753 P.2d 585];Greystone, supra, 168 Cal.App.4th at p. 1208.) There is no reason to think in this case or in general that the developer and other major players have “left the scene” via bankruptcy, as is often the case with auditor liability suits. (Bily, supra, 3 Cal.4th at p. 400.) But because the developer’s alleged misdeeds are themselves derivative of defendants’ allegedly negligent conduct, they do not diminish the closeness of the connection between defendants’ conduct and plaintiff’s injury for purposes of determining the existence of a duty of care.

Second, recognizing that an architect who is a principal provider of professional design services on a residential building project owes a duty of care to future homeowners does not raise the prospect of “`liability in an indeterminate amount for an indeterminate time to an indeterminate class.'” (Bily, supra, 3 Cal.4th at p. 385,quoting Ultramares Corp. v. Touche (N.Y. 1931) 255 N.Y. 170 [174 N.E. 441, 444].) As the complaint here alleges, defendants engaged in work on the Project with the knowledge that the [584] finished construction would be sold as condominiums and used as residences. There was no uncertainty, as there was in Bily, as to “the existence, let alone the nature or scope, of the third party transaction that resulted in the claim.” (Bily, supra, 3 Cal.4th at p. 400.) Defendants’ work on the Project “was intended to affect the plaintiff,” and “the `end and aim’ of the transaction was to provide” safe and habitable residences for future homeowners, a specific, foreseeable, and well-defined class. (Biakanja, supra, 49 Cal.2d at p. 650.) There is no “spectre of vast numbers of suits and limitless financial exposure” in this case. (Bily, at p. 400.) Instead, defendants “clearly intended to undertake the responsibility of influencing particular business transactions [(i.e., condominium purchases)] involving third persons [(i.e., prospective homeowners)]” (id. at p. 408) and could therefore “ascertain the potential scope of its liability and make rational decisions regarding the undertaking” (id. at p. 409). Further, as noted, defendants can limit their liability in proportion to fault through an action for equitable indemnification.

Defendants point to a provision in the contract with the developer that expressly disclaims the existence of any “third-party beneficiary of the obligations contained in the Agreement.” But we have never held that third party beneficiary status is a prerequisite to alleging negligence. In Bily, we noted only that third party beneficiaries “may under appropriate circumstances possess the rights of parties to the contract” (Bily, supra, 3 Cal.4th at p. 406, fn. 16), not that the lack of such status precludes liability in tort. If anything, the contract provision on which defendants rely “only serves to emphasize the fact that [defendants] were more than well aware that future homeowners would necessarily be affected by the work that they performed,” as the Court of Appeal observed.

Third, the prospect of private ordering as an alternative to negligence liability is far less compelling here than in Bily. Whereas “[i]nvestors, creditors, and others who read and rely on audit reports and financial statements are not the equivalent of ordinary consumers” because “they often possess considerable sophistication in analyzing financial information and are aware from training and experience of the limits of an audit report `product,'” the average home buyer is more akin to “the `presumptively powerless consumer’ in product liability cases.” (Bily, supra, 3 Cal.4th at p. 403.) The typical home buyer “`clearly relies on the skill of the developer and on its implied representation that the house will be erected in reasonably workmanlike manner and will be reasonably fit for habitation. He has no architect or other professional adviser of his own, he has no real competency to inspect on his own, his actual examination is, in the nature of things, largely superficial, and his opportunity for obtaining meaningful protective changes [585] in the conveyancing documents prepared by the builder vendor is negligible.'” (Kriegler v. Eichler Homes, Inc. (1969) 269 Cal.App.2d 224, 228 [74 Cal.Rptr. 749] (Kriegler).) As Chief Justice Traynor said for the court in Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850 [73 Cal.Rptr. 369, 447 P.2d 609], “the usual buyer of a home is ill-equipped with experience or financial means to discern … structural defects. [Citation.] Moreover a home is not only a major investment for the usual buyer but also the only shelter he has. Hence it becomes doubly important to protect him against structural defects that could prove beyond his capacity to remedy.” (Id. at p. 867.)

