Category Archives: Case Law

Berryman v. Merit Property Management, Inc.

(2007) 152 Cal.App.4th 1544

[Association Records; Transfer Document Fees] An association’s managing agent is permitted to earn a profit on the fees it charges for providing property transfer documents.

Bramson, Plutzik, Mahler & Birkhaeuser, Alan R. Plutzik, Jennifer S. Rosenberg, Walnut Creek; Reich Radcliffe, Marc G. Reich, Newport Beach; Law Offices of Kyle Crenshaw and Kyle Crenshaw, Newport Beach for Plaintiffs and Appellants.
Nossaman, Guthner, Knox & Elliott, Veronica M. Gray, Irvine, James C. Powers, Los Angeles, and Brad B. Grabske, Irvine, for Defendant and Respondent.

OPINION

MOORE, J.

Plaintiffs appeal from a judgment entered after the trial court sustained defendants’ demurrer without leave to amend. Plaintiffs allege that defendant Merit Property Management, Inc., wrongfully charged certain fees in connection with the transfer of title for home purchases. We find the facts alleged fail to state a claim on which relief can be granted, and therefore the trial court properly sustained defendants’ demurrer. Because plaintiffs have failed to demonstrate that further amendment will cure the complaint’s deficiencies, the trial court did not abuse its discretion in denying further leave to amend, and we affirm.

I. FACTS

Merit Property Management, Inc. (Merit) is in the business of managing residential common interest developments, typically known as homeowner associations (associations). Some homeowners belong to more than one association, because their home resides in both a “master” and “sub” association. Associations enter into written contracts with Merit to provide management services.

In April 2004, plaintiffs William J, Berryman and Betty C. Berryman, as trustees of the Berryman Family Trust (collectively plaintiffs or the Berrymans) sold a home located in two associations managed by Merit. They allege that Merit charged them $100 in document fees and $450 in transfer fees ($225 for each association), one-half of which was paid by the buyers. These fees were not remitted to the associations, but retained by Merit.

In March 2005, plaintiffs filed a putative class and representative action against Merit, several other entities that appear to be related, and Doe defendants. Alleging nine separate causes of action, the gravamen of the [1549] complaint was that Merit wrongfully charged homeowners such as the Berrymans’ document and transfer fees upon the purchase or sale of their residence. Plaintiffs alleged these fees were in excess of those permitted by statute, specifically Civil Code section 1368 (subsequent statutory references, unless specified, are to the Civil Code.)

The complaint thus alleged Merit had violated section 1368 and was liable under any number of theories, including violation of Business and Professions Code section 17200, et seq. (the Unfair Competition Law or UCL), section 1750, et seq. (the Consumer Legal Remedies Act or CLRA), money had and received, breach of fiduciary duty and constructive fraud, negligence and negligence per se, and several equitable claims. Plaintiffs also sought class certification.

Merit filed a demurrer and motion to strike, but on the day before the hearing was set plaintiffs filed a first amended complaint. The first amended complaint again cited section 1368, asserting this limited the amount Merit could charge. The same nine causes of action were alleged. Merit again demurred and the trial court sustained the demurrer with leave to amend.

Plaintiffs then filed a second amended complaint (SAC), alleging the same nine causes of action. The gravamen of the complaint was also the same. With regard to the document fees, plaintiffs alleged that Merit routinely charged sellers for documents that had not been requested, regardless of whether Merit actually provided them. With regard to the transfer fees, plaintiffs alleged the fee of $225 per association was improper because it was not authorized by statute or by the contract between Merit and the association. Plaintiffs further alleged that Merit concealed the true nature and amount of these fees, both with regards to the homeowners to whom they were charged and to the associations.

Again Merit demurred, and this time the trial court sustained the demurrer without further leave to amend, entering judgment in Merit’s favor on December 27, 2005. Plaintiffs filed a motion for reconsideration, attaching their proposed third amended complaint, which deleted all references to section 1368. The court denied reconsideration and entered an amended judgment in favor of Merit. Plaintiffs now appeal the court’s ruling sustaining the demurrer to the SAC. They argue it properly states a cause of action, or in the alternative, that they should be permitted another opportunity to amend the complaint. [1550]

II. DISCUSSION

A. Standard of Review

“In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. `We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.] And when it is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff. [Citation.]” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, 216 Cal.Rptr. 718, 703 P.2d 58.) We review the trial court’s decision de novo. (McCall v. PacifiCare of Cal, Inc. (2001) 25 Cal.4th 412, 415, 106 Cal.Rptr.2d 271, 21 P.3d 1189.)

B. The Underlying Statutory Scheme

The Davis-Stirling Common Interest Development Act (the Act) (§ 1350 et seq.) governs homeowner associations. The Act “consolidated the statutory law governing condominiums and other common interest developments…. Common interest developments are required to be managed by a homeowners association (§ 1363, subd. (a)), defined as `a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development’ (§ 1351, subd. (a)), which homeowners are generally mandated to join [Citation.]” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81, 14 Cal.Rptr.3d 67, 90 P.3d 1223, fn. omitted.)

Associations may hire managing agents to conduct day-to-day operations. (§§ 1363.1, 1363.2.) A managing agent is not a full-time employee of the association, but “is a person or entity who, for compensation or in expectation of compensation, exercises control over the assets of a common interest development.” (§ 1363.1, subd. (b).)

One task that managing agents may perform is facilitating the transfer of ownership when a residence in an association is sold. A seller is required to [1551] provide rather extensive documentation regarding the association, and at the seller’s request, the association must provide these documents to the seller within 10 days of a written request. (§ 1368, subds.(a), (b).) “The association may charge a reasonable fee for this service based upon the association’s actual cost to procure, prepare, and reproduce the requested items.” (§ 1368, subd. (b).)

With respect to the transfer of title, section 1368, subdivision (c)(1) states, in relevant part, that “neither an association nor a community service organization or similar entity may impose or collect any assessment, penalty, or fee in connection with a transfer of title or any other interest except for the following: [¶] (A) An amount not to exceed the association’s actual costs to change its records….” In this case, plaintiffs are essentially arguing that Merit, like the “association” referred to in section 1368, cannot charge a fee greater than its actual cost to reproduce documents or to transfer title records.

C. The Brown Decision and Us Application

In 2005, this court decided Brown v. Professional Community Management, Inc. (2005) 127 Cal.App.4th 532, 25 Cal. Rptr.3d 617 (Brown). In that homeowner cross-complained against her association and its management company, alleging that the fees the management company charged for providing collection services to the association were illegal. The trial court had sustained the defendants’ demurrer to Brown’s complaint, which alleged that the fees violated section 1366.1, giving rise to claims under the CLRA and for negligence, among others. (Id. at p. 535, 25 Cal.Rptr.3d 617.)

The decision began by noting the language of section 1366.1, which states: “`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.’ [Citation.]” (Brown, supra, 127 Cal.App.4th at p. 537, 25 Cal. Rptr.3d 617.) The court rejected Brown’s argument that this restriction also applied to management companies: “The statute prohibits an `association’ from charging fees or assessments in excess of the costs for which the fee or assessment is charged. As noted ante, an `association’ is a defined term under the Act, and the definition requires the `association’ to be a nonprofit entity. In contrast, the Act imposes separate duties on a managing agent. (See §§ 1363.1 & 1363.2.) And those statutory duties are owed to the `association’ and its board of directors, not to individual owners of separate property interests in the common interest development. (§§ 1363.1 & 1363.2.) Significantly, the Act does not require a managing agent to be a nonprofit entity. It is clear, both from the definitions in the Act and from the separately imposed duties, the Legislature meant `association,’ when it used that term, and it meant `managing agent,’ when it used that term.” (Id. at p. 538, 25 Cal.Rptr.3d 617.) [1552]

The same reasoning applies to the instant case. Like the language in section 1366.1, section 1368 statute permits an “association” to charge “a reasonable fee for this service based upon the association’s actual costs ….” (§ 1368, subd. (b).) Further, an “association” may charge a fee for transfer of title in “an amount not to exceed the association’s actual costs ….” (§ 1368, subd. (c)(1)(A).) These limitations, like those in section 1366.1, apply to the association, not its managing agent, for the same reasons.

The Brown court then went on to construe the statute: “Thus, we understand the section 1366.1 prohibition, which runs expressly against an `association,’ to mean, for example, that fees or assessments levied against homeowners for the purpose of defraying the cost of mowing the grass in the common areas, or of painting the association’s clubhouse, or of replacing the deck of the association’s swimming pool, or any other of the myriad of the association’s management and maintenance responsibilities, may not exceed the cost to the association for providing those services.” (Brown, supra, 127 Cal.App.4th at p. 538, 25 Cal.Rptr.3d 617.)

As the court noted, “The costs incurred by the association, for which it levies an assessment or charges a fee, necessarily include the fees and profit the vendor charges for its services. While section 1366.1 prohibits an association from marking up the incurred charge to generate a profit for itself, the vendor is not similarly restricted. Plaintiff would have it that no vendor selling its services to an association could charge a fee, or, indeed, continue in business as a profit-making enterprise. That cannot be the law.” (Brown, supra, 127 Cal.App.4th at p. 539, 25 Cal.Rptr.3d 617.)

The same logic applies to section 1368. As in Brown, an association’s “costs” for purposes of the statute include “the fees and profit the vendor charges for its services.” (Brown, supra, 127 Cal.App.4th at p. 539, 25 Cal.Rptr.3d 617.) As the court noted in Brown, the statutory language prevents associations from charging inflated fees for documents and for transfer of title and using those fees for other purposes; it does not constrain the amount a managing agent may charge for these services. “Competitive forces, not the statute, will constrain the vendors’ fees and charges.” (Ibid.) This is no different with respect to section 1368, and plaintiffs’ arguments to the contrary are entirely unpersuasive.^{[FN. 1]} Indeed, there is no way we could logically reach a different conclusion without contradicting Brown, and as its holding stands on firm ground both logically and legally, we decline to do so. [1553]

D. The Gravamen of Plaintiffs’ Claims

Despite using slightly different language, each of plaintiffs’ nine causes of action is predicated on the notion that Merit’s practice of charging document and transfer fees is impermissible, based either on Merit’s contract with each association or on section 1368. If this fundamental assumption is untrue, plaintiffs’ claims cannot stand.

Throughout its briefs and in the court below, plaintiffs repeatedly stated that Merit’s charges are “unauthorized”—that is, not specifically permitted by statute or contract. The implication, however, that a for-profit business must have statutory or contractual authorization for providing a service to a third party and charging a fee for that service is fundamentally flawed. Indeed, it is up to plaintiffs to demonstrate why a statute or a contract prohibits Merit from doing so.

As discussed above, we reject plaintiffs’ assertion that section 1368 renders the document and transfer charges unlawful. In addition to relying on section 1368, plaintiffs also assert that the management contracts limit the amount Merit may charge for documents and transfer fees. No management contract is attached to the SAC, which alleges both that the contract does not permit Merit to charge such fees at all, but even if it did, “both the Management Contracts and Civil Code § 1368 limit MERIT’S charges to $15/hour for only the actual cost to the Client Associations.” The SAC also alleges that Merit’s charges for documents are limited to 15 cents per page for copying.

The problem with these allegations is that plaintiffs are not parties to the contract with Merit—the associations are. Even assuming the allegations are true, plaintiffs are at best incidental beneficiaries and have no standing to recover under the contract. (Southern Cal. Gas Co. v. ABC Construction Co. (1962) 204 Cal. App.2d 747, 750, 22 Cal.Rptr. 540.) By the same logic, plaintiffs cannot use the contracts to bootstrap liability under other theories, such as the UCL, CLRA or common law theories such as negligence. Permitting such recovery would completely destroy the principle that a third party cannot sue on a contract to which he or she is merely an incidental beneficiary.

As we address plaintiffs’ claims below, we shall try to prevent repeating these points. To the extent a cause of action relies on either violation of section 1368 or breach of the contracts between Merit and the associations, the claim cannot be maintained. [1554]

E. The UCL Claims

The UCL is codified in Business and Professions Code section 17200 et seq. The UCL prohibits any “unlawful, unfair or fraudulent business act or practice.” “Because Business and Professions Code section 17200 is written in the disjunctive, it establishes three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent.” (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647, 58 Cal.Rptr.2d 89.) An act can be alleged to be any or all of the three prongs of the UCL—unlawful, unfair, or fraudulent.

1. The “Unlawful” Prong of the UCL

Under its “unlawful” prong, “the UCL borrows violations of other laws … and makes those unlawful practices actionable under the UCL.” (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1505, 82 Cal.Rptr.2d 368.) Thus, a violation of another law is a predicate for stating a cause of action under the UCL’s unlawful prong. In attempting to state a claim under this prong of the UCL, the SAC provides a laundry list of state and federal statutes Merit allegedly violated. These include theft by false pretenses (Pen.Code, § 484), federal mail and wire fraud (18 U.S.C. §§ 1341, 1343), breach of warranty of authority (§ 2342), and several parts of the Act (§§ 1363.1, 1368), and Business and Professions Code § 17500.

While purporting to incorporate its factual allegations by reference, the SAC nonetheless fails to plead facts to support its allegations that Merit has violated each of these statutes. For example, with respect to Penal Code section 484, we are unable to find factual allegations asserting reliance or false pretense; the allegation that the fees are “unauthorized” is a legal conclusion. With regard to mail and wire fraud, the SAC does not allege facts supporting a specific intent to defraud or use of the federal mail or telephone wires to do so.

With respect to the purported breach of the warranty of authority, plaintiffs assert this means that Merit warrants to sellers that it has the authority from its associations to impose document and transfer fees. The Restatement, however, defines such a breach as making a contract or representation on behalf of another whom he has no power to bind. (Rest.2d Agency, § 329.) The SAC alleges that the management contracts state Merit is to act on the association’s behalf with respect to transferring ownership and that such charges, which shall be “reasonable fees as allowed within the [C]ivil [C]ode” shall be charged to the owner. As the SAC expressly alleges that Merit has an agent’s authority in this matter, it fails to allege a violation of the breach of the warranty of authority. [1555]

With respect to section 1363.2, plaintiffs claim Merit violates this statute by retaining funds that belong to the associations. Yet there is nothing pled to support the implied assertion that the document and transfer fees belong to the associations, rather than to Merit for performing the service.

We have already rejected plaintiffs’ contention that Merit’s conduct violates section 1368, and we shall address the claim under the CLRA separately below.

2. The “Unfair” Prong of the UCL;

Under the UCL, “[a]n act or practice is unfair if the consumer injury is substantial, is not outweighed by any countervailing benefits to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided.” (Daugherty v. American Honda Motor Co., Inc. (2006) Cal.App.4th 824, 839.)

Plaintiffs argue they have sufficiently alleged a claim under this prong of the UCL by alleging: “Merit charges the Transfer Fee to sellers for purported services which neither its Management Agreements nor any other contract, law or rule allow it to charge sellers.” Plaintiffs further claim the fees exceed the amount permitted by the management contract and are retained by Merit rather than remitted to the associations.

As we discussed above (see section 11(B), ante) we are unaware of any statutory or case law that requires a for-profit business to point to a statute or contract that allows it to charge a fee for a service. The burden is on the plaintiffs to show why Merit was not permitted to do so. Further, as we also discussed, plaintiffs cannot bootstrap a claim for breach of contract—which, as incidental beneficiaries, they are not allowed to bring—onto a UCL claim.

Plaintiffs also argue that the court abused its discretion in sustaining the demurrer on the UCL claim, because demurrers on such claims are disfavored. In support of this assertion, plaintiffs cite Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735, 740, 162 Cal.Rptr. 543 (Motors, Inc.). “The determination of whether a particular business practice is unfair necessarily involves an examination of its impact on its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer. In brief, the court must weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim—a weighing process quite similar to the one enjoined on us by the law of nuisance. [Citations.]” The court then goes on to state: “While this process is complicated enough after a hearing in which the defendant has revealed the factors determining the utility of his conduct, it is really quite impossible if only the plaintiff has [1556] been heard from, as is the case when it is sought to decide the issue of unfairness on demurrer.” (Ibid.)

We do not take the statement in Motors, Inc. to mean that a special rule applies to demurrers in cases under the UCL. It simply reflects the general rule that questions of fact—such as whether the utility of the defendant’s conduct outweighed the gravity of the harm—cannot be decided on demurrer. If, however, as here, the facts as pled would not state a claim even if they were true, the demurrer may be sustained.^{[FN. 2]} The facts pled here do not state a claim that as a result of any wrongful conduct by Merit, plaintiffs suffered a substantial, unavoidable injury.

3. The “Fraudulent” Prong of the UCL

To support their argument that the SAC adequately pleads that Merit’s behavior is fraudulent under the UCL, plaintiffs point to allegations that “when Merit obtains payment of Transfer and Document Fees through escrow upon the sale of a home. Merit does not disclose detailed listings or breakdowns of specific charges comprising its Transfer or Document Fees, and that it omits to break these out for sellers for the specific purpose of concealing from class members the nature of fees being charged.” Plaintiffs further allege that Merit fails to disclose the fees to the associations and their boards of directors “in the financial reports it provides.”

“Unlike common law fraud, a Business and Professions Code section 17200 violation can be shown even without allegations of actual deception, reasonable reliance and damage. Historically, the term `fraudulent,’ as used in the UCL, has required only a showing that members of the public are likely to be deceived. [Citation.]” (Daugherty v. American Honda Motor Co., Inc., supra, 144 Cal.App.4th at p. 838, 51 Cal.Rptr.3d 118.) The court noted, however, that it could not [1557] find that “a failure to disclose a fact one has no affirmative duty to disclose is `likely to deceive’ anyone within the meaning of the UCL.” (Ibid.)

This reasoning applies here. The SAC does not allege any affirmative duty to disclose a breakdown of its fees to sellers. And while Merit has a duty to disclose the state of an association’s financial status in the reports it provides to boards of directors, no duty is alleged to disclose Merit’s financial status. Document and transfer fees would not be reflected in association financial reports because the fees are paid to Merit, not the association.

The remaining cases plaintiffs cite each address affirmative misrepresentations through advertising, and are inapposite here. (See, e.g., Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 951, 119 Cal.Rptr.2d 296, 45 P.3d 243; Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211, 197 Cal.Rptr. 783, 673 P.2d 660.) Absent a duty to disclose, the failure to do so does not support a claim under the fraudulent prong of the UCL.

F. Unjust Enrichment, Constructive Trust, Accounting

As pled in the SAC, none of these causes of action includes any factual allegations. Plaintiffs concede that each of these claims “are based on, and seek equitable relief for, the same conduct underlying the UCL claim.” Indeed, as the UCL provides only equitable relief, they would appear to be entirely duplicative of that claim. In any event, as the UCL claim does not state a cause of action, neither do any of these equitable claims.

G. The CLRA

The CLRA (§ 1750 et seq.) is a consumer protection statute. It enables a consumer to bring a class action on behalf of himself or herself and other consumers similarly situated if the consumer has suffered “any damage” from the use or employment of any of 23 enumerated acts or practices. (§§ 1780, subd. (a), 1781, subd. (a).) It is limited to transactions “intended to result or which results in the sale or lease of goods or services to any consumer….” (§ 1770, subd. (a).) Consumers in a CLRA class action may recover actual damages or a statutory minimum in addition to injunctive relief, restitution, attorney fees and any other relief. (§ 1780, subds.(a), (d).)

Plaintiffs allege three violations of the CLRA: 1) “Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he or she does not have;” (§ 1770, subd. (a)(5)); 2) “Representing that a transaction confers [1558] or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law;” (§ 1770, subd. (a)(14)), and 3) “Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not.” (§ 1770, subd. (a)(16).) According to plaintiffs, these allegations all boil down to plaintiffs’ contention that “Merit misrepresented to sellers that they owed Merit the challenged fees.”

Merit argues that plaintiffs and the class they purport to represent are not “consumers” under the CLRA. The CLRA defines “consumer” as “an individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes.” (§ 1761, subd. (d).) It further defines “transaction” as an “agreement between a consumer and any other person, whether or not the agreement is a contract enforceable by action, and includes the making of, and the performance pursuant to, that agreement.” (§ 1761, subd. (e).)

Although it is a somewhat technical distinction, we agree with Merit that the CLRA does not include transactions such as obtaining documents and transferring title. According to the SAC, these matters, and the demand for fees in return, are made through escrow. Thus, the transaction does not involve the “sale or lease of goods or services to any consumer” as contemplated by the CLRA, and the SAC fails to state a cause of action.

H. Breach of Fiduciary Duty

Plaintiffs’ next claim is for breach of fiduciary duty. An association has a fiduciary relationship with its members. (Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 650-651, 191 Cal.Rptr. 209.) In an attempt to impute the associations’ fiduciary duty to Merit, plaintiffs allege an agency relationship. “Associations consented to and delegated to MERIT as their agent, and MERIT assumed responsibility for fulfilling such statutory and fiduciary duties.”

The allegation of a fiduciary relationship must be supported by either a contract, or a relationship that imposes it as a matter of law. (Committee on Children’s Television, Inc., v. General Foods Corp., supra, 35 Cal.3d at p. 221, 197 Cal.Rptr. 783, 673 P.2d 660.) The mere allegation that Merit assumed fiduciary duties to the individual homeowners is a legal conclusion, not a well-pled fact. Indeed, it appears from the SAC that Merit’s relationship with individual homeowners was merely commercial. Merit performed a service and charged a fee; nothing more is apparent.

Plaintiffs’ attempts to apply exceptions to the general rule that a fiduciary relationship requires a contract or imposition of that relationship as a matter [1559] of law are unavailing. The exceptions they set forth simply do not apply here. (Cf. § 2343; Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39, 260 Cal.Rptr. 183, 775 P.2d 508; Casey v. U.S. Bank Nat, Assn. (2005) 127 Cal.App.4th 1138, 1144, 26 Cal.Rptr.3d 401.)

Plaintiffs’ theory of “aiding and abetting” is equally unpersuasive. “`Liability may … be imposed on one who aids and abets the commission of an intentional tort if the person (a) knows the other’s conduct constitutes a breach of duty and gives substantial assistance or encouragement to the other to so act or (b) gives substantial assistance to the other in accomplishing a tortious result and the person’s own conduct, separately considered, constitutes a breach of duty to the third person.’ [Citations.]” (Fiol v. Doellstedt (1996) 50 Cal.App.4th 1318, 1325-1326, 58 Cal.Rptr.2d 308.) The SAC has not alleged any wrongdoing on the part of the associations—indeed, it asserts they are entirely ignorant of Merit’s fees. There can be no claim for aiding and abetting without allegations that the associations are also wrongdoers.

I. Negligence and Negligence Per Se

The final two claims in the SAC are for negligence and negligence per se. The latter claim is based on Merit’s purported violation of section 1368, and as we have already noted, is legally without merit. As to the former claim, the SAC simply alleges: “In doing the acts of imposing and collecting Transfer Fees, MERIT owed a duty of care to Plaintiffs and other members of the class. MERIT breached that duty by charging and collecting illegal Transfer Fees.”

This allegation does not include facts, merely legal conclusions. Plaintiffs argue that because the association owes a fiduciary duty to its members, it also owes an ordinary duty of care, and therefore Merit does also. We fail to follow this logic, but to the extent it relies on the assumption that Merit assumed the associations’ fiduciary duty, we reject it. To the extent it relies on something else, it is waived for failure to fully develop the argument. (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 865, 64 Cal.Rptr.2d 324.)

J. Money Had and Received

In addition to the specific counts plaintiffs allege, they also plead a common count for money had and received. This claim incorporates prior facts by reference, and is based on the same underlying facts. “A common count is not a specific cause of action, however; rather, it is a simplified form of pleading normally used to aver the existence of various forms of monetary indebtedness, including that arising from an alleged duty to make restitution [1560] under an assumpsit theory. [Citations.] When a common count is used as an alternative way of seeking the same recovery demanded in a specific cause of action, and is based on the same facts, the common count is demurrable if the cause of action is demurrable. [Citations.]” (McBride v. Boughton (2004) 123 Cal. App.4th 379, 394-395, 20 Cal.Rptr.3d 115.) Thus, because this count must stand or fall on the viability of plaintiffs’ other claims, the demurrer was properly sustained.

K. Further Amendment

The burden of demonstrating that a complaint’s deficiencies can be cured through further amendment is “squarely on the plaintiff.” (Blank v. Kirwan, supra, 39 Cal.3d at p. 318, 216 Cal.Rptr. 718, 703 P.2d 58.) From reviewing plaintiffs’ proposed third amendment complaint and their arguments, we are unpersuaded that further amendment would lead to a viable complaint.

It appears from the history of this case that this lawsuit began under the false impression that section 1368 applied to management companies such as Merit, not merely to associations. Additionally, plaintiffs appeared to believe that they could maintain a claim for Merit’s alleged violation of its contracts with associations. Neither is true, but plaintiffs have repeatedly tried to plead around these matters.

