Category Archives: Case Law

Ward v. Superior Court

(1997) 55 Cal.App.4th 60

[Enforcement; Recorded Notice of Noncompliance] An association is not legally authorized to record a notice of noncompliance in response to a member’s violation of the CC&Rs.

Ronald M. Katzman for Petitioners. No appearance for Respondent. Wolf, Rifkin & Shapiro and Andrew S. Gelb for Real Party in Interest.

OPINION
ZEBROWSKI, J.

This case concerns whether a homeowners association may record, in a county’s land title records, a document asserting that a homeowner is in violation of the association’s covenants, conditions and restrictions (hereafter CC&R’s). We conclude that there is no authority for recordation of such a document, and that the document recorded in this case should have been expunged.

I. The Facts

Petitioners own a house in the Beverlywood area of Los Angeles. The property is subject to a declaration of restrictions which was recorded in 1940 and which affects 1,324 homes. These restrictions were updated in 1994 by the recordation of an amended and restated declaration of CC&R’s. The CC&R’s are administered by the Beverlywood Homes Association (hereafter BHA). For purposes of this petition, it is assumed that petitioners are bound by these CC&R’s. ^{[FN. 1]}

The CC&R’s provide for “Architectural and Design Control” by BHA. These controls require approval of construction or alterations by BHA. The [63] CC&R’s indirectly provide that BHA may record a notice of noncompliance by providing that property improvements will eventually be deemed in compliance “unless actual notice executed by the Association of such … noncompliance shall appear of record in the office of the County Recorder of Los Angeles County ….” Petitioners obtained approval from BHA for a remodeling project on their property. The project approval included approval for the painting of the new construction in “blue/blue-grey tones.” The evidence is in conflict, however, as to whether the shades later applied precisely matched the colors approved.

Either when painting was underway or shortly after it was completed in June 1995, petitioners received a letter from the BHA president complaining about the “atrocious bright-blue color” being applied, which the president found “hideous” and “offensive.” ^{[FN. 2]} The letter contended that “as to the color, you never obtained approval of this color and, as such, you have now violated the CC&Rs.” The letter purported to levy a fine of $50 and advised that the fine would be rescinded only if petitioners painted their property in a “color consistent with that in the surrounding neighborhood.” The letter continued that if petitioners did not comply, not only would additional fines accrue, but in addition “a notice of non-compliance will be filed against the property. A notice of non-compliance is notice to the world that there is a violation of CC&Rs. Such notice simply has the effect of preventing a sale, transfer or mortgage of the affected property.” The letter from the BHA president concluded “[l]et me assure you, I have received numerous phone calls from your neighbors, as well as those passing by your house while walking their dog or children. Because I live on the street behind you, most of the people in our local neighborhood know where I live and, unfortunately, also know my phone number.”

Petitioners refused to repaint their house in accordance with the demands of BHA. Several months later, in October 1995, while trying to refinance, petitioners learned from their title insurance company that BHA had unilaterally and without further notice recorded a “Notice of Non-Compliance with Declaration of Restrictions (Non-Conforming Improvement)” (hereafter the notice of noncompliance) against their property. As a consequence, the pending refinance could not close. Petitioners attempted to negotiate a release of the notice of noncompliance, but BHA refused to release the notice until petitioners repainted their home. Petitioners would not agree to repaint. In order to complete the refinance with the notice of noncompliance still of record, petitioners had to post a cash bond of $10,000 in favor of their title insurer. [64]

Negotiations apparently continued without progress until BHA filed suit in March 1996. BHA sought abatement of the offending color as a nuisance, punitive damages, attorney fees and costs. Petitioners moved for expungement of the notice of noncompliance. The motion was denied. This petition for writ of mandate followed.

II. The Statutory Law

A. There is no specific authorization for recordation of a notice of noncompliance.

Miller and Starr contains a nonexclusive list of 99 types of instruments that may be recorded. The recordation of most of these instruments is specifically authorized by statute. (3 Miller & Starr, Cal. Real Estate (2d ed. 1989) Recording and Priorities, §§ 8:4-8:5, pp. 275-292.) A notice of noncompliance with CC&R’s is not on the list, nor has any other specific authorization been cited. If a notice of noncompliance is recordable, recordation must be authorized by inclusion within a generic category of recordable documents.

B. BHA relies on generic authority that does not authorize recordation of a notice of noncompliance.

[1] BHA relies on the generic authorization for recordation of documents contained in Government Code section 27280, subdivision (a), which provides that “[a]ny instrument or judgment affecting the title to or possession of real property may be recorded ….” The notice of noncompliance in this case was not a “judgment,” hence if recordable, it must be recordable as an “instrument.”

The term “instrument” as used in Government Code section 27280 is defined in Government Code section 27279, subdivision (a), as “a written paper signed by a person or persons transferring the title to, or giving a lien on real property, or giving a right to a debt or duty.” Three categories are thus presented. A recordable “instrument” is one which either a) transfers title, b) “gives” a lien, or c) “gives” a right or duty.

Clearly the notice of noncompliance has no effect on the state of the title. Title remains vested in petitioners as before, possibly subject to typical deeds of trust or similar financing liens, etc. The first category of the “instrument” definition does not apply.

Nor does the notice of noncompliance “give,” or create, a lien on real property. While it does cloud the title by giving public notice of a claim and [65] creating uncertainty about the ability of BHA to force an eventual repainting of the house, the notice of noncompliance does not create a “lien.” Nor has BHA argued that its notice of noncompliance creates a “lien.” Hence the second category of the “instrument” definition does not apply.

BHA relies on the third category of the “instrument” definition. BHA argues that the notice of noncompliance is a recordable instrument “because it is in writing and gives ‘a right to a debt or duty’ in that it provides petitioners and any successors notice of their duty to bring their property into compliance.” Clearly there is a major difference between providing notice of a duty, and “giving” or creating that duty. To the extent that BHA has the “right” to dictate the color of a wall or garage door, that “right” was given to BHA by the CC&R’s. If the right exists, it exists whether or not a notice of noncompliance is recorded to give public notice of BHA’s claim. In this case, for example, BHA filed suit to enforce this claimed right, something BHA could have done without recording a notice of noncompliance. Thus BHA’s notice of noncompliance does not come within the third category of the “instrument” definition.

Even assuming that the notice of noncompliance were an “instrument” as defined by Government Code section 27279, it would be recordable only if-pursuant to Government Code section 27280-it affected “title to” or “possession of” the real property. As discussed above, the notice of noncompliance does not affect title to the property. Nor does it affect possession. Petitioners retain possession as well as title. Legally speaking, petitioners can freely transfer title and possession. The constraints petitioners are experiencing on transfer of title and possession are practical ones, not legal limitations. For example, property subject to a lis pendens remains freely transferable as a legal matter. (See, e.g., Stagen v. Stewart-West Coast Title Co. (1983) 149 Cal.App.3d 114, 122 [196 Cal.Rptr. 732].) The notice of noncompliance involved here has no legal effect on title or possession, or on transfers of title or possession. Instead, the notice simply creates uncertainty about whether BHA will be able to force petitioners (or their successors) to repaint their home. It is because few purchasers or lenders would likely be willing to assume this risk that transfer or encumbrance of the property might be impeded.

No authority for recordation of the notice of noncompliance has been cited except for the statutes discussed above. Since the cited statutes do not authorize the recording and no other statutory authority can be found, it must be concluded that there is no statutory authorization for recording such a document. [66]

C. The notice of noncompliance is not recordable in the absence of statutory authority.

[2] The system for public recording of land title records was established by statute. (See Gov. Code, § 27201 et seq.) The proper operation of that system is hence one of legislative intent.

A county recorder is obligated to accept for recordation only those documents which are “authorized or required by law to be recorded.” (Gov. Code, § 27201.) There is no authority for the proposition that a county recorder either must or may record documents which are not “authorized or required by law to be recorded,” i.e., there is no authority for the proposition that the recorder must or may accept unauthorized documents for recordation. Nor is there any authority for the proposition that parties may by private contract create a right to record, for their own private purposes, documents which are not “authorized or required by law to be recorded.”

In order to rule in favor of BHA that BHA’s notice of noncompliance is a recordable document, we would have to accept the proposition that any type of document is recordable unless recordation of that type of document is specifically prohibited. If that were the legislative intent, it is expectable that there would then be code sections prohibiting the recordation of specific types of documents.^{[FN. 3]} However, BHA has cited no such code sections. Moreover, if it were the Legislature’s intent, in enacting the land title recording system, that any type of document could be recorded in that system, there would be no need for the Legislature to identify specific types of documents that are recordable. (Cf. 3 Miller & Starr, Cal. Real Estate, supra, Recording and Priorities, §§ 8:4-8:5, pp. 275-292 [listing specific types of recordable documents].) Yet the Legislature has taken great effort to identify various types of recordable documents. When the Legislature does specify a recordable type of document, the Legislature generally also specifies the standards according to which the propriety of such a recordation would be judged, and has often provided specific procedures governing disputes over propriety of a recording. (See, e.g., Code Civ. Proc., § 405 et seq.; Civ. Code, § 3109 et seq.) Thus there is no principled basis on which we can accept the proposition that the Legislature intended all documents of every kind to be recordable unless specifically prohibited. We therefore [67] conclude that BHA’s notice of noncompliance was not a recordable document.^{[FN. 4]}

D. The notice of noncompliance should have been expunged.

[3] Petitioners’ motion to expunge the notice of noncompliance was brought pursuant to Civil Code section 3412, which provides that a written instrument may be adjudged void or voidable if it may cause serious injury if left outstanding. Here the notice of noncompliance was not a legally recordable document. The undisputed evidence demonstrated that the improper recordation of this document had created a cloud on title, preventing refinancing of petitioners’ property until they posted a $10,000 bond. The bond remains outstanding. We consider this a sufficiently serious injury to require expungement of the improperly recorded notice.^{[FN. 5]}

III. Disposition

Accordingly, the superior court is directed to set aside its order denying petitioners’ motion to expunge the notice of noncompliance and to issue a [68] new and different order granting the motion. The temporary stay is vacated. Real party to pay the costs of this petition.

Boren, P. J., and Nott, J., concurred.

The petition of real party in interest for review by the Supreme Court was denied August 20, 1997. Mosk, J., and Kennard, J., were of the opinion that the petition should be granted.

FN 1. The issue here is not whether CC&R’s can be enforced. It is whether a notice of violation of CC&R’s is a type of document which can be recorded in the public land title records. We therefore need not consider the effect or application of Civil Code section 1354 (CC&R’s enforceable as equitable servitudes) or the case of Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361 [33 Cal.Rptr.2d 63, 878 P.2d 1275] (equitable servitudes to be enforced unless in violation of public policy). Rather than whether CC&R’s can be enforced, the question is whether compliance with CC&R’s can be coerced by recording a notice of noncompliance without statutory authority.

FN 2. Shade of color is not the issue here. The issue is the recordability of the notice of noncompliance.

FN 3. For example, Code of Civil Procedure section 405.36 prohibits the re-recording of a lis pendens after the lis pendens has once been expunged, unless leave of court is first obtained. This code section is only necessary because another section specifically authorizes the recording of a lis pendens in the first instance. (Code Civ. Proc., § 405.20.)

FN 4. The argument has been suggested that homeowners associations such as BHA need the ability to record notices of noncompliance in order to effectively enforce CC&R’s. We need not debate the issue here, for that is a matter for legislative attention. The Legislature can consider whether recording should be allowed, and what type of procedures for review of recordings should be provided. Recordation could be authorized with a ready made system for due process review, for example, by simply amending the definition of “real property claim” in Code of Civil Procedure section 405.4 (the lis pendens law) to include a claim of violation of CC&R’s. However, only the Legislature can make such public policy decisions.

FN 5. Attached to BHA’s complaint against petitioners was a copy of the CC&R’s. Article 3 of those CC&R’s deals with “Common Area,” and references a “Schedule B” on which parcels of land “owned by the Association for the benefit of the Members” were supposed to be listed. However, no Schedule B was attached to the copy of the CC&R’s appended to the complaint. It is therefore unclear whether BHA is, or is not, a common interest development subject to the regulation of the Real Estate Commissioner set forth in title 10, California Code of Regulations, section 2792.26. A homeowners association subject to this regulation “cannot be empowered to cause a[n] … abridgment of an owner’s right to the full use and enjoyment of his individually-owned subdivision interest on account of the failure by the owner to comply with provisions of the governing instruments … except by judgment of a court or a decision arising out of an arbitration ….” Placing a cloud on title with the specific intent of preventing transfer or refinancing can reasonably be construed as an “abridgment of an owner’s right to the full use and enjoyment of his individually-owned subdivision interest.” It thus appears that, to the extent BHA may be subject to this regulation because of status as a common interest development, it may be prohibited from recording notices such as the one involved in this case. To the extent the regulation is not applicable because BHA may not be a common interest development, the decision we make here is consistent with the approach taken by the Real Estate Commissioner.

Watts v. Oak Shores Community Association

(2015) 235 Cal.App.4th 466

[Operating Rules; Rental Activities; Board Deference] Homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.

Burlison Law Group and Robert C. Burlison, Jr., for Plaintiffs, Cross-defendants and Appellants and for Cross-defendant and Appellant.
Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, Michael B. Wilk, Caroline E. Chan, Ryan D. Harvey; Adams Kessler, Adrian J. Adams, Gary S. Kessler, Paul S. Ablon, Aide C. Ontiveros and Tina Chu for Defendant, Cross-complainant and Respondent.

[CERTIFIED FOR PARTIAL PUBLICATION^{[FN. *]}]

OPINION

GILBERT, P. J. —

Here we hold, among other things, that homeowners associations may adopt reasonable rules and impose fees on members relating to short-term rentals of condominium units.

Two owners of one lot in a common interest development and one of two owners of another lot brought an action challenging regulations and fees adopted by the homeowners association. The association cross-complained against all owners of both lots for fees and declaratory relief. The association [469] prevailed on the complaint and cross-complaint. The trial court also awarded the association statutory attorney fees and costs on the complaint and cross-complaint. As we explain in the unpublished portion of this opinion, the judgment must be clarified so that the attorney fees awarded on the complaint are against plaintiffs only, and not against the cross-defendant who was not a plaintiff. In all other respects, we affirm.

FACTS

Oak Shores is a single-family residential common interest development. It is governed by the Oak Shores Community Association (Association). The Association is governed by a board of directors (Board). All property owners in the development are members of the Association.

The Association’s governing documents include its covenants, conditions and restrictions (CC&R’s) and its bylaws. The Board “may adopt, amend, or repeal Rules for the use, occupancy and maintenance of the Project; for the general health, welfare, comfort, and safety of Members; and to interpret and implement these CC&R’s, and establish penalties for violation of such Rules.” (CC&R’s, art. 6.2.) “In the event the Association undertakes to provide materials or services that benefit a particular Member, such Member in accepting the materials or services agrees to reimburse the Association for the costs incurred by the Association, which shall become a Special Assessment against the Member.” (Id., art. 3.8.)

Oak Shores consists of 851 parcels of land. Six hundred sixty parcels are developed with single-family homes. Only about 20 percent, 125 to 150, of the homes are occupied by full-time residents. Approximately 66 absentee homeowners rent their homes to short-term vacation renters.

Ken and Joyce Watts and Lynda Burlison (collectively Watts) are absentee owners who rent their homes to short-term vacation renters. Watts filed a complaint against Oak Shores challenging fees charged and rules and regulations enacted by the Association. The challenge included a rule stating the minimum rental period is seven days; an annual fee of $325 imposed on owners who rent their homes; a rule limiting the number of automobiles, boats and other watercraft that renters are allowed to bring into Oak Shores; a mandatory garbage collection fee; boat and watercraft fees; building permit fees; and property transfer fees.

[[/]]^{[FN. *]}

[470] Short-term Renters

The Association has a rule stating that the minimum rental period is seven days. The Association’s general manager testified that, based on his discussion with Board members, staff and code enforcement officers, as well as his review of gate and patrol logs, short-term renters cause more problems than owners or their guests. The problems include parking, lack of awareness of the rules, noise and use, and abuse of the facilities. Expert James Smith testified that, unlike guests who are typically present with the owners, short-term renters are never present with the owner. Guests tend to be less destructive and less burdensome. Short-term renters require greater supervision and increase administrative expenses.

A $325 fee is charged to all owners who rent their homes. A 2007 study calculated each rental cost the Association $898.59 per year.

Watercraft

All short-term renters and guests who bring watercraft into Oak Shores pay a fee of $25 per day or $125 per week. Short-term renters and guests are limited to one boat or two personal watercraft. Owners and long-term renters do not pay such special fees and are not limited in the number of watercraft they can bring into Oak Shores.

Boats have a negative impact on the Association’s roads. There are also costs of maintaining the docks and parking lot used by the renters and increased costs for code enforcement.

Expert Smith testified that renters comprise only 8 percent of the people entering the gate, but renters bring in 37 percent of the boats.