Defendants contend that plaintiff has options for redress within the bounds of privity: Plaintiff may seek an assignment of the developer’s rights against defendants, or plaintiff may pursue its design defect claims against the developer, and the developer may in turn seek redress from defendants. But it is questionable whether this more attenuated form of liability will consistently provide adequate redress. More importantly, the chief interest of prospective homeowners is to avoid purchasing a defective home, not only to have adequate redress after the fact. The long-established common law rule holding architects as independent professionals directly accountable to third party homeowners is most likely to vindicate that interest.

Moreover, as we recognized in Bily, the sophisticated consumer of audit reports “might expend its own resources to verify the client’s financial statements or selected portions of them that were particularly material to its transaction with the client. Or it might commission its own audit or investigation, thus establishing privity between itself and an auditor or investigator to whom it could look for protection.” (Bily, supra,3 Cal.4th at p. 403.) But it is unrealistic to expect home buyers to take comparable measures. A liability rule that places the onus on home buyers to employ their own architects to fully investigate the structure and design of each home they might be interested in purchasing does not seem more efficient than a rule that makes the architects who designed the homes directly responsible to home buyers for exercising due care in the first place. This seems especially true in “today’s society” given the “mass production and sale of homes” (Kriegler, supra, 269 Cal.App.2d at p. 227), such as the 595-unit condominium project in this case.

For the reasons above, we conclude that the allegations in the complaint are sufficient, if proven, to establish that defendants owed a duty of care to the homeowners who constitute the Association. Our conclusion, which coheres with a substantial body of case law (ante, at pp. 574-577), may be [586] summarized in terms of the Biakanja factors: (1) Defendants’ work was intended to benefit the homeowners living in the residential units that defendants designed and helped to construct. (2) It was foreseeable that these homeowners would be among the limited class of persons harmed by the negligently designed units. (3) Plaintiff’s members have suffered injury; the design defects have made their homes unsafe and uninhabitable during certain periods. (4) In light of the nature and extent of defendants’ role as the sole architects on the Project, there is a close connection between defendants’ conduct and the injury suffered. (5) Because of defendants’ unique and well-compensated role in the Project as well as their awareness that future homeowners would rely on their specialized expertise in designing safe and habitable homes, significant moral blame attaches to defendants’ conduct. (6) The policy of preventing future harm to homeowners reliant on architects’ specialized skills supports recognition of a duty of care. Options for private ordering are often unrealistic for typical homeowners, and no reason appears to favor homeowners as opposed to architects as efficient distributors of loss resulting from negligent design.

Defendants contend that the balance of Biakanja factors is no different in this case than in Weseloh, supra, 125 Cal.App.4th 152, where the court found no duty of care owed by a design engineer to the third party owner of commercial property. But the defendants in Weseloh played a materially different role in the construction project than defendants did here.

In Weseloh, a property owner (Weseloh) contracted with a general contractor (Wessel) to build an automobile dealership on the property. A subcontractor, Sierra Pacific Earth Retention Corporation (Sierra), built the retaining walls for the project. Sierra, in turn, enlisted Charles Randle, an employee of Owen Engineering Company (Owen), to design two retaining walls for a fee of $1,500 or $2,200. Neither Randle nor Owen had a contractual relationship with Weseloh, and neither supervised the construction of the retaining walls. At Sierra’s request, Randle and Owen inspected the retaining walls after construction. When a portion of the retaining walls failed, resulting in $6 million of property damage, Weseloh sued Wessel, Sierra, Randle and Owen. Weseloh entered into a settlement agreement with Wessel and Sierra, but the suits against Randle and Owen went forward. On summary judgment, the trial court concluded that Randle and Owen owed no duty to Weseloh, and the Court of Appeal affirmed. (See Weseloh, supra, 125 Cal.App.4th at pp. 158-162.)