The bottom line is that these facts—no matter how artfully they are pled—do not leave plaintiffs with any basis for a claim. They cannot cure these deficiencies by removing references to section 1368 or by pleading even more explicitly that Merit is breaching its contract with the associations. Once again, they ask for leave to plead that “no law, statute or contract permits Merit to impose those charges on sellers.” As we have repeatedly stated, it is up to plaintiffs to demonstrate why the charge is illegal, not for Merit to justify that it is legal for it to charge a fee for a service it provides.

We understand plaintiffs may find the total of $325 in charges an irksome part of the home resale process. They may believe those fees are out of line with market forces. Their remedy, then, is to persuade their association’s board of directors to find a management company that offers these services for less. If Merit realizes it is losing business because its fees are out of line with the marketplace, it will surely adjust its fees accordingly. Similarly, if they believe Merit is breaching its contract with the association by charging such fees, they can demand their board of directors seek redress from Merit directly. If they believe they were charged $100 for documents and never requested or received any documents whatsoever, they are free to bring a suit in small claims court to recover that amount. None of the factual allegations [1561] presented thus far, however, nor the proposed amendments to them, support the claims advanced here. The demurrer was properly sustained without further leave to amend.

III. DISPOSITION

The judgment is affirmed. Merit is entitled to its costs on appeal.

WE CONCUR: O’LEARY, Acting P.J., and ARONSON, J.

[FN. 1] We also reject plaintiffs’ assertion that Merit is advancing a theory under which section 1368 immunizes it from liability. Merit’s argument is that section 1368 does not create liability. Thus, while plaintiffs are free to sue Merit, in order to succeed, they must advance some viable theory of recovery. That theory cannot be predicated on a statute which, as a matter of law, applies to associations and not to management companies.

[FN. 2] Moreover, the sweeping nature of claims under the unfairness prong has been called into question in recent years. Referencing the balancing test adopted in Motors, Inc., the court noted: “We believe these definitions are too amorphous and provide too little guidance to courts and businesses. Vague references to `public policy,’ for example, provide little real guidance.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 185, 83 Cal.Rptr.2d 548, 973 P.2d 527 (Cel-Tech).) The court went on to narrow the scope of claims of unfair practices under the UCL in cases in which a competitor alleged anticompetitive behavior. (Id. at p. 187, 83 Cal.Rptr.2d 548, 973 P.2d 527.)

Subsequent Court of Appeal decisions have taken note of this decision in other contexts. “Cel-Tech,however, may signal a narrower interpretation of the prohibition of unfair acts or practices in all unfair competition actions and provides reason for caution in relying on the broad language in earlier decisions that the court found to be `too amorphous.’ Moreover, where a claim of an unfair act or practice is predicated on public policy, we read Cel-Tech to require that the public policy which is a predicate to the action must be ‘tethered’ to specific constitutional, statutory or regulatory provisions.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 854, 128 Cal.Rptr.2d 389, fn omitted.)

Liebler v. Point Loma Tennis Club

(1995) 40 Cal.App.4th 1600

[Operating Rules; Non-Resident Use] A HOA may create and enforce a rule excluding non-resident owners from use of the HOA’s common area recreational facilities.

Alan L. Williams for Plaintiff and Appellant.
Genson, Even, Crandall & Wade and Kurt A. Moll for Defendant and Respondent.

[1604] OPINION

NARES, J.-

Kenneth Liebler (Liebler) appeals a judgment in favor of defendant Point Loma Tennis Club Community Corporation (PLTC), following a determination the PLTC declaration of covenants, conditions and restrictions did grant PLTC the authority to enact rules which exclude Liebler, a nonresident owner, from using the common area recreational facilities.

Liebler contends (1) the PLTC covenants, conditions and restrictions do not grant PLTC such a power of exclusion; (2) the rules and regulations which exclude nonresident owners from common area recreational facilities are unreasonable; and (3) the covenants, conditions and restrictions also do not grant PLTC the power to impose fines for violations. We affirm the judgment.

FACTS ^{[FN. 1]} AND PROCEDURE

Liebler purchased a condominium unit^{[FN. 2]} in the Point Loma Tennis Club in June 1984. When Liebler purchased his unit, he received a copy of the recorded PLTC declaration of covenants, conditions and restrictions (CC&Rs) and the PLTC rules and regulations.

The CC&Rs (1) establish ownership of a unit as the basis for holding a membership in the PLTC (§ 2.1) and (2) repeatedly set out the duty of the corporation to establish necessary rules for use and occupancy of the property (§ 3.2.9) and the common areas as well (§ 7.8.2).

Since 1977 (some seven years before Liebler acquired his unit), the PLTC rules have specifically excluded nonresident owners from use of the common area recreational facilities. In addition, the CC&Rs contain a covenant specifically prohibiting the severance and separate conveyance of an owner’s interest in his unit from his undivided interest in the common area. Liebler never lived in the unit, but leased it to his daughter and then to a succession of tenants.

At the time Liebler purchased his unit, he and his daughter registered and obtained identification cards for use of the PLTC recreational facilities. After Liebler’s daughter moved out and Liebler rented the unit to others, he [1605] continued to use the recreational facilities, in particular, the tennis courts. The Sullivans, Liebler’s tenants at the time of the lawsuit, also used the recreational facilities.

Shortly after Liebler leased his unit to the Sullivans, he amended the lease agreement to include a statement that “Both parties confirm that for all purposes, the tenant and landlord share the premises as cotenants.” No evidence was introduced showing Liebler ever occupied the unit or shared it with the Sullivans in any way other than by continuing to use the common area recreational facilities.

Early in 1992, some homeowners asked the board of directors of the PLTC homeowners association (Board) to look into use of the tennis courts by nonresidents and others who “did not belong there.” In April a list was compiled of owners who held identification cards but whose addresses indicated they were not residents of PLTC. The Board then sent a letter to each of these nonresident owners asking for the return of their cards, reminding them of the rule requiring assignment of the use of the facilities to their tenants, and advising them that nonresident owners who continued to use the facilities would be asked to leave or fined.

All the nonresident owners except Liebler complied, either by returning their cards or, in some cases, reporting the cards as lost. Liebler responded with a hostile letter informing the Board he was a “registered resident” of his unit by the terms of his lease and he considered himself entitled to the privileges of a tenant as well as those of an owner. Liebler did not, however, provide the Board with a copy of the lease. Liebler later testified he did not live in the unit at the time he advised the Board that he was a “registered resident.” Liebler continued to use the PLTC tennis courts at will.

On May 12, 1992, the Board sent Liebler a notice of violation in an attempt to enforce the rule against use of the recreational facilities by nonresident owners. Liebler appeared before the PLTC grievance committee for a hearing on June 16, 1992. At the hearing, Liebler continued to insist he was entitled to use the recreational facilities based on the wording of his lease, but refused the committee’s request to view the lease itself.

After Liebler spoke to the committee, it considered the matter and recommended Liebler be fined $150 for past violations and be notified that future violations of the nonresident rule would incur additional fines. Liebler continued to use the facilities. PLTC continued to fine Liebler. Liebler has never paid any fines and PLTC has not taken legal action to attempt to collect them.

[1606] Liebler sued PLTC, seeking declaratory relief from the fines, and enforcement of equitable servitude by issuance of a temporary restraining order, and temporary and permanent injunctions against enforcement of the nonresident rule. Liebler also alleged breach of the covenant of enjoyment by PLTC, due to interference with Liebler’s claimed property right in the easement of enjoyment of the common recreational facilities.

After trial, the court determined the PLTC CC&Rs granted the Board the authority to create a rule excluding nonresident owners from use of the common recreational facilities. The court found the nonresident rule as enacted was reasonable and it had been reasonably enforced. The court made a partial ruling on the fines issue, finding the PLTC had the authority to impose fines on a member of the association, but declining to decide whether the fines were legally enforceable until an attempt was made to collect. Judgment was entered for PLTC.

STANDARD OF REVIEW

Liebler claims the CC&Rs do not provide for the rule excluding nonresident owners from use of the common areas, and also attacks the reasonableness of the rule in question. (1) It is clear that provisions restricting use and occupancy in recorded covenants governing a condominium project are “presumed to be reasonable and will be enforced uniformly against all residents of the common interest development unless the restriction is arbitrary, imposes burdens on the use of lands it affects that substantially outweigh the restriction’s benefits to the development’s residents, or violates a fundamental public policy.” (Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 386). Rules made pursuant to recorded use restrictions are evaluated for their reasonableness in light of the interests of the residents as a whole, rather than the individual interests of a particular homeowner. (Ibid.)

DISCUSSION

I. Exclusion of Nonresident Owners From Common Areas

(2a) Liebler argues the provisions of article 8 of the PLTC CC&Rs create an easement of enjoyment in the common area to the benefit of a unit owner which cannot be abrogated by rules later adopted by the board of directors. Liebler points to specific portions of article 8 which provide:

“8. MEMBERS EASEMENTS OF ENJOYMENT IN THE COMMON AREA:

“The owners shall have the right and easement of enjoyment in and to the Common Area and such right and easement shall be appurtenant to and shall [1607] pass with the title to every assessed residential condominium subject to the following provisions:

“8.1 The right of the Corporation to limit the number of guests of members.

“8.2 The right of the Corporation to establish uniform rules and regulations pertaining to the use of the Common Area and the recreational facilities thereon.

“…. …. …. …. …. …. ….

“8.7 Any Member may delegate in accordance with the By-Laws, his right of enjoyment to the Common Area and facilities to the members of his family, his tenants or contract purchasers who reside on the Property.”

The rule to which Liebler objects is found in the rules and regulations of the PLTC as follows;^{[FN. 3]}

“IV. RECREATIONAL AREA

“…. …. …. …. …. …. ….

“4.2 Use: The recreational facilities shall be used only by residents of PLTC and their guests. The right to use the facilities is appurtenant to the individual condominium unit and can not be separated from it (CC&R Section 8). Nonresident owners, whose units are rented or available for rent, do not have the use of the recreational facilities.”

Liebler’s argument is that by virtue of ownership, he gains an easement of enjoyment in the common area which he may continue to exercise until he transfers the actual title of the unit to a subsequent owner. He insists he is entitled to continue to use the common area so long as he owns the unit, and in addition, he may allow his tenants to also use the common area recreational facilities. He argues his right as an owner cannot be abridged by a rule that excludes nonresident owners from enjoyment of the recreational facilities.

Liebler relies primarily upon MaJor v. Miraverde Homeowners Assn. (1992) 7 Cal. App.4th 618, 625-626 [9 Cal. Rptr.2d 237], which held that [1608] similar rule impermissibly created two categories of members, terminating a right “originally granted by the CC&Rs to all members whether resident or not.” Although the present case also involves a dispute over use of tennis courts, there are significant legal and factual differences between the two. MaJor involved a completely physically disabled tenant who was an immediate family member of the owners, themselves former occupants, and the rule in question not only was promulgated long after their purchase, but appeared to have specifically singled out and targeted the owners for disparate treatment. (Id. at 621-622.)

The MaJor court itself noted the limits of its decision, which did not reach delegation of the right of enjoyment to a third party (MaJor v. Miraverde Homeowners Assn., supra, 7 Cal. App.4th at p. 626, fn. 1), or to the situation where, as here, a nonresident owner sought use of the tennis court both for himself and for a tenant. (Id. at p. 628, fn. 2.)

A further and central point distinguishing this case from MaJor, however, is the presence in the PLTC CC&Rs of a covenant specifically prohibiting severance and separate conveyance of an owner’s component interests in the private and common use areas. MaJor is silent as to whether the CC&Rs there contained such a provision, and the MaJor court never discussed and appears not to have contemplated the effect such a provision would have when read together with the rest of the CC&Rs. Here, however, the PLTC CC&R article 12.2 contains the following covenant:

“12. COVENANTS AGAINST PARTITION AND SEVERABILITY OF COMPONENT INTEREST:

“…. …. …. …. …. …. ….

“12.2 No Owner shall be entitled to sever his Unit from his related undivided interest to the Common Area for any purpose, and no component interest may be severally sold, conveyed, encumbered or hypothecated. Any violation or attempted violation of this provision shall be void and of no effect….”

The plain meaning of CC&R article 12.2 is that the exclusive use area (the unit) and the undivided interest in the common area are a unitary interest for conveyance purposes, and one may not be conveyed without the other. As noted by the court below, the most obvious way to attempt severability would be for an owner to attempt to convey his interest in the common area to a third party who would not otherwise have rights of access.

A less obvious but equally prohibited severance would occur if an owner attempted to convey the unit, but reserve the right of common area access to [1609] himself, thus denying the purchaser or lessee the use of the common area. What Liebler attempted was a variant on this form of separate conveyance.

The amendment to Liebler’s lease declaring that landlord and tenants shared the premises as cotenants, when there was no family or prior relationship with the lessees and no evidence Liebler ever shared the unit with them, can only have been an attempt to reserve to himself access to the common area while conveying a leasehold estate in the unit. This is contrary to CC&R article 12.2’s prohibition against separate conveyance.

When CC&R article 12.2 is read together with article 8.7, which declares members may delegate their rights of enjoyment to the common area to their tenants “who reside on the property,” it becomes clear the intent of the CC&R provisions is to have one set of users per unit: either the owner or the tenant, but not both. There is no mention of delegating common area rights and contemporaneously retaining them. Because under article 12.2 access to the common area cannot be severed from the unit, a conveyance of the unit to a tenant necessarily suspends the owner’s access to the common area for the length of the tenancy.^{[FN. 4]}

Thus, unlike MaJor, where the rule against nonresident owners was held ultra vires to the board’s authority, here PLTC rule 4.2 is simply a clear statement of the effect of CC&R article 12.2, read together with CC&R article 8.7. None of Liebler’s rights have been extinguished or terminated, and at such time as he ceases leasing the unit and himself becomes a resident he will regain full access to the common area recreational facilities.

(3) As explained in Nahrstedt v. Lakeside Village Condominium Association, supra, 8 Cal.4th at page 372, “Use restrictions are an inherent part of any common interest development and are crucial to the stable, planned environment of any shared ownership arrangement. [Citation].” The Nahrstedt court said further: “The restrictions on the use of property in any common interest development may limit activities conducted in the common areas as well as in the confines of the home itself. [Citations.]

“…. …. …. …. …. …. ….

[1610] “… Ordinarily … ownership also entails mandatory membership in an owners association, which, through an elected board of directors, is empowered to enforce any use restrictions contained in the project’s declaration or master deed and to enact new rules governing the use and occupancy of property within the project. [Citations.] 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.
[Citation.]” (8 Cal.4th at pp. 373-374.)

(2b) Nahrstedt makes clear that restrictions contained in the recorded CC&Rs will be accorded a presumption of validity. (Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 383.) In this case, the challenged rule is clearly within the contemplation of the relevant presumptively valid provisions of sections 8 and 12 of the CC&Rs, as well as sections 3.2.9 and 7.8.2. Because we hold the challenged rule is a proper implementation of the relevant sections of the CC&Rs, Liebler’s argument that the rule is not permitted by the CC&Rs must fail.

II. Reasonableness

(4a) The next argument raised by Liebler is that the rule which he challenges is not reasonable, and for this reason may not be enforced against him. (5) The ability to enforce use restrictions is not, of course, absolute. California Civil Code section 1354, subdivision (a) provides: “The covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable….” The Nahrstedtcourt defined unreasonable as those restrictions which “are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.” (Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 382.)

In addition, enforcement of the restriction must be in good faith, not arbitrary or capricious, and by procedures which are fair and uniformly applied. (Nahrstedt v.Lakeside Village Condominium Assn., supra, 8 Cal.4th at p. 383.) The framework of reference, as the court made clear, is not the reasonableness specific to the objecting homeowner, but reasonableness as to the common interest development as a whole. (Id. at p. 386.) Thus, restrictions recorded in the declaration (here, the CC&Rs) are presumptively reasonable, and so long as uniformly applied, will be enforced by the courts unless they fall into one of the three categories of “unreasonable” restrictions. (Ibid.)

(4b) In this case Liebler’s claim that exclusion of nonresident owners 5850from the common recreational facilities is unreasonable must fail, since the [1611] evidence received below demonstrates (a) the restriction was reasonable in itself from the perspective of the development as a whole, rather than that of Liebler, and (b) this reasonable restriction was also neither arbitrarily nor unfairly applied, but was instead applied evenhandedly.

A. The Restriction Itself Is Reasonable.

Viewed from the perspective of this particular common interest development as a whole, there is no indication that the restriction is arbitrary.^{[FN. 5]} To the contrary, as noted by the court below, there are valid reasons why members of a tennis-oriented residential condominium might choose to restrict access to their private tennis courts, since maintaining a low density ensures the courts will be available to residents, families and guests.

The number of tennis courts constructed in any particular development is likely determined during the design phase based on the proposed number of occupants, extrapolated from the number of units in the condominium. The added burden from use by nonresident owners in addition to tenants and owner-residents could potentially greatly increase the number of individuals competing for court space, and this decrease in availability lessens the attractiveness of a tennis-oriented facility.

We are unable to discern any issue of fundamental public policy in the action of a private association which determines to limit access to the available tennis courts to only those members actually in residence, when no restrictions whatsoever are placed on who may choose to reside in the condominium. Any owner may choose to reside on the premises, and thus have complete access to the common area recreational facility.^{[FN. 6]}

Finally, viewed from the context of the common interest development as a whole, the burden on the individual owner is most certainly not disproportionate to the benefit to the whole. Presumably, a large factor in the decision of a prospective owner or tenant to move into a tennis-oriented facility is ready access to private courts. Maintaining a low density by excluding the public, and here, in long-standing restrictions, nonresident owners as well, [1612] confers a benefit on the residents for which many will pay a higher price. Thus Liebler himself has benefited from the restriction, since he is presumably thereby able to negotiate from his tenants a higher rent than he otherwise would have been able to obtain for the premises.

B. The Restriction Has Been Fairly Applied.

Liebler argued the restriction was unfairly and arbitrarily applied, and he had been singled out for exclusion in some sort of personal vendetta. Yet despite a full and fair hearing below, no evidence supported his allegations. The facts and documents stipulated to before trial, and later supported by uncontroverted testimony, indicate that after nonspecific complaints from residents to the Board about nonresidents using the facilities in contravention of the rules, the initial steps toward enforcement were directed at all nonresident owners who were using or potentially using the recreational facilities.

First, a list was compiled of owners with identification cards for use of the recreational facilities whose addresses were not in the confines of PLTC. Then, a form letter was sent to each asking for the return of the cards. With the single exception of Liebler, all nonresident owners complied with the request.

Liebler chose to respond with a letter that can at best be described as hostile. He continued to use the facilities whenever he wished, even after he was no longer in possession of his identification card, and went on using them at least until the date of trial. Faced with such flagrant disregard for its authority, the Board ultimately chose to fine Liebler for his repeated violations.^{[FN. 7]}

Before fining Liebler, PLTC provided him notice and an opportunity for a hearing. He addressed the grievance committee in person. Although the Board continued to fine Liebler as he continued to violate the restriction, no attempt was made to collect the fines, and Liebler has suffered no out-of-pocket damages. Despite Liebler’s allegations of unfairness no evidence was introduced, even in his own testimony, that would show an attempt at selective enforcement.

Since the restriction has been both reasonably and evenly enforced against all to whom it applies, and the enforcement procedures have been fair, including advance written notice, compliance with a previously published and distributed schedule of fines, according Liebler the opportunity to be heard by the grievance committee before proceeding with fines, and since no [1613] evidence was introduced of selective enforcement, Liebler’s assertion of unreasonable enforcement must fail.

III. Authority to Impose Fines

(6a) Liebler last contends that, absent an express provision in the PLTC CC&Rs authorizing such, the Board lacks the authority to subject him to fines. CC&R article 3.2.9 states the corporation may “[e]stablish and publish such rules and regulations as the Board may deem reasonable in connection with the use, occupancy and maintenance of all of the Property….” PLTC rule 5.2 provides in part that “[e]nforcement shall be carried out in a fair and timely manner by means of fines … and other legal action as appropriate.” Section VI of the PLTC rules is a schedule of fines, providing that for “Misuse of the common area” the fine will be $50. Liebler received copies of the PLTC rules when he purchased his condominium unit. For the reasons which follow, we reject Liebler’s assertion these provisions cannot support the imposition of fines upon him.

(7) As noted in part I, ante, our Supreme Court in Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at page 373, stated that one of the characteristics of condominium ownership is “mandatory membership in an owners association, which, through an elected board of directors, is empowered to enforce any use restrictions contained in the project’s declaration or master deed and to enact new rules governing the use and occupancy of property within the project.”

While cautioning against abuses of such regulatory power (Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at pp. 373-374), the Nahrstedt court (as we have cited in part I, ante) went on to observe: “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. [Citation.]” (8 Cal.4th at p. 374, italics added.)

(6b) Civil Code section 1363, subdivision (i) provides in pertinent part that “[i]f an association adopts or has adopted a policy imposing any monetary penalty, including any fee, on any association member for a violation of the governing documents or rules of the association … the board of directors shall adopt and distribute to each member … a schedule of the monetary penalties that may be assessed for those violations, which shall be in accordance with authorization for member discipline contained in the governing documents.”

[1614] Because the PLTC governing documents establishing the right to fine offending association members comply with the cited code section, and because the authorization for the challenged rules is itself contained in the recorded PLTC CC&Rs, Liebler is incorrect in asserting such fines are unauthorized. The trial court correctly found PLTC had the power to impose fines upon Liebler for his violations of PLTC rules, although that court did not address the question of the means by which such fines might be collected.^{[FN. 8]}

CONCLUSION

The judgment is affirmed. Respondents to recover costs on appeal.

Work, Acting P.J., and Haller, J., concurred.

A petition for a rehearing was denied January 8, 1996, and appellant’s petition for review by the Supreme Court was denied February 29, 1996.

[FN. 1] The facts are not in dispute, having largely been stipulated to before trial. The trial was conducted without a jury, and neither party raises any issue of fact on appeal.

[FN. 2] For a description of “common interest” developments tracing the development of modern condominium ownership, see Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 370-375 [33 Cal. Rptr.2d 63, 878 P.2d 1275].

[FN. 3] Although this rule was adopted in 1992, both parties agree a rule excluding nonresident owners from use of the recreational facilities has existed since at least 1977, predating Liebler’s ownership in PLTC by at least seven years.

[FN. 4] We also observe that Civil Code section 1362 provides in any event that “[u]nless the declarationotherwise provides, in a condominium project, or in a planned development in which the common areas are owned by the owners of the separate interests, the common areas are owned as tenants in common, in equal shares, one for each unit or lot.” (Italics added.) Necessarily, if the common areas are owned in shares of “one for each unit,” it is not logically possible (even absent the covenant to the contrary herein) to convey a lease in the unit together with the interest in the common areas, while also retaining the latter separately.

[FN. 5] Liebler argued below that the reasonableness of the rule was to be tested from his own perspective, citing Bernardo Villas Management Corp. v. Black (1987) 190 Cal. App.3d 153 [235 Cal. Rptr. 509] and Portola Hills Community Assn. v. James (1992) 4 Cal. App.4th 289 [5 Cal. Rptr.2d 580]. These cases have been disapproved in Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at pages 385-386, requiring instead the focus be on “the restriction’s effect on the project as a whole, not on the individual homeowner.” (Id. at p. 386.)

[FN. 6] Liebler’s amended lease agreement declaring that he and his tenants “share the premises as cotenants” is ineffectual in light of the admitted fact Liebler does not reside on the premises.

[FN. 7] We do not here decide the separate question of whether such fines are legally enforceable. See part III, post.

[FN. 8] We also need not here reach the question of the means by which such fines may be collected, as there is at present no actual case or controversy concerning this matter. Both sides agree no attempt has been made to collect the fines, and absent such collection efforts, a determination in the abstract of the manner in which PLTC might collect such fines would constitute an advisory opinion. “`The rendering of advisory opinions falls within neither the functions nor the jurisdiction of this court.’ (People ex rel. Lynch v. Superior Court (1970) 1 Cal.3d 910, 912 [83 Cal. Rptr. 670, 464 P.2d 126].)” (Salazar v. Eastin (1995) 9 Cal.4th 836, 860 [39 Cal. Rptr.2d 21, 890 P.2d 43].) That holding applies here.

Ironwood Owners Association IX v. Solomon

(1986) 178 Cal.App.3d 766

[Architectural Control; Enforcement] A HOA must show that it has followed its own standards and procedures when taking action to enforce violations of its governing documents.

Erwin & Anderholt and Michael J. Andelson for Defendants and Appellants.
Guralnick, McClanahan & Zundel, Wayne S. Guralnick and Judith L. Pilson for Plaintiff and Respondent.

OPINION
KAUFMAN, J.

Defendants Bernard and Perlee Solomon (Solomons) appeal from a summary judgment in favor of plaintiff Ironwood Owners Association IX (Association). The judgment granted the Association a mandatory injunction compelling the removal of eight date palm trees from the Solomons’ property. The Association was also granted declaratory relief, the court finding the Solomons in violation of the Association’s declaration [769] of covenants, conditions and restrictions (CCRs) for having planted the date palm trees without previously filing a plan with and obtaining the written approval of the Association’s architectural control committee.