Parking Restrictions

Association rules restrict parking in the lower marina lot to owners on weekends and holidays during the summer months. A lot not much further away is available to all.

Construction Permits

The Association charges a plan-check fee of $100 and a road impact fee of $1,600 for new construction. Expert Smith testified that heavy equipment used to construct homes places more wear on the roads and results in greater usage. It is appropriate to consider the need for reserves in determining the [471] amount of the fee. The Board president testified that road resurfacing and repair are the basis for the fee.

Trash Collection Fees

The Association contracts with a trash collector. It passes the fees pro rata onto all owners of developed lots. The Association does not distinguish between full-time and part-time residences because it is too difficult to make that determination. It does not charge the owners of undeveloped lots because they do not produce trash.

Civil Code Former Section 1366.1^{[FN. 1]}

Former section 1366.1 (repealed by Stats. 2012, ch. 180, § 1 and reinstated with nonsubstantive changes as § 5600, subd. (b)) provided, “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

David Levy and Travis Hickey are certified public accountants. Levy testified that the expenses generated by owners who rent short term far exceed the income generated from those owners. He analyzed fees and costs contained in the Association’s financial statements and reserve studies. He concluded the fees charged were reasonable and complied with the law. Levy also consulted with the Association’s former auditors. Levy and Hickey concluded that the fees were reasonable and did not violate former section 1366.1. Levy also testified the fees charged by comparable associations for similar activities were higher or equivalent to fees charged by Oak Shores.

Hickey testified that he is the Association’s former auditor. He studied the fees and consulted with another former auditor. He concluded the fees were fair, reasonable, and in compliance with the law. They do not exceed the costs for which they are levied. No association conducts a formal study to set fees. Nor does any association conduct time and motion studies. In fact, time and motion accounting is not possible.

Homeowners association expert Karen Conlon testified the Association met the standard of care for giving members notice of rule and fee changes. Fee increases can be enacted by adopting a budget for the year.

Swimming Pool

The Association paid a pool contractor $35,000 to repair a swimming pool. The contractor absconded with the money without repairing the pool. A [472] former director testified that a former Board president wrote a check to the contractor without Board approval. Expert Smith testified it is not typical, nor within the standard of care, for an association to purchase a performance bond.

Release and Unclean Hands

[[/]]^{[FN. *]}

Ken Watts has never obtained a business license to rent his home, nor has he paid transient occupancy taxes since at least 2000. He owes at least $5,000 in back taxes. Watts has repeatedly mischaracterized his renters as guests in order to avoid applicable rental rules and regulations. Portions of his testimony at trial were “demonstrably false.” Throughout his tenure at Oak Shores, he has adopted a “rancorous, accusatory and obstructionist” style of interaction with Board members and staff. He has occasionally intimidated staff with bizarre and threatening behavior.

Judgment

The trial court found for the Association on the complaint. [[/]]^{[FN. *]} The court found that the Association’s rules and regulations are reasonable and comply with the Association’s governing documents and the law, and that the fees charged comply with former section 1366.1.

The trial court also found for the Association on the cross-complaint. It granted the Association an injunction ordering cross-defendants to abide by the rules and regulations. [[/]]^{[FN. *]}

DISCUSSION

[[/]]^{[FN. *]}

[473] II.

Watts contends that the judgment is based on incorrect legal grounds.

(1) Watts claims that the rule applying judicial deference to association decisions applies only to ordinary maintenance decisions. But in Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249 [87 Cal.Rptr.2d 237, 980 P.2d 940], our Supreme Court stated, “`Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development’s governing documents, and comply with public policy.'” (Id., at p. 264, quoting Nahrstedt v. Lakeside Village Condominium Assn.(1994) 8 Cal.4th 361, 374 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) It is true the facts inLamden involve the association board’s decision to treat termites locally rather than fumigate. But nothing in Lamden limits judicial deference to maintenance decisions. Common interest developments are best operated by the board of directors, not the courts.

Watts’s reliance on Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930 [117 Cal.Rptr.3d 481] is misplaced. There, an owner sued the association for failing to properly maintain the sewer lines. In applying judicial deference, the court stated that the Lamden rule gives “deference to the reasoned decisionmaking of homeowners association boards concerning ordinary maintenance.” (Affan, at p. 940.) But there is no reason to read Lamden so narrowly. In fact, courts have given deference to board decisions that do not concern ordinary maintenance. Thus, for example, in Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 [97 Cal.Rptr.2d 280], the court gave deference to an association board’s decision denying an owner’s application for a room addition on aesthetic grounds.

(2) Article 3.8 of the CC&R’s gives the Board broad powers to adopt rules for Oak Shores. Nothing in the article or elsewhere prohibits the Board from adopting rules governing short-term rentals, including fees to help defray the costs such rentals impose on all owners. The Board may reasonably decide that all owners should not be required to subsidize Watts’s vacation rental business.

That short-term renters cost the Association more than long-term renters or permanent residents is not only supported by the evidence but experience and common sense places the matter beyond debate. Short-term renters use the common facilities more intensely; they take more staff time in giving directions and information and enforcing the rules; and they are less careful in using the common facilities because they are not concerned with the long-term consequences of abuse.

[474] (3) In arguing the cost of short-term rentals must be borne by all members, Watts cites California Code of Regulations, title 10, section 2792.16, subdivision (a). That regulation provides, “Regular assessments to defray expenses attributable to the ownership, operation and furnishing of common interests by the Association shall ordinarily be levied against each owner according to the ratio of the number of subdivision interests owned by the owner assessed to the total number of interests subject to assessments.” Watts’s reliance on the regulation is misplaced for a number of reasons. First, the regulation applies to subdivision developers. Watts cites no authority that it also applies to continuing operations of a common interest development. Second, the regulation is qualified by the word “ordinarily.” (Ibid.) It clearly does not state an immutable rule. Third, the regulation applies to “[r]egular assessments.” (Ibid.) Watts cites no authority that it applies to the type of use fees at issue here.

Watts’s reliance on the Association’s articles of incorporation, article II, paragraph (d), is also misplaced. The paragraph under the heading “General Purposes” states in part: “To fix and establish the fees, dues and assessments that each member of this corporation shall pay to this corporation for the purpose of providing funds to carry out the community purposes and objects of this corporation, and to receive and collect such fees, dues and assessments.” Nothing in the paragraph provides that each member shall pay the same amount regardless of his or her activities on the premises. It does confirm, however, the power of the Association to impose fees as well as assessments. Thus, it confirms the power of the Association to impose the type of fees at issue here.

Watts’s reliance on Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670, 685 [174 Cal.Rptr. 136] (“Laguna Royale“) is misplaced. There, a common interest development was built on a 99-year ground lease. The defendants purchased a unit in the development. Later, the defendants transferred undivided interests to three other families. No more than one family would use the unit at a time and each of the four families agreed to 13-week periods of exclusive use. The ground lease contained a provision prohibiting transfer of the unit without the development association’s approval. The association refused to approve the transfer on the ground, among others, that use by the four families would place an undue burden on the other owners in their use and enjoyment of their units so as to be inconsistent with their quiet enjoyment and maintenance of security. The trial court invalidated the assignments. The Court of Appeal reversed.

In reversing, the Court of Appeal affirmed that the association had the authority to enact reasonable regulations on the use and alienation of the condominiums. (Laguna Royale, supra, 119 Cal.App.3d at p. 682.) The court [475] also determined that the reason given for refusing consent to the transfer is rationally related to the proper operation of the property and purposes of the association. (Id., at p. 686.) The court concluded, however, there was no evidence that consecutive use of the unit by the four families one at a time would be so disruptive as to interfere substantially with the other owners’ use and enjoyment or the maintenance of security. (Id., at p. 687.) The court pointed out that the association’s bylaws allowed leasing of a unit for 90 days or more, a use more intense than the 13 weeks exclusive use agreed to by each of the four families. (Ibid.)

If anything, Laguna Royale is favorable to the Association. It confirms the authority of the Association to enact reasonable regulations governing transfers so as to preserve the owner’s quiet enjoyment of the premises and the maintenance of security. There was simply no evidence in Laguna Royale that four 13-week periods of occupation by a single family would have a significant impact on the enjoyment of the premises by other owners or on security. Here there is more than ample evidence that short-term rentals have such significant impacts.

[[/]]^{[FN. *]}

IV.

Watts contends the trial court erred in adopting the proportionality test in determining the reasonableness of the fees.

(4) Former section 1366.1 prohibits an association from imposing or collecting “an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.”

At trial, Watts argued the Association was required to conduct time and motion studies to determine the correct amount of the fees. The trial court rejected Watts’s argument. In its statement of decision, the court stated the issue is whether “rough proportionality” between the fees and costs is sufficient to comply with the statute. The court found that the evidence established a “reasonably close” relationship between each contested fee and the cost it is intended to offset. The court concluded that relationship satisfied former section 1366.1.

(5) Nothing in the language of former section 1366.1 requires the exact correlation between the fee assessed and the costs for which it is levied that [476] Watts appears to demand. In some instances, such an exact correlation may be impossible to obtain. In other instances, the costs of studies necessary to obtain an exact correlation may be prohibitive, requiring the Association to add the costs to the fees. The “golden rule” for statutory interpretation is that where several alternative interpretations exist, the one that appears the most reasonable prevails. (Stewart v. Board of Medical Quality Assurance (1978) 80 Cal.App.3d 172, 179 [143 Cal.Rptr. 641].)

(6) The most reasonable interpretation of former section 1366.1 is that it requires nothing more than a reasonable good faith estimate of the amount of the fee necessary to defray the cost for which it is levied. Whether the court uses the term “roughly proportional” or “reasonably close,” the test has been met here.

In Foothills Townhome Assn. v. Christiansen (1998) 65 Cal.App.4th 688 [76 Cal.Rptr.2d 516], a homeowners association imposed a special assessment of $1,300 against each owner. The assessment was to replenish the association’s reserve fund, which had been depleted paying for storm damage. The reserve fund could be used for purposes other than storm damage. An owner challenged the assessment as violating former section 1366.1. The court upheld the amount of the assessment on the ground that there was no showing that the usual reserve balance was excessive or that the amount of the assessment pushed the fund above its usual balance. (Foothills, at p. 694.) The court did not require a precise correlation between the amount of the assessment and the cost for which it was levied.

Watts argues that the Association should be bound by its admissions made during discovery that no studies to determine costs associated with the fees were conducted. The discovery to which Watts refers was interrogatories answered in February 2007. Trial began in April 2011. At trial, the Association produced evidence of studies that supported the fees. Watts points to no place in the record where the Association’s witnesses were asked to explain the apparent discrepancy between the interrogatory responses and their testimony. Nor does Watts cite any authority in support of the argument requiring the trial court to reject the Association’s evidence at trial. Watts has failed to carry the burden of showing error on appeal. (See In re Marriage of Ananeh-Firempong (1990) 219 Cal.App.3d 272, 278 [268 Cal.Rptr. 83] [judgment presumed correct, error must be affirmatively shown].)

(7) Watts claims that the garbage fees were initiated January 1, 2001, without ever being adopted by the Association as required by former section 1357.100, subdivision (a), repealed by Stats. 2012, ch. 180, § 1, now § 4340. But that statute simply defines “`[o]perating rule.'” (Former § 1357.100, subd. (a).) It does not set forth any particular procedure for adopting any rule. Moreover, it defines operating rule as a “regulation.” (Ibid.) The garbage fee is not a regulation. It is simply a cost the Association passes through to the owners of the developed lots.

[477] Watts claims the Board adopted or increased fees and fines by simply including them in the budget. But Watts cites no authority prohibiting the Board from adopting or increasing fees and fines in that manner.

In any event, Watts’s entire contention is based on a view of the evidence most favorable to themselves. Watts fails to cite the evidence most favorable to the judgment. That evidence includes the testimony of Karen Conlon, an expert on homeowners associations. She testified the Association met the standard of care on notice of rules and fee charges. Board members also testified that Board meetings agenda and minutes were posted on the Association’s Web site. Watts has waived the contention on appeal. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 [92 Cal.Rptr. 162, 479 P.2d 362].)

[[/]]^{[FN. *]}

The attorney fee portion of the judgment is ordered modified as discussed in the unpublished portion of the opinion. In all other respects, the judgment is affirmed. Costs on appeal are awarded to respondent and against all appellants.

Yegan, J., and Perren, J., concurred.

[FN. *] Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for partial publication. The portions of this opinion to be deleted from publication are identified as those portions between double brackets, e.g., [[/]].

[FN. *] See footnote, ante, page 466.

[FN. 1] All statutory references are to the Civil Code unless noted otherwise.

[FN. *] See footnote, ante, page 466.

Alfaro v. Community Housing Improvements System & Planning

(2009) Cal.App.4th 1356

[Deed Restriction; Enforceable] A Deed Restriction that requires the properties to remain affordable to buyers with very low to moderate income is considered a valid, reasonable and enforceable restriction.

Law Offices of Bruce Tichinin, Inc., and Bruce Tichinin for Plaintiffs and Appellants.
Lombardo & Gilles, Esau Soren Diaz; Noland, Hamerly, Etienne & Hoss, Lloyd W. Lowrey, Jr., Daniel E. Griffee; Charles J. McKee, County Counsel, and Kathryn Reimann, Deputy County Counsel, for Defendants and Respondents.

OPINION
RUSHING, P. J. —

I. INTRODUCTION

Plaintiffs are the owners of 23 single-family residences^[FN.1] in the Moro Cojo inclusionary housing development projects (sometimes “the Projects”) outside [1364] of Castroville in the County of Monterey. With two exceptions, they obtained their grant deeds directly from either defendant Community Housing Improvement System & Planning Association, Inc. (CHISPA), or defendant South County Housing, Inc. (South County), both nonprofit corporations (sometimes collectively “defendants”). They acquired their properties through a special program aimed at creating affordable housing for households of very low to moderate incomes. In lieu of a cash downpayment, plaintiffs invested time and labor in helping to build their own residences and those of their neighbors. The Projects were developed subject to a deed restriction that requires the properties to remain affordable to buyers with very low to moderate incomes.

In this lawsuit, plaintiffs claim they were surprised to learn of this deed restriction after they had invested their time and labor. They seek either to invalidate it or to recover damages on a variety of theories, including inadequate recording, unreasonable restraint on alienation, fraudulent nondisclosure of the restriction, breach of an implied contract, waiver and estoppel. After the trial court sustained demurrers to three successive complaints, plaintiffs declined leave to amend their remaining cause of action for constructive fraud, and the trial court dismissed the action. For the reasons stated below, we will dismiss the appeal as to the County of Monterey and will reverse the judgment after concluding that plaintiffs’ properties are subject to a valid affordable housing deed restriction, that the statutes of limitations have lapsed as to claims by 24 plaintiffs of fraudulent and negligent nondisclosure and breach of implied contract mostly against CHISPA, and that the same claims by the other 16 plaintiffs against South County remain viable.

II. THE ALLEGED FACTS

On December 20, 1994, the Monterey County Board of Supervisors, by resolution No. 94-524, approved development permits subject to 103 conditions for certain property outside of Castroville. Among those conditions was condition No. 99: “That all the units in the Moro Cojo Inclusionary Housing Development Projects (SH 93001 and SH 93002) be affordable to very low, low and moderate income households as defined in Section 50093 of the California Health and Safety Code.” This project included a subdivision including 175 single-family dwellings and a senior housing development. In so doing, the county found “that Northern Monterey County and Castroville, specifically, suffers from an acute need for affordable housing.”

Monterey County’s approvals of these Projects were challenged in a lawsuit in Monterey County Superior Court (Alliance to Enforce Mandates v. County of Monterey (Super. Ct. Monterey County, No. 102344)) that was [1365] settled by agreement filed November 28, 1995. Among the terms of the stipulated judgment was that condition No. 99 “shall be a permanent deed restriction on the project parcels, and shall not be subordinated to any financing, encumbrance, loan, development agreement, contract, lease or other document.”

On September 30, 1997, the Monterey County Board of Supervisors, by resolution No. 97-408, accepted the final subdivision map for the Projects. They found, among other things, that condition No. 99 would be implemented by a deed restriction that would be recorded along with the final map.

On October 13, 1997, the owner of the property, CHISPA, on behalf of itself and two limited partnerships, recorded a document (#9759925) entitled “DEED RESTRICTION” with the Monterey County Recorder. The restriction referenced resolution No. 94-524 and quoted condition No. 99 as the owner’s covenant with the county. The restriction provided that it “shall remain in full force and effect during the period that said permit, or any modification or amendment thereof, remains effective, and during the period that the development authorized by said permit or any modification of said development, remains in existence in or upon any part of, and thereby confers benefit upon, the subject property described herein, and to that extent, said deed restriction is hereby deemed and agreed by owner to be a covenant running with the land, and shall bind owner and all his/her assigns or successors in interest.”^[FN.2] The subject property was described in an exhibit as “All of Tract No. 1284 of Moro Cojo,” with references to the filing date, volume, and page in the Monterey County records. According to plaintiffs, this restriction is perpetual and prevents their heirs from inheriting their properties.