As suggested by the size of their fee, the defendants in Weseloh had a limited role in the construction project. The “undisputed evidence” showed that “neither Randle nor Owen had a `role in the construction’ of the retaining walls….” (Weseloh, supra, 125 Cal.App.4th at p. 164.) In addition, [587] although “Randle was aware the property was owned by Weseloh,” the Court of Appeal found it significant that Randle and Owen provided their services to Sierra, another engineering firm. As the court observed, “the earth retention calculations prepared for Wessel … identified the preparer as [Sierra], not Randle or Owen. This evidence bolsters the position that Randle and Owen’s role in the project was to primarily benefit Sierra as the preparer of the calculations. To the extent Randle and Owen’s participation in the project would also benefit Wessel and the Weseloh plaintiffs, it was only through Sierra.” (Id.at p. 167; see id. at p. 171, fn. 5 [noting that Sierra paid $1.2 million of the alleged $6 million liability under the settlement agreement].)

The circumstances in this case are plainly different. Unlike Randle and Owen, whose work informed their client’s own exercise of technical expertise in preparing earth retention calculations, defendants here were the sole entities providing architectural services to the Project. They did not provide their specialized services to a client or other entity that in turn applied its own architectural expertise to the plans and specifications supplied by defendants. Moreover, defendants not only applied their expertise to designing the Project but further applied their expertise to ensure that construction would conform to approved designs. Weseloh, which expressly limited its holding to its facts (Weseloh, supra, 125 Cal.App.4th at p. 173), does not stand for the broad proposition that a design professional cannot be liable in negligence to third parties so long as it renders “professional advice and opinion” (id. at p. 169) without having ultimate decisionmaking authority. Instead, Weseloh merely suggests that an architect’s role in a project can be so minor and so subordinate to the role or judgment of other design professionals as to foreclose the architect’s liability in negligence to third parties.

Moreover, the Weseloh court, reviewing the case at the summary judgment stage, concluded that the plaintiffs had “failed to produce evidence showing how and the extent to which their damages were caused by the asserted design defects.” (Weseloh, supra, 125 Cal.App.4th at p. 168.) The court also noted the absence of evidence that “Sierra actually used Randle and Owen’s design without alteration in constructing the retaining walls.” (Ibid.) These observations regarding lack of causation not only informed Weseloh‘s duty analysis (see id. at pp. 168-169) but also provided an independent basis for granting summary judgment in the defendants’ favor. In the present case, which is before us on demurrer, no similar causation problem confronts us. According to the complaint, defendants approved the use of defective windows and designed a defective ventilation system, all of which created conditions that made the homes uninhabitable for portions of the year. The complaint sufficiently alleges the causal link between defendants’ negligence and plaintiff’s injury that was lacking in Weseloh.

[588] IV.

For the reasons above, we conclude that the trial court erred in sustaining defendants’ demurrer on the ground that they owed no duty of care to the Association’s members. Because the Court of Appeal correctly reversed the trial court’s judgment, we affirm the Court of Appeal’s judgment.

Cantil-Sakauye, C. J., Baxter, J., Werdegar, J., Chin, J., Corrigan, J., and Richman, J.,^[*] concurred.

[*] Associate Justice, Court of Appeal, First Appellate District, Division Two, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

Pacific Hills Homeowners Association v. Prun

(2008) 160 Cal.App.4th 1557

[Architectural Control; Statute of Limitations] The 5 year statute of limitations under Code Civ. Pro. § 336 applies to both recorded restrictions as well as unrecorded restrictions such as architectural guidelines.

COUNSEL

Law Offices of Richard A. Tinnelly, Bruce R. Kermott, Aliso Viejo; Blackmar, Principe & Schmelter, Gerry C. Schmelter, San Diego, and Christina B. VonBehren, for Plaintiff and Appellant.
Law Office of Julie M. McCoy and Julie M. McCoy, Newport Beach, for Defendants and Appellants.

OPINION

Defendants Jon L. Prun and Linda L. Prun appeal from a judgment requiring them to reduce the height of or move a gate and a fence in the front of their residence that violates the height and setback requirements in the covenants, conditions, and restrictions and architectural guidelines adopted by plaintiff Pacific Hills Homeowners Association. They contend the action was not subject to a five-year statute of limitations in Code of Civil Procedure section 336, subdivision (b) (all further statutory references are to this code unless otherwise noted) as the court determined but was barred by the four-year statute of limitations in section 337.