Facts^{[FN 1]}

The Solomons purchased a residential lot in the Ironwood Country Club, a planned unit development, in March 1979. They do not dispute that they bought the property with full notice of the CCRs, which were duly recorded in Riverside County in December 1978.

The date palm trees in question were planted sometime during July 1983 and have remained there since. The Solomons have admitted and it is therefore undisputed that they did not file a plan regarding the palm trees with the Association’s architectural control committee and accordingly never received a permit or approval for the landscaping addition.

The Association is, pursuant to section 1.02 of the CCRs, “a non-profit California corporation, the members of which [are] all of the several Owners of the Real Property.” The Association’s members elect a board of directors to conduct the Association’s business affairs. Under section 2.04^{[FN 2]} the board has the power to “enforce all of the applicable provisions” of the Association’s bylaws, its articles of incorporation, and the CCRs (subd. (a)), to “delegate any of the powers or duties imposed upon it herein to such committees, officers or employees as the Board shall deem appropriate” (subd. (e)), and to “take such other action and incur such other obligations … as shall be reasonably necessary to perform the Association’s obligations hereunder or to comply with the provisions or objections [sic] of [the CCRs]” (subd. (i)).

The architectural control committee is a body of three persons first appointed by Silver Spur Associates, the original owner and conveyor of the property; committee vacancies are now filled by the board of directors. The following provisions from the CCRs describe the powers and duties of and procedures to be followed by the architectural control committee:

“4.02. Duties of architectural control committee. All plans and specifications for any structure or improvement whatsoever to be erected on or moved upon or to any Residential Lot, and the proposed location thereof on any such Residential Lot, and construction material, the roofs and exterior [770] color schemes, any later changes or additions after initial approval thereof, and any remodeling, reconstruction, alterations or additions thereto on any such Residential Lot shall be subject to and shall require the approval in writing, before any such work is commenced, of the Architectural Control Committee.

“4.03. Submission of Plans. There shall be submitted to the Architectural Control Committee two complete sets of plans and specifications for any and all proposed Improvements to be constructed on any Residential Lot, and no structures or improvements of any kind shall be erected, altered, placed or maintained upon any Residential Lot unless and until the final plans, elevations and specifications therefor have received such written approval as herein provided. Such plans shall include plot plans showing the location on the Residential Lot of the building, wall, fence or other structure proposed to be constructed, altered, placed or maintained thereon, together with the proposed construction material, color schemes for roofs, and exteriors thereof, and proposed landscape planting.

“4.04. Approval of Plans. The Architectural Control Committee shall approve or disapprove plans, specifications and details within thirty days from the receipt thereof or shall notify the Owner submitting them that an additional period of time, not to exceed thirty days, is required for such approval or disapproval. Plans, specifications and details not approved or disapproved, or for which time is not extended within the time limits provided herein, shall be deemed approved as submitted. One set of said plans and specifications and details with the approval or disapproval of the Architectural Control Committee endorsed thereon shall be returned to the Owner submitting them and the other copy thereof shall be retained by the Architectural Control Committee for its permanent files. Applicants for Architectural Control Committee action may, but need not, be given the opportunity to be heard in support of their application.

“4.05. Standards for Disapproval. The Architectural Control Committee shall have the right to disapprove any plans, specifications or details submitted to it if: (i) said plans do not comply with all of the provisions of [the CCRs]; (ii) the design or color scheme of the proposed building or other structure is not in harmony with the general surroundings of the Real Property or with the adjacent buildings or structures; (iii) the plans and specifications submitted are incomplete; or (iv) the Architectural Control Committee deems the plans, specifications or details, or any part thereof, to be contrary to the best interest, welfare or rights of all or any of the other Owners.”

[771] Discussion

1. CCRs Require Submission of Landscaping Plan

(1a) We have concluded the court ruled correctly that the CCRs require the submission of a plan to the architectural control committee for substantial landscaping changes such as the planting of eight tall date palm trees. Section 4.02 gives the committee power and duty to review “additions” to residential lots and we interpret this term broadly to include any substantial change in the structure and appearance of buildings and landscapes. We note that in drafting the CCRs, the original conveyor of the subdivision property included section 8.02(b) which provides for liberal construction of its provisions.^{[FN 3]} (See also Civ. Code, § 1370 [formerly Civ. Code, § 1359].) Furthermore, “proposed landscape planting” is specifically enumerated in section 4.03 as an item to be described in plans for such additions filed with the committee, which clearly shows the committee was to take landscaping into account when it weighed the esthetic aspects of plans it received.

(2) (See fn. 4.), (3) Because no extrinsic evidence bearing on the interpretation of these provisions of the CCRs was shown to exist,^{[FN 4]} this question was solely one of law (Estate of Dodge (1971) 6 Cal.3d 311, 318 [98 Cal. Rptr. 801, 491 P.2d 385]) and was therefore properly determined by the court on summary judgment. (See Milton v.Hudson Sales Corp. (1957) 152 Cal. App.2d 418, 433 [313 P.2d 936].) (1b) The court’s declaratory conclusion that the Solomons were and are required under the CCRs to submit a plan to the architectural control committee proposing the addition of the eight date palm trees will be affirmed.

2. Association’s Request for Injunction Does Pose Questions of Material Fact

The Association’s request for a mandatory injunction compelling the removal of the Solomons’ palm trees was in effect a request to enforce an administrative decision on its part disapproving the palm trees as not meeting the standards set forth in section 4.05 of the CCRs. That this is so is [772] demonstrated by the final letter sent by the Association’s counsel to the Solomons demanding removal of the palm trees: “Despite the provisions [of the CCRs] referenced above, you unilaterally installed the date palm trees on your property, substantially changing the uniform development, harmony and balance of the improvements within the Association. The fact that you did not obtain approval from the Architectural Control Committee is not even at issue.” (Italics added.)

(4a) Despite the Association’s being correct in its contention the Solomons violated the CCRs by failing to submit a plan, more was required to establish its right to enforce the CCRs by mandatory injunction.^{[FN 5]} (5) When a homeowners’ association seeks to enforce the provisions of its CCRs to compel an act by one of its member owners, it is incumbent upon it to show that it has followed its own standards and procedures prior to pursuing such a remedy, that those procedures were fair and reasonable and that its substantive decision was made in good faith, and is reasonable, not arbitrary or capricious. (Cohen v. Kite Hill Community Assn. (1983) 142 Cal. App.3d 642, 650-651 [191 Cal. Rptr. 209], and cases there cited; Laguna Royale Owners Assn. v. Darger (1981) 119 Cal. App.3d 670, 683-684 [174 Cal. Rptr. 136]; cf. Pinsker v. Pacific Coast Society of Orthodontists (1974) 12 Cal.3d 541, 550 [116 Cal. Rptr. 245, 526 P.2d 253]; Lewin v. St. Joseph Hospital of Orange (1978) 82 Cal. App.3d 368, 388 [146 Cal. Rptr. 892]; also cf. Code Civ. Proc., § 1094.5.)

“The criteria for testing the reasonableness of an exercise of such a power by an owners’ association are (1) whether the reason for withholding approval is rationally related to the protection, preservation or proper operation of the property and the purposes of the Association as set forth in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner.” (Laguna Royale Owners Assn. v. Darger, supra, 119 Cal. App.3d 670, 683-684.)

(4b) Several questions of material fact therefore remained before the trial court when it granted summary judgment in this case. First is the question whether the Association followed its own procedures as set forth in the CCRs. According to the CCRs the Association is governed by a board of directors, but there is nothing in the record showing any decision in respect to this matter by the Association’s board of directors. Secondly, the record does not document and the parties do not indicate that the architectural [773] control committee ever met to consider whether or not the Solomons’ palm trees violated the standards set forth in section 4.05 of the CCRs. The record contains no indication that either the board or the architectural control committee made any findings, formal or informal, as to whether the palm trees met the standard in section 4.05 upon which the disapproval of the palm trees was apparently based.

There is some indication in the record that the Association attempted to assess the esthetic impact of the palm trees on the community. The matter was discussed at several meetings, members of the board communicated in writing and over the phone with Bernard Solomon, and at least two “polls” were conducted to elicit community opinion. As a matter of law, however, these acts on the part of the Association without appropriate decisions by the governing board or the proper committee did not constitute a reasonable application of the CCRs to the palm trees dispute. The CCRs carefully and thoroughly provide for the establishment of an Architectural Control Committee and impose upon it specifically defined duties, procedures and standards in the consideration of such matters. The record as it stands discloses a manifest disregard for these provisions: whatever decision was made does not appear to be that of the governing body or the committee designated to make the decision; no findings of any sort bridge the analytic gap between facts and the conclusions of the decisionmaker, whoever that was; and the record provides no means for ascertaining what standard was employed in the decisionmaking process.^{[FN 6]}

(6) To be successful on a motion for summary judgment, the moving party must show it is entitled to judgment as a matter of law. (Baldwin v. State of California (1972) 6 Cal.3d 424, 439 [99 Cal. Rptr. 145, 491 P.2d 1121]; Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417 [42 Cal. Rptr. 449, 398 P.2d 785].) (4c) Having failed to establish that its actions were regular, fair and reasonable as a matter of law, the Association was not entitled to a mandatory injunction on summary judgment and the trial court erred in granting that relief.

Disposition

That portion of the trial court’s judgment granting the Association declaratory relief and affirming its interpretation of the declaration of covenants, [774] conditions and restrictions (¶¶ 1 and 2) is affirmed. Otherwise the judgment is reversed. Each party shall bear its own costs on appeal.

Rickles, Acting P.J., and McDaniel, J., concurred.

[FN. 1] The facts as contained in the record are largely undisputed and are drawn from the complaint, the parties’ statements in motions, briefs and on deposition, and supporting declarations.

[FN. 2] All further citations will be to the CCRs unless otherwise noted.

[FN. 3] Section 8.02(b) provides: “The provisions of [the CCRs] shall be liberally construed to accomplish [their] purpose of creating a uniform plan for the operation of the project for the mutual benefit of all Owners.”

[FN. 4] At oral argument counsel for the Solomons indicated that in Mr. Solomon’s deposition he stated it was not his understanding that landscaping restrictions of this sort applied to the Solomons’ property or that the Solomons were required to submit plans for approval of the date palms. But evidence of Mr. Solomon’s subjective belief would have been irrelevant; the test is an objective one. (See 1 Witkin, Summary of Cal. Law (1973) Contracts, § 522, p. 445, and authorities there cited.)

[FN. 5] Even had the basis for the injunction been solely the failure to submit plans for approval, the record would still be deficient. There is nothing showing final board action on that basis either. Moreover, had that been the sole basis, the injunction should properly have been in the alternative, e.g., either to remove the trees or submit a plan. Here the order was unconditional and absolute.

[FN. 6] From comments made at oral argument it may appear that these things were in fact done and are simply not reflected in the record. That of course may be properly shown in subsequent proceedings.

Ryland Mews Homeowners Association v. Munoz

(2015) 234 Cal.App.4th 705

[Architectural Control; Nuisances; Hardsurface Flooring] A HOA has the authority to place restrictions on the type of flooring that may be installed in a homeowner’s unit in order to prevent the creation of nuisances.

Plastiras & Terrizzi, Michael Patrick Terrizzi; and Mariam Smairat for Plaintiffs and Respondents.
Ruben Munoz, in pro. per.; and John M. Wadsworth for Defendant and Appellant.

OPINION

ELIA, Acting P. J. —

In this dispute between defendant Ruben Munoz and plaintiff Ryland Mews Homeowners Association (HOA or Association), plaintiff obtained a preliminary injunction requiring Munoz to remedy the unauthorized modification of the flooring in his upstairs condominium unit to reduce the transmission of noise to the unit below. Defendant contends that the superior court improperly balanced the prospective harm to each party and erroneously concluded that plaintiff would prevail at trial. We find no abuse of discretion and will therefore affirm the order.

Background

When defendant and his wife moved into unit No. 322 of the subject property in February 2011, he replaced the carpets with hardwood floors to accommodate his wife’s severe dust allergy. After the installation, Resty Cruz and David Yborra, occupants of the unit below, began to experience “sound transfer” through the floor. Before defendant’s occupancy Cruz and Yborra had never had any problems with sound transmission from above. But after February 2011 the noise from upstairs at all hours of the day and night became “greatly amplified” and “intolerable,” so that Cruz and Yborra found it difficult to relax, read a book, watch television, or sleep.

On November 28, 2011, Susan Hoffman, an employee of the firm that provided property management services for the Association, wrote to defendant, notifying him that his alteration of the flooring appeared to have been made without prior approval of the HOA. Hoffman requested a copy of the written approval in the event that the property management files were incomplete. Defendant did not respond within the 30 days Hoffman had given him, so on January 31, 2012, with authorization from the HOA board of directors, Hoffman wrote to defendant again, this time requesting alternative dispute resolution (ADR) under the Davis-Stirling Common Interest Development Act, Civil Code former section 1369.530 (now Civ. Code, § 5935).^{[FN. 1]} [708] Included in the letter was the text of former section 1369.530, which expressly allowed defendant 30 days in which to accept or reject ADR; after that period, the request was to be deemed rejected. (Former § 1369.530, subd. (c).) Defendant still did not respond.

Plaintiff brought this action on July 12, 2012, seeking an injunction and declaratory relief. Plaintiff alleged that defendant had violated the restrictions applicable to all residents at the time of the floor installation. On September 28, 2012, plaintiff applied for a preliminary injunction, “restraining and enjoining” defendant from “[m]aintaining hardwood flooring” and from violating other HOA restrictions. Attaching declarations from Hoffman, Cruz, and Yborra, plaintiff alleged that without the requested injunction, adjacent homeowners would continue to suffer “great and immediate irreparable harm in that Defendant’s hardwood floors create an acoustic nuisance, both violating the neighboring owner’s sense of quiet enjoyment, but also [sic] reducing property values for all owners within the Association.” Plaintiff further asserted that it was “inevitable” that it would ultimately prevail in the action and that compliance with the HOA rules would be of only “moderate” cost to defendant.

Defendant opposed the motion, contending that hardwood floors were necessary in his home because his wife was severely allergic to dust; consequently, removing the floors and installing new floors not only would be expensive but would endanger his wife’s health. He found the likelihood of plaintiff’s success on the merits to be “questionable” and maintained that no irreparable harm had been shown. Both defendant and his wife, Elena Delgado, submitted declarations describing Delgado’s medical condition. Defendant also stated that he had received no complaints about noise between the time of installation in February 2011 and the notice of November 28, 2011.

On December 12, 2012, defendant moved to strike the complaint, enter judgment on the pleadings, and refer the matter to ADR. Defendant contended that plaintiff had failed to file a certificate stating that the ADR requirements set forth in former section 1369.530 had been met or waived. The court granted defendant’s motion to strike as authorized by former section 1369.560, subdivision (b). It granted plaintiff leave to amend, however, and it denied defendant’s motion for judgment on the pleadings as well as his request for referral to ADR. Plaintiff then amended its complaint and submitted a certificate of compliance in accordance with former section 1369.560, subdivision (a)(2), (3).

The hearing on the injunction request took place on December 13, 2012. The court confirmed with plaintiff that it was not demanding that defendant [709] “tear up the floors,” but sought only a “proposal through a contractor” for a modification consistent with the HOA rules. Plaintiff added a request for an interim solution, that throw rugs be placed on 80 percent of the floors outside the kitchen and bath areas. The court found those suggestions reasonable and granted the request. Its written order, however, was not filed until April 2013.

In March 2013 defendant demurred to the first amended complaint and again moved to strike, alleging an insufficient certificate showing compliance with the statutory ADR provisions, plaintiff’s failure “to state facts demonstrating a cause of action,” and its failure “to demonstrate the necessity for injunctive relief.” This time, however, the court overruled the demurrer and denied the motion to strike, observing that factual disputes existed which should not be resolved at the pleading stage of the litigation.

On the same day, April 17, 2013, the court filed its order granting the preliminary injunction. As the language of the order informs defendant’s analysis of it as an unjustified mandatory injunction, we quote the relevant portions: “1. Any further installation of flooring or floor covering in your separate interest located at 435 N. 2nd St. #322 San Jose, CA shall be in compliance with the Association governing documents. [¶] 2. You shall reduce undue transmission of acoustic trespass or nuisance from the subject unit in violation of the governing documents. Such transmissions shall be reduced as follows: … 80% of the total flooring area, other than kitchen or bathrooms[,] must be covered with throw rugs or comparable sound[-] dampening material, in particular those areas with heavy travel such as hallways; [¶] 3. You shall present to the Ryland Mews Homeowners Association, through its Board of Directors or design review committee, a proposal for modification to the existing floor covering, such proposal to be within the specific approved guidelines and specifications for floor covering modifications established by the Association.” The modification proposal had to be submitted within 30 days. If plaintiff rejected the proposal in good faith, based on the Association’s architectural standards, defendant then had an additional 15 days to supplement or revise his proposal. If defendant’s plans were approved, defendant had 15 days thereafter to initiate construction of the modifications and 60 days to complete the construction. He then was required to notify the Association and “cooperate with a compliance inspection.” From that order granting the injunction defendant brought this timely appeal.

Discussion

Defendant raises two issues on appeal. He first contends that the court abused its discretion in granting the injunction, which he classifies as mandatory. He then asserts that the court “lacked jurisdiction” to issue the [710] injunction because the ADR request did not comply with former section 1369.530 (now § 5935). Because this second issue will be dispositive if defendant is correct, we address it first.

1. Compliance with former section 1369.530

(1) Under former section 1369.520, subdivision (a), plaintiff, as an association managing a common interest development, was prohibited from filing an action for declaratory, injunctive, or writ relief against defendant unless the parties had “endeavored to submit their dispute to alternative dispute resolution pursuant to this article.” Plaintiff could initiate this process by complying with former section 1369.530. That section required plaintiff to serve on defendant a “Request for Resolution” containing the following: “(1) A brief description of the dispute between the parties. [¶] (2) A request for alternative dispute resolution. [¶] (3) A notice that the party receiving the Request for Resolution is required to respond within 30 days of receipt or the request will be deemed rejected. [¶] (4) If the party on whom the request is served is the owner of a separate interest, a copy of this article.” (Former § 1369.530, subd. (a).)

Defendant’s grievance is directed at the last condition. He complains that he did not receive a copy of the entire article, which comprised the ADR provisions applicable to common interest developments. (See former §§ 1369.510-1369.570.) Defendant insists that in its ADR request to him plaintiff did not substantially comply with former section 1369.530, subdivision (a)(4), when it included a copy of only that statute. He then contends, “Because Mr. Munoz challenged the defect by way of a demurrer and a motion to strike, the trial court should have granted his relief.”

We are not, however, reviewing the court’s order overruling defendant’s demurrer and denying his motion to strike the first amended complaint.^{[FN. 2]} It was in that demurrer and motion to strike, not his opposition to the injunction, that defendant raised the issue of noncompliance with former section 1369.530. Furthermore, defendant cites no authority for his assertion that plaintiff’s failure to provide the entire article 2 of chapter 7 of title 6 of part 4 of division 2 in requesting ADR deprived the court of jurisdiction to issue the preliminary injunction.

Nor does he identify any prejudice attributable to plaintiff’s technical deficiency in complying with the statute. While pointing out that the “obvious purpose” of former section 1369.530, subdivision (a)(4), is to “apprise the [711] owner of important procedural rights and duties involved in the ADR process,” defendant, an attorney, has never asserted that he did not understand his rights. The letter he received requesting ADR informed him that he had 30 days to accept or reject the request, and that if he did not respond, he would be deemed to have rejected it. He implicitly rejected the request. Although the request letter contained the entire text of former section 1369.530 — including subdivision (a)(4), the provision requiring plaintiff to provide a copy of article 2 of chapter 7 of title 6 of part 4 of division 2 — defendant never complained that he had not received the entirety of that article until his motion to strike the complaint. And even then his supporting declaration did not relate any confusion about or misunderstanding of his rights. Also absent in defendant’s argument is any indication that he would have accepted plaintiff’s request if he had received the entire article governing the procedures involved in ADR between him and the Association. In these circumstances we cannot find prejudice in the omission of the remaining statutory provisions in article 2.^{[FN. 3]}

2. Merits of the preliminary injunction request

(2) In deciding whether to issue a preliminary injunction, a court must weigh two “interrelated” factors: (1) the likelihood that the moving party will ultimately prevail on the merits and (2) the relative interim harm to the parties from issuance or nonissuance of the injunction. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 999 [90 Cal.Rptr.2d 236, 987 P.2d 705]; Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432 [261 Cal.Rptr. 574, 777 P.2d 610].) “[T]he decision to grant a preliminary injunction rests in the sound discretion of the trial court.” (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69 [196 Cal.Rptr. 715, 672 P.2d 121].) Accordingly, on appeal we review that decision for abuse of discretion. “A trial court will be found to have abused its discretion only when it has `”exceeded the bounds of reason or contravened the uncontradicted evidence.”‘ [Citations.] Further, the burden rests with the party challenging the injunction to make a clear showing of an abuse of discretion.” (Ibid.; Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1047 [151 Cal.Rptr.3d 65].)

[712] In reviewing the lower court’s ruling for abuse of discretion, we do not reweigh the evidence or evaluate the credibility of witnesses. “`[T]he trial court is the judge of the credibility of the affidavits filed in support of the application for preliminary injunction and it is that court’s province to resolve conflicts.’ [Citation.] Our task is to ensure that the trial court’s factual determinations, whether express or implied, are supported by substantial evidence. [Citation.] Thus, we interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court’s order.” (Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 625 [43 Cal.Rptr.2d 774].)

Defendant contends that a higher level of scrutiny is called for here because the superior court’s order was “clearly a mandatory injunction,” not a prohibitory one.^{[FN. 4]} In his view the injunction “cannot bear that scrutiny because the facts presented in support of the injunction did not demonstrate that this was an extreme case in which the right to mandatory injunctive relief was clear, or that irreparable harm would ensue without the order actually granted.”

Defendant’s argument in effect asks this court to reweigh the evidence. He repeats his assertion that he did not violate the HOA restrictions; two of the alleged rules “didn’t exist when he installed the hardwood floors. He couldn’t have breached them.” He further suggests that his own opposition “cast[s] severe doubt on the credibility of the sound problems described by Mr. Yborra and Mr. Cruz.” Defendant further contests the remedy imposed in the injunction. Noting the interim measure of using throw rugs on the floors, he insists that there were “other, less draconian” remedies than “requiring Mr. Munoz to tear out his entire floor.”

Defendant’s analysis is flawed. Not only does he request an improper reweighing of the witnesses’ credibility, his contentions are premised on an inaccurate representation of the evidence presented below. Contrary to defendant’s assumption, for example, plaintiff was not relying on the 2012 HOA rules; in asking for the injunction it clearly relied on the 1993 [713] “Declaration of Restrictions,” which was in effect when defendant replaced the carpeting with hardwood floors. Section 3.3 of that document provided, “No activity shall be conducted in any Unit or Common Area that constitutes a nuisance or unreasonably interferes with the use or quiet enjoyment of the occupants of any other Condominium.” Section 3.17 more specifically stated, “No Unit shall be altered in any manner that would increase sound transmission to any adjoining or other Unit, including, but not limited to, the replacement or modification of any flooring or floor covering that increases sound transmissions to any lower Unit.” And under section 7.2(v), prior written approval had to be obtained from the architectural review committee before “[a]ny replacement or modification to any floor coverings or wall or ceiling materials or any penetration or other disturbance of any wall, floor, or ceiling, if the replacement[,] modification, penetration or disturbance could result in any increase in the sound transmissions from the Unit to any other Unit.” Defendant’s protest that he was wrongly accused of violating nonexistent restrictions is without merit.

Defendant further misrepresents the court’s order. The court did not direct him to tear out the hardwood floors; at the hearing it emphasized more than once that it did not want anyone inferring that “he’s got to go back out and tear up the floors. That’s not what I’m ordering.” What the court did order was a proposal from defendant to the board of directors or to a design review committee for modifying the floors to bring them into compliance with the guidelines established by the Association.

(3) We see no abuse of discretion in such an order, even if the injunction was of a mandatory rather than prohibitory nature subject to heightened appellate scrutiny. Indeed, the directive to find a compromise in modifying the flooring, as well as the interim remedy of using throw rugs, reflected a balanced consideration of the circumstances of everyone involved, including the residents below who were adversely affected by defendant’s violation of the noise and nuisance restrictions. The finding that defendant’s violation of the HOA rules had resulted in a continuing “great nuisance” for the occupants below was supported by substantial evidence in the declarations of Cruz and Yborra, whose credibility was for the superior court, not this court, to determine. The evidence clearly supported the court’s weighing of the relative interim harm to the parties and its implied determination that plaintiff would ultimately prevail on the merits. We must conclude, therefore, that defendant has failed to meet his burden to show that the court exceeded the bounds of reason or contravened uncontradicted evidence. Reversal is not required.