According to a brochure distributed by CHISPA, applicants with low or very low incomes, under Monterey County guidelines, could become homeowners by pooling their efforts and spending 40 hours a week per family for eight to 10 months building their own homes under CHISPA supervision. Specialty work such as plumbing and electrical would be done by professionals. Applicants had to qualify for federal Rural Development loans available under the Rural Housing Service Mutual Self-Help Housing Program.

South County distributed a document dated May 3, 2001, explaining the financing in English and Spanish as follows. The home prices were set at fair [1366] market value. However, the owners could pay on the following terms. The homeowner made a promissory note to the County of Monterey on which no monthly payments were due so long as the owner was not in default under the terms of the note. The homeowner was to make a one-time payment equal to the amount of a first-time homebuyer program mortgage subsidy within 30 days of the completion of the home. The amount of the note and accrued interest was due on sale or transfer of the home. The county had a first option to purchase the property at fair market value if the owner wished to sell. If the county declined, the homeowner could sell the home to any person. The owner was guaranteed a return on a “sweat equity” downpayment valued at $16,000 plus specified interest, effected, if necessary, by a forgiveness of principal and interest.

At various unspecified dates, plaintiffs all participated in this program to obtain their properties and fully performed their obligations under their contracts. By working with plaintiffs through these programs, defendants created confidential, fiduciary relationships and were the managing partners in a joint venture. Defendants did not disclose the existence of the deed restriction to plaintiffs before they invested their time and labor. Plaintiffs were not informed before purchasing their properties that they are required to sell them to “persons meeting unspecified income limits” for prices “well under their current fair market values . . . .”

The preliminary title reports given to all plaintiffs “at the time they purchased their property referred to Covenants, Conditions, and Restrictions, and Deed Restrictions of record, but the references did not describe any limits on the sale value of their properties, or the ability of Plaintiffs to encumber their properties for financing.”

CHISPA issued 12 grant deeds to 18 plaintiffs on the following dates: January 31, 2000, Jose and Maria Marin; May 11, 2000, Jennifer Cruz; May 12, 2000, Salvador Sanchez;^[FN.3] May 31, 2000, Napolean and Ligaya Ducusin; June 5, 2000, Efrain and Amparo Ochoa,^[FN.4] July 12, 2000, Celestino Salazar;^[FN.5] July 13, 2000, Juan and Silvia Palacios; July 14, 2000, Lorena Maravilla; July 17, 2000, Estee Hurley; December 6, 2000, Howard Carter; February 12, 2001, Raul and Yolanda Perez; June 19, 2001, Panfilo and Isaura Barbaso.

[1367] How South County obtained title to property in the Projects is not explained in the record. South County issued 10 grant deeds to 16 plaintiffs on the following dates: February 9, 2000, Jose and Carmen Cervantes, Fermin and Rosario Chavarin, Juventino and Socorro Chavez; February 14, 2000, Jose and Rebecca Pineda; February 15, 2000, Roberto Alfaro, Manuel Castro, Tomas Alfaro;^[FN.6]February 22, 2000, Octavio Martinez and Erendira Sanchez; February 28, 2001, Ramiro and Rosario Castillo; May 22, 2001, Claudio Serrato.^[FN.7]

Each grant deed from CHISPA stated, “See Attached Exhibit for CC & R Incorporation.” The incorporation page referenced the three deed restrictions and the covenants, conditions, and restrictions recorded on October 13, 1997.^[FN.8] The grant deeds from South County did not contain this provision, except for the deeds to the Castillos and Claudio Serrato.^[FN.9^]

[1368] This deed restriction breached “an unwritten contract the existence and terms of which were implied from the conduct and the” written brochures distributed by defendants containing the terms that, if plaintiffs contributed their time and labor to construct the homes and assumed the indebtedness necessary to purchase the homes, defendants “would convey to said Plaintiffs title to the homes free of any restriction prohibiting said Plaintiffs from selling their homes at fair market value.”

Following receipt of their grant deeds, on February 15, 2000, plaintiffs Pinedas executed a note promising to pay South County $38,190. On July 24, 2000, plaintiff Hurley executed a note promising to pay CHISPA $27,500. On May 22, 2001, plaintiff Claudio Serrato executed a note promising to pay Monterey County $101, 270.^[FN.10] Each of these notes advises that it contains provisions affecting resales and assumptions. Each note provides that the loan was made to make the residence affordable to the borrower, who is not required to make payments of principal or interest so long as the borrower owns the property.

Plaintiffs were “unsophisticated, first-time homebuyers, a substantial number of whom are not literate in English, which is the only language in which the DEED RESTRICTION is expressed. . . .” They “were ignorant in fact of the DEED RESTRICTION and its effect on the marketability of their homes” until plaintiff Rebecca Pineda attempted to sell her home in April 2004 and was informed by CHISPA of the deed restriction and that she could not sell her property for more than $162,000. Plaintiff “Estee Perez [sic]” was told she could not sell her house for more than $149,688, which is less than the total debt against the property. It was then that plaintiffs first discovered “the restraint on their ability to refinance their properties or to resell them at fair market value to any person of their choosing . . . .” Until then, defendants had failed to disclose the effect of the deed restriction.

Defendants have allowed “some Plaintiffs to encumber their properties through refinancing at debt amounts greater than the less-than-market-value to which the DEED RESTRICTION purportedly limits resale value . . . .”

III. PROCEDURAL HISTORY

On August 5, 2005, plaintiffs filed a complaint, naming as defendants CHISPA, South County, and the County of Monterey. After a hearing on November 18, 2005, on December 12, 2005, the trial court sustained the [1369] demurrers by all defendants with leave to amend and granted a motion by South County to strike part of the complaint.

A new attorney for plaintiffs filed a 23-page first amended complaint. After a hearing on May 26, 2006, on July 14, 2006, the trial court sustained the demurrers by all defendants to plaintiffs’ first seven causes of action without leave to amend, and sustained the demurrers to the remaining four causes of action with leave to amend. The formal order filed August 4, 2006, sustained the demurrers of all defendants, and dismissed the first amended complaint against Monterey County in its entirety with prejudice. A notice of entry of this ruling was served on plaintiffs on August 14, 2006. No appeal was filed from this order.

Plaintiffs filed a 27-page second amended complaint, dropping the County of Monterey as a defendant. After a hearing on October 20, 2006, on November 9, 2006, the trial court granted defendants’ requests for judicial notice and sustained the remaining defendants’ demurrers to plaintiffs’ first 10 causes of action without leave to amend and dismissed these causes of action with prejudice in favor of CHISPA and South County. The court granted plaintiffs leave to amend their claim for constructive fraud. A notice of entry of this order was filed on November 16, 2006. Because plaintiffs did not amend their complaint in time, on January 19, 2007, the action was dismissed with prejudice. On January 10, 2007, plaintiffs filed a notice of appeal from a purported judgment of dismissal on November 16, 2006. On January 26, 2007, an amended notice of appeal designated the order of dismissal as filed on January 19, 2007.

IV. THE APPEAL AS TO MONTEREY COUNTY

On September 18, 2007, the County of Monterey filed a motion to dismiss this appeal as not filed within the time allotted by rule 8.104 of the California Rules of Court. This court initially suspended briefing in light of this motion, and, on March 19, 2008, we deferred the motion for consideration along with the appeal.

(1) The order filed August 4, 2006, dismissed the first amended complaint with prejudice against Monterey County as a defendant, while granting plaintiffs leave to amend some causes of action against CHISPA and South County. When a trial court’s ruling on a demurrer leaves one or more causes of action pending or subject to amendment between two parties, that ruling is not appealable by those parties. (Turpin v. Sortini (1982) 31 Cal.3d 220, 224-225, fn. 3 [182 Cal.Rptr. 337, 643 P.2d 954]; North American Chemical [1370] Co. v. Superior Court (1997) 59 Cal.App.4th 764, 773 [69 Cal.Rptr.2d 466]; County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 312 [40 Cal.Rptr.3d 313].) On the other hand, “[a]n order dismissing fewer than all defendants from an action is a `final judgment’ as to them, and is thus appealable.” (Hydrotech Systems, Ltd. v. Oasis Waterpark (1991) 52 Cal.3d 988, 993, fn. 3 [277 Cal.Rptr. 517, 803 P.2d 370]; cf. Seidner v. 1551 Greenfield Owners Assn. (1980) 108 Cal.App.3d 895, 901-902 [166 Cal.Rptr. 803];Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115 [55 Cal.Rptr.2d 276]; cf. Code Civ. Proc., §§ 581, subd. (f)(1), 581d.)

Plaintiffs recognize this general rule, but seek to apply the following exception. “Because of the nature of the principal/surety relationship, the courts have carved out a special rule for cases involving sureties and other parties having a unity of interest. The rule is that when one party to a judgment has a unity of interest with another party whose rights are not determined by the judgment, no appeal lies until the rights or duties of the interested party have been resolved by a final judgment.” (T&R Painting Construction, Inc. v. St. Paul Fire & Marine Ins. Co. (1994) 23 Cal.App.4th 738, 743 [29 Cal.Rptr.2d 199], and cases cited.) We see no allegation in the first amended complaint that Monterey County was in a principal-surety relationship with the other two defendants. The exception by its terms is inapplicable.^[FN.11]

(2) Plaintiffs assert that they dropped Monterey County as a defendant from the second amended complaint in order to comply with the court’s ruling on the demurrers to the first amended complaint, but they did not intend, by this pleading amendment, to waive their right to appeal from the August 4, 2006 order. It is not this pleading amendment that bars plaintiffs’ appeal from this order, but their failure to file a timely appeal from that order. “Upon an appeal” from an appealable order or judgment, “the reviewing court may review . . . any intermediate ruling, proceeding, order or decision. . .” (Code Civ. Proc., § 906^[FN.12]; cf. County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th 292, 312), but it may not review an [1371] earlier appealable ruling. (Berge v. International Harvester Co. (1983) 142 Cal.App.3d 152, 158 [190 Cal.Rptr. 815]; Morrissey v. City and County of San Francisco (1977) 75 Cal.App.3d 903, 906 [142 Cal.Rptr. 527].)

Because plaintiffs have not yet filed a notice of appeal from this earlier ruling, there is no issue before us concerning any potential liability of Monterey County. We will grant the county’s motion to dismiss the appeal as to it. In light of this conclusion, we do not consider whether plaintiffs should have exhausted their administrative remedies.

V. THE STANDARD OF REVIEW OF GENERAL DEMURRERS

California law requires a complaint in a civil action to contain both “(1) [a] statement of the facts constituting the cause of action, in ordinary and concise language” and “(2) [a] demand for judgment for the relief to which the pleader claims to be entitled. If the recovery of money or damages is demanded, the amount demanded shall be stated.” (Code Civ. Proc., § 425.10, subd. (a).) What is necessary to state a cause of action are the facts warranting legal relief, and not whether a plaintiff has provided apt, inapt, or no labels or titles for causes of action. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 38-39 [77 Cal.Rptr.2d 709, 960 P.2d 513]; Lee Newman, M.D., Inc. v. Wells Fargo Bank (2001) 87 Cal.App.4th 73, 78-79 [104 Cal.Rptr.2d 310]; Saunders v. Cariss (1990) 224 Cal.App.3d 905, 908 [274 Cal.Rptr. 186].)

A general demurrer is a trial of a pure issue of law and “presents the same question to the appellate court as to the trial court, namely, whether the plaintiff has alleged sufficient facts to justify any relief, notwithstanding superfluous allegations or claims for unjustified relief. [Citations] `[T]he allegations of the complaint must be liberally construed with a view to attaining substantial justice among the parties. (Code Civ. Proc., § 452.)’ [Citation.] Pleading defects which do not affect substantial rights of the parties should be disregarded. (Code Civ. Proc., § 475; [citation].)

“In evaluating a demurrer, we assume the truth of all material facts properly pleaded in the complaint unless they are contradicted by facts judicially noticed (Code Civ. Proc., §§ 430.30, subd. (a), 430.70; [citation]) but no such credit is given to pleaded contentions or legal conclusions. [Citations.] Specific factual allegations modify and limit inconsistent general statements.” (B & P Development Corp. v. City of Saratoga, supra, 185 Cal.App.3d 949, 952-953.)

[1372] An amended complaint may be regarded as superseding the original complaint in some situations (Singhania v. Uttarwar (2006) 136 Cal.App.4th 416, 425 [38 Cal.Rptr.3d 861]), such as when the plaintiff elects to amend a cause of action to which a demurrer is sustained. (See County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th 292, 312.) “Although ordinarily an appellate court will not consider the allegations of a superseded complaint [citation], that rule does not apply when the trial court denied plaintiffs leave to include those allegations in an amended complaint.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 209 [197 Cal.Rptr. 783, 673 P.2d 660], superseded by statute on another ground as stated in Californians for Disability Rights v. Mervyn’s, LLC (2006) 39 Cal.4th 223, 227 [46 Cal.Rptr.3d 57, 138 P.3d 207].) When plaintiffs decline to amend a complaint, as this court has explained, they have “clearly elected to stand on the second amended complaint with respect to that cause of action and may challenge the court’s ruling on that cause of action on an appeal from the subsequent dismissal of their action.” (County of Santa Clara v. Atlantic Richfield Co., supra, 137 Cal.App.4th at p. 312.) When plaintiffs decline an invitation to amend a cause of action, on appeal we assume that the complaint contains their strongest statement of that cause of action. (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091 [32 Cal.Rptr.3d 483, 116 P.3d 1162].)

VI. THE EFFECT OF RECORDING THE DEED RESTRICTION

(3) It is increasingly common for developers of residential subdivisions to impose restrictive conditions on the incoming residents of the subdivision in an attempt to enhance their enjoyment of their homes and to maintain or increase property values. (E.g., Zabrucky v. McAdams (2005) 129 Cal.App.4th 618, 623-624 [28 Cal.Rptr.3d 592]; Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 976 [97 Cal.Rptr.2d 280].) In 1995, the California Supreme Court resolved some confusion in California law and described how to impose effective restrictive covenants. “[I]f a declaration establishing a common plan for the ownership of property in a subdivision and containing restrictions upon the use of the property as part of the common plan is recorded before the execution of the contract of sale, describes the property it is to govern, and states that it is to bind all purchasers and their successors, subsequent purchasers who have constructive notice of the recorded declaration are deemed to intend and agree to be bound by, and to accept the benefits of, the common plan; the restrictions, therefore, are not unenforceable merely because they are not additionally cited in a deed or other document at the time of the sale.” (Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 349 [47 Cal.Rptr.2d 898, 906 P.2d 1314] (Anderson).) This rule applies to both equitable servitudes and covenants running with the land. (Id. at p. 355.)

[1373] In reaching this conclusion, the court observed, among other things: “`[R]unning covenants generally enhance alienability, and therefore many authorities feel that they should be encouraged.'” (Anderson, supra, 12 Cal.4th at p. 364.) The “`financial viability of the community depends on continued covenant compliance . . . .'” (Ibid.) “Having a single set of recorded restrictions that apply to the entire subdivision would also no doubt fulfill the intent, expectations, and wishes of the parties and community as a whole.” (Ibid.)

(4) Anderson, supra, 12 Cal.4th at page 355 explained: “By statute, any instrument `affecting the title to . . . real property may be recorded’ by the `county recorder of the county in which the real property affected thereby is situated.’ (Gov. Code, § 27280, subd. (a); Civ. Code § 1169.) . . . Civil Code section 1213 provides that every `conveyance’ of real property recorded as prescribed by law provides `constructive notice’ of its contents to subsequent purchasers. The term `conveyance’ is broadly defined to include `every instrument in writing . . . by which the title to any real property may be affected . . . .’ (Civ. Code, § 1215, italics added.)”

In our case, a deed restriction was recorded on October 13, 1997, that was intended to require all the units in the Projects to be affordable to very low, low and moderate income households as defined in Health and Safety Code section 50093.^[FN.13] This deed was recorded well before plaintiffs obtained their grant deeds, and inferentially before they entered into contracts to acquire their residences.

(5) Plaintiffs seek to avoid the impact of Anderson by arguing that the decision is limited to “use restrictions” and does not apply to restraints on alienation. They assert that the Anderson rule was intended to enhance alienability of property, not restrict it. It has been said, “Equity will not enforce any restrictive covenant that violates public policy.” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 381 [33 Cal.Rptr.2d 63, 878 P.2d 1275].)