They also assert that, in any event, the action was barred by laches and waiver, and the court erroneously excluded certain evidence of other nonconforming use. We disagree with each contention.

Plaintiff filed a cross-appeal claiming that portion of the judgment requiring it to pay for two-thirds of the cost of relocation of defendants’ gate upon satisfaction of certain conditions was erroneous. It did not address the substance of that issue, however, arguing that because defendants had not satisfied the conditions, its own appeal was moot. We decline plaintiffs request to clarify the effect of that part of the judgment.

Thus, we affirm the judgment.

FACTS

Defendants’ home is located in a planned community subject to a Declaration of Covenants, Conditions and Restrictions (CC & R’s) and governed by plaintiff. The CC & R’s allow plaintiff to adopt reasonable rules and incorporate them into the CC & R’s. The CC & R’s require “the prior written approval of the Architectural Committee” (committee) before construction of any improvement, including a “fence or wall” and also mandate submission of plans to the committee and its approval before construction can begin. Plaintiff also adopted Architectural Guidelines (guidelines) that limit fences to 6 feet in height unless they are within 20 feet of the front property line, in which case the maximum height is 3 feet.

In late 2000 defendants decided to erect a mechanical gate, connected to a fence and pilasters, across their driveway. Jon testified they reviewed the [1561] copy of the CC & R’s and guidelines they received when they purchased the home and found no mention of setbacks. Jon also testified that after this action was filed he noticed that the copy of the guidelines they received upon purchase of their home contained only odd-numbered pages; they were missing the page containing the setback requirements. (We note that the guidelines and amended guidelines in the record show the setback requirement was on odd-numbered pages.)

After reviewing those documents, Jon then called the property management company and asked about setbacks. Jon testified that Bill Scales, the Architectural Administrator, told him that neither plaintiff nor the City of Mission Viejo had setback requirements. According to Jon, Scales only said that color was critical and the gate should be of high quality. Scales assured him “there won’t be any problem” or “there shouldn’t be any problem” after Jon told him a professional contractor was installing the gate. Jon also testified Scales said he would fax the forms defendants needed for plaintiffs approval and that permission should take only a couple of weeks. Jon testified he understood the approval was “basically a formality.”

Scales testified he did not remember the call and would not have checked a city setback requirement for a homeowner because he had no copy of those codes.

In the meantime defendants started building the gate. When Scales learned of it he sent a letter informing them construction violated the CC & R’s because prior approval was required; he asked for plans to be submitted. In late November Jon completed the forms he had received from Scales and sent them both to him and to the committee; he did not enclose plans.

In January 2001, plaintiff sent a letter to defendants asking for plans. Defendants re-sent their application with a drawing that did not show the specifics of the gate as required by the CC & R’s. Consequently, plaintiff returned it stamped, “Disapproved as submitted” (capitalization omitted) with another request for defendants to “[s]ubmit clear drawings….” Defendants then did so, showing the gate within three feet of the front property line. In mid-February the committee denied approval of defendants’ proposed fence and gate because it did not comply with the setback requirements. But defendants had already completed the gate. [1562]

In late July and August 2001 plaintiff sent letters to defendants, first asking them to comply with the CC & R’s and then inviting them to attend a board meeting in October. Thereafter plaintiff sent a letter giving defendants a November deadline for them to move the gate to comply with the setback requirements and advising it would assess a $100 fine if they did not; plaintiff also invited them to a meeting in December to “discuss the situation.”

At some point plaintiff contacted the City of Mission Viejo advising it of the situation. In May 2002, the city sent written notice to defendants that their gate violated its setback requirements. Between November 2002 and January 2003, plaintiff sent four more letters assessing fines and inviting defendants to meetings, which they attended.