[714] Disposition

The order is affirmed.

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

[FN. 1] All further statutory references are to the Civil Code.

[FN. 2] The challenge to this order was made by a petition for writ of mandate, which this court summarily denied. On appeal defendant duplicates the argument raised in the petition, even to the extent that he refers to himself as the real party in interest.

[FN. 3] In addition to former section 1369.530, article 2 of chapter 7 of title 6 of part 4 of division 2 consisted of (1) an explanation of the terms “`[a]lternative dispute resolution'” and “`[e]nforcement action'” (former § 1369.510); (2) the requirement that ADR be attempted before an association may file an action for injunctive, declaratory, or writ relief (former § 1369.520); (3) the requirement that ADR be completed within 90 days (former § 1369.540); (4) the tolling of the statute of limitations after the ADR request is served (former § 1369.550); (5) the requirement of a certificate of compliance (former § 1369.560); (6) referral of the action to ADR by stipulation of the parties (former § 1369.570); (7) a provision governing the court’s consideration of fees and costs (former § 1369.580); and (8) a requirement that an association provide the members with an annual summary of article 2 (former § 1369.590).

[FN. 4] “`[T]he general rule is that an injunction is prohibitory if it requires a person to refrain from a particular act and mandatory if it compels performance of an affirmative act that changes the position of the parties.'” (Oiye v. Fox, supra, 211 Cal.App.4th at p. 1048, quoting Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435, 446 [60 Cal.Rptr.2d 641].) Although a preliminary mandatory injunction is subject to stricter review on appeal, (Teachers Ins. & Annuity Assn. v. Furlotti (1999) 70 Cal.App.4th 1487, 1493 [83 Cal.Rptr.2d 455]), “[t]he principles upon which mandatory and prohibitory injunctions are granted do not materially differ. The courts are perhaps more reluctant to interpose the mandatory writ, but in a proper case it is never denied” (Allen v. Stowell (1905) 145 Cal. 666, 669 [79 P. 371]).

Ruoff v. Harbor Creek Community Association

(1992) 10 Cal.App.4th 1624

[Insurance; Liability] A HOA’s members were held personally liable in excess of the HOA’s insurance policy limit for injuries stemming from the HOA’s common areas that were owned by the HOA’s members as tenants in common.

Dicaro, Highman, D’Antony, Dillard, Fuller & Gregor, Henry P. Schrenker, Sheri Laughlin Bills, Cassidy, Warner, Brown, Combs & Thurber, Lloyd W. Felver, Stockdale, Peckham & Werner, Kelly A. Woolsey, Waters, McCluskey & Boehle and Joseph R. Saunders for Defendants and Respondents.

OPINION
SONENSHINE, J.

Martha Ruoff and Russell Ruoff, individually and as Martha’s conservator, challenge summary judgments entered in favor of various defendants [FN. 1] in a suit arising out of Martha’s slip and fall on a stairway in the common area of the 152-unit Harbor Creek complex. Martha sustained catastrophic injuries. According to appellants, whose statement is uncontradicted by respondents, on August 9, 1988, Martha fell backwards, landing at the bottom of the stairs, her foot wedged in a gap between the side of the building and the edge of the stairs. Comatose and bleeding, she was taken to Mission Hospital and admitted to the intensive care unit (ICU) where she was treated for multiple skull fractures. Due to complications, she underwent partial amputation of her left thumb, index and middle fingers. A month after the accident, a percutaneous endoscopic gastrostomy (insertion of a feeding tube in the stomach) was performed. The following month, a lumbo-peritoneal shunt was inserted in her spine for draining fluids. Martha remained in a coma. A tracheotomy tube inserted at the time of the accident was not removed for two and one-half months. Released from Mission Hospital after 107 days in the ICU, Martha was transferred to the Rehabilitation Institute of Santa Barbara, where she underwent a course of treatment and therapy until, after eight months, the Ruoffs were no longer able to pay for the institutional care. Martha now lives at home, where her 72-year-old husband takes care of her. She is unable to bathe, dress or feed herself. She is incontinent in bladder and bowel. Her diagnosis and prognosis include “probable permanent memory loss, gait disturbance, incontinence and other severe neurological abnormalities.” Her only communication is “babble.” She will require 24-hour-a-day care for the remainder of her life. Her medical expenses to date exceed $750,000.

The summary judgment argument of the defendants, individual owners of Harbor Creek condominium units, is based on the following undisputed facts: (1) They are tenants-in-common of the common areas of the complex,[1627]each owning an undivided 1/152 interest; (2) they have delegated control and management of the common areas to their homeowners association (HOA), which has no ownership interest in the property; (3) the HOA has liability insurance of $1 million; and (4) it is authorized to assess its members for pro-rata contribution if a judgment exceeds policy limits. The owners argue that for these reasons, (a) Civil Code section 1365.7 [FN. 2] should be read to immunize them from civil liability, and (b) departure from the common law rule of property owners’ liability would serve the greater good and work no substantial detriment to injured third persons.

The Ruoffs contend the immunity of section 1365.7 is expressly limited to volunteer HOA officers or directors and cannot be expanded judicially to include others. The owners, as tenants-in-common in the common area, are subject to the same nondelegable duties to control and manage their property as are other property owners. The trial court agreed with the owners. We agree with the Ruoffs and reverse.

On appeal from summary judgment, the trial court’s determination of a question of law is subject to independent review. (Wu v. Interstate Consolidated Industries (1991) 226 Cal.App.3d 1511, 1514 [277 Cal.Rptr. 546].) [1] Initially, we note the Ruoffs’ assertion that the trial court failed to fulfill its duty under Code of Civil Procedure section 437c, subdivision (g), to specify the reasons for its determination. [FN. 3] We agree the statement of reasons-by-reference was noncompliant. But the court’s failure to perform its statutory duty does not automatically result in reversal. We need only determine whether the record establishes the owners’ entitlement to summary judgment in their favor. As stated in Barnette v. Delta Lines, Inc. (1982) 137 Cal.App.3d 674, 682 [187 Cal.Rptr. 219]: “We are not confined,[1628]in considering the granting of the summary judgment, to the sufficiency of the stated reasons. It is the validity of the ruling which is reviewable and not the reasons therefor. [Citation.]” (See also California Aviation, Inc. v. Leeds (1991) 233 Cal.App.3d 724, 730-731 [284 Cal.Rptr. 687].)

II.

[2a] The summary judgments were granted on the basis that, as a matter of law, the individual condominium owners could not be held liable for injuries sustained in the common area of the Harbor Creek complex. The record establishes that the decision involved no determination of whether the owners had exercised due care; it involved only a determination that no duty existed. [FN. 4]

In the usual case, an owner or occupier of real property must exercise ordinary care in managing the property. (§ 1714, subd. (a).) The duty of care is owed to persons who come on the land (see generally, Rowland v. Christian (1968) 69 Cal.2d 108 [70 Cal.Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496]), and ordinarily it is nondelegable. (Swanberg v. O’Mectin (1984) 157 Cal.App.3d 325, 331- 332 [203 Cal.Rptr. 701].)

In the case of a condominium complex, section 1365.7 immunizes a volunteer officer or director of an association managing a common interest residential development from civil tort liability if (1) the injury-producing negligent act or omission was performed within the scope of association duties, was in good faith, and was not willful, wanton, or grossly negligent, and (2) the association maintained at least $1 million of applicable general liability insurance if the development exceeds 100 separate interests. [FN. 5] (§ 1365.7, subds. (a)(1), (2), (3) and (4)(B).) Subdivision (b) allows the volunteer officer or director to recover actual expenses incurred in executing the duties of the position without losing the statutory immunity. But subdivision (c) excludes from the definition of volunteer any officer or director who, at the time of the negligent act or omission, received compensation as an employee of statutorily designated persons or entities. Under subdivision (d), the association itself does not enjoy immunity for the negligent acts or omissions of its officers or directors. Finally, subdivision (e) expressly limits[1629]the immunity of section 1365.7 to the designated persons: “This section shall only apply to a volunteer officer or director who resides in the common interest development either as a tenant or as an owner of no more than two separate interests in that development.” We find this to be a comprehensive and extraordinarily clear immunity statute.

[3a] Statutory interpretation presents a question of law. (Schuhart v. Pinguelo (1991) 230 Cal.App.3d 1599, 1607 [282 Cal.Rptr. 144].) [2b] The owners contend that in section 1365.7, the Legislature intended to immunize them from liability for tortious acts or omissions in the management and control of the commonly held property. Under established rules of statutory construction, we may not read such an intention into this unambiguous statute. [3b] “It is axiomatic that in the interpretation of a statute where the language is clear, its plain meaning should be followed. [Citation.]” (Lubin v. Wilson (1991) 232 Cal.App.3d 1422, 1427 [284 Cal.Rptr. 70]; see also Forrest v. Trustees of Cal. State University & Colleges (1984) 160 Cal.App.3d 357, 362 [206 Cal.Rptr. 595].) Moreover, we must attach significance to every word of a statute. (See McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1454 [282 Cal.Rptr. 828].) [2c] If we were to read the statute as the owners urge, we would need to read out the express limitation of immunity of subdivision (e). We are not permitted or inclined to do that. [FN. 6]

We also reject the owners’ convoluted argument that by reverse implication, based on a reading of Davert v. Larson (1985) 163 Cal.App.3d 407 [209 Cal.Rptr. 445], section 1365.7 endows them with a right to delegate their duties of control and management of the common areas and thus escape liability to which they would otherwise be subjected under established law.

In Davert, the Court of Appeal, in a case of first impression, reversed a summary judgment in favor of a defendant property owner who asserted “he owed no duty of care to plaintiffs as a landowner because he took title to his interest in the property subject to a recorded declaration of covenants, conditions and restrictions delegating exclusive control over the subject property to [a property owners’ association].” (Davert v. Larson, supra, 163[1630]Cal.App.3d at p. 409.) The owner claimed his ownership interest of 1/2500 was too small to provide a basis for liability and he personally exercised no control over the management of the property. (Id. at p. 410.) The appellate court noted with approval the conclusion of “a leading commentator” that “individual owners of common areas in California are liable to third parties for torts arising in common areas. [Citation.]” (Id. at p. 411.) In its discussion, the court alluded to the fact that existing California law did “not require insurance to protect third parties in the case of common area torts.” (Id. at p. 412.) Thus, “relieving individual owners in common of liability would eliminate any motivation on the part of any party to exercise due care in the management and control of commonly owned property and could leave third parties with no remedy at law.” (Ibid.) The Davert court concluded: “[T]enants in common of real property who delegate the control and management of the property to a separate legal entity should not be immunized from liability to third parties for tortious conduct.” (Ibid.)

The owners say Davert means that if the duty of control and management is delegated to a separate legal entity and sufficient liability insurance is available for injured parties, then the reason for imposition of liability on the individual owners evaporates. The argument continues: Since section 1365.7 was enacted after publication of Davert, and requires HOA’s to maintain certain minimum levels of liability insurance, the Legislature must have been reacting to Davert and intending to eliminate common law rules regarding property owners’ liability.

The argument is crafty, but unavailing. [4] In the first place, when we are urged to find that a statute is intended to silently abrogate an established rule of law, we must heed the Supreme Court’s admonition that “it should not ‘be presumed that the Legislature in the enactment of statutes intends to overthrow long-established principles of law unless such intention is made clearly to appear either by express declaration or by necessary implication.’ [Citation.]” (Theodor v. Superior Court (1972) 8 Cal.3d 77, 92 [104 Cal.Rptr. 226, 501 P.2d 234]; see also McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn., supra, 231 Cal.3d at p. 1455.) [2d] In the second place, the owners’ reliance on Davert for negative inferences is off the mark. The clear holding of Davert is that tenants in common who delegate control and management of the property remain jointly and severally liable for tortious acts or omissions causing injury to third persons. We do not deem the court’s observation about the wisdom of retaining landowners’ liability where ownership is shared to be judicial advice that a tenant in[1631]common can buy his or her way out of liability by purchasing insurance for the property manager. [FN. 7]

III.

The owners attempt to justify the summary judgment with a number of other policy-type arguments to illustrate why we should rewrite section 1365.7. They assert the HOA’s liability insurance of $1 million is sufficient to take care of the needs of the Ruoffs, who would therefore suffer no detriment if liability were not imposed on the individuals. But even if we agreed with the proposition in the abstract-and we do not-the issue of sufficiency of the insurance policy would be a question of fact, inappropriate for determination by summary judgment. (Code Civ. Proc., § 437c, subd. (c).) [FN. 8]

The owners also contend that because the HOA can make assessments against the association members for pro-rata shares of any judgment exceeding the policy limits, immunity for the individuals will not work any hardship on the Ruoffs. But, as the Ruoffs astutely observe, “[p]roblems with this approach abound,” [FN. 9] and “the power to assess is not the panacea Defendants argue.” Indeed, it might prove to be a wholly illusory remedy.

The owners assert that under the HOA declaration of covenants, conditions and restrictions, the HOA is incorporated as a nonprofit mutual benefit[1632]corporation, therefore the members are entitled to immunity under Corporations Code section 7350, subdivision (a). [FN. 10] They argue that because the HOA is a corporation, the Ruoffs must look solely to the corporate assets. The problem with this contention is that the record does not establish the fact of incorporation. [FN. 11] Therefore, we express no opinion as to its merits. The judgments in favor of the owners are reversed and the matter remanded for further proceedings in accordance with this decision. The Ruoffs shall recover their costs on appeal.

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

FN 1. Summary judgments were granted in favor of Raymond J. Niksarian; Sonya Niksarian; Anne S. Bates; Frank Bates and Anne S. Bates, Trustees for the Trust Agreement of Frank F. Bates and Anne S. Bates; Warner Younis; Pat Younis; Judd L. Miller; William E. Hasbrouck; Robert Banks; Nancy Banks; Wendell F. Deeter and E. Violet Deeter as Trustees for the Deeter Family Revocable Trust; Ronald F. Lackey; Barbara A. Lackey; and Dorothy Auerbach.

FN 2. Civil Code section 1365.7 is part of the Davis- Stirling Common Interest Development Act ( Civ. Code, div. 2, pt. 4, ch. 1, § 1350 et seq.). The act provides conditional immunity from tort damages to “a volunteer officer or director who resides in the common interest development either as a tenant or as an owner of no more than two separate interests in that development.” See discussion, post.

All further statutory references are to the Civil Code unless otherwise specified.

FN 3. Code of Civil Procedure section 437c, subdivision (g) provides, in pertinent part: “Upon the grant of a motion for summary judgment … the court shall … specify the reasons for its determination,” referring to the evidence supporting and opposing which shows no triable issue exists.

When counsel asked the court to specify its reasons for granting the summary judgment motions, the court responded: “I have spent more time thinking about this than any other case in my inventory. I am incorporating every argument that the moving parties have made as the basis for my decision. I am throwing it all to the Fourth. [¶] Your briefs are the bases for your positions when the court of appeals [sic] deals with this issue. I will not make any independent findings.”

FN 4. The court’s order granting summary judgment states: “[T]he court finds as a matter of law that the aforementioned defendant homeowners did not breach any duty owed to the plaintiffs herein.” The record establishes that no factual evidence regarding the owners’ acts or omissions was before the court. The owners relied on the HOA’s liability policy, its internal rules, and declarations of individual owners who said they did not exercise control of the common areas.

FN 5. The Harbor Creek complex contains 152 units, and there is no dispute that the number of separate interests exceeds 100.

FN 6. When it enacted section 1365.7, the Legislature was also aware of the Uniform Common Interest Ownership Act of 1982, but did not adopt it. Under section 3-107 of the uniform act, an HOA is responsible for maintenance of the common areas of a condominium complex, unless the HOA’s declaration provides otherwise. Under section 3-113, individual unit owners are immune from civil liability for injuries occurring in the common areas if the HOA maintains sufficient liability insurance meeting certain standards and naming each condominium owner as an insured party with respect to liability based on his or her ownership of the common areas. Obviously, the Legislature and the authors of the uniform act took different paths.

FN 7. We also reject the owners’ half-hearted assertion that section 1365.7 violates equal protection under the federal and state Constitutions. The matter warrants little discussion. The owners say the immunity offered to the HOA’s volunteer officers and directors “is irrational … because the effect is to immunize those who are vested with control over the common area, and allow potential liability to remain with those who retain no control over the common area.” As the Ruoffs observe, there is no fundamental right or suspect class involved, thus the classification need only bear a rational relationship to a legitimate state purpose. (Weber v. City Council (1973) 9 Cal.3d 950, 959 [109 Cal.Rptr. 553, 513 P.2d 601].) The bill’s author stated: “This bill is greatly needed to protect the directors and officers of the 13,000-16,000 community interest associations in California that will need 30,000 to 40,000 volunteers to serve on the boards of these associations each year. That need may not be met as many people are not volunteering because they fear being sued.” (Letter dated Sept. 1, 1991, from Assemblywoman Lucy Killea to the Honorable George Deukmejian.)

FN 8. In light of the apparent irremediable nature of Martha’s injuries and the continuing accrual of medical expenses which are already approaching the $1 million policy limit, the owners appear to be blowing smoke when they claim the insurance is “sufficient.”

FN 9. The Ruoffs pose apt questions: “[W]hat happens to the current owners who sell their units before judgment? What happens to a unit owner whose individual insurance company denies coverage for an assessment in contract, but does [sic] over third party injuries occurring in common areas? What about those who sell after judgment, but before the assessment? What happens to a future unit owner whose individual insurance company denies coverage because the ‘loss’ preceded the commencement of the policy?”

FN 10. Corporations Code section 7350, subdivision (a) relieves members of a nonprofit mutual benefit corporation from personal liability for the debts, liabilities or obligations of the corporation.

FN 11. The only proof of incorporation offered is a copy of article II, section 2.01 of the HOA declaration, stating: “Organization of Association. The Association is or shall be incorporated under the name of Harbor Creek Community Association, as a corporation not for profit under the Nonprofit Mutual Benefit Corporation Law of the State of California.” This is hardly proof. Moreover, the various separate statements of undisputed facts in support of the summary judgment motions do not contain any reference to incorporation and member immunity. Finally, we do not even know if such a defense is at issue in the lawsuit because we have not been provided with a copy of the answers filed by the defendants.

Diamond Heights Village Association, Inc. v. Financial Freedom Senior Funding Corp.

(2011) 196 Cal.App.4th 290

[Assessment Collection; Judgment Lien Merger] When a HOA assessment lien is enforced by the HOA through judicial action, the debt secured by the assessment lien is merged into the judgment.

Ragghianti Freitas, David F. Feingold and Rodrigo D. Dias for Plaintiff and Appellant and for Plaintiff and Respondent.
Steyer Lowenthal Boodrookas Alvarez & Smith, Jeffrey H. Lowenthal, Carlos A. Alvarez and Benjamin R. Ehrhart for Defendant and Appellant and for Defendant and Respondent.

OPINION

[294] SEPULVEDA, J.

Plaintiff Diamond Heights Village Association, Inc. (Association), sued the owners of a condominium unit for failing to pay assessments levied for maintenance of common areas. The Association also sued Financial Freedom Senior Funding Corporation (Financial Freedom), which holds a deed of trust on the unit securing a reverse mortgage loan. In its single cause of action against Financial Freedom, the Association sought foreclosure of assessment liens and priority over the deed of trust. Financial Freedom obtained a summary judgment in its favor. A bench trial against the unit owners on other causes of action was held, at which the court partially voided Financial Freedom’s deed of trust.

The Association appeals the summary judgment for Financial Freedom, and Financial Freedom appeals the judgment on the remaining claims voiding its property interest. Financial Freedom also appeals the court’s attorney fee orders.

We affirm summary judgment for Financial Freedom on the lien foreclosure cause of action and reverse the judgment on the remaining claims to the extent it voids Financial Freedom’s deed of trust. The trial court erred in voiding Financial Freedom’s security interest in the property when Financial Freedom had not been joined as a party on the claims being tried, and final judgment had already been entered in its favor. We affirm the court’s attorney fee orders.

I. FACTS

The Association maintains a 396-unit residential condominium complex in San Francisco known as Diamond Heights Village. Diamond Heights Village is governed by a first restated declaration of covenants, conditions, and restrictions (CC&R’s) recorded in 1990. Under the CC&R’s, homeowners agree to pay assessments levied by the Association for maintenance of Diamond Heights Village. (See Civ. Code, § 1366 [authorizing assessments].)

[295]

A. Assessment liens

Mark Williams owned a unit in Diamond Heights Village and failed to pay the assessments. The Association recorded notices of delinquent assessment in 1994 and 1995. To avoid collection efforts by the Association and other creditors, Williams filed five separate bankruptcy petitions from 1995 to 1999, each of which was dismissed. Several days after the fifth bankruptcy petition was dismissed, Williams conveyed the Diamond Heights Village condominium unit to himself and his mother, Lois Crosby, as joint tenants. In 2000 and 2001, the Association recorded assessment liens against the condominium unit. (Civ. Code, § 1367.)

B. Judgment on assessment liens

In 2002, the Association obtained a default judgment against Williams for foreclosure of the assessment liens. The total amount of the judgment, including attorney fees and costs, was $39,199.^[[1]^] The Association did not record an abstract of judgment. The court issued a writ of execution for the sale of the unit to satisfy the judgment. Crosby, now a joint tenant of the unit, filed a petition for bankruptcy to evade the Association’s collection efforts. A second writ of execution was issued and a foreclosure sale was set for 2004, after Crosby’s bankruptcy petition was dismissed, but Williams filed a sixth bankruptcy petition on the day set for the sale. That bankruptcy petition, like all the others, was dismissed. Several months later, Williams and Crosby embarked on another transaction affecting the condominium unit before a foreclosure sale was conducted.

C. New first deed of trust

In October 2004, Crosby applied for a reverse mortgage with defendant Financial Freedom, a subsidiary of IndyMac Bank. A homeowner must be 62 years of age or older to qualify for a reverse mortgage with Financial Freedom. Crosby, born in 1920, qualified. Crosby’s application stated that there was an outstanding judgment against her and listed the Association among those holding a lien on the property.

Financial Freedom ordered a preliminary title report that noted title ownership by Crosby and her son, Williams, as joint tenants. The preliminary title report did not list the Association’s assessment liens despite their [296] recordation with the county recorder’s office. The Association’s judgment had not been recorded and was not listed in the title report.^[[2]^]

In November 2004, Financial Freedom obtained certification from the Association concerning certain features of Diamond Heights Village, such as unit ownership in fee simple and the provision of property and liability insurance. The Association also certified that there was nothing in the CC&R’s “that would prevent the placing of a first mortgage lien on an individual unit or would jeopardize the first lien status of such a mortgage due to future association assessments.” (Italics added.) Financial Freedom’s certification form did not ask if there were unpaid past assessments.

Financial Freedom completed the transaction in December 2004, creating a new first mortgage. Williams transferred his one-half interest in the unit to his mother, Crosby, giving her full title to the unit. Crosby then executed a deed of trust in favor of Financial Freedom to secure a reverse mortgage loan. The two documents—Williams’s grant deed and Crosby’s deed of trust—were notarized by the same person on the same date, and recorded within seconds of each other. Williams did not receive any consideration from his mother for the transfer of his ownership interest in the unit. In funding the loan, Financial Freedom paid off first and second deeds of trust totaling $219,935. Financial Freedom also paid $48,948 in cash to Crosby. Financial Freedom funded the loan in an amount no less than $278,505.

D. Amended judgment on assessment liens

An amended judgment against Williams and Crosby for foreclosure of the Association’s assessment liens was entered in 2005. The amended judgment included interest and costs incurred from the time of the original 2002 judgment and totaled $51,184. The Association did not record an abstract of judgment for the amended judgment. The Association obtained a writ of execution for the sale of the unit, but Crosby filed another petition for bankruptcy. The petition was later dismissed. The judgment was last renewed in January 2008 for an updated amount of $64,854.

E. Complaint to set aside fraudulent transfer and to foreclose lien

The Association learned of Financial Freedom’s first deed of trust at some point and, in an effort to establish priority for its assessments over Financial Freedom’s deed of trust, filed the present action in December 2007. The [297] Association stated six causes of action: setting aside fraudulent transfer; conspiracy; breach of contract (CC&R’s); foreclosure of a lien; open book account; and injunctive relief. All of the causes of action were stated against Williams and Crosby but only the fourth cause of action for foreclosure of a lien was stated against Financial Freedom. The fourth cause of action also named judgment creditor Hassen & Associates as a defendant. In that cause of action, the Association alleged that homeowners Williams and Crosby owed assessments amounting to $67,149 as of December 2007 (plus assessments accruing after filing of the complaint). It was further alleged that the homeowners had not satisfied the 2000 and 2001 assessment liens, nor the 2002 judgment and that those liens and judgment “remain valid and encumber the property.” The Association alleged that Financial Freedom’s 2004 deed of trust is subordinate to the liens and judgment held by the Association. While seeking judicial foreclosure of the assessment liens, the Association also stated its intention to reserve its right to enforce the existing judgment foreclosing the same liens.