Plaintiffs overlook the very public policy that benefitted them. The California Legislature has found and declared “that it is to the economic benefit of the state and a public purpose to encourage the availability of adequate housing and home finance for persons and families of low or moderate income, and to develop viable urban and rural communities by providing decent housing, enhanced living environment, and increased economic opportunities for persons and families of low or moderate income.” (Health & Saf. Code, [1374] § 50004; cf. Health & Saf. Code, § 50003; Gov. Code, former § 11011.9, subd. (a)(2), (3), §§ 54220, subd. (a), 54235, 65913.) Local governments are required to include provisions for such housing in their general plans. (Gov. Code, §§ 65588, 65583, subds. (a)(1), (c)(2).) “[T]he court found . . . that a valid public purpose was served by encouraging the construction of moderate and low-income housing projects.” (California Housing Finance Agency v. Elliott(1976) 17 Cal.3d 575, 584 [131 Cal.Rptr. 361, 551 P.2d 1193], discussing Winkelman v. City of Tiburon (1973) 32 Cal.App.3d 834 [108 Cal.Rptr. 415] with approval.) Rent control also has been recognized as “protecting the public interest in having affordable and properly maintained rental housing available to the citizens of the community.” (Cotati Alliance for Better Housing v. City of Cotati (1983) 148 Cal.App.3d 280, 296 [195 Cal.Rptr. 825]; cf. Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 676 [209 Cal.Rptr. 682, 693 P.2d 261].)

While a number of the covenants, conditions, and restrictions applicable to the Projects were intended to increase the residents’ enjoyment of their homes and to maintain the value of their properties, there is no doubt that committing the properties to continued affordability by very low to moderate income buyers will tend to depress their market value. However, such a restriction serves the public policy of providing adequate housing for such citizens. To the extent that depressing the market value of a property inhibits its sale or alienation, such a restriction is necessary to ensure that the property remains affordable to the poor who were and are the intended beneficiaries of the Projects. It has the same impact as rent control. We perceive no hostility in the reasoning of Anderson to creating a covenant or servitude in service of this policy.

We will discuss more fully in the next section whether the deed restriction is an unreasonable restraint on alienation. We conclude here that the rule of Anderson applies to the deed restriction recorded in this case, which was obviously intended to implement a common plan of maintaining the affordability of the Projects for low and moderate income persons who wish to follow in plaintiffs’ footsteps. Its recording provided constructive notice to subsequent purchasers, including plaintiffs, that their properties, if sold, had to be affordable to persons of very low to moderate incomes.

Government Code section 27281.5, subdivision (a) states requirements for giving effect to governmental restrictions on conveying real property: “Any restriction imposed upon real property on or after January 1, 1982, which restricts . . . the ability of the owner of real property to convey the real property . . . and which is imposed by a municipal or governmental entity on real property . . . which is not owned by the municipal or governmental entity, shall be specifically set forth in a recorded document which particularly describes the real property restricted in order to impart constructive [1375] notice of the restriction, or shall be referenced in a recorded document which particularly describes the real property restricted and which refers by page and book number to a separately recorded document in which the restriction is set forth in full.”^[FN.14]

Plaintiffs’ first purported cause of action in their first amended complaint attempted to allege that the grant deeds by CHISPA and South County violated this statute in several ways. Plaintiffs now concede “that the deeds of CHISPA meet the requirements for the second alternative means of compliance for [Government Code section] 27281.5 in that the deeds `refer by page and book number to a separately recorded document in which the restriction is set forth in full . . . .'” They also concede that their pleading inaccurately identified the defects in South County’s grant deeds, and they request leave to amend.

(6) It is true that most of the South County grant deeds (except the last two in time) made no specific reference to the recorded deed restriction of October 13, 1997. However, this omission does not invalidate the restriction so long as the recorded deed restriction itself “particularly describes the real property restricted in order to impart constructive notice of the restriction.” Plaintiffs assert that the deed restriction “does not give the required `particular’ description of the individual Lots to which it applies, but only the general description of the Tract Map . . . as `All of Tract No. 1284 . . . .'” When a deed restriction is generally applicable to a subdivision, we do not believe that this statute requires the deed to set out specific descriptions of every lot within the subdivision. In this case the deed would have had to describe at least 175 separate lots. It is settled that a deed can incorporate the description of property in a map or other document by sufficiently specific reference. (McCullough v. Olds(1895) 108 Cal. 529, 531-532 [41 P. 420]; Calvi v.[1376] Bittner (1961) 198 Cal.App.2d 312, 316 [17 Cal.Rptr. 850]; Kapner v. Meadowlark Ranch Assn. (2004) 116 Cal.App.4th 1182, 1187 [11 Cal.Rptr.3d 138] (Kapner).)

Civil Code section 1468, subdivision (a) provides that a covenant does not run with the land unless the lands to be burdened and benefitted “are particularly described in the instrument containing such covenants.” In Kapner, supra, 116 Cal.App.4th 1182,a property owner argued that his parcel was not particularly described in protective covenants and restrictions that applied to the entire ranch of which his property was a part. The appellate court concluded: “By describing the entire ranch, the rerecorded PC&R’s particularly describe all of the land benefited and burdened by the fifth amendment. That is all that is necessary. Anyone searching the title to Kapner’s parcel would realize that his parcel is part of the land that is particularly described as being encumbered by the amended PC&R’s.” (Id. at p. 1188.) We reach the same conclusion. The deed restriction here particularly described all the property that is subject to it in compliance with Government Code section 27281.5, subdivision (a). Plaintiffs have no prospect of amending their complaint to allege a violation of this statute.

VII. THE RESTRICTION IS A REASONABLE RESTRAINT ON ALIENATION

The purported third and fourth causes of action of the first amended complaint challenged the deed restriction as a void restraint on alienation.

(7) Civil Code section 711 provides, “Conditions restraining alienation, when repugnant to the interest created, are void.” City of Oceanside v. McKenna (1989) 215 Cal.App.3d 1420 [264 Cal.Rptr. 275] (McKenna) explained, “`”The day has long since passed when the rule in California was that all restraints on alienation were unlawful under the statute; it is now the settled law in this jurisdiction that only unreasonable restraints on alienation are invalid.” [Citation.]'” (Id. at p. 1427, quoting Martin v. Villa Roma, Inc. (1982) 131 Cal.App.3d 632, 635 [182 Cal.Rptr. 382],quoting Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670, 682 [174 Cal.Rptr. 136].)

“In determining whether a restraint on alienation is unreasonable, the court must balance the justification for the restriction against the quantum of the restraint. The greater the restraint, the stronger the justification must be to support it.” (McKenna, supra, 215 Cal.App.3d at p. 1427.) In McKenna, the City of Oceanside sold property to a developer at a below market price subject to a set of covenants, conditions, and restrictions that, among other things, bound the developer and its successors in interest for 10 years and [1377] prohibited any owner from “renting or leasing the property at any time for any reason. The CC&Rs also include eligibility requirements for initial and subsequent purchasers of the units and provisions for prescreening of prospective purchasers by the Commission. The CC&Rs were designed to assure the continued affordability of the condominiums and to foster an owner-occupied environment in the redevelopment area.” (Id. at p. 1423.)

As the court explained, “the City and the Commission subsidized the construction of Sea Village at a cost of more than $1 million in public funds to provide affordable housing to low and moderate income persons and to foster an owner-occupied community in the redevelopment area.” (McKenna, supra, 215 Cal.App.3d at p. 1429.) “[T]he disputed restrictions clearly and directly are related to the stated purposes of maintaining a stabilized community of low and moderate income residents and discouraging speculation by real estate investors. [¶] Certainly, the provision of housing for low and moderate income persons is in keeping with the public policy of this state.” (Id. at p. 1427.) Under prior precedent, “the enforceability of the restriction depends on whether the restriction is reasonable. Whether a restriction is reasonable will depend upon the particular circumstances of the case.” (Id. at p. 1430.) The court concluded: “[T]he restrictions support rather than offend the policies of this state. Given this factor and the fact they clearly and directly are related to the legitimate purposes for which the Sea Village condominium project was established, we find as a matter of law they are reasonable.” (Id. at p. 1428, fn. omitted.)

Plaintiffs criticize McKenna for not applying the very balancing test it articulated. Plaintiffs acknowledge that “the policy of assuring low cost housing” is “very important,” but they argue that it is outweighed by the consequences of enforcing the deed restriction, which include discouraging plaintiffs from maintaining and improving their properties and forfeiting the “otherwise naturally-occurring increase in equity from rising market value that is the main right of value in real property title ownership . . . .”

(8) Plaintiffs are essentially arguing that this housing program should have been designed differently, namely just to benefit them, the first wave of low income buyers. We acknowledge that it would be a more beneficial program to this first wave if they were able to sell their properties for whatever price they could command. However, plaintiffs do not discuss how avoiding the affordable housing deed restriction will benefit the second wave and later waves of low income buyers. There is an inherent conflict between the goals of maximizing the financial benefits to the first wave and preserving [1378] affordable housing for future buyers. We consider it reasonable to impose a continuing affordability requirement for the benefit of future low to moderate income homeowners. It is our duty to interpret the deed restriction “in a way that is both reasonable and carries out the intended purpose of the contract.” (Dieckmeyer v. Redevelopment Agency of Huntington Beach (2005) 127 Cal.App.4th 248, 259 [24 Cal.Rptr.3d 895] (Dieckmeyer).)

A similar policy argument was rejected in Dieckmeyer, supra, 127 Cal.App.4th 248, a case not cited by the parties. There a buyer of low income housing sought to prepay the promissory note she executed and to eliminate the equity share retained by the City of Huntington Beach and its redevelopment agency. Under that program, the condominium was sold subject to covenants, conditions, and restrictions requiring that all subsequent buyers “`qualify as low, very low, or moderate income households'” and that no property be sold, leased, or transferred without the city’s written approval. (Id. at p. 251.) The loan agreement also created an equity share in the city equal to a percentage of the profit on any sale that was due on several conditions, including a sale to a nonqualified buyer, but not to a sale to a qualified buyer approved by the city who assumed the loan. (Id. at pp. 251-252.)

Dieckmeyer argued “that imposing the equity share after prepayment violates a legislative intent to expand housing opportunities for people of all economic levels, because it would deny her profits she could use to buy a better home.” (Dieckmeyer, supra, 127 Cal.App.4th at p. 257.) The court rejected this contention as follows. “Dieckmeyer claims that holding her to the equity share denies lower income earners the opportunity to improve their financial condition, stifles housing opportunity because she cannot buy a better home, and would force her to `forfeit the American dream of home ownership if she relocates.’ Hyperbole aside, what Dieckmeyer is trying to do is get out of a contract in order to make more money. As we have said, if Dieckmeyer did not like the deal, she should not have taken it. Having enjoyed the benefits of owning a home through the affordable housing program, she cannot now reject its obligations.” (Id. at pp. 257-258.)

(9) Plaintiffs criticize the deed restriction here as “perpetual in duration” and purporting “to prohibit inheritance by the heirs of Plaintiffs.” We see nothing in the deed restriction attached to the complaint that prohibits inheritance. As we have explained before in reading a complaint, “a general description of an exhibit attached to a complaint will be disregarded where inconsistent with the exhibit. [Citations.]” (B & P Development Corp. v. City of Saratoga, supra, 185 Cal.App.3d 949, 953.) The covenant itself provides that it is binding on the assigns and successors in interest of the original owner. This would seem to apply to the heirs of an owner.

[1379] We do not see a perpetual restriction in the deed either. It remains effective while the “development authorized by said permit or any modification of said development, remains in existence in or upon any part of, and thereby confers benefit upon, the subject property described herein.” We understand this to say that it remains effective while it is beneficial. Presumably when there is no further need for affordable housing for low income households, the restriction will lose effect. Our interpretation of this restriction is not influenced by its characterization as perpetual in a letter by attorneys for CHISPA dated September 8, 2005, which is incorporated by reference into the first amended complaint. What is of concern to us is the actual wording of the deed restriction, not its characterization by plaintiffs or defendants.

In any event, a similar restriction of indefinite duration was upheld as a reasonable restraint on alienation in Martin v. Villa Roma, Inc., supra, 131 Cal.App.3d 632, 633, 635. We conclude that this deed restriction, which ensures that residential property will remain affordable to very low, low, and moderate income households so long as such a restriction is beneficial, is a reasonable restraint on alienation.

Plaintiffs call the deed restriction not only unreasonable, but unintelligible in the purported second cause of action in the first amended complaint. What plaintiffs seem to have in mind is that an agreement, including a deed, “cannot be specifically enforced . . . [¶] . . . [¶] . . . the terms of which are not sufficiently certain to make the precise act which is to be done clearly ascertainable.” (Civ. Code, § 3390, subd. 5.) They rely on Saterstrom v. Glick Bros. Sash etc. Co. (1931) 118 Cal.App. 379 [5 P.2d 21], which concluded, “The deed of trust being void for lack of a sufficient description of the property conveyed, the sale and all proceedings under the deed of trust would likewise be wholly ineffective and void.” (Id. at p. 383.) That was a case to quiet title in which the appellate court set aside the sale of a property.

Plaintiffs do not seek to rescind their own grant deeds, just the deed restriction mentioned in some of the deeds. Plaintiffs assert it is uncertain which of their properties must be sold to very low income households, which to low income households, and which to moderate income households. The deed restriction provides that “all the units in the [Projects] be affordable to very low, low and moderate income households.” It does not attempt to segregate the units into three separate categories. We see nothing uncertain about this phrase. “And” does not mean “or.” Each unit must be affordable to a very low income household, though it would not violate the deed to sell it to a qualified moderate income household.

[1380] VIII. WAIVER AND ESTOPPEL

The first amended complaint alleged that defendants allowed “several of Plaintiffs to refinance their properties so as to encumber the title with debt in excess of” sale prices affordable to buyers with low to moderate incomes. Defendants thereby have implicitly waived the deed restriction (sixth cause of action) and are estopped to enforce the deed restriction as to those plaintiffs who were allowed to refinance (seventh cause of action). Plaintiffs argue that their excessive refinancing “will make it impossible as a practical matter to sell these properties to persons” of low income.

(10) The right to enforce a restrictive covenant may be deemed generally waived when there are “a sufficient number of waivers so that the purpose of the general plan is undermined,” in other words, when “substantially all of the landowners have acquiesced in a violation so as to indicate an abandonment.” (Kapner, supra, 116 Cal.App.4th 1182, 1189-1190.) Plaintiffs here collectively own 22 of 175 single-family residences. A nebulous allegation that “several” of them have been allowed to refinance is clearly insufficient to establish that defendants have generally waived their right to enforce the restrictive covenant, even if the restrictive covenant is understood to prohibit refinancing.

As CHISPA points out, there is nothing in the deed restriction that prohibits plaintiffs from refinancing. They are bound to sell their homes at affordable prices, but there is no prohibition against them transforming their “sweat equity” into real cash without selling their homes.^[FN.15] It was not a violation of the restriction for “several” plaintiffs to find lenders who were willing to make loans in excess of the value of the property. If these transactions make it undesirable or impracticable for plaintiffs to sell their homes, they can retain ownership until market values rise or they pay down their loans.

To support their claim that the deed restriction prohibits refinancing, plaintiffs cite a provision in the settlement agreement in the prior action that the deed restriction is permanent and “shall not be subordinated to any financing . . . .” (Italics & underscoring added.) What this judgment prohibits is subordination, not refinancing. Plaintiffs have not alleged that their refinancing attempted to subordinate the deed restriction.

(11) Because we do not understand the deed restriction to prohibit refinancing, we also do not understand the allegation in the first amended [1381] complaint that defendants, by “allowing such refinancing . . . impliedly represented to such Plaintiffs that the DEED RESTRICTION was inapplicable as to such Plaintiffs . . . .” Among the elements of estoppel is that the party asserting it must be ignorant of the true facts and must reasonably rely on the other party’s conduct to his detriment. (Berkeley Police Assn. v. City of Berkeley (1977) 76 Cal.App.3d 931, 938-939 [143 Cal.Rptr. 255]; Feduniak v. California Coastal Com. (2007) 148 Cal.App.4th 1346, 1369 [56 Cal.Rptr.3d 591].) Allowing plaintiffs to do what was not prohibited by the deed restriction cannot bar defendants from enforcing the restriction. We discuss more fully in the next section whether those unnamed plaintiffs who refinanced can claim to be ignorant of the true facts at the time of their refinancing.

IX. ALLEGED CONCEALMENT AND FAILURE TO DISCLOSE

The second amended complaint alleged that defendants, as sellers of realty and as fiduciaries by virtue of their relationships with plaintiffs, breached an obligation to disclose a fact materially affecting the value of the property, namely the deed restriction, until the restriction was referenced in the grant deeds by CHISPA (sixth cause of action) and South County (seventh cause of action) after plaintiffs had invested their time and labor.^[FN.16] Further, defendants intentionally concealed this fact. The eighth cause of action (against CHISPA) and the ninth (against South County)^[FN.17] alleged fraudulent suppression.^[FN.18]

(12) Unlike the causes of action alleging nondisclosure, the causes of action alleging concealment do not acknowledge that the deed restrictions were referenced in many grant deeds. However, we are entitled to accept that as a fact. A plaintiff may plead inconsistent counts or causes of action in a verified complaint, but this rule does not entitle a party to describe the same transaction as including contradictory or antagonistic facts. (Faulkner v. California Toll Bridge Authority (1953) 40 Cal.2d 317, 328 [253 P.2d 659]; [1382] cf. Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC(2008) 162 Cal.App.4th 858, 886 [76 Cal.Rptr.3d 325].) In such circumstances, we may accept as true the more specific allegations. (Faulkner v. California Toll Bridge Authority, supra, 40 Cal.2d at pp. 328-329.) In addition, “[a] court may take judicial notice of something that cannot reasonably be controverted [such as a recorded deed], even if it negates an express allegation of the pleading.” (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117 [62 Cal.Rptr.3d 59].)