In March 2003, plaintiffs lawyer sent a letter to defendants, stating it was plaintiffs “last effort to resolve th[e] matter” and insisting that the gate be moved back. It gave defendants 10 days to advise whether or not they intended to comply; if not plaintiff would take legal action. Jon testified he called the lawyer and explained defendants'”side of the … story.” He also testified plaintiffs counsel told him he thought that sounded “logical” and “plausible”; he wanted to research the matter and said if he did not get back to defendants, they should “consider the matter closed.”

Thirteen months later in April 2004 a different lawyer sent a letter to defendants inviting them to submit the matter to alternative dispute resolution and advising that if they did not respond in 30 days, plaintiff “may authorize” filing of a lawsuit. When Jon called that lawyer he was told, “we’re going to make you move the gate.” Nothing happened until almost one year later, in March 2005, when plaintiffs lawyer sent another letter suggesting mediation.

When defendants did not mediate, in April 2005 plaintiff filed this action for breach of the CC & R’s, nuisance, and declaratory and injunctive relief. The injunction sought was based on violation of the setback requirements, not defendants’ failure to obtain prior approval of the project. The case went to trial only on the injunction cause of action.

The court found in favor of plaintiff. It ruled, in part, that the five-year statute of limitations in section 336, subdivision (b) applied and thus the action was filed timely. The court also found defendants had not proven their other affirmative defenses of estoppel, laches, or waiver. [1563]

The judgment ordered defendants to lower their fence, gates, and pilasters to a maximum of 3 feet, or, in the alternative, to set them back to at least 20 feet from the front property line. In that case, the height could be up to six feet. If defendants chose the latter alternative and gave plaintiff timely written notice of their decision, plaintiff would be required to pay two-thirds of the cost of the relocation. If defendants did not timely give notice, they had to pay the entire cost of the ordered corrections. If defendants gave such notice and plaintiff did not agree in writing to pay two-thirds of the cost, the injunction would dissolve and defendants would be allowed to keep the gates and fence as built.

DISCUSSION

1. Applicable Statute of Limitations

Plaintiff filed this action more than four years but less than five years after defendants erected the gate. Defendants contend that section 336, subdivision (b), which is a five-year statute of limitations, applies only to recorded documents, in this case, CC & R’s, and not to unrecorded rules and regulations or guidelines of homeowners associations such as are at issue here. We disagree.

Section 336, subdivision (b) provides for a five-year statute of limitations for “[a]n action for violation of a restriction, as defined in Section 784 of the Civil Code.” Civil Code section 784 states, “`Restriction,’ when used in a statute that incorporates this section by reference, means a limitation on, or provision affecting, the use of real property in a deed, declaration, or other instrument, whether in the form of a covenant, equitable servitude, condition subsequent, negative easement, or other form of restriction.”

Defendants maintain that, for this definition to apply, a restriction must be recorded. They advance several grounds for this assertion, including the plain language of the statute and its legislative history, the rule that statutes should be harmonized, the absence of the setback restriction from the recorded CC & R’s, and the principle of ejusdem generis. Based on our reading of the plain language of section 336, subdivision (b) and Civil Code section 784, we conclude section 336, subdivision (b) does not govern merely recorded restrictions but applies to unrecorded restrictions as well. [1564]

“`When interpreting statutes, “we follow the Legislature’s intent, as exhibited by the plain meaning of the actual words of the law” “`…'” giving them their usual and ordinary meaning and construing them in context. [Citation.] If the plain language of the statute is clear and unambiguous, our inquiry ends, and we need not embark on judicial construction. [Citations.] If the statutory language contains no ambiguity, the Legislature is presumed to have meant what it said, and the plain meaning of the statute governs.’ [Citation.]” (Stephens v. County of Tulare (2006) 38 Cal.4th 793, 801-802, 43 Cal. Rptr.3d 302, 134 P.3d 288.) This is so “`”`whatever may be thought of the wisdom, expediency, or policy of the act.'”‘ [Citations.]” (California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist. (1997) 14 Cal.4th 627, 632, 59 Cal. Rptr.2d 671, 927 P.2d 1175; see also Jarrow Formulas, Inc. v. LaMarche (2003) 31 Cal.4th 728, 733, 3 Cal.Rptr.3d 636, 74 P.3d 737.)