F. Answers and cross-complaint

Financial Freedom answered the complaint raising several affirmative defenses, including the statute of limitations. It also filed a cross-complaint for declaratory relief and other claims. Financial Freedom asserted that it has a valid first lien against the Diamond Heights Village condominium unit and that it is “a bona fide encumbrancer with respect to said lien.” It sought a judicial determination of the rights and interests of itself and the Association in the property. Judgment creditor Hassen & Associates also answered the complaint. Homeowners Williams and Crosby never answered the complaint and their default was entered in March 2008.

G. Summary judgment motion

In February 2009, Financial Freedom moved for summary judgment on the Association’s complaint, which stated a single cause of action against Financial Freedom for foreclosure of liens. Financial Freedom noted that the Association did not have a judgment lien and was basing its priority claim upon the assessment liens. Financial Freedom argued that the Association’s action for foreclosure of the assessment liens, and the claimed priority under them, failed because (1) foreclosure of the assessment liens had already been litigated, reduced to judgment, and merged into that judgment; (2) foreclosure of the assessment liens was time-barred; and (3) the CC&R’s expressly subordinated assessment liens to first mortgage holders like Financial Freedom.

[298] Judge Charlotte Woolard ruled on the motion on May 6, 2009, and granted summary judgment on the first ground. The court ruled that the Association’s assessment liens merged into the judgment in the earlier foreclosure action against the homeowners, that the judgment was unrecorded, and that Financial Freedom’s recorded deed of trust thus had priority.

H. Judgment for Financial Freedom

Financial Freedom requested dismissal of its cross-complaint and sought entry of judgment in its favor. In June 2009, Judge Woolard entered a judgment in favor of Financial Freedom and against the Association decreeing that the Association “shall recover nothing, and shall obtain no relief, as against defendant Financial Freedom, in this action.” The court denied Financial Freedom’s motion for contractual attorney fees under the CC&R’s because there was “no privity” between Financial Freedom and the Association. (Civ. Code, § 1717.)

I. Trial of remaining claims

The Association’s remaining claims against homeowners Williams and Crosby and judgment creditor Hassen & Associates were tried before Judge Nancy Davis on May 26, 2009, a few weeks after Judge Woolard had granted summary judgment to Financial Freedom. The Association contended that Judge Woolard’s summary judgment ruling in Financial Freedom’s favor did not preclude Judge Davis from setting aside the alleged fraudulent conveyance and determining Financial Freedom’s security interest as a result of setting aside that conveyance. The court agreed and proceeded to resolve issues affecting Financial Freedom despite a dispositive ruling in Financial Freedom’s favor on the only cause of action against it and its absence from trial on the remaining claims. The only defendant appearing at trial was judgment creditor Hassen & Associates.

The court issued a statement of decision in August 2009. The court found that “the transfer from Williams to Crosby was fraudulent and must be set aside to the extent necessary to satisfy the Association’s claim” for assessments. The court noted that, “[a]t the time of the transfer, Williams and Crosby owned the Unit as Joint tenants, each owning an undivided one-half interest. As the transfer is set aside, the result is that Williams and Crosby remain joint tenants and were joint tenants at the time the deed of trust was granted to Financial Freedom by Crosby.” Crosby “could encumber her own one half interest, but could not encumber the one half interest in the Unit owned by Williams who, at the time, was a judgment debtor of the Association.” The court ruled that the deed of trust “conveyed by Crosby to Financial [299] Freedom is void to the extent [the deed] purported to encumber Williams’s one half interest” in the condominium unit.

The court’s statement of decision acknowledges that a fraudulent transfer is not voidable against “a person who took in good faith and for a reasonably equivalent value.” (Civ. Code, § 3439.08, subd. (a).) The court ruled that Financial Freedom was not a bona fide encumbrancer entitled to the protection of this statute because Financial Freedom “actively participated in the transfer from Williams to Crosby” and performed an inadequate title review that failed to discover the recorded assessment liens. The court also suggested that Financial Freedom forfeited any claim to bona fide encumbrancer status by dismissing its cross-complaint for declaratory relief and choosing not to appear at trial.

J. Judgment for the Association

The court entered a judgment in August 2009 ordering the Diamond Heights Village condominium unit sold and declaring the rights of the Association, homeowners, Financial Freedom, and judgment creditor Hassen & Associates to the proceeds of the sale. The court declared Hassen & Associates to have senior position, with right of first payment. The court ordered the remaining funds held until any appeal was resolved and, thereafter, “divided between the Association and Financial Freedom in accordance with their one-half secured interest” in the unit. The court awarded the Association $89,562 for assessments through May 2009, payable from Williams’s one-half interest in the property. The court also awarded the Association attorney fees against the homeowners under the CC&R’s, later assessed at $82,086, to be paid from Williams’s property interest. Financial Freedom was left with just Crosby’s original one-half interest in the property to secure its mortgage loan and payments of at least $278,505. Sale proceeds from that one-half interest may be insufficient to pay the full amount owed to Financial Freedom.

In September 2009, Financial Freedom filed a motion to vacate the judgment. Financial Freedom argued that the court had no jurisdiction to enter a judgment affecting Financial Freedom’s deed of trust because (1) the prior summary judgment fully adjudicated the Association’s single cause of action against Financial Freedom, (2) the Association’s appeal of the summary judgment divested the court of jurisdiction before the court ruled on the remaining claims affecting Financial Freedom’s interest, and (3) Financial [300] Freedom was not a defendant on the Association’s remaining claims and not a party to the trial. The court denied the motion in February 2010.

K. The appeals

We are presented with three related appeals, which we have consolidated for purposes of briefing, argument, and decision. On the summary judgment in Financial Freedom’s favor on the foreclosure cause of action: the Association appeals the judgment and Financial Freedom separately appeals the post judgment order denying it attorney fees. On the judgment following trial in the Association’s favor on the cause of action for fraudulent conveyance and all other remaining claims: Financial Freedom appeals both the judgment (and order denying its motion to vacate the judgment) and the post judgment order awarding the Association attorney fees.

II. DISCUSSION

A. Summary judgment was properly granted to Financial Freedom

As noted above, the Association recorded assessment liens against the Diamond Heights Village condominium unit in 2000 and 2001. (Civ. Code, § 1367.) In 2002, the Association obtained a default judgment against homeowner Williams for foreclosure of the assessment liens. The Association did not record an abstract of judgment. The court issued writs of execution for the sale of the unit to satisfy the judgment but the homeowners’ petitions for bankruptcy stayed proceedings and prevented levy. It was at this juncture that Williams conveyed his one-half interest in the property to his joint tenant and mother, Crosby, and she then mortgaged the entire property to Financial Freedom.

The Association then filed a new complaint in which it asserted a single cause of action against Financial Freedom for foreclosure of the Association’s assessment liens and sought priority over Financial Freedom’s deed of trust. Financial Freedom moved for summary judgment arguing, among other things, that the Association’s action for foreclosure of the assessment liens, and claimed priority under them, failed because foreclosure of the assessment liens had already been litigated, reduced to judgment, and merged into that judgment. Judge Woolard granted the motion. The court ruled that the Association’s assessment liens merged into the judgment from the earlier foreclosure action against the homeowners, the judgment was unrecorded, and Financial Freedom’s recorded deed of trust thus had priority.

(1) The court was correct. A condominium assessment becomes a debt of the owner when the assessment is levied by the condominium association. [301] (Civ. Code, § 1367.1, subd. (a).) “The debt is only a personal obligation of the owner, however, until the community association records a `notice of delinquent assessment’ against the owner’s interest in the development. Recording this notice creates a lien and gives the association a security interest in the lot or unit against which the assessment was imposed.” (Sproul & Rosenberry, Advising Cal. Common Interest Communities (Cont.Ed.Bar 2003) § 5.36, p. 328 [hereafter, Common Interest Communities]; see Civ. Code, § 1367, subd. (d).) The lien dates from the time the lien is properly recorded. (Thaler v. Household Finance Corp. (2000) 80 Cal.App.4th 1093, 1100-1102 .) “California follows the `first in time, first in right’ system of lien priorities.” (Id. at p. 1099.) Condominium assessment liens follow this same system. An assessment lien is “prior to all other liens recorded subsequent to the notice of assessment, except that the [CC&R’s] may provide for the subordination thereof to any other liens and encumbrances.”^[[3]^] (Civ. Code, § 1367, subd. (d).)

(2) It is generally understood that a lien is not a debt but acts as “security for payment of a debt or other obligation.” (4 Cal. Real Estate (3d ed. 2003) § 10:128, p. 395 (rel. 11/2003); see Civ. Code, § 2872.) The debt is the assessment, which is secured by the assessment lien. An assessment lien may be enforced “in any manner permitted by law,” including judicial foreclosure. (Civ. Code, § 1367, subd. (e).) When an assessment lien is enforced through judicial action, the debt secured by the lien is merged into the judgment. The doctrine of merger is an aspect of res judicata. (Passanisi v. Merit-McBride Realtors, Inc. (1987) 190 Cal.App.3d 1496, 1510.) “Under that aspect a claim presented and reduced to judgment merges with the judgment and is thereby superseded. [Citation.] The claimant’s remedy thereafter is to enforce the judgment; he may not reassert the claim.” (Ibid.)

“[W]hen a final judgment is entered, all causes of action arising from the same obligation are merged into the judgment and all alternative remedies to enforce that obligation extinguished by the judgment granting one of those remedies. [Citation.] The creditor cannot thereafter enforce the original obligation, because the judgment `”. . . creates a new debt or liability, distinct from the original claim or demand, and this new liability is not merely evidence of the creditor’s claim, but is thereafter the substance of the claim itself.”‘ ([Citation,] italics in original.) In other words, the . . . judgment extinguishes the contractual rights and remedies previously extant, [302] substituting in their place only such rights as attach to a judgment.” (O’Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 602.)

(3) Once a judgment is obtained, the judgment creditor may create a judgment lien by recording an abstract of judgment or may choose to levy execution, thereby creating an execution lien. (Code Civ. Proc., §§ 674, 697.710; Kahn v. Berman (1988) 198 Cal.App.3d 1499, 1507, fn. 7.) An execution lien does not arise when a writ of execution is issued by the court, but rather when the levying officer levies the property (constructively seizes it) by recording a copy of the writ of execution and notice of levy. (Code Civ. Proc., §§ 697.710, 700.010, 700.015, subd. (a); Kahn, supra, at p. 1508; see generally 8 Witkin, Cal. Procedure (5th ed. 2008) Enforcement of Judgment, § 99, p. 143.) The record here does not show that a levy ever occurred to create an execution lien, and the Association makes no claim to having an execution lien. The Association relies exclusively upon its assessment liens, despite having already foreclosed those liens in a 2002 judgment. The claim is unavailing. Those liens were foreclosed and the debts they secured were merged into the judgment. The Association’s remedy was to record the judgment, in which case the judgment lien would have given the Association priority over Financial Freedom. (Code Civ. Proc., § 697.310 et seq.)

(4) The Association seems to argue that an assessment lien lasts forever, even if foreclosed in a prior proceeding. This is incorrect. A lien is not a debt but acts as “security for payment of a debt or other obligation.” (4 Cal. Real Estate, supra, § 10:128, p. 395 (rel. 11/2003).) All liens are “extinguished by the lapse of time” if an enforcement action is not timely pursued on the principal obligation.^[[4]^] (Civ. Code, § 2911, subd. 1.) Where an action is timely pursued, the debt secured by the lien merges into the judgment. The judgment then becomes the debt. The judgment is enforceable for a period of 10 years, and longer if renewed. (Code Civ. Proc., §§ 683.020, 683.120, subd. (b).) (5) The Association has an enforceable judgment. It does not, however, have a lien on the property because the assessment liens and underlying debts merged into the judgment and the judgment was not recorded.

The Association argues that application of the merger doctrine under these circumstances creates the anomalous situation of a condominium association losing priority the moment a judgment is entered on an assessment. The Association argues that assessment liens should work like real estate attachment liens imposed during litigation. Where an attachment lien is in effect, a [303] judgment lien created on the same property relates back to the date the attachment lien was created and preserves the judgment creditor’s original priority. (Code Civ. Proc., § 697.020, subd. (b).) But a judgment itself does not relate back to the date of the attachment liens—it is the judgment lien that does so. Here, there is no judgment lien. The Association, therefore, has an unsecured judgment and may pursue enforcement against the homeowners. The Association may not, however, relitigate foreclosure of its assessment liens in an effort to achieve priority over Financial Freedom’s deed of trust.

The Association maintains that it is not really relitigating the assessments but, instead, the fraudulent conveyance that gave Financial Freedom a deed of trust. But Financial Freedom was not named as a defendant in the fraudulent conveyance cause of action. Financial Freedom was named as a defendant in a single cause of action for judicial foreclosure of the assessment liens. In that cause of action, the Association sought recovery against the homeowners for past assessments and alleged that the 2000 and 2001 liens encumber the property to secure the assessments. Those allegations were asserted, and adjudicated, in prior litigation. They may not be relitigated now. The trial court properly granted summary judgment to Financial Freedom on the Association’s cause of action to foreclose the previously litigated assessments liens.

B. The trial court erred in rendering a judgment on remaining claims that impaired Financial Freedom’s interests

The trial court granted defendant Financial Freedom summary judgment on the only cause of action stated against it. The order was filed on May 6, 2009. Financial Freedom then dismissed its cross-complaint, and Judge Woolard entered judgment for Financial Freedom on June 3, 2009. The judgment decreed that the Association “shall recover nothing, and shall obtain no relief, as against defendant Financial Freedom, in this action.”

Trial of the Association’s remaining claims against other defendants commenced before Judge Davis on May 26, 2009, and judgment was entered on August 17, 2009. Trial of those remaining claims was proper, including trial of the Association’s cause of action against the homeowners for fraudulent conveyance of their condominium unit. It was not proper, however, to void Financial Freedom’s security interest in the property (in whole or part) when Financial Freedom had not been joined as a party to the fraudulent conveyance cause of action, and final judgment had already been entered in its favor.

The Association brought its first cause of action to set aside a fraudulent transfer of real property against homeowners Williams and Crosby. A transfer is fraudulent if the debtor made the transfer “[w]ith actual intent to hinder, [304] delay, or defraud any creditor of the debtor,” “[w]ithout receiving a reasonably equivalent value in exchange for the transfer,” and with the intent to incur debts beyond the debtor’s ability to pay. (Civ. Code, § 3439.04, subd. (a)(1), (2).) Here, the Association alleged that Williams fraudulently conveyed his one-half interest to Crosby for no consideration in order to evade his debt to the Association, and that the transfer left Williams insolvent. The Association further alleged that Crosby was complicit in the fraudulent scheme. Crosby, once she obtained full ownership of the property, took out a reverse mortgage loan and made Financial Freedom the beneficiary of a deed of trust securing the loan. The Association did not allege that Financial Freedom participated in the homeowners’ fraudulent scheme. In fact, the Association did not name Financial Freedom as a defendant in its action to set aside the alleged fraudulent conveyance. Nor did the Association name the trustee of the deed of trust, Alliance Title Company. The Association’s position, adopted by Judge Davis, was that the court could void Financial Freedom’s security interest in the conveyed property despite Financial Freedom’s nonjoinder. This was error.

(6) The Association was free to exclude Financial Freedom from the fraudulent conveyance cause of action if it sought only a personal judgment against Williams and Crosby. But if the Association wanted to void Financial Freedom’s interest in the property, it should have joined the deed beneficiary as a party. (Code Civ. Proc., § 379.) Transferees are necessary parties “in an action to declare a transfer void as fraudulent.” (Heffernan v. Bennett & Armour (1952) 110 Cal.App.2d 564, 586-587.) Williams transferred his one-half interest to Crosby, making her the principal transferee, but the transaction also included Crosby’s execution of a deed of trust benefitting Financial Freedom. The Association may not void the deed of trust without joining Financial Freedom as a party and giving it an opportunity to defend the transfer. Trust beneficiaries, like Financial Freedom, “are necessary parties to an action affecting the security of a deed of trust.” (Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454, 461; accord, Sylvester v. Sylvester (Alaska 1986) 723 P.2d 1253, 1259-1260 [mortgagee a necessary party in fraudulent conveyance action to set aside mortgage].) A deed of trust is, in practical effect, a mortgage with a power of sale. (Monterey S.P. Partnership, supra, at p. 460.) A respected commentator on the law has noted that a mortgagee is not indispensable to a fraudulent conveyance action “if the conveyance is to be set aside subject to the mortgage, . . . [b]ut where the suit is to set aside a previously given mortgage as fraudulent, then the mortgagee is a proper party defendant.” (3A Moore, Moore’s Federal Practice (2d ed. 1996) ¶ 19.09[6], p. 19-191.) The Association argues that Financial Freedom’s absence from the trial is the fault of Financial Freedom itself because it dismissed its cross-complaint seeking a declaration of its interests. This is incorrect. [305] Financial Freedom was entitled to abandon its cross-complaint after obtaining summary judgment in its favor on the only cause of action stated against it in the complaint. It was the Association’s obligation, as plaintiff in the fraudulent conveyance cause of action, to name parties necessary to obtaining the relief it sought.

The judgment voiding Financial Freedom’s interest in the property is also defective in another respect. Judge Woolard granted Financial Freedom’s summary judgment motion on May 6, 2009, and entered judgment on June 3, 2009. Judge Davis did not enter judgment on the remaining claims until August 17, 2009, over two months after Financial Freedom obtained a judgment decreeing that the Association “shall recover nothing, and shall obtain no relief, as against defendant Financial Freedom, in this action.” Judge Davis’s judgment also came after the Association appealed Judge Woolard’s judgment in Financial Freedom’s favor. Despite that final decree, and its appeal, Judge Davis issued a judgment granting the Association relief against Financial Freedom. Judge Davis voided Financial Freedom’s deed of trust as to one-half of the property and gave the Association priority over Financial Freedom on that half. This, too, was error.

(7) Judge Woolard properly entered judgment for Financial Freedom in this multiple defendant action after adjudicating the single cause of action stated against it. (Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 437.) “A judgment is the final determination of the rights of the parties in an action or proceeding.” (Code Civ. Proc., § 577, italics added.) “It is elementary that where a tribunal has jurisdiction over the parties and the subject matter, the jurisdiction continues until a final judgment is entered. . . .” (Riley v. Superior Court (1957) 49 Cal.2d 305, 309, italics added.) The court lost jurisdiction over Financial Freedom once judgment was entered in its favor, and thus had no power to void its property interest in the condominium unit.

Therefore, we must reverse the judgment entered by Judge Davis and remand the case with directions to enter a judgment affecting the rights only of those defendants properly before it: homeowners Williams and Crosby and judgment creditor Hassen & Associates. The judgment shall not invalidate any part of Financial Freedom’s deed of trust or otherwise impair its interests in the property.

C. The trial court was correct in ruling that Financial Freedom is not entitled to attorney fees

(8) Attorney fees incurred to enforce a contract are recoverable by the party prevailing on the contract if the contract specifically provides for such [306] recovery. (Civ. Code, § 1717.) The Diamond Heights Village CC&R’s contain several attorney fee provisions. The CC&R’s state that the Association may maintain a lawsuit against a unit owner for delinquent assessments, and that any judgment against the owner shall include an award of reasonable attorney fees. The Association is also entitled to attorney fees, according to the CC&R’s, in a court action to foreclose assessment liens. The CC&R’s also contain a general attorney fee provision, which states that the Association, or any owner, has the right to enforce the CC&R’s and is entitled to recover attorney fees in such an action.

The Association, in its foreclosure cause of action against the homeowners, Financial Freedom, and judgment creditor Hassen & Associates, included in its complaint a plea for an award of contractual attorney fees against the homeowners. The Association did not request attorney fees against Financial Freedom. Nevertheless, Financial Freedom filed a motion for contractual attorney fees after obtaining summary judgment in its favor. The court denied the motion, and Financial Freedom challenges that denial on appeal. The trial court was correct.

Civil Code section 1717, subdivision (a) provides in pertinent part that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”

(9) Civil Code “[s]ection 1717 was enacted to establish mutuality of remedy where [a] contractual provision makes recovery of attorney’s fees available for only one party [citations], and to prevent oppressive use of one-sided attorney’s fees provisions.” (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 128.) In this case, for example, the attorney fee provision in the CC&R’s entitling the Association to attorney fees if it prevailed in an action against a condominium unit owner would reciprocally entitle the owner to fees should he or she prevail.

Civil Code section 1717 is also interpreted “to further provide a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff would clearly be entitled to attorney’s fees should he prevail in enforcing the contractual obligation against the defendant.” (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at p. 128.) Thus, a [307] defendant who did not sign the contract containing the fee provision was held to be entitled to attorney fees where the defendant was unsuccessfully sued as an alleged coventurer bound by the contract. (Ibid.) Had the plaintiff in that case prevailed on its claim, the defendant would have had to pay the plaintiff’s attorney fees. (Ibid.) The court reasoned that the defendant therefore had a reciprocal right to fees when she prevailed. (Id. at p. 129.)

These principles do not aid Financial Freedom because the Association did not sue Financial Freedom under the CC&R’s, never sought fees against Financial Freedom under the CC&R’s, and was not entitled to fees against Financial Freedom had the Association prevailed. Civil Code section 1717 covers signatories to a contract containing a fee provision and those who are sued as alleged parties to the contract or otherwise alleged to be bound by its terms. The Association never alleged that Financial Freedom was bound by the CC&R’s. The Association included Financial Freedom in the cause of action for judicial foreclosure of liens because Financial Freedom claimed a senior lien that the Association disputed. The action between the Association and Financial Freedom rested upon a legal question as to lien priority, not contractual enforcement of the CC&R’s.

Financial Freedom argues that it is nevertheless entitled to fees because “as a practical matter” Financial Freedom, and not the legally liable homeowners, would have had to bear the cost of the fees if the Association prevailed against the owners. Financial Freedom reasons as follows: if the Association prevailed on its judicial foreclosure claim and assertion of lien priority, the Association would have been entitled to fees against the homeowners under the CC&R’s. Those fees, as a debt of the homeowners, would have been paid to the Association from the sale proceeds before Financial Freedom, as a junior lienholder on half the property, received any proceeds (or Financial Freedom would have to pay the Association’s secured debt and fees to protect Financial Freedom’s property interest and avoid foreclosure of the property). Financial Freedom argues that this collateral economic consequence of a foreclosure action entitles it to fees.

Financial Freedom’s argument relies upon Saucedo v. Mercury Sav. & Loan Assn.(1980) 111 Cal.App.3d 309 (Saucedo). In Saucedo, home buyers took the property subject to an existing loan secured by a deed of trust. (Id. at p. 311.) The deed holder refused to allow the purchasers to assume the loan without paying a transfer fee and increased interest, and threatened to enforce a due-on-sale clause requiring full payment of the loan. (Ibid.) The purchasers filed a successful suit to enjoin the deed holder from [308] enforcing the due-on-sale clause, and the court held that they were entitled to attorney fees. (Id. at pp. 312, 315.) The court found that the purchasers would not have been liable for fees had the deed holder prevailed because the loan note was between the deed holder and prior owner but also found that “as a . . . practical matter” the purchasers would have to pay off the secured debt, including attorney fees, if they wanted to prevent foreclosure and retain their home. (Id. at p. 315.) The court concluded that “[t]his practical `liability’ of the nonassuming grantee [purchaser] is sufficient to call into play the remedial reciprocity established by Civil Code section 1717.” (Ibid.) Since the purchasers would, “as a real and practical matter” be required to pay attorney fees incurred by the deed holder to prevent foreclosure, the purchasers were entitled to recover attorney fees when they prevailed in a declaratory relief action that forestalled foreclosure. (Ibid.)

There are distinguishing points between Saucedo and this case. A central point of distinction is that the purchasers who recovered fees in Saucedo were the successors in interest to the property subject to the promissory note containing the disputed due-on-sale clause and fee provision. (See Leach v. Home Savings & Loan Assn. (1986) 185 Cal.App.3d 1295, 1304-1306 [distinguishing and limiting Saucedo].) Here, the Association and Financial Freedom are complete strangers to each other, and the dispute rests upon the priority of competing security interests established by separate documents (an assessment lien and a deed of trust). The case resembles Clar v. Cacciola (1987) 193 Cal.App.3d 1032, 1037-1039 more than it resembles Saucedo, supra, 111 Cal.App.3d at page 315. In Clar, this District Court of Appeal refused to extend the reciprocal attorney fee provision of Civil Code section 1717 where the parties advanced competing claims on the priority of two deeds of trust. (Clar, supra, at pp. 1038-1039.) The prevailing defendants in Clar claimed a right to recover attorney fees because, had they lost, the plaintiffs’ attorney fees would have been added to the secured debt under the terms of the deed of trust, which the defendants would have had to pay “to prevent foreclosure and protect their equity in the property.” (Id. at p. 1037.) The court held that the defendants’ potential obligation to pay fees was too speculative. (Id. at pp. 1037-1038.)