(13) A claim of fraud based on mere nondisclosure may arise when there is a confidential relationship,^[FN.19] when the defendant has made a representation that is likely to mislead absent a disclosure, when there is active concealment of the undisclosed matter, or “when one party to a transaction has sole knowledge or access to material facts and knows that such facts are not known to or reasonably discoverable by the other party.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 347 [134 Cal.Rptr. 375, 556 P.2d 737].) A seller of real property has a common law duty to disclose “where the seller knows of facts materially affecting the value or desirability of the property which are known or accessible only to him and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer . . . .” (Lingsch v. Savage (1963) 213 Cal.App.2d 729, 735 [29 Cal.Rptr. 201]; see Reed v. King (1983) 145 Cal.App.3d 261, 265 [193 Cal.Rptr. 130].) There is a statutory duty to disclose deed restrictions in a real [1383] estate transfer disclosure statement. (Civ. Code, § 1102.6.)^[FN.20] It is fraud to suppress a fact with intent to induce a person to enter into a contract to acquire realty. (Civ. Code, §§ 1572, subd. 3; 1710, subd. 3; Lingsch v. Savage, supra, 213 Cal.App.2d 729, 735; Curran v. Heslop (1953) 115 Cal.App.2d 476, 480-481 [252 P.2d 378].)

(14) What must be disclosed by a property seller is the fact or facts affecting the property’s value. The seller is not required also to explain to the buyer why that fact affects the property’s value. (Sweat v. Hollister (1995) 37 Cal.App.4th 603, 608-609 [43 Cal.Rptr.2d 399], disapproved on another ground in Santisas v. Goodin (1998) 17 Cal.4th 599, 609, fn. 5 [71 Cal.Rptr.2d 830, 951 P.2d 399] [once seller disclosed that residence was in flood plain, seller was not required to disclose effect of local ordinance on rebuilding or improving it]; Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 416 [98 Cal.Rptr.2d 176] [“The material fact that had to be disclosed was the fact that there was a lawsuit for defects, not each and every allegation contained within the court file.”]; Stevenson v. Baum (1998) 65 Cal.App.4th 159, 165-166 [75 Cal.Rptr.2d 904] [once seller disclosed that mobilehome park was subject to recorded easements, seller was not required to disclose the location of an oil pipeline easement or how he had accommodated it].)

Reasonable or justifiable reliance on the nondisclosure is an element of such fraud. (Lingsch v. Savage, supra, 213 Cal.App.2d 729, 739.) “`Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff’s reliance is reasonable is a question of fact.'” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239 [44 Cal.Rptr.2d 352, 900 P.2d 601].)

“A breach of the duty to disclose gives rise to a cause of action for rescission or damages.” (Karoutas v. HomeFed Bank (1991) 232 Cal.App.3d 767, 771 [283 Cal.Rptr. 809].) In this case, plaintiffs do not request rescission of their purchase contracts. “In fraud cases involving the `purchase, sale or exchange of property,’ the Legislature has expressly provided that the `out-of-pocket’ rather than the `benefit-of-the-bargain’ measure of damages should apply. ([Civ. Code,] § 3343, subds. (a), (b)(1).) This section does not apply, however, when a victim is defrauded by its fiduciaries. In this situation, the `broader’ measure of damages provided by [Civil Code] sections 1709 and 3333 applies.” (Alliance Mortgage Co. v. Rothwell, supra,10 Cal.4th at pp. 1240-1241, fns. omitted.) The parties have not discussed the measure of damages and how the recorded deed restriction affects the value of the properties which plaintiffs have received.

[1384] South County’s demurrer to the second amended complaint asserted that the seventh and ninth causes of action were vague and violated the particularity requirement for pleading fraud. South County elaborates on this contention on appeal.

(15) As restated by Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 993 [22 Cal.Rptr.3d 352, 102 P.3d 268], “`[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice. [Citations.] “Thus `”the policy of liberal construction of the pleadings. . . will not ordinarily be invoked to sustain a pleading defective in any material respect.”‘ [Citation.] [¶] This particularity requirement necessitates pleading facts which `show how, when, where, to whom, and by what means the representations were tendered.'”‘” (Cf. Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, supra, 162 Cal.App.4th 858, 878.)

This statement of the rule reveals that it is intended to apply to affirmative misrepresentations. If the duty to disclose arises from the making of representations that were misleading or false, then those allegations should be described. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, supra, 162 Cal.App.4th 858, 877-878.) However, as noted above (see fn. 18, ante, at p. 1381), plaintiffs have apparently abandoned their earlier claims of intentional and negligent misrepresentations. As plaintiffs accurately respond, it is harder to apply this rule to a case of simple nondisclosure. “How does one show `how’ and `by what means’ something didn’t happen, or `when’ it never happened, or `where’ it never happened?”

We believe that certain observations made in the context of a class action are relevant here, where there are 38 plaintiffs. One of the purposes of the specificity requirement is “notice to the defendant, to `furnish the defendant with certain definite charges which can be intelligently met.'” (Committee on Children’s Television, Inc. v. General Foods Corp., supra, 35 Cal.3d 197, 216.) Less specificity should be required of fraud claims “when `it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy,’ [citation]; `[e]ven under the strict rules of common law pleading, one of the canons was that less particularity is required when the facts lie more in the knowledge of the opposite party . . . .'” (Id. at p. 217.) Also “considerations of practicality enter in” when multiple plaintiffs and defendants are involved. (Ibid.)

In this case, the plaintiffs may or may not know the names of all the corporate employees with whom they interacted. To afford defendants adequate notice of plaintiffs’ claims, it does not appear necessary to require each of the 38 plaintiffs to allege each occasion on which an agent of either defendant could have disclosed the restrictive deed. Surely defendants have [1385] records of their dealings with the plaintiffs. “Those details . . . are properly the subject of discovery, not demurrer.” (People ex rel. Sepulveda v. Highland Fed. Savings & Loan (1993) 14 Cal.App.4th 1692, 1718 [19 Cal.Rptr.2d 555]; cf. Charpentier v. Los Angeles Rams Football Co.(1999) 75 Cal.App.4th 301, 312 [89 Cal.Rptr.2d 115].)

A. Constructive Notice, Inquiry Notice, and Actual Knowledge

(16) One of the central issues in this appeal is whether plaintiffs are chargeable with notice of the deed restriction at an earlier time than its disclosure in the grant deeds. As explained above, the recording of a deed restriction is ordinarily regarded as imparting constructive notice of its contents to subsequent purchasers. (Civ. Code, § 1213; Anderson, supra, 12 Cal.4th 345, 349, 355.) Anderson, supra, 12 Cal.4th 345,went on to state on page 355: “Constructive notice is `the equivalent of actual knowledge; i.e., knowledge of its contents is conclusively presumed.’ (4 Witkin, Summary of Cal. Law [(9th ed. 1987) Real Property], § 203, p. 408, italics in original.)”^[FN.21] Defendants rely on Anderson as establishing that plaintiffs had constructive notice and actual knowledge of the deed restriction by virtue of its recording and, by virtue of this knowledge, cannot successfully allege that defendants failed to disclose it.

There was a caveat in Anderson, however. “`If future takers purchase a piece of property with notice of a restriction made by a predecessor, then, in the absence of duress or fraud, they may ordinarily be thought to have bargained for the property with the restriction in mind, and to have shown themselves willing to abide by it.'” (Anderson, supra, 12 Cal.4th at p. 366, italics added.)

Plaintiffs argue that the doctrine of constructive notice does not apply to fraud causes of action. Bishop Creek Lodge v. Scira (1996) 46 Cal.App.4th 1721 [54 Cal.Rptr.2d 745] (Scira) stated on page 1734: “Under a long line of cases, the fact that the victim had constructive notice of the truth from public records is no defense to fraud. The existence of such public records [1386] may be relevant to whether the victim’s reliance was justifiable, but it is not, by itself, conclusive. (Seeger v. Odell(1941) 18 Cal.2d 409, 414-417 [115 P.2d 977]; Grange Co. v. Simmons (1962) 203 Cal.App.2d 567, 576-577 [21 Cal.Rptr. 757]; Gross v. Needham (1960) 184 Cal.App.2d 446, 460 [7 Cal.Rptr. 664]; Sullivan v. Dunnigan (1959) 171 Cal.App.2d 662, 668 [341 P.2d 404]; Regus v. Schartkoff (1957) 156 Cal.App.2d 382, 389 [319 P.2d 721]; Schaefer v. Berinstein (1956) 140 Cal.App.2d 278, 296 [295 P.2d 113];Mills v. Hellinger (1950) 100 Cal.App.2d 482, 487 [224 P.2d 34]; Barder v. McClung(1949) 93 Cal.App.2d 692, 697 [209 P.2d 808]; Stoll v. Selander (1947) 81 Cal.App.2d 286, 292 [183 P.2d 935]; Anderson v. Thacher (1946) 76 Cal.App.2d 50, 70 [172 P.2d 533].)” The rationale for this exception is, “The purpose of the recording acts is to afford protection not to those who make fraudulent misrepresentations but to bona fide purchasers for value.” (Seeger v. Odell, supra, 18 Cal.2d at p. 415 (Seeger).) Defendants do not discuss this authority, cited by plaintiffs, in their briefs.

To see how this principle has been applied, we will review the 11 above cited cases to see which ones involved a claim that the plaintiffs should have learned of fraud in the purchase of sale or realty by virtue of recorded documents. Over half of them involved different facts.^[FN.22] Of the cases that involved the sale of real property, in Mills v. Hellinger, supra, 100 Cal.App.2d 482, the seller of property misrepresented the acreage to the buyer, who was entitled to rely on the seller’s statements and was not deemed to know better from public records. (Id. at p. 487.) In Barder v. McClung, supra, 93 Cal.App.2d 692, the sellers of property told the buyer that the rear unit included a kitchen, without disclosing that they added the kitchen in violation of existing building restrictions and zoning regulations. The court held that the buyer was not “bound by constructive notice of the zoning ordinance,” because the sellers had a duty “to disclose to plaintiff that the rear apartment was maintained and used in violation of existing zoning ordinances.” (Id. at p. 697; cf. Watt v. Patterson (1954) 125 Cal.App.2d 788, 793 [271 P.2d 200] [property sellers are not required to disclose zoning regulations of which they are unaware and about which they have not misled buyers]; City of West [1387] Hollywood v. Beverly Towers, Inc. (1991) 52 Cal.3d 1184, 1194-1195 [278 Cal.Rptr. 375, 805 P.2d 329] [in the absence of fraud, property owners are presumed to have constructive notice of zoning ordinances affecting their properties without recording the ordinances under Gov. Code, § 27281.5].)

In Grange Co. v. Simmons, supra, 203 Cal.App.2d 567, the owners of a warehouse induced the Sahlmans to exchange their property for the warehouse by misrepresenting that the property was free and clear and the walls and roof would last a lifetime, and by suppressing the existence of (a) a deed allowing the builder of the warehouse to demand at any time that the roof be removed at the owners’ expense and (b) a demand by the builder to remove the roof. (Id. at pp. 573-574.) The Sahlmans’ real estate agents obtained a preliminary title report reflecting the recorded restrictive covenant, but did not advise the Sahlmans of the covenant before they signed off on the exchange. (Id. at pp. 572, 575.) The appellate court acknowledged that “the Sahlmans had constructive notice of the [title report],” but concluded that they were nevertheless justified in relying on the contrary representations of someone they were entitled to trust. (Id. at p. 576.) “`The doctrine of constructive notice does not apply where there has been such a [false] representation of fact.'” (Ibid.)

Thus, in each of the above cases involving fraud in the sale of realty, there was an actual misrepresentation, not a mere nondisclosure, and the plaintiff was held not to have constructive notice of the falsity of the statement from a recorded document. Stevenson v. Baum, supra, 65 Cal.App.4th 159 distinguished Seeger as follows. “Seeger is a case of active, affirmative, intentional misrepresentation, not the mere alleged failure to disclose; moreover, Seeger did not involve facts which were just as accessible to the plaintiff as to the defendant.” (Id. at pp. 166-167.) In none of the above cases was there evidence that the plaintiff had actual knowledge or notice of the existence of a recorded document contradicting the defendant’s misrepresentation.

We believe that Scira, supra, 46 Cal.App.4th 1721 accurately describes the interaction of constructive and actual notice in a real estate fraud case. Unfortunately, the facts are somewhat involved. Several years before they opened escrow to sell a lodge, the owners told the ultimate buyer that the lodge had the exclusive right in the area to rent cabins and sell beer and gasoline. (Id. at p. 1728.) At that time, the owners were in litigation with some neighbors regarding the enforceability of this covenant. (Id. at p. 1727.) The neighbors had cross-complained to invalidate the covenant and filed a lis pendens. (Ibid.) After the buyer opened escrow on the lodge, he received a preliminary title report disclosing the restrictive covenant and the lis pendens. He asked the owners to clear the lis pendens from the title. (Id. at p. 1728.) They did so by entering a stipulated judgment declaring the covenant [1388] unenforceable, after which the lis pendens was withdrawn. (Ibid.) The owners failed to disclose the terms of this judgment to the buyer, who sued the owners for fraud, among other causes of action. (Id. at pp. 1728-1729.) At the buyer’s urging, the trial court initially excluded the lis pendens from evidence and ultimately instructed the jury that it did not provide the buyer with notice of the stipulated judgment. (Id. at pp. 1732-1733.)

The trial court’s rulings were predicated on former statutes providing that, once the lis pendens was withdrawn, it provided neither actual nor constructive notice of its contents (now Code Civ. Proc., § 405.60), and further, that no person “shall be deemed to have actual knowledge of the action or any matter claimed, alleged, or contended therein, irrespective of whether such person actually possessed actual knowledge of the action or matter . . . .” (Scira, supra, 46 Cal.App.4th 1721, 1731-1732 & fns. 7, 8.)

Invoking the rule that constructive notice “as such, is irrelevant in a fraud action,” the appellate court concluded that these statutes were likewise irrelevant. (Scira, supra,46 Cal.App.4th at p. 1734.) If these statutes “applied in a fraud action, the plaintiff could purchase property after a lis pendens had been expunged or withdrawn and claim fraudulent misrepresentation or fraudulent nondisclosure of matter as to which he or she had actual knowledge.” (Id. at p. 1735.) The court considered it manifestly unfair to exclude evidence of the plaintiff’s actual knowledge. (Ibid.) The buyer complained that this imposed a duty of inquiry. The court responded: “Admittedly, in some cases, a fraud plaintiff’s unreasonable failure to inquire into the truth may bar recovery. Nevertheless, a fraud plaintiff does not have the `duty of inquiry’ that a purchaser of real property does. The fraud plaintiff need only demonstrate justifiable reliance; this is a different, and far lower, standard. Thus, . . . a land purchaser who fails in his or her `duty of inquiry’ takes subject to prior interests such inquiry would have revealed; nevertheless, he or she may be able to recover for the seller’s fraudulent misrepresentations regarding those interests.” (Ibid.)

The appellate court concluded that excluding the evidence of the lis pendens was prejudicial. The owners were prepared to prove that it gave the buyer “actual knowledge” that the pending action might affect title to the property. “In light of the other evidence in the record, a jury could reasonably conclude that [the buyer] should have made a further inquiry or investigation into precisely how the lis pendens was cleared, and he was not justified in relying on the [owners’] failure to disclose.” (Scira, supra, 46 Cal.App.4th at p. 1736.)

(17) Scira thus differentiated constructive notice from actual knowledge and from inquiry notice. Actual notice is “express information of a fact . . . .” [1389] (Civ. Code, § 18, subd. 1.) “Every person who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, has constructive notice of the fact itself in all cases in which, by prosecuting such inquiry, he might have learned such fact.” (Civ. Code, § 19; see Pacific Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Assn. (1986) 184 Cal.App.3d 817, 825-826 [229 Cal.Rptr. 269] [subsequent encumbrancer had constructive notice, if not actual knowledge, of existence of prior recorded deed of trust and was on inquiry notice of the terms of the promissory note to which the deed referred].) Scira establishes that, though defrauded buyers will not be deemed to have constructive notice of public records, this does not insulate them from evidence of their actual knowledge of the contents of documents presented to them or from being charged with inquiry notice based on those documents.