A restriction, as defined in Civil Code section 784, is a limitation on the use of real property, as set out in several specified types of documents, including covenants, equitable servitudes, conditions subsequent, and negative easements, with a catchall description at the end applying to any “other form of restriction.”

Nothing in the language states this last category of restriction must be recorded. The fact that all enumerated documents are generally recorded does not compel such an interpretation. Had that been the intent of the Legislature, it could have easily used the language any “other form of recorded restriction.”

But it did not, and it is not within our province to do so in the guise of interpretation, even if that seems like a more logical or better policy. If such was its intent, the Legislature has the ability and opportunity to amend the language to make this clear.

Because we determine the plain meaning of the statute based on its language, we do not resort to extrinsic aids to construe its meaning. (Beat Bank, SSB v. Arter & Hodden, LLP (2007) 42 Cal.4th 503, 508, 66 Cal.Rptr.3d 52, 167 P.3d 666.) Thus, we need not address defendants’ other arguments as to the meaning of the statutes.

2. Laches

Defendants also assert that plaintiffs claim is barred by laches. “`The defense of laches requires unreasonable delay plus either acquiescence in the [1564] act about which plaintiff complains or prejudice to the defendant resulting from the delay.’ [Citation.]” (Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 68, 99 Cal.Rptr.2d 316, 5 P.3d 874.) Defendants argue plaintiffs more than four-year delay in filing the action was “patently unreasonable” and that the delay shows plaintiff acquiesced in defendants’ placement of the gate. It points to three 1-year periods in which plaintiff did virtually nothing with respect to defendants’ gate.

There is no question plaintiff delayed in enforcing the setback restriction. Despite the spin it tries to put on the facts, plaintiffs alleged “sheer volume” of attempts and “continued … efforts to bring [defendants] into compliance” do not explain those lengthy gaps in its contacts with defendants or its extended inactivity. We do not condone this course of conduct and in the right fact situation, which we do not define, such delays could support a finding of laches.

But we agree with the trial court that defendants cannot show prejudice. They began building the gate before they submitted an application for approval of their project and before the architectural committee got involved. The evidence showed construction was finished by as early as November 2000 and no later than February 2001. Thus, it would not have mattered whether plaintiff was diligent.

Nor, despite the delays, can defendants show plaintiff acquiesced. Plaintiff made its opposition to the gate known from the moment it was built, and it never changed its position or communicated to defendants it had changed its position. And, importantly, Jon testified that from February 2001 until the complaint was filed, he understood that plaintiff “appeared to want the gate moved.” Thus, the defense of laches must fail.

3. Waiver

Defendants also assert plaintiff waived its right to enforce the guidelines because it did not apply them fairly, reasonably, or uniformly. They contend plaintiff had the burden of proof to show it in fact did enforce the guidelines fairly, and the court erred in not requiring that plaintiff meet that burden but instead put the burden on defendants to prove an affirmative defense. Finally, defendants claim the court erred by excluding defense evidence that showed plaintiff had arbitrarily allowed a nonconforming use by another property owner. None of these arguments persuades.

“When a homeowners’ association seeks to enforce the provisions of its CCRs to compel an act by one of its member owners, it is incumbent upon it to show that it has followed its own standards and procedures prior to [1566] pursuing such a remedy, that those procedures were fair and reasonable and that its substantive decision was made in good faith, and is reasonable, not arbitrary or capricious. [Citations.]” (Ironwood Owners Assn. IX v. Solomon (1986) 178 Cal.App.3d 766, 772, 224 Cal.Rptr. 18.) “The criteria for testing the reasonableness of an exercise of such a power by an owners’ association are (1) whether the reason for withholding approval is rationally related to the protection, preservation or proper operation of the property and the purposes of the Association as set forth in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner. [Citations.]” (Laguna Royale Owners Assn. v. Darger (1981) 119 Cal. App.3d 670, 683-684, 174 Cal.Rptr. 136.)