(10) Likewise, Financial Freedom’s claim for attorney fees stretches Civil Code section 1717 too far. The statute is meant to prevent “oppressive use of one-sided attorney’s fees provisions” (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at p. 128), not to abolish the general rule that each party pay its own attorney fees. It is one thing to grant nonsignatories the right to attorney fees where they are sued as if they were contracting parties liable for fees or otherwise held to the terms of the contract, and quite another to grant nonsignatories the right to attorney fees where no legal liability for fees was ever asserted and only an attenuated economic impact is threatened. The “practical liability” approach advocated by Financial Freedom is fraught with [309] peril. As one commentator has noted, “[i]n practical liability . . . cases, courts must make very fact specific analyses about the prevailing party’s potential liability had [he or] she lost. Nearly identical factual circumstances could yield entirely different results. The danger with analyzing the prevailing party’s practical liability is subjectivity and lack of guidelines for the courts to follow.” (Miller, Attorneys’ Fees for Contractual Non-Signatories Under California Civil Code Section 1717: A Remedy in Search of a Rationale (1995) 32 San Diego L.Rev. 535, 578-579, fn. omitted.) We decline Financial Freedom’s invitation to embark on this course.

D. The Association was entitled to attorney fees against the homeowners

As noted earlier, claims against the remaining defendants were tried after defendant Financial Freedom obtained summary judgment. Following that trial, the court awarded the Association, as the prevailing party, attorney fees against defendant homeowners Williams and Crosby under the CC&R’s and a statute authorizing fee recovery in a condominium association’s action to collect delinquent assessments. (Civ. Code, §§ 1717, 1366, subd. (e)(1).) Financial Freedom does not deny the validity of these fee provisions but argues that fees should have been denied in this instance because “as a practical matter” Financial Freedom as a junior lienor on one-half of the foreclosed property, not the homeowners, will bear the economic impact of the fee award. We again note our reluctance to embrace the practical liability approach to Civil Code section 1717 but have no occasion to discuss it further here. We are reversing the judgment to the extent that it voided Financial Freedom’s senior lienor status on the property, and thus no adverse economic impact attends the court’s order awarding fees to the Association against the homeowners. Financial Freedom’s objection to the fee award is therefore moot.

III. DISPOSITION

The June 3, 2009 judgment in favor of Financial Freedom is affirmed. The August 17, 2009 judgment in favor of the Association is reversed to the extent that it voided, in whole or part, Financial Freedom’s deed of trust on the property. The case is remanded with directions to amend the judgment consistent with the views expressed in this opinion, and to permit Financial Freedom an opportunity to address the court concerning amendment at any hearing conducted on the matter.

The September 24, 2009 order denying Financial Freedom attorney fees against the Association is affirmed. The February 8, 2010 order granting the Association attorney fees against Williams and Crosby is affirmed.

[310] The parties shall bear their own costs and attorney fees incurred on these appeals.

Ruvolo, P. J., and Rivera, J., concurred.

[1] Monetary amounts are rounded to the nearest dollar in this opinion.

[2] The title report did list an abstract of judgment in favor of Hassen & Associates in the amount of $6,438 that was recorded in 1996. On appeal, it is undisputed that Hassen & Associates has a judgment lien superior to the secured interest of the Association and Financial Freedom.

[3] To ensure financeability of condominiums, most CC&R’s “provide that the association’s lien is subordinate to the lien of any first deed of trust” regardless of when recorded, and Financial Freedom argued as an alternative basis for summary judgment that the CC&R’s here are no exception. (Common Interest Communities, supra, § 5.46 p. 339, italics added; see generally 9 Miller & Starr, Cal. Real Estate (3d ed. 2001) §§ 25B:92, 25C:57, pp. 25B-181 to 25B-185, 25C-182 to 25C-183 (rel. 10/2007) [hereafter, Cal. Real Estate].) We resolve the summary judgment on the ground adopted by the trial court and thus do not reach that issue.

[4] As yet another alternative basis for summary judgment, Financial Freedom argued that the Association’s 2007 action to foreclose on the 2000 and 2001 liens was time-barred. (See Cause of Action to Enforce Condominium Assessment (1989) 20 Causes of Action 827, § 9, accessible on Westlaw, database updated Sept. 2010 [assessment liens subject to statute of limitations].) We need not reach that issue.

Barry v. OC Residential Properties

(2011) 194 Cal.App.4th 861

[Foreclosure; Redemption Price] When a property is sold through nonjudicial foreclosure of an assessment lien, the redemption price may include maintenance and repair expenses incurred by the purchaser during the redemption period that were reasonable necessary for the preservation of the property.

Law Offices of David A. Elwell and David A. Elwell for Plaintiff and Appellant.
Law Offices of Steven D. Silverstein and Steven D. Silverstein for Defendant and Respondent.

OPINION
RYLAARSDAM, Acting P. J.-

Plaintiff Shelby E. Barry filed a petition in the superior court to determine the redemption price for her unit in a common interest development that defendant OC Residential Properties, LLC had acquired at a nonjudicial foreclosure sale. (Civ. Code, § 1367.1, subd. (g); Code Civ. Proc., § 729.070, subd. (a).) The trial court ruled the amount due was $18,148.71, a sum that included over $17,900 in expenses defendant paid for maintenance and repair work on the unit after the foreclosure sale, an electric bill, and interest on the foreclosure sale purchase price. Plaintiff challenges the inclusion of these sums in the redemption price and the constitutionality of the procedure for determining the amount she needed to pay to redeem the property. Finding no error, we shall affirm the order.

FACTS

In 1977, plaintiff acquired a unit in a common interest development. Over the years, she leased the unit to others.[865]

Plaintiff failed to pay the monthly association fee. In June 2008, Associated Lien Services, the trustee under an October 2006 lien recorded by the homeowners association, issued a notice of trustee’s sale. According to the notice, “the unpaid balance of the obligation secured by the property,” plus costs, exceeded $10,000. Initially, the sale was scheduled for July 2008 but it was continued until June 17, 2009.

On the latter date, defendant purchased the unit at the foreclosure sale for $66,092.60. The sale was subject to plaintiff’s right of redemption.

At the time of the foreclosure sale the unit was vacant. In a declaration supporting her petition, plaintiff claimed her “last tenant made substantial improvements” and the property was “in a condition such that I could re-rent it” with only some “minimal cleaning . . . .”

After purchasing the unit at the foreclosure sale, defendant paid a locksmith $336.11 to change the locks. One of its employees claimed, “Upon entering the . . . property on 6/17/09, . . . [defendant] discovered the property in need of repair and rehabilitation.”

Between June 22 and July 2 defendant: (1) paid a pest control company $800 to repair termite damage to the unit; (2) hired a contractor to make repairs, paying $16,800 for the work; and (3) paid an electricity bill for $17.15.

In her declaration, plaintiff claimed that, on July 3, she had a locksmith replace the locks. She also asserted “[a]n inspection of [the] property was made at that time which disclosed . . . the work undertaken by [defendant] was not complete,” and the unit “could not be rented in the condition it was in.”

The trustee sent plaintiff a letter enclosing a schedule showing the balance due to redeem the unit was $29,548.71 after deducting nearly $57,900 then held in trust. The schedule included the sums mentioned above, plus two months homeowners’ association assessments, taxes, collection costs, and $770 for two months’ interest on defendant’s purchase price. Plaintiff objected to including the repair expenses, utility payment, and interest in the redemption price. She deposited $11,500 with the trustee and filed the current petition for a judicial determination of the amount owed.

After a hearing, the court issued an order declaring “the additional amount required to redeem the property total[ed] $18,148.71,” constituting the difference between plaintiff’s deposit and the balance claimed by the trustee. In part, the court found plaintiff “failed to meet her burden of proof to show that[866]the work performed was not for the reasonable maintenance, upkeep, and repair of improvements on the property.” Although not supported by the appellate record, plaintiff’s opening brief asserts she timely paid the additional sum due and redeemed the unit.

DISCUSSION

1. Introduction

Generally, there is no right of redemption in nonjudicial foreclosure proceedings. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1236.) But this case involves the foreclosure of a unit in a common interest development that resulted from plaintiff’s failure to pay the homeowner association’s monthly assessment for maintenance and preservation of the development’s common areas. (Civ. Code, §§ 1367, subd. (a); 1367.1, subd. (g) [association may enforce lien for delinquent assessments through “sale by . . . trustee”].) Code of Civil Procedure section 729.035 declares, “Notwithstanding any provision of law to the contrary, the sale of a separate interest in a common interest development is subject to the right of redemption . . . if the sale arises from a foreclosure by the association of a common interest development pursuant to subdivision (g) of [s]ection 1367.1 of the Civil Code . . . .” (See also Civ. Code, § 1367.4, subd. (c)(4) [“A nonjudicial foreclosure by an association to collect upon a debt for delinquent assessments shall be subject to a right of redemption”].)

Code of Civil Procedure section 729.060, subdivision (a) requires “[a] person who seeks to redeem the property [to] deposit the redemption price with the levying officer who conducted the sale before the expiration of the redemption period.” Subdivision (b) of this statute defines the redemption price as “the total of the following amounts . . . . [¶] (1) The purchase price at the sale. [¶] (2) The amount of any assessments or taxes and reasonable amounts for fire insurance, maintenance, upkeep, and repair of improvements on the property. [¶] (3) Any amount paid by the purchaser on a prior obligation secured by the property to the extent that the payment was necessary for the protection of the purchaser’s interest. [¶] (4) Interest on the amounts described in paragraphs (1), (2), and (3) . . . .” In addition, subdivision (c) of Code of Civil Procedure section 729.060 authorizes an offset to the redeeming party for “[r]ents and profits from the property paid to the purchaser or the value of the use and occupation of the property to the purchaser . . . .”

[1] After the trustee notified plaintiff of the amount required to redeem the property, she challenged it by filing a petition under Code of Civil Procedure section 729.070. This statute creates a procedure allowing one[867]“seeking to redeem the property [who] disagree[s with] the redemption price” to petition “the court for an order determining the redemption price . . . .” (Code Civ. Proc., § 729.070, subd. (a).) The statute requires a hearing on the petition at which “the person seeking to redeem the property has the burden of proof.” (Code Civ. Proc., § 729.070, subds. (c), (e).) “At the conclusion of the hearing, the court shall determine by order the amount required to redeem the property” based “upon affidavit or evidence satisfactory to the court” and, “[i]f an amount in addition to that deposited with the levying officer is required to redeem the property, the person seeking to redeem shall” have “10 days after the issuance of the order[ to] pay the additional amount . . . .” (Code Civ. Proc., § 729.070, subds. (f), (g).)

The trial court ruled against plaintiff, finding she had not met her burden of proof to show the redemption price demanded by the trustee exceeded the legally permitted amount or that she entitled to an offset.

2. Due Process

Plaintiff attacks the constitutionality of the redemption procedure created by Code of Civil Procedure section 729.070. She claims defendant’s “conduct [in entering the unit] prevented [her] from describing the [property’s] condition” and therefore the statute “does not afford a meaningful hearing for [a] . . . homeowner to meet her[] burden of proof.”

[2] Both the United States Constitution and the California Constitution guarantee no one may be deprived of his or her property “‘without due process of law.'” (Morongo Band of Mission Indians v. State Water Resources Control Bd. (2009) 45 Cal.4th 731, 736.) In civil proceedings, this guarantee includes the right to have a matter decided by a tribunal having jurisdiction of the action that is free of bias and conducts a full hearing on the matter after the parties have been given notice of the proceeding and an opportunity to appear and participate in it. (7 Witkin, Summary of Cal. Law (10th ed. 2005) Constitutional Law, §§ 640-642, pp. 1041-1044; 2 Witkin, Cal. Proc. (5th ed. 2008) Jurisdiction, §§ 302-304, 307-308, pp. 914-916, 918-921.) “When the Constitution requires a hearing, it requires a fair one, one before a tribunal which meets established standards of procedure. . . . Procedure is the fair, orderly, and deliberate method by which matters are litigated. To judge in a contested proceeding implies the hearing of evidence from both sides in open court, a comparison of the merits of the evidence of each side, a conclusion from the evidence of where the truth lies, application of the appropriate laws to the facts found, and the rendition of a judgment accordingly.” (Estate of Buchman (1954) 123 Cal.App.2d 546, 560.)[868]

[3] Plaintiff’s argument is meritless. She does not claim the trustee failed to give her notice of her default or the impending nonjudicial foreclosure sale resulting from her failure to pay monthly homeowner assessments. After the foreclosure sale, she admittedly received an itemized notice of the amount needed to redeem the property. The procedure created by Code of Civil Procedure section 729.070 afforded her a means to challenge the amount demanded by the trustee with a noticed hearing before an unbiased judicial tribunal where she was allowed to present evidence and argument on the issue.

Plaintiff claims this procedure fails to “safeguard[] . . . the right to discovery” and she was not given a chance to document the condition of the premises before defendant entered and began making modifications to the unit. But she also acknowledged her last tenant vacated the premises before the foreclosure sale, thereby giving her possession of the premises to inspect and document the unit’s habitable condition. There is no explanation of why plaintiff could not have obtained a declaration from the former tenant or photographically documented the condition of the premises when the last tenancy ended.

[4] Nor did defendant engage in wrongdoing when it entered the unit. By statute, it had the right “from the time of sale until redemption . . . to enter the property during reasonable hours to repair and maintain the premises . . . .” (Code Civ. Proc., § 729.090, subd. (c).) Thus, we reject plaintiff’s denial of due process claim.

3. Defendant’s Right to Enter and Repair the Unit

Next, plaintiff repeats her argument defendant acted as a trespasser, claiming it failed to contact her before having a locksmith change the locks and then engage a contractor to perform work that prepared the property for sale.

Plaintiff acknowledges Code of Civil Procedure section 729.090, subdivision (c) authorizes the purchaser at a foreclosure sale to enter the property “to repair and maintain the premises . . . .” While this statute limits entry to “reasonable hours” (ibid.), nothing in the statute required defendant to notify plaintiff or seek her cooperation. In addition, when the foreclosure sale occurred the unit was admittedly vacant and plaintiff had not shown any interest in recovering the property.

After entry, defendant began rehabilitating the unit with the intention of reselling it. Contrary to plaintiff’s claim, this effort did not alter the unit’s intended use. For that reason, plaintiff’s reliance on Dwyer v. Carroll (1890)[869]86 Cal. 298 is unpersuasive. There a landlord reentered the leased premises, a building used as a hotel, purportedly to make needed repairs to the first floor. Instead, the landlord raised the building’s foundation several feet and added a cellar and a new floor, thereby requiring the plaintiff and his lodgers to vacate the premises. Here, the unit was vacant when defendant entered and the work performed by it was to make the unit habitable. Thus, whether occupied by a third-party purchaser or a tenant, in either case the unit would be employed for the same purpose, habitation.

4. The Sums Charged for the Unit’s Maintenance, Upkeep, and Repair

Next, plaintiff presents a series of arguments attacking the amount awarded to defendant for the work performed on the unit before she retook possession of it.

[5] One claim is that the trial court erred by not imposing the burden of proof to establish the reasonableness of the repair costs on defendant. Plaintiff cites several policy reasons why defendant should carry the proof burden. But, as she acknowledges, under Evidence Code section 500, “[e]xcept as otherwise provided by law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he [or she] is asserting.” Here, Code of Civil Procedure section 729.070, subdivision (e) expressly provides “[a]t the hearing on the petition, the person seeking to redeem the property has the burden of proof.” Thus, by statute the Legislature has declared the party challenging a trustee’s stated redemption price carries the burden to establish the validity of its objections to the disputed amounts.

Plaintiff’s second claim concerns the license status of Axcell Construction, the contractor defendant hired to repair and rehabilitate the unit. In support of her petition, plaintiff submitted evidence Axcell’s license was suspended at the time it worked on the unit. She argues defendant “cannot pass on [to her] an unlawful obligation for payments made to the unlicensed contractor . . . .” We disagree with this interpretation of the applicable law.

[6] Business and Professions Code section 7031, subdivision (a) declares “no person engaged in the business or acting in the capacity of a contractor, may bring or maintain any action . . . for the collection of compensation for the performance of any act or contract where a license is required by this chapter without alleging that he or she was a duly licensed contractor at all times during the performance of that act or contract, regardless of the merits of the cause of action brought by the person . . . .” While “[g]enerally a contract made in violation of a regulatory statute is void” and “courts will not ‘”lend their aid to the enforcement of an illegal agreement or one against[870]public policy”‘” (Asdourian v. Araj (1985) 38 Cal.3d 276, 291), “‘the rule is not an inflexible one to be applied in its fullest rigor under any and all circumstances. A wide range of exceptions has been recognized.’ [Citation]” (ibid.).

[7] “It is not the law that every transaction connected with an illegal transaction is itself illegal. Each case must turn on its own facts. The purpose of the statute which has been violated must be considered. In that connection, the court should consider whether a holding that the collateral transaction is illegal will tend to assist or defeat the main purpose of the statute. . . . [¶] This principle is stated . . . as follows: ‘If refusal to enforce or to rescind an illegal bargain would produce a harmful effect on parties for whose protection the law making the bargain illegal exists, enforcement or rescission, whichever is appropriate, is allowed.'” (Robertson v. Hyde (1943) 58 Cal.App.2d 667, 672.)

[8] Cases have recognized “causes of action that do not seek ‘the collection of compensation for the performance of any act or contract for which a license is required’ are beyond the scope of Business and Professions Code section 7031.” (Holland v. Morse Diesel Internat., Inc. (2001) 86 Cal.App.4th 1443, 1451.) This case does not involve a collection action by Axcell for the cost of its work. Rather, defendant sought reimbursement from plaintiff for expenses it incurred to maintain and make repairs to the unit, including the amount it paid to Axcell. Thus, the sum claimed is in the nature of indemnification for one who paid by another who in justice should pay. (See Ranchwood Communities Limted Partnership v. Jim Beat Construction (1996) 49 Cal.App.4th 1397, 1421 [“total ban on . . . liability for equitable indemnity, arising from a too-strict interpretation of the licensing law, would be a windfall and would not be within the protective purpose of the licensing statute”].)

Finally, plaintiff claims defendant is barred from recovering the repair and maintenance expenses because it “was creating a new thing, i.e., rehabilitating a rental unit for sale.” This argument essentially amounts to an attack on the sufficiency of the evidence to support the trial court’s decision. “‘It is well established that a reviewing court starts with the presumption that the record contains evidence to sustain every finding of fact.’ [Citations.]” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881.) Consequently, “‘[w]hen a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate courtbeginsandendswith the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.’ [Citations.]” (Ibid.) The same rule applies “whether the[871]trial court’s ruling is based on oral testimony or declarations. [Citation.]” (Shamblin v. Brattain (1988) 44 Cal.3d 474, 479, fn. omitted.)

[9] As a general rule “the mortgagee may make such repairs as are reasonably necessary for the preservation of the property, but not permanent improvements, or things which conduced merely to his comfort or convenience. [Citations.]” (Raynor v. Drew (1887) 72 Cal. 307, 312.) “‘The ordinary rule in respect to improvements is that the mortgagee will not be allowed for them further than is proper to keep the premises in necessary repair. Unreasonable improvements may be of benefit to the estate; but, unless made with the consent and approbation of the mortgagor, no allowance can be made for them. The mortgagee has no right to impose them upon the owner, and thereby increase the burden of redeeming.’ [Citation.]” (Malone v. Roy (1895) 107 Cal. 518, 523.)

Defendant’s opposition to the petition included the declaration of Toby Strassenberg, one of its project managers. It stated he “personally evaluated the extent of damage” to the unit, concluding it was “in need of repair and rehabilitation.” In part, the repair work resulted from the discovery of substantial termite damage. He also claimed, the “repairs made were necessary to prevent further damage to the property . . . .”

Referring to her claim repairs “necessary to ‘maintain’ the property as a rental unit” are distinguishable from repairs rehabilitating the unit for the purpose of a resale, plaintiff claims “no conflict appeared in the evidence before the trial court.” While it may be true defendant made the repairs with the intent of reselling the unit, as discussed above, the distinction between one living in the unit as an owner and one living in it as a tenant, insofar as the right of redemption is concerned, amounts to a distinction without a difference.

Thus, plaintiff has failed to establish the trial court erred by awarding defendant the entire amount expended in the effort to repair and maintain the unit after acquiring it at the foreclosure sale.

5. Denial of Plaintiff’s Request for an Offset

Finally, noting the repair work begun by defendant “was not complete at the date of the hearing” on her petition and claiming “the amount to complete the work” would exceed the $770 in interest awarded to defendant as part of the redemption price, plaintiff argues awarding this amount to defendant would be inequitable.[872]

[10] Code of Civil Procedure section 729.060, subdivision (b)(1) and (4) expressly provides “[i]nterest on” “[t]he purchase price at the sale” constitutes an element of the redemption price. The statute allows an offset to one seeking to redeem the property only for “[r]ents and profits from the property paid to the purchaser or the value of the use and occupation of the property to the purchaser . . . .” (Code Civ. Proc., § 729.060, subd. (c).) As discussed above, defendant presented evidence supporting a finding substantial repairs were needed to make the inhabitable. Consequently, the unit was not available for occupation while it was being rehabilitated. In addition, defendant’s failure to complete the repair work resulted from plaintiff’s repossession of the unit while the work was in progress. Therefore, we reject plaintiff’s offset claim as well.

DISPOSITION

The order is affirmed. Respondent shall recover its costs on appeal.

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

FN *. Pursuant to Cal. Const., art. VI, § 21.

Multani v. Witkin & Neal

(2013) 215 Cal.App.4th 1428

[Assessment Collection; Redemption Rights] A nonjudicial foreclosure sale may be set aside where a HOA fails to notify the foreclosed owner of his/her redemption rights after the foreclosure sale.

Law office of Gary Kurtz and Gary Kurtz for Plaintiffs and Appellants.
Richardson Harman Ober, Kelly G. Richardson and Brian D. Moreno for Defendants and Respondents.

OPINION

ZELON, J.

INTRODUCTION

The Castle Green Homeowners Association notified Afshan and Rahim Multani that they were delinquent in paying their monthly assessment fees. After the Multanis disputed the debt, the association conducted a nonjudicial foreclosure sale of their condominium unit. The Multanis sued to set aside the foreclosure alleging irregularities in the sale notices and procedure. They further alleged that the association and its agents had committed tortious acts during the foreclosure process.

Defendants filed a motion for summary judgment or adjudication arguing that the court should dismiss the foreclosure claims because plaintiffs had actual knowledge of the foreclosure proceedings and failed to exercise their postsale right of redemption. Defendants also argued that plaintiffs’ tort claims were untimely and predicated on privileged conduct related to the foreclosure process. The court granted the motion.

We reverse the trial court’s dismissal of plaintiffs’ claims seeking to set aside the foreclosure sale, concluding that defendants failed to demonstrate that they notified the plaintiffs of their right of redemption as required by Code of Civil Procedure section 729.050.

FACTUAL AND PROCEDURAL BACKGROUND

A. Summary of Plaintiffs’ Complaint

1. Plaintiffs’ factual allegations

In January of 2010, plaintiffs Afshan and Rahim Multani filed a complaint against the Castle Green Homeowners Association (the Association) and [1435] numerous other parties arising from a foreclosure of the Multanis’ condominium unit.^[1] The complaint alleged that, in 1998, plaintiffs had purchased a condominium unit in the “Castle Greens” building in Pasadena, California. Plaintiffs obtained financing to purchase the unit from Chase Bank, who later transferred the loan to IndyMac Bank.

In 2005, Rahim Multani returned from an overseas trip and was informed by the Association and its agents, LB Property Management and SBS Lien Services, that he was delinquent in paying his homeowner assessment fees. Although Multani paid the delinquent fees, he received a letter from SBS in August of 2005 alleging that he still owed approximately $2,000 in fees and costs. Multani met with SBS and issued a payment of $743.16 that was never credited to his account. In October, Multani attempted to pay the Association his monthly assessment but was told that the account had been referred to SBS “for collection.” One month later, the Association, acting through SBS, recorded a notice of delinquent assessment against the property in the amount of $3,317, which consisted of $2,229 in unpaid assessments and an additional $1,087 in attorney’s fees, costs, late fees and interest.

Throughout 2006, Multani and the Association continued to “disput[e] the validity of the amount … owed….” In February of 2007, Multani received a notice of sale informing him that the Association “intended to enforce the lien created by the November … recording of the Notice of Assessment by selling the Subject Property on March 27, 2007.” The Association alleged that Multani now owed almost $12,000 in assessment fees and costs. Although Multani disputed the Association’s accounting, he agreed to pay the full amount and the Association released the assessment lien.