The Significance of the Preliminary Title Reports

Plaintiffs have admitted receiving preliminary title reports that referred to the deed restrictions, though they alleged that these “references did not describe any limits on the sale value of their properties, or the ability of Plaintiffs to encumber their properties for financing.” Defendants assert that these title reports gave plaintiffs actual notice of the deed restriction. The reports themselves are not in the joint appendix on appeal.

(18) Since 1982, the Insurance Code has limited the significance of such preliminary reports. (Southland Title Corp. v. Superior Court (1991) 231 Cal.App.3d 530, 537 [282 Cal.Rptr. 425]; see White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 884 [221 Cal.Rptr. 509, 710 P.2d 309].) A preliminary title report is an offer “to issue a title policy subject to the stated exceptions set forth” therein. (Ins. Code, § 12340.11.) “The reports are not abstracts of title” and “shall not be construed as, nor constitute, a representation as to the condition of title to real property . . . .” (Ibid.) An “`[a]bstract of title'” is a written listing of “all recorded conveyances” affecting “the chain of title to the realty property described therein.” (Ins. Code, § 12340.10.) The intent of these statutes is to relieve title insurers from liability as title abstractors for the negligent preparation of preliminary title reports. (Cf. Southland Title Corp. v. Superior Court, supra, 231 Cal.App.3d 530, 537-538.) These statutes do not make such reports meaningless. The reports serve to apprise the prospective insured of the state of title against which the insurer is willing to issue a title insurance policy. (Ibid.)

Despite these statutes, a purchaser who receives and reads a preliminary title report revealing the existence of a deed restriction has actual notice of its existence (cf.Sain v. Silvestre (1978) 78 Cal.App.3d 461, 470 [144 Cal.Rptr. 478], disapproved on another ground in Reynolds Metals Co. v. [1390] Alperson (1979) 25 Cal.3d 124, 129 [158 Cal.Rptr. 1, 599 P.2d 83]) and is on inquiry notice of the nature of that restriction. Plaintiffs argue that, unlike Mr. Silvestre, they have not admitted they read the title reports, and therefore are not chargeable with actual knowledge of the existence of the deed restriction. In the absence of a claim that defendants somehow prevented them from reading the preliminary title reports or misled them about their contents, plaintiffs cannot blame defendants for their own neglect in reading the reports. A seller’s nondisclosure of the state of a property’s title, unaccompanied by affirmative misstatements about that title, should not blind a reasonably prudent buyer from reading a document that purports to describe the state of the title of the property he or she is about to acquire.

Plaintiffs have alleged that they received the title reports “at the time they purchased their property . . . .” It is not at all clear when plaintiffs claim to have purchased their properties. Plaintiffs assert that we must assume they received their reports at the close of escrow. However, this is not what they have alleged. They did allege that the deed restrictions were not disclosed in the grant deeds “until . . . close of escrow,” but this language is not repeated regarding the preliminary title reports. The contracts of sale alleged here were not of the usual form, as plaintiffs’ downpayments were effectively eight to 10 months of labor. The complaint does not clarify whether plaintiffs executed any documents prior to engaging in this labor that entitled them to ownership of properties at its culmination. The complaint does not give any dates for when any plaintiff purchased his or her property or received a preliminary title report.

In any event, there is no allegation that the preliminary title reports amounted to a disclosure by defendants. The reports therefore cannot have satisfied defendants’ duty of disclosure of the deed restriction. They are relevant to whether plaintiffs justifiably relied on defendants’ nondisclosure of the deed restriction, but we have not been presented with sufficient facts, including the timing of the reports, to resolve that question as a matter of law. They are also relevant to whether plaintiffs have timely filed fraud claims, an issue to which we turn our attention.

The Statute of Limitations for Fraud or Mistake

In demurring to the original complaint, CHISPA asserted, “the third cause of action, which sounds in fraud, is barred by the statute of limitations. The statute of limitations for a fraud based cause of action is three years. (Code Civ. Proc., § 338, subd. (d).)” “Here from the face of the complaint, it is clear that the action was brought more than three years after . . . defendants’ alleged failure to disclose the deed restriction.” South County joined in this demurrer. The ruling sustaining the demurrers did not specifically rely on the [1391] statute of limitations. CHISPA reiterated this argument in its demurrer to the first amended complaint’s allegations of fraudulent (10th cause of action) and negligent (11th cause of action) misrepresentation. South County did not assert the three-year limitations period in its written demurrer to the first amended complaint, but it did orally at the hearing on its demurrer. The ruling otherwise sustaining the demurrers overruled them on the statute of limitations grounds. CHISPA did not again reiterate its statute of limitations defense in demurring to the second amended complaint. South County has invoked the same statute of limitations in its demurrer to the second amended complaint and on appeal, although the demurrer directed this argument only to the 10th cause of action alleging negligent nondisclosure.

(19) “When a ground for objection to a complaint, such as the statute of limitations, appears on its face or from matters of which the court may or must take judicial notice, a demurrer on that ground is proper.” (Cochran v. Cochran (1997) 56 Cal.App.4th 1115, 1120 [66 Cal.Rptr.2d 337].) “[W]hen `the relevant facts are not in dispute, the application of the statute of limitations may be decided as a question of law.'” (Sahadi v. Scheaffer (2007) 155 Cal.App.4th 704, 713 [66 Cal.Rptr.3d 517],quoting International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 611-612 [38 Cal.Rptr.2d 150, 888 P.2d 1279].)

(20) There is a three-year limitations period for: “An action for relief on the ground of fraud or mistake. The cause of action in that case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” (Code Civ. Proc., § 338, subd. (d).) “It is necessary for a plaintiff to allege facts showing that suit was brought within a reasonable time after discovery of the fraud without unnecessary delay and that failure to make the discovery sooner was not due to negligence.” (Seeger, supra, 18 Cal.2d 409, 418.) On appeal, plaintiffs concede that this is the limitations period applicable to their sixth, seventh, eighth, and ninth causes of action in their latest complaint.

The doctrine of inquiry notice is usually invoked when the issue is whether a statute of limitations has expired before a plaintiff should have discovered a cause of action. It has been applied to claims of fraud in the sale of realty. In Henigan v. Yolo Fliers Club (1930) 208 Cal. 697 [284 P. 906], a man purchased a tract of land amounting to 152.44 acres with the intent of subdividing it. He was told by an agent of the seller that if he purchased the 109.2 acres south of a fence on the property, the seller would give him 43.24 worthless acres north of the fence. (Id. at p. 701.) He purchased the property at a price of $210 per acre for each of the 152.44 acres, obtaining no donation of property. (Id. at p. 700.) He filed suit seeking damages for fraud over three years later.

[1392] The buyer argued that he was entitled to rely on the seller’s statements and that constructive notice did not apply. (Henigan v. Yolo Fliers Club, supra, 208 Cal. at pp. 702-703.) The California Supreme Court rejected this contention as follows on page 703. “But the full application of this rule does not meet the issue here, for after consummation of the sale, facts abundant came to the notice of appellant that could not but have aroused an inquiry as to the true facts. The conscious fact that he had purchased 152.44 acres of land and paid the full price therefor and that no acreage appeared anywhere as donated land, either in the deed or in the map procured by him, and the further fact that, after subdivision, [he sold for value part of the worthless land], speaks eloquently to the effect that he knew waste area had been bought by him and was being offered for sale at a profit. These facts, in view of the finding of the court thereon, bring into operation the doctrine recognized by the case of Tarke v. Bingham [(1898)] 123 Cal. 163 [55 P. 759], where, in discussing the facts under the statute of limitations here involved, it was recognized that the rule contended for by appellant here would give way in cases where the facts meet the following test: `The circumstances must be such that the inquiry becomes a duty, and the failure to make it a negligent omission.'” The court further commented, “A visit to the land, or a perusal of the deed, consultation of the map, the knowledge of the acreage bought and the purchase price paid, the fixing of the values on the subdivisions of the tract or the totaling of the acreage in all the subdivisions, or a consideration of the question as to whether waste land was to be donated to purchasers from him would have brought home to plaintiff full knowledge of the facts upon which he urges fraud.” (Id.at p. 702.) The court upheld a lower court finding that the action was barred by the statute of limitations.

(21) As stated long ago in Sisk v. Caswell (1910) 14 Cal.App. 377 [112 P. 185]: “[A] party will not be permitted to plead ignorance of the covenants of a deed executed to him, after it has been accepted and recorded, as a ground for defeating the force and effect of such covenants. The presumptions are always in favor of the validity of a deed and its recitals. [¶] It is not, of course, claimed that the plaintiff fraudulently or otherwise prevented the defendant from giving the deed personal inspection and thus fully familiarizing himself with its precise provisions and covenants before he accepted and recorded it.” (Id. at p. 390.) On the other hand, a buyer’s failure to read a deed may be excused by justifiable reliance on a seller’s misrepresentations. (Kantlehner v. Bisceglia (1951) 102 Cal.App.2d 1, 3 [226 P.2d 636].)

B. Applying the Law of Notice to Plaintiffs’ Fraud Claims

(22) Applying the principles discussed above to this case, we reach the following conclusions. The recording of the affordable housing deed restriction served to bind subsequent purchasers, including plaintiffs. However, its [1393] mere recording did not relieve defendants from their duty as sellers of realty to disclose its existence. The fact that residential property must remain affordable to those with very low to moderate incomes doubtless affects its value. Plaintiffs’ constructive notice of the deed restriction by virtue of its recording does not preclude them from seeking damages based on the allegation that they were induced to labor for months by defendants’ failure to disclose its existence.

All of the CHISPA grant deeds and two of the South County grant deeds did disclose the deed restriction by express reference to the recorded document. This gave plaintiffs actual knowledge of the existence of the deed restriction and inquiry notice of the nature of the restriction. Defendants were not required in the deeds to explain the impact of the deed restriction on marketability.

The grant deeds provided actual notice of the deed restriction. Plaintiffs do not allege that defendants either prevented them from reading the grant deeds or affirmatively misled them about their contents. This notice amounts to plaintiffs’ discovery of the alleged fraud, at least as to those plaintiffs who received such deeds. (Loeffler v. Wright (1910) 13 Cal.App. 224, 231 [109 P. 269] [plaintiff is deemed to have actual notice of misrepresentations about contents of deed when he signed it]; cf. Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1596 [71 Cal.Rptr.3d 361][plaintiff had actual knowledge of omissions and misrepresentations in documents once he read them].) As summarized above (beginning on p. 1367, ante), the last of the grant deeds was issued on June 19, 2001. The original complaint was filed over three years later, on August 5, 2005. We conclude that the fraud claims by all plaintiffs other than those mentioned in footnote 9 (ante, p. 1367) are barred by the statute of limitations.^[FN.23]

[1394] (23) Plaintiffs seek to avoid this conclusion by asserting the relaxed discovery rule applicable to fiduciaries. “Although the general rules relating to pleading and proof of facts excusing a late discovery of fraud remain applicable, it is recognized that in cases involving such a [fiduciary] relationship facts which would ordinarily require investigation may not excite suspicion, and that the same degree of diligence is not required.” (Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 440 [159 P.2d 958]; cf. Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th 1226, 1240.)

A person in a fiduciary relationship may relax, but not fall asleep. “[I]f she became aware of facts which would make a reasonably prudent person suspicious, she had a duty to investigate further, and she was charged with knowledge of matters which would have been revealed by such an investigation.” (Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, 875 [191 Cal.Rptr. 619, 663 P.2d 177] [husband and wife].) Assuming for the sake of discussion that defendant nonprofit corporations were fiduciaries to plaintiffs and not just sellers of property, they disclosed the existence of a deed restriction in 13 of their grant deeds. If nothing earlier had alerted plaintiffs that they were not obtaining free and clear title to their properties, this gave them actual knowledge of the existence of the deed restriction and of defendants’ prior nondisclosure of this condition.

[1395] Plaintiffs also argue that a person holding legal title may bring an action to quiet title at any time that a “hostile claim is asserted in some manner to jeopardize the superior title.” Crestmar Owners Assn. v. Stapakis (2007) 157 Cal.App.4th 1223, 1228 [69 Cal.Rptr.3d 231] explained, “the statute of limitations for an action to quiet title does not begin to run until someone presses an adverse claim against the person holding the property. (Muktarian v. Barmby (1965) 63 Cal.2d 558, 560 [47 Cal.Rptr. 483, 407 P.2d 659]. . . .)” This principle applies to plaintiffs’ causes of action in their first amended complaint seeking to quiet their titles by invalidating the deed restriction. As we have explained above, for reasons other than the applicable statute of limitations, they have not stated a cause of action warranting that remedy.

(24) “To determine the statute of limitations which applies to a cause of action it is necessary to identify the nature of the cause of action, i.e., the `gravamen’ of the cause of action. [Citations.] `[T]he nature of the right sued upon and not the form of action nor the relief demanded determines the applicability of the statute of limitations under our code.'” (Hensler v. City of Glendale (1994) 8 Cal.4th 1, 22-23 [32 Cal.Rptr.2d 244, 876 P.2d 1043].)

Plaintiffs’ quiet title causes of action are premised on the illegality, invalidity, and unenforceability of the recorded deed restriction. In contrast, the gravamen of their fraud causes of action is that defendants breached a duty to disclose before plaintiffs acquired their properties that the properties’ market value would be depressed by an effective and valid deed restriction. “The question is: Was the discovery of the fraud, as a matter of law, made more than three years prior to commencement of the action?” (Henigan v. Yolo Fliers Club, supra, 208 Cal. 697, 704.) We conclude, as a matter of law, that those plaintiffs who received actual notice of the deed restriction in their grant deeds discovered defendants’ alleged fraud at the time they received their deeds, over three years before their original complaint was filed. Their remaining in possession of the property does not excuse their failure to file the complaint earlier.

As to those plaintiffs who did not receive grant deed notice of the recorded deed restriction, it does not appear from the face of the second amended complaint and facts subject to judicial notice that the limitations period has lapsed on their fraud claims. We conclude that they may be entitled to damages, though not invalidation of the deed restriction, if they can prove that they were induced to perform labor for months by South County’s failure to disclose the deed restriction.

X. ALLEGED BREACH OF IMPLIED CONTRACT

In the second amended complaint, plaintiffs alleged that they entered implied unwritten contracts with CHISPA (fourth cause of action) and South [1396] County (third and fifth causes of action) including the terms that, if plaintiffs contributed their time and labor to construct their homes and assumed the necessary indebtedness, defendants “would convey to Plaintiffs title to the homes free from [a] restriction prohibiting Plaintiffs from selling their homes at fair market value.” Plaintiffs fully performed their obligations under these contracts. By providing grant deeds subject to the recorded deed restriction, defendants breached these implied contracts. Plaintiffs requested either specific performance of this covenant or damages.

(25) Although the statute of frauds requires agreements for the sale of real property to be in writing (Civ. Code, § 1624, subd. (a)(3)), plaintiffs have alleged that they fully performed their obligations under their implied contracts. “The doctrine of part performance by the purchaser is a well-recognized exception to the statute of frauds as applied to contracts for the sale or lease of real property.” (Sutton v. Warner (1993) 12 Cal.App.4th 415, 422 [15 Cal.Rptr.2d 632].)

South County demurred to the third cause of action based on the two-year statute of limitations applicable to “[a]n action upon a contract, obligation or liability not founded upon an instrument of writing . . . .” (Code Civ. Proc., § 339, subd. 1.)^[FN.24] It reiterates this contention on appeal. CHISPA also makes this contention on appeal, although it was not asserted in its demurrer.

As this court explained in B & P Development Corp. v. City of Saratoga, supra, 185 Cal.App.3d at page 959: “An appellate court may . . . consider new theories on appeal from the sustaining of a demurrer to challenge or justify the ruling. As a general rule a party is not permitted to change its position on appeal and raise new issues not presented in the trial court. [Citation.] This is particularly true `when the new theory depends on controverted factual questions whose relevance thereto was not made to appear’ in the trial court. [Citation.] However, `a litigant may raise for the first time on appeal a pure question of law which is presented by undisputed facts.’ [Citations.] A demurrer is directed to the face of a complaint (Code Civ. Proc., § 430.30, subd. (a)) and it raises only questions of law (Code Civ. Proc., § 589, subd. (a); [citation]). Thus an appellant challenging the sustaining of a [1397] general demurrer may change his or her theory on appeal [citation], and an appellate court can affirm or reverse the ruling on new grounds. [Citations.] After all, we review the validity of the ruling and not the reasons given. [Citation.]”

Just as we have concluded that most plaintiffs are deemed to have discovered the fraudulent nondisclosure when they received grant deeds disclosing the deed restriction, we conclude that the dates of those grant deeds are when their cause of action for breach of an implied contract accrued, which was well over two years before the action was filed.