Here there was evidence plaintiff followed its ordinary procedures in attempting to enforce the setback requirement. It sent letters demanding that defendants comply with the guidelines, invited defendants to meet with the board, imposed fines, and finally filed suit.

Defendants complain that their nextdoor neighbors, Anthony and Kathleen Garcia, built in violation of the guidelines but plaintiff did not sue them to compel compliance with the architectural rules. Thus, they conclude, plaintiff lost its right to enforce the restrictions as to defendants. The Garcias obtained plaintiffs approval to build pilasters within the 20-foot setback area. But during construction, which occurred six years before defendants’, they apparently built their pilasters six feet high in violation of the guidelines. Plaintiff was unaware that had occurred until defendants pointed it out during the pendency of this dispute.

At that point plaintiffs committee sent letters to the Garcias asking them to modify the pilasters to conform to the guidelines, and the committee and the management company discussed the violation. Plaintiff determined that the Garcias’ pilasters were “not as obtrusive as [defendants’] gate was.” It also concluded, as its expert, an architect and engineer, testified that the Garcias’ pilasters are only a “minor obstruction” and therefore not as dangerous, compared to defendants’ gate, which is a safety hazard.

Although this is not overwhelming evidence, it met plaintiffs burden of proof to show it did address the Garcias’ violation and did not act unreasonably or unfairly in not suing them as it did defendants. Thus, the court did not improperly shift the burden of proof to defendants’ to prove an affirmative defense,

“[E]nforcement of the restriction must be in good faith, not arbitrary or capricious, and by procedures which are fair and uniformly applied. [Citation.] The framework of reference, as the court made clear, is not the [1567] reasonableness specific to the objecting homeowner, but reasonableness as to the common interest development as a whole. [Citation.]” (Liebler v. Point Loma Tennis Club (1995) 40 Cal.App.4th 1600, 1610, 47 Cal. Rptr.2d 783.) The evidence shows plaintiff took into account the relative safety of the two different structures, thus evaluating them in light of the entire development, in deciding how to proceed.

Defendants argue they had evidence of another homeowner’s violation of the guidelines that would support their waiver argument but the court erroneously excluded it. But nothing in the record shows defendants made an offer of proof, as was their burden, nor does it give us any information about the particulars of the evidence such that we could determine whether it was error to exclude it. Magic Kitchen LLC v. Good Things Internal, Ltd. (2007) 153 Cal.App.4th 1144, 1164-1165, 63 Cal.Rptr.3d 713.)

4. Plaintiffs Appeal

Plaintiff filed, a cross-appeal, claiming the court abused its discretion in ordering it to pay for two-thirds of the cost of moving defendants’ gate. It maintains there was no evidence the cost of relocating the gate would “cost twice” the amount plaintiffs expert testified to. Plaintiff misstates the court’s decision.

In its tentative ruling the judge did note it was “very likely it will cost appreciably more than [the expert’s] estimate.” But its ruling was not based on evidence of the cost. The tentative stated it was because of “plaintiffs sloppiness in not pursuing this much more promptly….” Injunctions are based on equity (Syngenta Crop Protection, Inc. v. Helliker (2006) 138 Cal.App.4th 1135, 1166-1167, 42 Cal.Rptr.3d 191), and we see no abuse of discretion in the result the court fashioned. (See City of Vernon v. Central Basin Mun. Water Dist. (1999) 69 Cal. App.4th 508, 516, 81 Cal.Rptr.2d 650.)

Plaintiff asserts that its appeal “is apparently moot” because defendants did not timely elect to move the gate back at least 20 feet from the property line, and asks for a “clarification of the effect of the passage of [the] time lines” set out in the judgment. We decline to do so. There is nothing in the record to show what occurred after judgment was entered with respect to the gate. Nor do we give advisory opinions. (Coleman v. Department of Personnel Administration (1991) 52 Cal.3d 1102, 1126, 278 Cal.Rptr. 346, 805 P.2d 300.) [1568]

DISPOSITION

The judgment is affirmed. In the interests of justice, the parties shall bear their respective costs on appeal.

WE CONCUR: O’LEARY and FYBEL, JJ.

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