Shortly after the lien was released, Multani contacted the Association and “requested that his account be given … credit f[or] … previously non-credited payments.” Between April and July of 2007, Multani continued to make his “required monthly assessment payments, but was never given the credit due on the account.” In February of 2008, the Association recorded a second notice of delinquent assessment lien against the property and, in June, recorded a “Notice of Default and Lien.” Six months later, on December 5, 2008, the Association and its trustee, Witkin & Neal, “set a sale date of the property to take place on January 27, 2009.” Multani “sent a letter disputing the validity of the amount owed” and requested alternative dispute resolution. The Association did not respond.

[1436] On January 5, 2009, “Indymac [Bank], the lender and beneficiary of the senior deed of trust [on the condominium unit], mistakenly instructed their [sic] trustee to foreclose … on the property.” Plaintiffs immediately filed a wrongful foreclosure action and IndyMac agreed to issue a notice of rescission of foreclosure, which was recorded on April 28, 2009. Plaintiffs contended that IndyMac’s actions had effectively “extinguish[ed] [the Association’s] lien and its Notice of Trustee’s Sale,” thereby requiring the Association to reinitiate the foreclosure process by recording a new lien.

The Association, however, elected to proceed and directed Witkin & Neal to record the notice of trustee sale set for January 27, 2009. In May of 2009, Multani informed the president of the Association, Randy Banks, that he “ha[d] been trying for some time to correct and rectify what seemed an impossible task of getting a [sic] accurate accounting on Plaintiffs’ account and getting the proper credits that were due.” Banks told Multani that he was unaware of the accounting discrepancies and would “provide assistance … with the outstanding issues regarding the [improper] Association assessments.”

Despite these assurances, on May 21, 2009, the Association placed a notice on the door of the Multanis’ condominium stating that they owed $13,640 for delinquent assessments and costs. Shortly after the notice was posted, the Multanis’ tenants informed them that the locks on the condominium unit had been changed. When Multani arrived at Castle Green to investigate the matter, he was met by Banks, who said that he had contacted the police and that Multani would be arrested if he did not leave the premises. Although Multani informed the responding officers that he was the legal owner of the condominium, he was forced to leave the building. Between May and October of 2009, Banks and other Association members continued to “harass[] Plaintiffs’ tenants,” causing them to vacate the condominium.

On July 23, 2009, the Association conducted a foreclosure sale of the Multanis’ condominium, which was purchased by ProValue Properties. Although the “property was estimated to be valued at approximately $400,000,” ProValue paid only $20,400, subject to IndyMac Bank’s $75,000 deed of trust. The Association and its trustee never notified the Multanis that the sale had been postponed from January 27 to July 23, nor did they provide any notice after the sale was completed.

In October of 2009, the Multanis signed a lease with new tenants who moved into the condominium. However, on November 19, the Multanis received a courtesy copy of an unlawful detainer complaint from the Los Angeles Superior Court stating that (1) a nonjudicial foreclosure of the condominium had occurred on July 23, 2009; (2) although originally scheduled to occur on January 27, 2009, the Association’s trustee had “from time [1437] to time postponed” the sale until July 23; and (3) a trustee deed of sale had been recorded on October 24, 2009, which was 90 days after the plaintiffs’ “right to redemption” had expired. Prior to receiving the unlawful detainer complaint, the plaintiffs were unaware of the foreclosure sale.

In November and December of 2009, ProValue repeatedly changed the locks on the condominium unit. Multani and his tenants had several disputes with ProValue, culminating in an altercation on December 17, 2009. Based on misrepresentations made by ProValue, the Pasadena police told Multani that he had to vacate the condominium by the end of the weekend or he would be arrested for trespassing. After being repeatedly harassed and threatened with arrest, Multani finally relinquished possession of the unit and elected to file a lawsuit against the Association, its agents — Witkin & Neal, SBS Lien Services and LB Property Management — and numerous other parties, including ProValue.

2. Summary of plaintiffs’ claims

The Multanis’ complaint asserted numerous claims seeking to set aside the foreclosure, including quiet title, wrongful foreclosure, rescission and declaratory relief. The Multanis alleged that the foreclosure was improper because the Association and its agents (collectively defendants) had failed to properly serve the notice of trustee sale or comply with other procedural requirements mandated under Civil Code section 2924 et seq. Plaintiffs also alleged that defendants had failed to comply with “Civil Code section 1367 et seq.,” which imposes additional procedural requirements on nonjudicial foreclosures conducted by homeowner associations for delinquent assessment fees. More specifically, plaintiffs alleged that defendants “failed to provide alternate dispute resolution as required by [Civil Code section 1367.4].” The Multanis further asserted that all of defendants’ foreclosure notices had been “effectively voided” when “Indymac Bank … conducted their non-judicial foreclosure sale of January 2009 and recorded the Deed Upon Sale.”

In addition to the foreclosure claims, the complaint alleged several tort claims based on defendants’ actions during the foreclosure process. Plaintiffs asserted claims for fraud, breach of fiduciary duty and intentional infliction of emotional distress alleging that defendants had (1) “intentionally mixed up the accounting of Plaintiffs’ dues, imposed unwarranted dues and other charges, and confused Plaintiffs as to what was actually going on by repeated filings of notices, liens, and releases of liens by Defendants”; (2) “intentionally did not properly credit Plaintiffs’ account so as to further extract additional monies in the form of collections costs, attorneys fees and late penalties”; and (3) “conspired to conduct a [nonjudicial foreclosure] sale without any notice to prevent Plaintiffs from opposing such sale.”

[1438] The complaint also asserted claims for interference with contractual relations and interference with prospective economic advantage, which were predicated on defendants’ harassment of plaintiff’s condominium tenants. The complaint listed numerous additional statutory claims based on similar conduct, including violation of the Unruh Civil Rights Act (Civ. Code, § 51 et seq.), violation of the Rosenthal Fair Debt Collection Practices Act (Civ. Code, § 1788 et seq.), violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) (18 U.S.C § 1961 et seq.) and unfair business practices.

B. Defendants’ Motion for Summary Judgment or Summary Adjudication

1. Defendants’ motion and supporting evidence

a. Summary of motion for summary judgment or adjudication

In June of 2011, the Association and its agents filed a motion for summary judgment or, alternatively, summary adjudication. First, defendants asserted that the undisputed evidence showed the Multanis had “violated the `tender rule’ by failing to tender the full amount before the foreclosure sale.” Second, defendants argued that they had provided evidence demonstrating substantial compliance with all statutory notice requirements. Third, defendants contended that plaintiffs were not harmed by any alleged procedural irregularity because they had actual notice that the foreclosure sale was scheduled to occur on January 27, 2009. Fourth, defendants argued that, pursuant to Civil Code section 1058.5, IndyMac Bank’s rescinded January 5th foreclosure had no effect on the Association’s foreclosure.^[2]

As to plaintiffs’ tort claims, defendants argued that all of the conduct alleged in the complaint was related to the “processing of [a] … foreclosure” and was therefore “covered by the Civil Code Section 47(b) absolute privilege.” The Association also argued that the allegations in the complaint demonstrated that plaintiffs’ interference claims were time-barred.

The Association’s agents, Witkin & Neal and LB Property Management, separately argued that all of the tort claims asserted against them should be dismissed because they were entitled to qualified immunity under Civil Code [1439] section 2924, subdivision (b) and defendants had “failed to articulate the alleged bad acts committed by [them].”

b. Summary of evidence filed in support of defendants’ motion

In support of their motion, defendants submitted a declaration from the chief operating officer of Witkin & Neal summarizing the actions the trustee had taken during the foreclosure proceedings. According to the declaration, on April 21, 2008, Witkin & Neal mailed plaintiffs a “pre-notice” of default letter informing them that a notice of delinquent assessment had been recorded against the property and that the current amount due on the account was $4,206.40. The letter further stated that plaintiffs had the right to “dispute the assessment debt by submitting a written request for dispute resolution.” A declaration of mailing indicated that the letter was sent to the Multanis’ condominium unit and a Pasadena post office box numbered “82341.”

The declaration also stated that, on June 23, 2008, Witkin & Neal mailed plaintiffs a notice of default and election to sell stating that the amount currently due totaled $5,494.73 and would continue to “increase until [the] account bec[a]me current.” A declaration of mailing indicated that the notice was sent to the same two addresses as the “pre-notice” letter and to a second Pasadena post office box numbered “92341.” On January 9, 2009, Witkin & Neal sent plaintiffs a notice of trustee’s sale informing them that (1) the sale was scheduled to occur on January 27, 2009; (2) the total unpaid balance was currently $10,267.62; and (3) the foreclosure sale was subject to a 90-day redemption period during which the owners could reclaim the property. A declaration of mailing indicated that the notice was sent to the same three addresses as the notice of default.

The declaration further alleged that, “at the time and place fixed in the Notice of Trustee’s Sale, [Witkin & Neal] did, by public announcement, and in a manner provided by law, postpone the sale date from time to time thereafter until July 23, 2009, when [Witkin & Neal] sold the Subject unit to ProValue Properties … for the sum of $20,200.” On July 31, 2009, defendants recorded a certificate of sale confirming that the property was sold to ProValue and that the sale was subject to a 90-day “right of redemption.” According to the declaration, plaintiffs “made no attempt to tender the full amount before the foreclosure sale date” and “failed to redeem the Subject Property during the 90-day right of redemption period.” At the expiration of the 90-day redemption period, Witkin & Neal recorded a trustee’s deed upon sale, dated November 6, 2009.

Defendants also submitted excerpts from Rahim Multani’s deposition in which he admitted that he stopped paying his assessment fees because he [1440] “felt that [a] claim of overpayment was not being handled correctly.” According to Multani, “no one gave [him] a correct accounting or breakdown of what the actual outstanding amount was owed.” Multani alleged that, in 2008, he had tried to pay the amount that he believed he owed but the Association rejected his payments. Thereafter, Multani made a “conscious decision” not to pay the “entire asserted balance” because he believed it was incorrect and was “always a moving target.” Multani also testified that, prior to December 16, 2009, he was unaware that the Association had actually held a foreclosure sale.

2. Plaintiffs’ opposition and supporting documentation

On August 10, 2011, plaintiffs submitted an opposition arguing that there were disputed issues of material fact as to whether defendants had complied with all of the mandated procedural requirements. Plaintiffs argued, in relevant part, that (1) “[d]efendants failed to provide notice to Plaintiffs for the secret sale [that occurred on July 23, 2009]”; (2) defendant failed to respond to Rahim Multani’s letter dated December 2008, in which he specifically requested alternative dispute resolution; and (3) IndyMac’s subsequently rescinded foreclosure “extinguished” any prior notices the Association had issued in relation to their own foreclosure. Plaintiffs also argued that they were excused from complying with the tender rule because they had disputed “the validity of the underlying debt.”

As to the tort claims, plaintiffs asserted that their complaint alleged numerous forms of noncommunicative conduct that were not privileged under Civil Code section 47 subdivision (b), including allegations that defendants had unlawfully harassed Multani and his tenants and repeatedly changed the locks on the condominium unit.

In support of their opposition, plaintiffs submitted a 14-page declaration from Rahim Multani that contained a detailed discussion of the accounting dispute that preceded the Association’s recording of the delinquency lien. Multani asserted that, in June of 2007, he paid the Association almost $12,000 to resolve a prior payment dispute that had begun in 2005, but that defendants failed to properly credit him for two prior payments totaling approximately $1,500 and then began to intentionally inflate their monetary claims. Multani alleged that, on December 22, 2008, he sent the Association board a letter in which he disputed the amount that he owed and requested alternate dispute resolution. The Association, however, never responded to the letter.

Multani’s declaration admitted that he knew defendants had scheduled a foreclosure sale for January 27, 2009, but asserted that he was led to believe [1441] the sale had been cancelled. Multani explained that, one day prior to the scheduled sale date, his attorney informed Witkin & Neal that IndyMac Bank had foreclosed on the property two weeks earlier. In response, Witkin & Neal allegedly stated “if that was the case, then there would be no sale taking place the next day.” According to Multani, Witkin & Neal never indicated that it might postpone the foreclosure sale, but then “surreptitious[ly]” sold the property to ProValue on July 23, 2009. Multani further stated that, after this “secret” sale occurred, defendants failed to provide him a notice of his right to redemption as required under Code of Civil Procedure section 729.050.^[3]

Multani also asserted that, during the foreclosure sale, defendants committed numerous “criminal acts by changing the locks on the Subject property…; calling the Pasadena Police Department on more than one occasion to attempt to prevent [him] from [entering the subject property]; improperly having [him] detained; and attempt[ing] to place [him] under citizen’s arrest for trespassing ….”^[4]

C. The Trial Court’s Ruling

At the hearing, plaintiffs argued that defendants had sent many of the foreclosure notices to the wrong address. According to plaintiffs’ attorney, Rahim Multani’s proper mailing address was post office box number 92341, but defendants had sent several of the notices to post office box number 82341. Plaintiffs’ counsel further argued that the proper address had been on file with the Association but, “at some point[,] the homeowners association started sending it to the wrong P.O. box.”

In response, defendants’ attorney argued that they had submitted several recordations of mailings in support of their motion showing that most of the notices had in fact been sent to post office box 92341. Counsel also argued that it was irrelevant whether defendants had mailed the notices to the correct address because plaintiffs had admitted they “had actual knowledge of the [foreclosure] process.” After the court informed the parties that it was going to take the matter under submission, the following exchange occurred:

“PLAINTIFFS’ COUNSEL: Your honor, can I just ask the court to take a look at [section] 729.050.

“COURT: And what is it?

[1442] “PLAINTIFFS’ COUNSEL: That talks about the requirements. Their certificate of sale.

“COURT: Oh yeah, I’m going to look at that.”

On August 23, 2011, the trial court filed an order granting judgment in favor of Witkin & Neal and LB Property Management and granting the Association judgment on 12 of the 15 remaining claims pleaded against it.^[5] The court concluded that defendants were entitled to judgment on each of the four claims seeking to set aside the foreclosure because plaintiffs had admitted that they “failed to tender the amount of the debt prior to the sale or exercise [their] right[s] of redemption after the sale.”^[6]

In addition, the court concluded that the following evidence demonstrated that plaintiffs were not “prejudice[ed]” by any “procedural irregularity” in the foreclosure proceedings: (1) prior to recording the notice of delinquent assessment, the Association sent plaintiffs a letter advising them of their right to alternative dispute resolution; (2) Witkin & Neal’s declaration demonstrated that defendants had properly complied with all statutory requirements when postponing the foreclosure sale from January 27, 2009, to July 23, 2009; and (3) plaintiffs admitted they had “actual knowledge of the foreclosure proceedings” and, “[d]espite such knowledge, [had] failed to exercise their 90-day statutory right of redemption.”

The trial court also concluded that defendants’ evidence showed that four notices had been sent to plaintiffs’ condominium unit and post office box 82341: (1) a notice to pay or lien, dated December 27, 2007; (2) a notice of delinquent assessment liens, which had been sent on February 28, 2008, and again on April 21, 2008; (3) a notice of default and election to sell, dated June 23, 2008; and (4) a notice of trustee’s sale, dated October 31, 2009. The latter two items were also sent to post office box 92341, which Multani had alleged to be his proper mailing address. The court further noted that plaintiffs had never specifically alleged that they did not receive any of these four items.

On the tort-based claims, the court ruled that defendants were entitled to dismissal of the fifth cause of action (fraud), eighth cause of action (breach of [1443] fiduciary duty) ninth cause of action (intentional infliction of emotional distress) and the 18th cause of action (unfair business practices) because each of those claims was predicated on “actions … subject to immunities set forth in [Civil Code sections] 47 and 2924(b).” In addition, the court ruled that plaintiffs’ 13th through 16th claims, which alleged interference with contractual relations and prospective economic advantage, were “time-barred.”

The court entered judgment in favor of Witkin & Neal and LB Property Management on September 12, 2011. Three claims, however, remained pending against the Association: violation of the Unruh Civil Rights Act, forcible detainer and a request for an accounting.

On September 23, the Association moved for judgment on the pleadings seeking dismissal “of these remaining claims … such that judgment [may be] entered in favor of the Association.” The trial court granted the motion on October 19, 2011, and entered a final judgment in favor of the Association on November 9, 2011. Plaintiffs filed a timely appeal of the trial court’s judgment and order granting defendants’ motion for summary judgment or adjudication.^[7]

DISCUSSION

A. Standard of Review

“`The standard for deciding a summary judgment motion is well-established, as is the standard of review on appeal.’ [Citation.] `A defendant moving for summary judgment has the burden of producing evidence showing that one or more elements of the plaintiff’s cause of action cannot be established, or that there is a complete defense to that cause of action. [Citations.] The burden then shifts to the plaintiff to produce specific facts showing a triable issue as to the cause of action or the defense. [Citations.] Despite the shifting burdens of production, the defendant, as the moving party, always bears the ultimate burden of persuasion as to whether summary judgment is warranted. [Citation.]’ [Citation.]” (Hypertouch, Inc. v. ValueClick, Inc.(2011) 192 Cal.App.4th 805, 817 [123 Cal.Rptr.3d 8] (Hypertouch).)

“`On appeal, we review de novo an order granting summary judgment. [Citation.] The trial court must grant a summary judgment motion when the [1444] evidence shows that there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. [Citations.] In making this determination, courts view the evidence, including all reasonable inferences supported by that evidence, in the light most favorable to the nonmoving party. [Citations.]’ [Citation.]” (Hypertouch, supra,192 Cal.App.4th at p. 818.) “The same standards apply to motions for summary adjudication.” (Id. at fn. 3.)

B. Defendants Failed to Satisfy Their Initial Burden of Production on Plaintiffs’ Foreclosure Claims

Plaintiffs argue that the trial court erred in dismissing each of their claims seeking to set aside the foreclosure sale because there are triable issues of fact as to whether defendants complied with numerous procedures required under the Civil Code and the Code of Civil Procedure. We reverse the trial court’s dismissal of the foreclosure claims, concluding that defendants failed to demonstrate that they notified plaintiffs of their right to redemption or the applicable redemption period as required under section 729.050.^[8]

1. The postsale right to redemption in nonjudicial foreclosures by a homeowner association for delinquent assessment fees

(1) Special procedures govern nonjudicial foreclosures initiated by a homeowner association for the collection of delinquent assessment fees. Under the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.) (the Act), which governs common interest developments (CID) in California,^[9] the amount of any unpaid association assessment, plus the reasonable costs of collection, late charges, and interest, constitute a “debt of the owner of the separate interest.” (Civ. Code, § 1367.1, subd. (a); see Civ. Code, § 1366, subd. (e)(1)-(3).) After complying with various notice requirements (see Civ. Code, § 1367.1, subds. (a)-(c)), an association may record a lien of delinquent assessment against the property (see Civ. Code, § 1367.1, subd. (e)) and then enforce the lien through a nonjudicial foreclosure “conducted in accordance with [Civil Code] [s]ections 2924, 2924b and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trust.” (Civ. Code, § 1367.1, subd. (g).)

As a general rule, the debtor in a nonjudicial foreclosure may avoid the loss of the property by “pay[ing] all amounts due at any time prior to the [1445] sale …” (Knapp v. Doherty (2004) 123 Cal.App.4th 76, 86-87 [20 Cal.Rptr.3d 1] (Knapp).) However, “[o]nce the … sale is completed, the trustor has no further rights of redemption.” (Id. at p. 87.) Prior to 2006, these same rules applied to nonjudicial foreclosures by an association for delinquent assessments.

In 2005, however, the Legislature adopted Senate Bill No. 137 (2005-2006 Reg. Sess.) (Stats. 2005, ch. 452, § 5, p. 3649), which placed numerous limitations on an association’s ability to utilize foreclosure as a means to collect assessments. The legislative history indicates that Senate Bill No. 137 was intended to “institute … important procedural … requirements to protect CID homeowners” from the “extreme hammer of non-judicial foreclosure in order to collect relatively small amounts of overdue assessments.” (Off. of Assem. Floor Analyses, 3d reading analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) as amended Sept. 1, 2005, pp. 4, 3.) Supporters of the Bill argued that there had been “too many instances” in which “CID associations [had] … initiated [foreclosures] for relatively small amounts …, [and then] sold [the property] for an all-too-often shockingly small fraction of its actual value.” (Id. at pp. 3-4.) The bill sought to avoid similar outcomes in the future by providing “CID homeowners” additional “due process protections.” (Ibid.)

(2) Senate Bill No. 137 added Civil Code section 1367.4, which prohibits (with certain exceptions) the use of foreclosure to collect delinquent assessments that total less than $1,800. (Civ. Code, § 1367.4, subd. (b).) Although the statute permits an association to “use … nonjudicial foreclosure” for delinquent assessments exceeding $1,800 (Civ. Code, § 1367.4, subd. (c)), section 1367.4, subdivision (c)(4) requires that the association provide CID owners a right to redeem the property within 90 days after the sale: “A nonjudicial foreclosure by an association to collect upon a debt for delinquent assessments shall be subject to a right of redemption. The redemption period within which the separate interest may be redeemed from a foreclosure sale under this paragraph ends 90 days after the sale….” A similar provision appears in section 729.035, which was also added as part of Senate Bill No. 137: “Notwithstanding any provision of law to the contrary, the sale of a separate interest in a common interest development is subject to the right of redemption within 90 days after the sale if the sale arises from a foreclosure by the association of a common interest development pursuant to subdivision (g) of Section 1367.1 of the Civil Code, subject to the conditions of Section 1367.4 of the Civil Code.”^[10]

[1446] The redemption process, which is normally available only in the context of judicial foreclosure, is governed by requirements set forth in the Code of Civil Procedure.^[11] Section 729.040 mandates that, following a foreclosure subject to a right of redemption, the trustee must deliver a “certificate of sale” to the purchaser and record a duplicate of the certificate in the office of the county recorder. (Id., subd. (a).) Under section 729.050, the trustee must also promptly notify the debtor of his redemption rights: “If property is sold subject to the right of redemption, promptly after the sale the levying officer or trustee who conducted the sale shall serve notice of the right of redemption on the judgment debtor. Service shall be made personally or by mail. The notice of the right of redemption shall indicate the applicable redemption period.”

Sections 729.060 to 729.090 describe how the debtor may redeem his or her property following the foreclosure sale. “[S]ection 729.060, subdivision (a) requires `[a] person who seeks to redeem the property [to] deposit the redemption price with the levying officer who conducted the sale before the expiration of the redemption period.’ Subdivision (b) of this statute defines the redemption price as `the total of the following amounts…. [¶] (1) The purchase price at the sale. [¶] (2) The amount of any assessments or taxes and reasonable amounts for fire insurance, maintenance, upkeep, and repair of improvements on the property. [¶] (3) Any amount paid by the purchaser on a prior obligation secured by the property to the extent that the payment was necessary for the protection of the purchaser’s interest. [¶] (4) Interest on the amounts described in paragraphs (1), (2), and (3)….’ In addition, subdivision (c) of … section 729.060 authorizes an offset to the redeeming party for `[r]ents and profits from the property paid to the purchaser or the value of the use and occupation of the property to the purchaser….'” (Barry v. OC Residential Properties (2011) 194 Cal.App.4th 861, 866 [123 Cal.Rptr.3d 727] (Barry).)

[1447] (3) Section 729.070 establishes “a procedure allowing one `seeking to redeem the property [who] disagree[s with the purchaser’s claimed] redemption price’ to petition `the court for an order determining the redemption price ….’ [Citation.]” (Barry, supra, 194 Cal.App.4th at pp. 866-867.) If the debtor does not deposit the redemption price or otherwise file a petition challenging the redemption price within the applicable redemption period, the trustee must deliver an executed trustee’s deed to the purchaser and provide the debtor notice that the trustee sale has occurred. (§ 729.080, subd. (a).) If, however, the debtor tenders “the redemption price determined by court order or agreed upon by the purchaser … [¶] … the effect of the sale is terminated and the person who redeemed the property is restored to the estate therein sold at the sale.” (§ 729.080, subds. (c), (d).)

2. Defendants failed to make a prima facie showing that plaintiffs cannot establish the elements necessary to set aside the foreclosure sale

Plaintiffs contend that the trial court erred in dismissing their foreclosure claims because defendants failed to notify them of their right of redemption as required under section 729.050.

a. Defendants have waived any argument regarding plaintiffs’ failure to plead a violation of section 729.050

Before addressing the merits of this argument, we assess defendants’ contention that we should “disregard[]” this “alleged [procedural] violation” because it “is outside the scope of the Second Amended Complaint.”

(4) Generally, “[a] defendant moving for summary judgment need address only the issues raised by the complaint; the plaintiff cannot bring up new, unpleaded issues in his or her opposing papers. [Citation.]” (Government Employees Ins. Co. v. Superior Court (2000) 79 Cal.App.4th 95, 98-99, fn. 4 [93 Cal.Rptr.2d 820].) Defendants assert that, in this case, plaintiffs’ “allegation that [the Association and its trustee] somehow violated … [s]ection 729.050 … does not exist in the [second amended complaint],” which prohibits them from raising the issue on appeal.