Plaintiffs seek to avoid this shorter limitations period by the same arguments made and rejected above. They assert that they did not discover these breaches until plaintiff Rebecca Pineda was told about the deed restriction in April 2004. However, the discovery rule is generally inapplicable to alleged breaches of contract unless there is a breach of fiduciary duty. (Krieger v. Nick Alexander Imports, Inc. (1991) 234 Cal.App.3d 205, 221-222 [285 Cal.Rptr. 717]; April Enterprises, Inc. v. KTTV(1983) 147 Cal.App.3d 805, 826-832 [195 Cal.Rptr. 421].) Even assuming the discovery rule applies to fiduciary relationships, we again deem plaintiffs to have discovered the breach of this implied contract when they received their grant deeds. As above, this conclusion about the statute of limitations does not eliminate the claims for breach of implied contract by those plaintiffs identified in footnote 9 (ante,p. 1367).

(26) CHISPA demurred to this cause of action for uncertainty in failing to allege whether the contract was express or implied. “If the complaint sets forth a cause of action upon a contract, express or implied, it cannot be attacked for ambiguity or uncertainty . . . .” (Hale Bros. v. Milliken (1904) 142 Cal. 134, 138 [75 P. 653].) The complaint clearly alleged that plaintiffs are relying on an implied, wordless promise to convey a restriction-free grant deed. While we may doubt that plaintiffs will be able to prove the existence of implied terms that conflict with express contractual terms (cf.Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 374 [6 Cal.Rptr.2d 467, 826 P.2d 710]), plaintiffs have so far avoided alleging, apart from the grant deeds and promissory notes, the express terms of their agreements to obtain real property in exchange for their labor. This alleged uncertainty affords no basis to sustain a demurrer to these claims of breach of implied contracts.

[1398] XI. DISPOSITION

The appeal is dismissed as to the County of Monterey. The judgment of dismissal is reversed as to South County. The order of November 9, 2006, sustaining the demurrer by CHISPA to the second amended complaint is upheld. The order sustaining the demurrer of South County to the second amended complaint is overruled only as to the third, fifth, seventh, ninth and 10th causes of action alleged by plaintiffs Jose and Carmen Cervantes, Fermin and Rosario Chavarin, Juventino and Socorro Chavez, Roberto Alfaro, Jose and Rebecca Pineda, Tomas and Patricia Alfaro, Manuel Castro, Octavio Martinez, Erendira Sanchez, Hector Mendoza, and Herlinda Rodriguez. The parties will bear their own costs on appeal.

Premo, J., and Bamattre-Manoukian, J., concurred.

___________________________________________________________________________

[FN. 1] The 40 plaintiffs are named individually, post (beginning on p. 1366), in the text that summarizes their grant deeds.

We have modified our original opinion to increase the number of plaintiffs. We grant plaintiffs’ implicit requests, filed after our original opinion, to augment the record with a reporter’s transcript showing that the trial court had consolidated another action with this one and to take judicial notice of another grant deed.

[FN. 2] Three other documents were recorded on the same date, a deed restriction that required all exterior design changes to be approved by the director of the Monterey County Planning and Building Inspection Department, a deed restriction that required owners to maintain all landscaped areas, and a declaration of covenants, conditions and restrictions of the Moro Cojo inclusionary housing development with a variety of conditions, such as prohibiting cats and requiring low flush toilets and a specified color scheme for the exteriors of the structures.

[FN. 3] On May 12, 2000, Salvador Sanchez, a married man, obtained a deed as his sole and separate property. The second amended complaint identifies Salvador as a co-owner with Patricia Sanchez.

[FN. 4] Presumably Efrain Ochoa is the person designated in the second amended complaint as “Efrain Ocho.”

[FN. 5] On July 12, 2000, Celestino Salazar and “Maria Guadalupe A. Salazar” obtained a grant deed from CHISPA as husband and wife. The record does not explain whether this Maria is the “Maria A. Melgoza” identified in the second amended complaint as a co-owner with Celestino.

[FN. 6] The grant deed of February 15, 2000, is to “Tomas Alfaro.” “Tomas Alfaro” by grant deed dated June 19, 2003, conveyed a joint tenancy interest to his wife “Patricia Alfaro.” We assume these are the plaintiffs named “Patricia Gonzalez Alfaro” and “Thomas Alfaro Camacho” in the second amended complaint.

[FN. 7] On May 22, 2001, Claudio Serrato, a married man, obtained a grant deed as his sole and separate property. The second amended complaint identifies Lidia Serrato as a co-owner with Claudio.

Plaintiffs Hector Mendoza and Herlinda Rodriguez did not receive a grant deed from South County or CHISPA. They obtained their property by grant deed dated August 20, 2000, from Eladio and Ma. Trinidad Hernandez. The Hernandezes received a grant deed from South County dated February 11, 2000.

[FN. 8] At the request of CHISPA, the trial court, in sustaining the demurrers to the first amended complaint, took judicial notice of the recorded grant deeds, the three recorded deed restrictions, the covenants, conditions, and restrictions, the county’s resolutions, and the settlement agreement filed in litigation challenging the Projects. Accordingly, so do we. (Evid. Code, § 459, subd. (a).)

Evidence Code section 452 authorizes judicial notice to be taken of, among other things: “(b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States.

“(c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States.

“(d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. [¶] . . . [¶]

“(g) Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute.

“(h) Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.”

These provisions have authorized this court previously to take judicial notice of documents recorded by the county recorder (B & P Development Corp. v. City of Saratoga (1986) 185 Cal.App.3d 949, 960 [230 Cal.Rptr. 192]) and resolutions by the county board of supervisors (Mapstead v. Anchundo(1998) 63 Cal.App.4th 246, 255, fn. 3 [73 Cal.Rptr.2d 602]).

[FN. 9] In other words, the deed restriction was not expressly referenced in South County’s deeds to Jose and Carmen Cervantes, Fermin and Rosario Chavarin, Juventino and Socorro Chavez, Roberto Alfaro, Jose and Rebecca Pineda, Tomas Alfaro, Manuel Castro, or Octavio Martinez and Erendira Sanchez, and indirectly to Hector Mendoza and Herlinda Rodriguez.

[FN. 10] On March 19, 2008, we granted plaintiffs’ unopposed request to take judicial notice of these three promissory notes.

[FN. 11] Plaintiffs also argue that “[t]his case is much like this Court’s case of Steen v. Fremont Cemetery[Corp.] (1992) 9 Cal.App.4th 1221 [11 Cal.Rptr.2d 780]. . . .” We disagree. Simply describing that opinion reveals its irrelevance to an order dismissing a party from an action.

In that class action case alleging wrongful cremation practices, one issue was the appeal ability of an order directing the defendant to turn over the names of its decedents to facilitate notice to the class. We concluded that the order was neither a final judgment nor an appealable collateral order. (Steen v. Fremont Cemetery Corp., supra, 9 Cal.App.4th at p. 1230.)

[FN. 12] Code of Civil Procedure section 906 provides in part: “Upon an appeal pursuant to Section 904.1 or 904.2, the reviewing court may review the verdict or decision and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party . . . . The respondent, or party in whose favor the judgment was given, may, without appealing from such judgment, request the reviewing court to and it may review any of the foregoing matters for the purpose of determining whether or not the appellant was prejudiced by the error or errors upon which he relies for reversal or modification of the judgment from which the appeal is taken.”

[FN. 13] It is pointless to prolong this opinion with a quotation of the almost 700 words in Health and Safety Code section 50093. It is safe to assume that the statute contains detailed definitions of “`[p]ersons and families of low or moderate income,'” “`[p]ersons and families of low income,'” and “`[p]ersons and families of moderate income.'”

[FN. 14] The full text of Government Code section 27281.5 follows. “(a) Any restriction imposed upon real property on or after January 1, 1982, which restricts either the ability of the owner of real property to convey the real property or the owner of a proprietary leasehold interest to convey such interest and which is imposed by a municipal or governmental entity on real property or a proprietary leasehold interest which is not owned by the municipal or governmental entity, shall be specifically set forth in a recorded document which particularly describes the real property restricted in order to impart constructive notice of the restriction, or shall be referenced in a recorded document which particularly describes the real property restricted and which refers by page and book number to a separately recorded document in which the restriction is set forth in full.

“(b) Any restriction on the ability of a person to convey real property which is subject to subdivision (a) shall be valid and enforceable only when the requirements contained in subdivision (a) have been met.

“(c) Nothing in this section shall be construed, either directly or by implication, to enhance, diminish, or authorize any municipal or governmental entity to impose a restriction on the ability of a person to convey real property or a proprietary leasehold interest.”

[FN. 15] We note that the three promissory notes each contain several provisions for the borrower encumbering the residence with another deed of trust.

[FN. 16] As noted above, the affordable housing deed restriction was referenced in each grant deed from CHISPA and in two (to Castillos and Serrato) from South County.

[FN. 17] The second amended complaint also purports to assert a 10th cause of action as an alternative to the ninth cause of action against South County. This allegation is that South County negligently failed to disclose the deed restriction due to its ignorance of the restriction. As plaintiffs’ fiduciary, South County had a duty to learn of this restriction. As we proceed to explain, nondisclosure by a fiduciary has been regarded as fraud, so we do not further analyze this 10th cause of action separately.

[FN. 18] We note that plaintiffs in the first amended complaint also attempted to allege causes of action for intentional (10th cause of action) and negligent misrepresentations (11th cause of action) by defendants. The trial court sustained demurrers to these causes of action with leave to amend, finding that “[p]laintiffs have failed to allege with specificity their fraud causes of action. The court is unable to tell, among the 38 plaintiffs and three defendants, who said what, to whom, and when.” Plaintiffs have apparently abandoned these claims in their second amended complaint.

[FN. 19] “Constructive fraud consists: [¶] 1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him . . . .” (Civ. Code, § 1573.) “[T]here is no clear line establishing when a fiduciary’s breach of the duty of care [and disclosure] will be merely negligent and when it may be characterized as constructive fraud. However, a breach of a fiduciary duty usually constitutes constructive fraud.” (Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 563 [29 Cal.Rptr.2d 463] [real estate broker].)

The trial court granted plaintiffs leave to amend their cause of action for constructive fraud, but plaintiffs did not do so. On appeal, they admit that “no denominated cause of action . . . purports to state the elements of constructive fraud,” but they claim that the allegations of other causes of action have adequately stated a cause of action for constructive fraud. They further claim that the remedy for constructive fraud is cancellation of the deed restriction.

Civil Code section 3399 authorizes reformation of an instrument “[w]hen, through fraud or a mutual mistake of the parties, or a mistake of one party, which the other at the time knew or suspected, a written contract does not truly express the intention of the parties . . . .” The statute does not authorize reformation of a deed to reflect one party’s unilateral mistake or misunderstanding if it was not shared by the other party. (La Mancha Dev. Corp. v. Sheegog (1978) 78 Cal.App.3d 9, 16 [144 Cal.Rptr. 59];Oates v. Nelson (1969) 269 Cal.App.2d 18, 25 [74 Cal.Rptr. 475].) We see no adequate allegation that defendants ever intended to grant plaintiffs properties free of the deed restriction. Absent this allegation, the remedy of reformation is unavailable.

[FN. 20] Plaintiffs have not specifically alleged a violation of this statute. The complaints have not mentioned the existence or nonexistence of a real estate transfer disclosure statement.

[FN. 21] This quotation from Witkin is based on two cases. Alhambra Redevelopment Agency v. Transamerica Financial Services (1989) 212 Cal.App.3d 1370 [261 Cal.Rptr. 248] observed, “Here, it is undisputed the Flemings properly recorded the contract, thereby giving Transamerica constructive, if not actual notice of the contract.” (Id. at p. 1377.) Anderson v. Willson (1920) 48 Cal.App. 289 [191 P. 1016] stated: “Without doubt, the presumption of notice thus raised by this code provision is conclusive and incontrovertible.” (Id. at p. 293.) Both cases concluded that a person with constructive notice did not qualify as a bona fide purchaser without notice. Neither case attributed actual knowledge to the purchaser. At most, constructive notice has been conclusively presumed. As we proceed to explain in the text, there is a difference between actual and constructive notice.

[FN. 22] Seeger, supra, 18 Cal.2d 409 (elderly couple induced to enter lease by attorney’s misrepresentation that a mortgage on their property had been foreclosed and the property sold at an execution sale); Gross v. Needham, supra, 184 Cal.App.2d 446 (brother misrepresented to his younger half sister significance of deed they executed); Sullivan v. Dunnigan, supra, 171 Cal.App.2d 662 (son and daughter-in-law misrepresented to elderly mother significance of deed she executed);Regus v. Schartkoff, supra, 156 Cal.App.2d 382 (tort claimants were misled by insurance adjuster about applicable limitations period); Schaefer v. Berinstein, supra, 140 Cal.App.2d 278 (attorney engaged by city to clear title to tax-deed properties misrepresented to city the status of the sales and the buyers, who were straw men); Stoll v. Selander, supra, 81 Cal.App.2d 286 (corporate officer misappropriated corporation’s property for himself); Anderson v. Thacher, supra, 76 Cal.App.2d 50(real estate brokers misrepresented to plaintiffs the ownership and value of realty they were to obtain by exchange of realty).

[FN. 23] In their petition for rehearing, plaintiffs who received grant deeds containing a reference to the deed restriction on resale price offer a new excuse for failing to discover the nature of this restriction. Those plaintiffs who are illiterate in English assert that “no person can receive actual notice of anything from a document written in a language the person cannot read.” While the complaint alleged their illiteracy, plaintiffs did not argue in their briefs or at oral argument that illiteracy immunizes them from receiving notice from documents. As this court has stated, “a reviewing court need not consider points raised for the first time on petition for rehearing.” (CAMSI IV v. Hunter Technology Corp. (1991) 230 Cal.App.3d 1525, 1542 [282 Cal.Rptr. 80].)

Moreover, this new argument lacks legal support. While the law is solicitous of those who are particularly susceptible to fraud due to their ignorance, age, or infirmity, illiterate adults are still expected to be prudent in their business transactions. (See C. I. T. Corporation v. Panac (1944) 25 Cal.2d 547, 559-560 [154 P.2d 710].) “[I]t is not unreasonable for the state to expect that persons such as those in plaintiffs’ position will promptly arrange to have someone translate the contents of the notice” apparently pertaining to the person’s right to receive welfare benefits. (Guerrero v. Carleson(1973) 9 Cal.3d 808, 814 [109 Cal.Rptr. 201, 512 P.2d 833].) Similarly, it would be prudent for an illiterate first-time homebuyer to get the help of a trusted person in reading and translating the documents seemingly essential to becoming a homeowner.

These plaintiffs offer to allege that defendants communicated with them orally and in writing exclusively in Spanish “except for the grant deeds, preliminary title reports, and other escrow documents.” Civil Code section 1632, subdivision (b), requires that Spanish translations be provided for several kinds of documents that were negotiated primarily in Spanish, not including grant deeds.

Plaintiffs’ petition for rehearing also clarifies that on the final pages of their reply brief, they intended, in admittedly “confusing phrasing,” to ask for leave to amend so that all plaintiffs can allege causes of action for specific performance and damages based on the breach of a common provision in their promissory notes relating to their right to resell their residences.

“The general rule is that points raised for the first time in a reply brief will not be considered unless good cause is shown for the failure to present them before.” (Trustee Capital Wholesale Electric etc. Fund v. Shearson Lehman Brothers, Inc. (1990) 221 Cal.App.3d 617, 627 [270 Cal.Rptr. 566].) Plaintiffs offer no explanation for failing to discover this language in their promissory notes, executed in 2000 and 2001, until after they filed their opening brief on appeal on August 15, 2007. Defendants have had no opportunity to brief this request, such as what limitations period is applicable, whether plaintiffs have shown diligence, and whether the new causes of action would relate back to the filing of the original complaint. Accordingly, we do not reach this request to order the trial court to grant leave to amend.

On the same reasoning, we do not reach plaintiffs’ offer, in their petition for rehearing, to amend the complaint to allege that they were told about many deed restrictions, though not the resale restriction, in workshops put on by CHISPA before they undertook construction of their residences. Nor do we consider plaintiffs’ three additional offers to allege a variety of other facts long known by them.

[FN. 24] The same two-year limitations period applies to “[a]n action based upon the rescission of a contract not in writing. The time begins to run from the date upon which the facts that entitle the aggrieved party to rescind occurred. Where the ground for rescission is fraud or mistake, the time does not begin to run until the discovery by the aggrieved party of the facts constituting the fraud or mistake.” (Code Civ. Proc., § 339, subd. 3.) As we have already observed, plaintiffs are not requesting rescission of their purchase contracts.

Plaintiffs assert that this shorter statute of limitations applies to their purported 10th cause of action alleging that South County was negligent in failing to learn of or disclose the existence of the deed restriction. As we have explained above (see fn. 17, ante, at p. 1381), we interpret this cause of action as arising in fraud, so it is subject to the longer statute of limitations.

Ritchey v. Villa Nueva Condominium Association

(1978) 81 Cal.App.3d 688

[Use Restrictions; Nuisances] A HOA has the power to issue reasonable regulations governing an owner’s use of his unit in order to prevent activities which might prove annoying to the general residents.

Joe B. Ritchey, in pro. per., for Plaintiff and Appellant.
Grunsky, Pybrum, Skemp & Ebey and James S. Farrar for Defendants and Respondents.

OPINION
CALDECOTT, J.

This is an appeal from a judgment entered pursuant to an order granting summary judgment in favor of defendants and respondents Villa Nueva Condominium Association^[FN.1] (hereinafter respondents) and against plaintiff and appellant Joe B. Ritchey (hereinafter appellant).

On July 30, 1973, appellant purchased a two-bedroom unit in the high-rise portion of the Villa Nueva Condominium project. As an owner of a condominium, appellant automatically became a member of the Villa Nueva Condominium Owners Association.^[FN.2] He likewise became subject to the provisions of the “Enabling Declaration Establishing a Plan for Condominium Ownership,” the bylaws, and decisions and resolutions of the association.^[FN.3][691]

In 1974, the board of directors submitted proposed bylaw amendments to the Department of Housing and Urban Development (hereinafter HUD). The proposed amendments would, inter alia, add a new article XI to the bylaws which would set forth requirements for the renting and selling of individual units in the project by the owners. These proposals included a limitation on occupancy in the high-rise portion of the condominium project to persons 18 years of age or older where the occupancy would involve a period of 14 days or more. On November 8, 1974, HUD approved the proposed amendments. That same day, notice was sent to all condominium owners that the proposed changes in the bylaws would be voted upon at an association meeting on November 20, 1974.

At the November 20 meeting, the amendment restricting occupancy in the high-rise portion of the project to persons 18 years of age and over was approved by 75.864 percent of the owners representing the total value of all units in the project.^[FN.4] Appellant voted by proxy against the proposed restriction on occupancy.

In 1975, appellant leased his condominium to Dorothy Westphal, a woman with two children. On October 7, 1975, the association brought suit against appellant and Westphal seeking to remove Westphal from her occupancy of unit number 34. The action was based upon the bylaw[692]restricting occupancy in the high-rise portion of the project to persons 18 years of age and older. Westphal moved out before an answer could be filed. The complaint was subsequently dismissed.

On November 13, 1975, appellant commenced the present action on behalf of himself and Dorothy Westphal. The complaint sought injunctive and declaratory relief, as well as damages for malicious prosecution, abuse of process and interference with a contractual relationship.

Subsequently, appellant moved for partial summary judgment. The motion was denied.^[FN.5] Appellant filed a second motion for partial summary judgment. The motion was denied without hearing on the ground that it had previously been heard and denied.

Appellant filed a third motion for partial summary judgment. Respondents countered, by filing a motion for summary judgment. The motions came on for hearing and the court denied appellant’s motion and granted respondents’ motion. Judgment in favor of respondents was entered that same day.

The appeal is from the judgment.

Appellant challenges the validity of an amendment to the bylaws of the Villa Nueva Condominium project which restricts occupancy in the high-rise portion of the project to persons 18 years of age and older.^[FN.6] Appellant contends that such an age restriction is per se unreasonable. In addition, he argues that under the circumstances of the present case, the occupancy restriction cannot reasonably be enforced against him.

Appellant urges that an age restriction is patently unreasonable in that it discriminates against families with children. Age restrictions in condominium documents have not been specifically tested in our courts. Nevertheless, we conclude on the basis of statutory and case authority that such restrictions are not per se unreasonable.[693]

In Flowers v. John Burnham & Co. (1971) 21 Cal.App.3d 700 [98 Cal.Rptr. 644], an apartment house restriction limiting tenancy to adults, female children of all ages, and male children under the age of five was held not to violate the Unruh Act guaranteeing equal access to “accommodations, advantages, facilities privileges, or services in all business establishments of every kind whatsoever.” (Civ. Code, § 51, see § 52.) The court noted that arbitrary discrimination by a landlord is prohibited by the act, but held: “Because the independence, mischievousness, boisterousness and rowdyism of children vary by age and sex … [the defendant], as landlord, seeks to limit the children in its apartments to girls of all ages and boys under five. Regulating tenants’ ages and sex to that extent is not unreasonable or arbitrary.” (21 Cal.App.3d at p. 703.)

Similarly, in Riley v. Stoves (1974) 22 Ariz.App. 223 [526 P.2d 747], the Arizona Court of Appeals upheld a covenant in a deed restricting occupancy of a subdivision to persons 21 years of age or older: “The restriction flatly prevents children from living in the mobile home subdivision. The obvious purpose is to create a quiet, peaceful neighborhood by eliminating noise associated with children at play or otherwise. …

“We do not think the restriction is in any way arbitrary. It effectively insures that only working or retired adults will reside on the lots. It does much to eliminate the noise and distractions caused by children. We find it reasonably related to a legitimate purpose and therefore decline to hold that its enforcement violated defendants’ rights to equal protection.” (526 P.2d at pp. 752-753; cited with approval in Coquina Club, Inc. v. Mantz (Fla.App. 1977) 342 So.2d 112, 113-114.)

It should also be noted that the United States Congress has adopted several programs to provide housing for the elderly (see generally 12 U.S.C. § 1701 et seq.; 42 U.S.C. § 1485), setting an age minimum of 62 years for occupancy. (12 U.S.C. § 1701q(d)(4); 42 U.S.C. § 1485(d)(3).) As the Riley court observed, “These sections represent an implicit legislative finding that not only do older adults need inexpensive housing, but also that their housing interests and needs differ from families with children.” (526 P.2d at p. 753. Cf. Retail Clerks U., Local 770 v. Retail Clerks Int. Ass’n. (C.D.Cal. 1973) 359 F.Supp. 1285 [age is a valid criterion for establishing mandatory retirement].)

[1] Under Civil Code section 1355, reasonable amendments to restrictions relating to a condominium project are binding upon every[694]owner and every condominium in that project “whether the burdens thereon are increased or decreased thereby, and whether the owner of each and every condominium consents thereto or not.”^[FN.7] Whether an amendment is reasonable depends upon the circumstances of the particular case. (See Riley … Stoves, supra, 526 P.2d at p. 752.

[2] The amendment to the bylaws here in issue operates both as a restraint upon the owner’s right of alienation, and as a limitation upon his right of occupancy. However, for the reasons hereinafter discussed, we conclude that under the facts of this case the amendment is reasonable. For the sake of simplicity, we will address each of these aspects of the amendment independently.

The Restraint Upon Alienation

Article IX of the bylaws expressly provides that, to the extent that the bylaws conflict with applicable federal and state statutes and regulations, the provisions of such statutes or regulations will apply. This provision is in accordance with the general rule that all applicable laws in existence when an agreement is made necessarily enter into the contract and form part of it. (Alpha Beta Food Markets v. Retail Clerk’s (1955) 45 Cal.2d 764, 771 [291 P.2d 433].)

Title 10 of the Administrative Code, section 2792.25, provides that restrictions in the bylaws may limit the right of an owner to sell or lease his condominium unit so long as the standards are uniform and objective, and are not based upon the race, creed, color, national origin or sex of the purchaser or lessee. (Cal. Admin. Code, tit. 10, § 2792.25, subd. (a).)^[FN.8] It[695]thus appears that a restriction upon alienation can be based upon the age of the vendee or lessee, or his family. (See 4 Miller & Starr, Current Law of Cal. Real Estate (rev. 1977) § 24:14(1), p. 34, fn. 3.)

Moreover, subdivision (b) of section 2792.25, in effect, merely converts the restriction upon alienation to a right of first refusal. That subdivision provides that such a restriction shall be deemed waived if the association fails to procure an equally favorable offer, or make such an offer on its own behalf, within 15 days after receipt of notice of the owner’s intent to accept an offer by a person who does not meet the prescribed standards.^[FN.9] It is generally recognized that a right of first refusal requiring merely that the property be offered to a designated party, but not binding upon the owner to sell at a predetermined price, is a reasonable restraint. (15A Am.Jur.2d, Condominiums, Etc., § 40, p. 870.) The bylaw is therefore a reasonable restriction upon an owner’s right to sell or lease his condominium unit to families with children.

The Limitation Upon Occupancy

Appellant purchased his condominium unit approximately 16 months prior to the enactment of article XI, section 3, of the bylaws. At that time, the enabling declaration establishing a plan for condominium ownership, the model form of subscription and purchase agreement, and the report to the public issued by HUD, consistently referred to units in the condominium project as “family home units” or “family units” located in “multi-family structures,” and emphasized their suitability for families[696]with children^[FN.10] Appellant states that he relied upon these representations when he purchased his unit.

Appellant, however, does not claim that any of these representations were false or were made to mislead him. As far as the record shows, appellant, at the time of his purchase and for several months thereafter, could lease the premises to a person with children under 18 years of age. Furthermore, appellant does not contend that it was represented to him that the conditions of occupancy would not be changed. In fact, at the time of his purchase, the enabling declaration specifically provided that the bylaws could be amended, and that he would be subject to any reasonable amendment that was properly adopted. Thus, the amendment is reasonable.

II.

Appellant claims that, as a condition of his federally insured loan for the purchase of his condominium, he was required to certify that he would not discriminate against families with children in leasing or selling his family unit. He argues that, since the association was created by the federal government, it is bound by his promise to the federal government not to discriminate against families with children.

Appellant raised this point in his declaration in opposition to respondents’ motion for summary judgment and in his declaration in support of his second and third motions for summary judgment. However, he did not attach a copy of his loan agreement with the federal government to any of these declarations. Respondents therefore attack the sufficiency of the declarations with respect to this issue on the ground that they were not properly documented.

[3] A motion for summary judgment requires supporting and opposing affidavits or declarations, which “shall be made by any person on[697]personal knowledge, shall set forth admissible evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.” (Code Civ. Proc., § 437c; italics added.) Generally, averments in the affidavit or declaration which depend upon written documentation are incompetent and cannot be considered unless there are annexed thereto the original document or certified or authenticated copies of such instruments, or unless excuse for nonproduction is shown. (Dugar v. Happy Tiger Records, Inc. (1974) 41 Cal.App.3d 811, 815-816 [116 Cal.Rptr. 412].)

As appellant failed to attach essential documents to his supporting and opposing declarations, those declarations are insufficient to raise a triable issue of fact on the question of his promise to the federal government not to discriminate against families with children.

III.

Appellant contends that the association exceeded the scope of its authority in enacting an age restriction on occupancy. He argues that the association was established for the sole purpose of operating and maintaining the common areas and facilities of the condominium project, and that any attempt to limit or prescribe the use of the individually owned units was ultra vires. This argument is without merit.

[4]The authority of a condominium association necessarily includes the power to issue reasonable regulations governing an owner’s use of his unit in order to prevent activities which might prove annoying to the general residents. Thus, an owner’s association can prohibit any activity or conduct that could constitute a nuisance, regulate the disposition of refuse, provide for the maintenance and repair of interiors of apartments as well as exteriors, and prohibit or regulate the keeping of pets. (15A Am.Jur.2d, supra, § 31, p. 861; § 40, p. 869. Cf. Hidden Harbour Estates, Inc. v. Norman (Fla.App. 1975) 309 So.2d 180 [rule prohibiting alcoholic beverages in the clubhouse adjacent common areas is valid and enforceable]; Forest Park Cooperative v. Hellman (1956) 2 Misc.2d 183 [152 N.Y.S.2d 685] [rule prohibiting separate washing machines in the respective apartments of a cooperative development is not arbitrary or unreasonable and is within the scope of authority of the directors of the development].)[698]

Therefore, a reasonable restriction upon occupancy of the individually owned units of a condominium project is not beyond the scope of authority of the owner’s association.

IV.

Appellant raises additional issues for the first time in his reply brief. Since good reason has not been shown for appellant’s failure to present them in his opening brief, they should not be considered on this appeal. (Hibernia Sav. and Loan Soc. v. Farnham (1908) 153 Cal. 578, 584 [96 P. 9]; 6 Witkin, California Procedure (2d ed. 1971) Appeal, § 442, p. 4405.)

The judgment is affirmed.

Rattigan, J., and Christian, J., concurred.

[FN. 1] The other defendants are the members of and the board of directors of the association.

[FN. 2] The association of owners, acting through its elected board of directors is responsible for administering the project, approving the annual budget, establishing and collecting monthly assessments, and arranging for the management of the project.

[FN. 3] The Enabling Declaration Establishing a Plan for Condominium Ownership provides:

“7. That each owner, tenant or occupant of a ‘family unit’ shall comply with the provisions of this Declaration, the By-Laws, decisions and resolutions of the Association or its representative, and the Regulatory Agreement, as lawfully amended from time to time, and failure to comply with any such provisions, decisions or resolutions, shall be grounds for an action to recover sums due, for damages, or for injunctive relief.”

All agreements and determinations lawfully made by the association pursuant to Civil Code section 1350 et seq., the declaration or the bylaws are binding on all owners of family units, and their successors and assignees.

Article I, section 2 of the bylaws provides:

“Section 2. By-Laws Applicability. The provisions of these By-Laws are applicable to the project and its occupants. (The term ‘project’ as used herein shall include the land.)”

Article I, section 3 of the bylaws provides:

“Section 3. Personal Application. All present or future owners, tenants, future tenants, or their employees, or any other person that might use the facilities of the project in any manner, are subject to the regulations set forth in these By-Laws and to the Regulatory Agreement, attached as Exhibit ‘C’ to the recorded Plan of Apartment Ownership.

“The mere acquisition or rental of any of the family units (hereinafter referred to as ‘Units’) of the project or the mere act of occupancy of any of said units will signify that these By-Laws and the provisions of the Regulatory Agreement are accepted, ratified, and will be complied with.”

[FN. 4] The bylaws provide that the bylaws can be amended with the approval of owners representing at least 75 percent of the total value of all units in the project as shown in the enabling declaration establishing a plan for condominium ownership.

[FN. 5] Appellant did not request, in his notice to prepare clerk’s transcript, the inclusion of any documents filed by him in support of his first motion for summary judgment.

[FN. 6] Article XI, section 3, of the bylaws provides as follows: “Occupancy in the High Rise portion of the project shall be limited to persons 18 years of age or older. The term occupancy refers to a continuous occupancy for a period of 14 days or more.”

[FN. 7] Civil Code section 1355 provides in relevant part as follows: “The owner of a project shall, prior to conveyance of any condominium therein, record a declaration of restrictions relating to such project, which restrictions shall be enforceable equitable servitudes where reasonable, and shall inure to and bind all owners of condominiums in the project. Such servitudes, unless otherwise provided, may be enforced by any owner of a condominium in the project, and may provide, among other things: … [] (c)[2] For amendments of such restrictions which amendments, if reasonable and made upon vote or consent of not less than a majority in interest of the owners in the project given after reasonable notice, shall be binding upon every owner and every condominium subject thereto whether the burdens thereon are increased or decreased thereby, and whether the owner of each and every condominium consents thereto or not.”

[FN. 8] Title 10 of the Administrative Code, section 2792.25, subdivision (a) provides as follows: “(a) Any provision which purports to restrict or abridge whether directly or indirectly, the right of an owner to sell or lease his subdivision interest must include uniform, objective standards for invoking the restriction upon sale or lease, none of which shall be based upon the race, color, creed, national origin or sex of the vendee or lessee.”

[FN. 9] Subdivision (b) of section 2792.25 of title 10 of the Administrative Code provides as follows:

“(b) (1) If the owner gives notice to the Association of the terms of a bona fide offer by a person who does not meet the prescribed standards and of his intention to accept the offer, the Association may have a period of not to exceed 15 days after receipt of the notice to procure or to make an offer on terms not less favorable to the owner than the terms of the offer of the person failing to meet the prescribed standards.

“(2) If the Association does not procure an offer or make an offer on its own behalf within 15 days after receipt of the aforesaid notice, the restrictions shall be deemed waived and the owner may thereafter sell to any person provided that the terms of sale are not less favorable to him than the terms of the original offer which failed to meet the prescribed standards.”

It should be noted that subdivision (b)(2) refers only to the owner’s right to sell after waiver by the association. However, when construed together with subdivisions (a) and (b)(1) of section 2792.25, it is apparent that it was also intended to apply to restraints on the right of an owner to lease his unit.

[FN. 10] The subscription and purchase agreement declared: “Churches, schools, shopping centers, playgrounds and other community facilities available to members of the project are located as follows: Various religious denominations are represented in City of Santa Cruz or surrounding area. Santa Cruz city schools include elementary, junior high and high schools–bus service. Also University of California, Santa Cruz Branch and Cabrillo College. Shopping–local is 1/2 block–major 1 block–city park adjacent–community facilities 2 to 4 blocks.” In its report to the public, HUD stated: “The County Government Center, Library, City Hall Complex, Civic Auditorium, Post Office, Schools, Churches and the Ocean Beach Resort are all within walking distance.” The report further described the project as having “a fenced tot play area.” In addition, the report stressed that the condominium owner is assured of occupancy.

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.

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