Plaintiffs’ complaint, however, alleges that defendants “conducted the foreclosure proceedings unlawfully in that they did not follow the California non-judicial foreclosure sale procedures prescribed by … Civil Code § 2924 and 1367.” The complaint also alleges violation of “§ 1367 et seq.” As discussed above, Civil Code section 1367.4, subdivision (c)(4) requires the association to provide CID owners a 90-day period to redeem the property, which triggers the trustee’s notice requirements under section 729.050.

[1448] (5) In any event, defendants have forfeited this issue. When a plaintiff opposes a motion for summary judgment or adjudication by raising an “unpleaded issue,” the defendant’s failure to “object to [the] injection of [the] unpleaded theory … [constitutes a] waive[r].” (Knapp, supra, 123 Cal.App.4th at p. 90; see Stalnaker v. Boeing Co.(1986) 186 Cal.App.3d 1291, 1302 [231 Cal.Rptr. 323].) The purpose of this objection requirement is to ensure that, if the objection is sustained, the plaintiff has an opportunity to request leave to amend the pleading to raise the unpleaded theory. (See Stalnaker, supra, 186 Cal.App.3d at p. 1302.)

In the trial court, plaintiffs’ opposition papers included a declaration from Rahim Multani in which he alleged that defendants did not comply with section 729.050’s notice requirements. Although defendants objected to numerous statements in Multani’s declaration on the ground that they introduced issues outside the pleadings, defendants did not raise this objection in regards to Multani’s statements about section 729.050. Moreover, during oral argument, plaintiffs’ attorney specifically requested that the trial court review section 729.050 and determine whether defendants had demonstrated compliance with its requirements. Defendants did not object to this request and the trial court agreed that it would consider the issue. Under these circumstances, “we deem waived defendants’ objection to plaintiffs’ … mode of pleading and argument.” (Stalnaker v. Boeing Co., supra, 186 Cal.App.3d at p. 1302; see id. at fn. 7 [finding waiver where “the newly introduced theory was … presented to the trial court, without defendants’ objection”].)

b. Defendants failed to make a prima facie showing that they were entitled to dismissal of plaintiffs’ claims seeking to set aside the foreclosure

As the party moving for summary adjudication of plaintiffs’ foreclosure claims, defendants had the “`initial burden of production to make a prima facie showing'” that “`one or more elements of the plaintiff’s cause of action cannot be established.'” (Hypertouch, supra, 192 Cal.App.4th at pp. 838, 818.)

(6) “The rights and powers of trustees in nonjudicial foreclosure proceedings have long been regarded as strictly limited and defined by the contract of the parties and the statutes.” (I. E. Associates v. Safeco Title Ins. Co. (1985) 39 Cal.3d 281, 287 [216 Cal.Rptr. 438, 702 P.2d 596].) “Because nonjudicial foreclosure is a `drastic sanction’ and a `draconian remedy’ [citation], `”[t]he statutory requirements must be strictly complied with, and a trustee’s sale based on statutorily deficient notice of default is invalid.”‘ [Citation.]” (Ung v. Koehler (2005) 135 Cal.App.4th 186, 202-203 [37 Cal.Rptr.3d 311]; see Holland v. Pendleton Mtge. Co. (1943) 61 Cal.App.2d 570, 573-574 [143 P.2d [1449] 493] [foreclosure sale invalid where trustee fails to comply with statutory notice procedures]; 4 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 10:210, p. 670 [“A sale of the collateral by an exercise of the power of sale in violation of the statutory limitations on the power is invalid.”].)

To set aside a foreclosure, a plaintiff must generally establish three elements: “(1) the trustee … caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale … was prejudiced or harmed; and (3) in cases where the trustor … challenges the sale, the trustor … tendered the amount of the secured indebtedness or was excused from tendering.” (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104 [134 Cal.Rptr.3d 622] (Lona).) Defendants argue that their moving papers made a prima facie showing that plaintiffs cannot establish any of these three elements.

i. Defendants introduced no evidence that they complied with section 729.050

(7) “Justifications … which satisfy the first element [(to set aside a foreclosure)] include the trustee’s … failure to comply with the statutory procedural requirements for the notice or conduct of the sale.” (Lona, supra, 202 Cal.App.4th at p. 104.) Although there is generally no “postsale right of redemption” in nonjudicial foreclosure proceedings (Alliance, supra, 10 Cal.4th at p. 1236), a nonjudicial foreclosure by an association for delinquent assessments is “subject to the right of redemption within 90 days after the sale.” (Code Civ. Proc., § 729.035; see Civ. Code, § 1367.4, subd. (c)(4).) As a result, the trustee who conducts the sale must “promptly … serve notice of the right of redemption on the judgment debtor,” which “shall indicate the applicable redemption period.” (§ 729.050.)

Defendants have failed to provide any evidence that they complied with this statutory requirement. In support of their motion for summary adjudication, defendants submitted evidence that they mailed the Multanis the following notices regarding the foreclosure proceedings: (1) a “pre-notice of Default letter,” mailed April 21, 2008; (2) a “Notice of Default and Election to Sell,” mailed June 23, 2008; (3) a “Notice of Board Decision to Foreclose and Notice of Default,” mailed October 7, 2008; and (4) a “Notice of Trustee’s Sale,” mailed January 9, 2009. Defendants also submitted evidence that, following the foreclosure sale, the trustee recorded a “Certification of Sale” on July 31, 2009, and then recorded the “Trustee’s Deed Upon sale … [a]fter the 90-day right of redemption period expired.”

Defendants, however, have cited no evidence in the record — and we have located none — demonstrating that it mailed the Multanis a notice of right to [1450] redemption as required under section 729.050. Instead, defendants contend that they had no burden to present evidence that they complied with section 729.050 because “[a] nonjudicial foreclosure sale is accompanied by a common law presumption that it `was conducted regularly and fairly.’ [Citations.]” (Lona, supra, 202 Cal.App.4th at p. 105.) Defendants appear to assert that this presumption was, standing alone, sufficient “`to make a prima facie showing'” (Hypertouch, supra, 192 Cal.App.4th at p. 836) that plaintiff could not demonstrate any procedural irregularity in the foreclosure proceedings.

(8) Defendants have not cited any authority indicating that this common law presumption of regularity applies to the postsale redemption procedures at issue here. All of the cases they cite applied the presumption in the context of standard nonjudicial foreclosures that were not subject to statutory redemption. Even if the common law presumption were to apply to redemption procedures, however, a defendant moving for summary adjudication of claims seeking to set aside a foreclosure may not discharge his or her initial burden of production by merely referencing the presumption. The presumption, which is rebuttable (see 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc. (2001) 85 Cal.App.4th 1279, 1284 [102 Cal.Rptr.2d 711]), merely requires that the party “attacking the sale … [must] `… plead[] and prove[] an improper procedure and the resulting prejudice.’ [Citation.]” (Knapp, supra, 123 Cal.App.4th at p. 86, fn. 4.) Thus, the plaintiff has the burden to allege in its pleading that a prejudicial irregularity occurred and then to prove that allegation at trial.

For the purposes of summary judgment or adjudication, however, defendants still must make a prima facie showing that plaintiffs could not prove that any irregularity occurred. This initial burden required defendants here to “`present evidence'” that they complied with the statutory procedures applicable to this foreclosure. (Hypertouch, supra, 192 Cal.App.4th at p. 838.) Their failure to do so means that they failed to “`conclusively negate[]'” the first element of plaintiffs’ foreclosure claims. (Ibid.)

ii. Defendants did not make a prima facie showing that plaintiffs suffered no harm from the procedural defect

The second element necessary to set aside a foreclosure requires the plaintiff to show that he or she was “prejudiced or harmed” by defendants’ failure to comply “with the statutory procedural requirements” for the foreclosure sale. (Lona, supra,202 Cal.App.4th at p. 104 [to challenge a sale successfully there must be evidence of a failure to comply with the procedural requirements for the foreclosure sale that caused prejudice to the person attacking the sale].)

[1451] (9) Section 729.050’s notification requirement serves two purposes. First, it ensures that the debtor is aware that the property may still be redeemed. Second, it informs the debtor the date on which his or her redemption rights expire. Presumably, a debtor who has not received such notice has been harmed or prejudiced by the fact that they were not informed of those rights. (See Residential Capital v. Cal-Western Reconveyance Corp. (2003) 108 Cal.App.4th 807, 822 [134 Cal.Rptr.2d 162] (Residential Capital) [“The inquiry is whether … there is a … defect in the statutory procedure that is prejudicial to the interests of the trustor and claimants.”].)

Defendants, however, contend that no such prejudice occurred here because plaintiffs were provided enough information to independently calculate when their redemption period was set to expire. In support, defendants cite evidence indicating that, prior to the foreclosure sale, they provided plaintiffs a statutorily required notice of intent to sell stating that (1) the foreclosure sale was scheduled to occur on January 27, 2009, and (2) the sale would be subject to a right of redemption that would end 90 days after the sale date. Defendants assert that, based on this information, plaintiffs could have determined when their right to redemption ended and therefore were not harmed by the trustee’s failure to comply with section 729.050.

(10) For the purposes of this appeal, we assume that defendants did in fact make a prima facie showing that they properly notified plaintiffs that the foreclosure sale was originally scheduled to occur on January 27 and that the sale would be subject to a 90-day right of redemption.^[12] Such evidence, however, is insufficient to demonstrate that plaintiffs suffered no prejudice or harm from defendants’ failure to comply with the notice requirements of section 729.050. Defendants’ argument is predicated on the assumption that a debtor has an independent duty to calculate the applicable redemption period based on information received during the foreclosure process. Section 729.050, however, specifically relieves the debtor of any such burden by requiring the trustee to provide notice of the applicable redemption period promptly after the foreclosures sale.

This postsale notice requirement is of heightened importance where, as here, the trustee postponed the original sale date without individualized notice to the debtor. Civil Code section 2924g permits a trustee to postpone a foreclosure sale for up to a year by making a public announcement “at the time and place last appointed for sale…. No other notice of postponement [1452] need be given.” (Civ. Code, § 2924g, subd. (d).)^[13] Although the foreclosure in this case was originally scheduled for January 27, 2009, defendants’ moving papers state that “[a]t the time and place fixed in the [notice of sale, the trustee] did, by public announcement … postpone the sale date from time to time … until July 23.” Defendants provided no evidence that they gave plaintiffs any notice regarding the postponements beyond the public announcement requirements described in Civil Code section 2924g. Thus, without the section 729.050 notice, plaintiffs could have only determined their applicable redemption period by attending each of the scheduled sale dates or otherwise researching when, exactly, the sale occurred. Again, section 729.050 relieved them of any such obligation.

(11) Defendants’ argument would also permit homeowner associations to ignore section 729.050 without consequence. Defendants were statutorily required to send the presale notice that contained the information they now contend remedied any harm from their subsequent failure to comply with section 729.050. The Civil Code requires that, before conducting a foreclosure sale predicated on delinquent assessment fees, the association must provide a notice of sale that includes the date of the sale and a statement “that the property is being sold subject to the right of redemption.” (Civ. Code, §§ 1367.4, subd. (c)(4), 2924b, subd. (b), 2924f.) Thus, defendants are essentially arguing that a trustee who complies with this presale notice requirement need not comply with section 729.050’s postsale notice requirement. This argument is the antithesis of the statutory scheme, which imposes a duty to provide a presale notice referencing the right to redemption and a postsale notice stating the applicable redemption period. The Legislature plainly concluded that, for the purpose of protecting a CID owner’s due process rights, both forms of notice are necessary.

The primary authority defendants cite in support of their assertion that plaintiffs cannot establish harm is Knapp, supra, 123 Cal.App.4th 76, which held that “a slight deviation from statutory notice requirements” does not always require a court to “invalidate a foreclosure sale, where the trustee otherwise complies fully with the Civil Code.” (Id. at p. 93.) The plaintiff in Knapp provided evidence that the defendant had served a notice of sale prematurely. Under the Civil Code, the trustee was required to comply with multiple timing requirements when serving the notice of sale: Civil Code section 2924 required the trustee to serve the notice no earlier than “`three months’ following recordation of the notice of default” (id. at p. 92), while [1453] section 2924b required that the trustee serve the notice “at least 20 days prior to the sale” (id. at p. 88). The court explained that the evidence showed the trustee “served the [s]ale [n]otice on … a date that was slightly less than three months after recordation of the [d]efault [n]otice,” but 29 days prior to the sale date. (Id. at p. 92.) “Thus, while the [s]ale [n]otice did not comply fully with the three-month requirement under section 2924, it provided more than the 20 days notice mandated under section 2924b ….” (Ibid., italics omitted.)

The court ruled that, under such circumstances, the foreclosure need not be set aside, concluding: “[T]he slight procedural irregularity in the service of the [s]ale [n]otice did not cause any injury to [b]orrowers. They had notice of the original sale date; the trustee’s sale did not go forward until almost one year after the date noticed. There was no prejudicial procedural irregularity.” (Knapp, supra, 123 Cal.App.4th at p. 94, italics omitted.) In the court’s view, the “[b]orrowers’ objection to the premature notice [wa]s, in effect, a criticism that the trustee provided too much notice of the sale. There [wa]s no evidence that they were prejudiced by the premature mailing of the notice. Given the fact that the trustee’s sale did not occur until almost a year after service of the [s]ale [n]otice, it is difficult to imagine how [b]orrowers could claim any prejudice.” (Id. at p. 96.)

In reaching its holding, the court specifically differentiated prior decisions setting aside foreclosure sales in which the debtor had been denied a “`substantial statutory right'” that was likely to result in prejudice. (Knapp, supra, 123 Cal.App.4th at p. 94.) According to the court, “no such substantial statutory right was abridged by trustee’s premature mailing of the [s]ale [n]otice, which otherwise gave [b]orrowers adequate and timely notice of the trustee’s sale.” (Ibid.)

The facts in Knapp bear little resemblances to the facts in this case. Defendants’ failure to comply with section 729.050 was not “a slight deviation from statutory notice requirements.” (Knapp, supra, 123 Cal.App.4th at p. 93.) Defendants did not, as in Knapp, send a statutorily required notice “slightly” prematurely; instead, the evidence suggests that they completely failed to send the notice required under section 729.050. Moreover, unlike in Knapp, defendants have provided no evidence that plaintiffs were not harmed by the procedural defect. Nothing in defendants’ moving papers demonstrates that, despite the lack of section 729.050 notice, plaintiffs were actually aware of the date on which their redemption rights were set to expire but elected not to redeem. At most, defendants have shown that plaintiffs might have been able to calculate when their redemption rights expired based on information that was provided in other statutorily mandated presale notices.

[1454] (12) In sum, defendants have failed to make a prima facie showing that their failure to comply with section 729.050 was not “prejudicial to the interests of the … claimants.” (Residential Capital, supra, 108 Cal.App.4th at p. 822.) Because defendants have provided no evidence that plaintiffs were notified, or were otherwise aware of the actual date on which their right to redemption expired, we cannot conclude that plaintiffs suffered no prejudice.^[14]

iii. Defendants failed to establish that the tender rule precluded plaintiffs from seeking to set aside the foreclosure sale

Defendants argue that plaintiffs cannot satisfy the third element necessary to set aside a foreclosure sale, which requires a showing that “the trustor … tendered the amount of the secured indebtedness or was excused from tendering.” (Lona, supra,202 Cal.App.4th at p. 104.) Defendants assert that plaintiffs have admitted they never offered to pay the full amount of the debt and are therefore precluded from challenging the foreclosure sale.

(13) The tender requirement is rooted in the equitable nature of an action to set aside a nonjudicial foreclosure. “Because the action is in equity, a defaulted borrower who seeks to set aside a trustee’s sale is required to do equity before the court will exercise its equitable powers. [Citation.] Consequently, as a condition precedent to an action by the borrower to set aside the trustee’s sale on the ground that the sale is voidable because of irregularities in the sale notice or procedure, the borrower must offer to pay the full amount of the debt for which the property was security. [Citation.] `The rationale behind the rule is that if [the borrower] could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the [borrower].’ [Citation.]” (Lona, supra, 202 Cal.App.4th at p. 112.)

(14) There are, however, several exceptions to the requirement. “First, if the borrower’s action attacks the validity of the underlying debt, a tender is [1455] not required since it would constitute an affirmation of the debt. [Citations.] [¶] Second, a tender will not be required when the person who seeks to set aside the trustee’s sale has a counterclaim or setoff against the beneficiary. In such cases, it is deemed that the tender and the counterclaim offset one another, and if the offset is equal to or greater than the amount due, a tender is not required. [Citation.] [¶] Third, a tender may not be required where it would be inequitable to impose such a condition on the party challenging the sale [Citation.] …. [¶] Fourth, no tender will be required when the trustor is not required to rely on equity to attack the deed because the trustee’s deed is void on its face. [Citation.]” (Lona, supra, 202 Cal.App.4th at pp. 112-113.)

(15) As discussed above, a nonjudicial foreclosure by an association predicated on delinquent assessment fees is unique in that the CID owner is entitled to a postsale right of redemption. (See Civ. Code, § 1367.4, subd. (c)(4); Code Civ. Proc., § 729.035.) Under these redemption rights, the property owner is entitled to receive notice of the applicable redemption period and then pay the redemption price or contest the redemption price through a judicial proceeding. (See §§ 729.050-729.080.) Therefore, unlike most forms of nonjudicial foreclosure, CID owners are provided an opportunity to avoid the loss of their property either by tendering the amount of the debt prior to the sale or paying the applicable redemption price — which consists of the purchase price and various other costs — after the sale.

(16) Defendants assume, without discussion, that the tender requirement applies where, as here, the debtor is seeking to set aside a nonjudicial foreclosure subject to a statutory, postsale right of redemption. Although we have found no authority analyzing the issue, we conclude that a debtor is properly excused from complying with the tender requirement where the nonjudicial foreclosure is subject to a statutory right of redemption and the trustee has failed to provide the notice required under section 729.050.

Applying the tender rule under such circumstances would be inconsistent with the statutory scheme. CID owners who were denied their statutory right to be notified of the redemption process could only challenge the denial of that right by offering to tender the amount of the secured debt. In other words, CID owners could only challenge an association’s failure to provide notice of the redemption process by offering to forego the redemption process. Such an outcome would be neither logical nor equitable.

Defendants argue that even if plaintiffs were not required to tender the amount of the secured debt as a condition of bringing their suit, they were [1456] nonetheless required to tender the redemption price, thereby ensuring that they could have redeemed the property had section 729.050 been properly followed. Defendants’ argument overlooks the fact that, under the statutory framework governing redemption, if the debtor and the purchaser disagree on the proper redemption price, the debtor may seek a judicial determination of the appropriate price. (See § 729.070.) Under defendants’ theory, however, CID owners would have to affirm the purchaser’s claimed redemption price through an offer of tender — thereby effectively waiving their right to seek a judicial determination of the redemption price — as a condition of challenging an association’s failure to comply with section 729.050. Given that the tender rule is inapplicable where the debtor’s action attacks the validity of the underlying debt, the rule should not be applied in a manner that would require a CID owner who never received notice of his redemption rights to forego any challenge to the redemption price.

Because defendants failed to make a prima facie showing that plaintiffs cannot establish any of the three elements necessary to set aside the foreclosure, it is not entitled to summary adjudication on plaintiffs second, third, sixth or seventh causes of action.

C. Plaintiffs Have Forfeited Any Claim of Error Regarding Additional Causes of Action Pleaded in the Second Amended Complaint

In addition to their four claims seeking to set aside the foreclosure, plaintiffs’ second amended complaint asserts 13 tort and statutory-based claims arising from various acts that defendants allegedly committed during the foreclosure process. The trial court dismissed all 13 of these additional claims at various points in the proceedings. The court sustained a demurrer without leave to amend on two of the claims — violations of the Rosenthal Fair Debt Collection Practices Act and RICO — prior to the hearing on the motion for summary adjudication. The trial court’s order granting defendants’ motion for summary adjudication dismissed four of the claims — fraud, breach of fiduciary duty, intentional infliction of emotional distress and unfair business practices — on the basis that each claim was predicated on “actions … subject to immunities set forth in [Civil Code sections] 47 and 2924(b).” The summary adjudication order also dismissed plaintiffs’ four interference claims, concluding that they were “time barred.” Finally, the court dismissed the remaining three claims for violation of the Unruh Civil Rights Act, accounting and forcible detainer pursuant to an order granting defendants’ motion for judgment on the pleadings.

[1457] Although a large majority of plaintiffs’ 60-page brief argues that we should reinstate their foreclosure claims because there is evidence defendants committed various procedural irregularities, the final five pages of the brief asserts that their “claims for wrongful closure are not based on a communicative act” and are therefore not precluded under the “litigation privilege.” (See Civ. Code, § 47, subd. (b).) In the course of this discussion, plaintiffs allude to various other claims in their complaint. Specifically, plaintiffs assert that Civil Code “[s]ection 47(b)(2), does not bar Plaintiffs’ cause of action for intentional interference with contractual relations because it is based upon an alleged tortious course of conduct. While the isolated act of filing a notice of lien was communicative, it was only one act in the overall course of conduct alleged in Appellant’s eight through twentieth causes of action.” This five-page section of the brief does not include a single citation to the record.

For the purposes of this appeal, we need not assess whether the litigation privilege applies to plaintiffs’ claims seeking to set aside the foreclosure sale. The trial court’s order granting the motion for summary adjudication demonstrates that it dismissed those particular claims based on its finding that plaintiffs had not complied with the tender rule and had not been prejudiced by any “procedural irregularity,” not because the claims were precluded under the litigation privilege. For the reasons discussed above, we have reversed the trial court’s dismissal of those claims.

(17) As to the remaining causes of action set forth in the second amended complaint, plaintiffs have forfeited any claim of error. “[I]t is appellant’s burden to affirmatively show error. [Citation.] To demonstrate error, appellant must present meaningful legal analysis supported by citations to authority and citations to facts in the record that support the claim of error. [Citations.]” (In re S.C. (2006) 138 Cal.App.4th 396, 408 [41 Cal.Rptr.3d 453] (S.C.).) “Mere suggestions of error without supporting argument or authority other than general abstract principles do not properly present grounds for appellate review.” (Department of Alcoholic Beverage Control v. Alcoholic Beverage Control Appeals Bd. (2002) 100 Cal.App.4th 1066, 1078 [123 Cal.Rptr.2d 278].) “Hence, conclusory claims of error will fail.” (S.C., supra, 138 Cal.App.4th at p. 408.)

Plaintiffs’ conclusory assertions that the litigation privilege does not apply to their “cause of action for intentional interference with contractual relations” or their “eight through twentieth causes of action”^[15] does not constitute “adequate factual or legal analysis.” (Placer County Local Agency Formation Com. v. Nevada County Local Agency Formation Com. (2006) 135 [1458] Cal.App.4th 793, 814 [37 Cal.Rptr.3d 729].) The record demonstrates that most of these claims were not dismissed pursuant to the litigation privilege. The trial court dismissed the plaintiffs’ 13th through 16th claims, which allege interference with contract relations and prospective economic advantage, based on the statute of limitations. The 10th and 11th claims for violations of the Rosenthal Fair Debt Practices Act and RICO were dismissed pursuant to an order sustaining a demurrer that is not in the record and was not appealed by plaintiffs. Plaintiffs’ 12th and 17th claims for forcible detainer and an accounting were dismissed pursuant to an order granting defendants’ motion for judgment on the pleadings. Plaintiffs, however, provide no independent legal analysis of that motion or the resulting order.

Plaintiffs’ discussion of the litigation privilege consists of little more than a summary of general abstract principles that is devoid of a single citation to the record. (See generally Metzenbaum v. Metzenbaum (1950) 96 Cal.App.2d 197, 199 [214 P.2d 603] [“[A]n appellate court cannot be expected to search through a voluminous record to discover evidence on a point raised by appellant when his brief makes no reference to the pages where the evidence on the point can be found in the record.”].) Although plaintiffs’ brief summarizes various holdings pertaining to different aspects of the litigation privilege, it fails to adequately explain how those holdings relate to the nonforeclosure claims asserted in the complaint.

In sum, to the extent plaintiffs were requesting that we reverse the trial court’s dismissal of any claims beyond those seeking to set aside the foreclosure sale, they failed “to provide meaningful legal analysis and record citations for [their] complaints.” (S.C., supra, 138 Cal.App.4th at p. 408.)^[16] These claims have therefore been abandoned. (Reyes, supra, 65 Cal.App.4th at p. 466, fn. 6.)

DISPOSITION

The trial court’s judgment is reversed and the case is remanded for further proceedings. The trial court’s order granting defendants’ motion for summary judgment, or, in the alternative, summary adjudication is reversed to the [1459] extent it dismisses plaintiffs’ second, third, sixth and seventh claims. The trial court’s order granting defendants’ motion for judgment on the pleadings is affirmed. Each party shall its own costs.

Perluss, P. J., and Jackson, J., concurred.

[1] This factual summary is predicated on the allegations in plaintiffs’ second amended complaint, which was filed on June 28, 2010.

[2] Civil Code section 1058.5, subdivision (b) states, in relevant part: “Where a trustee’s deed is invalidated by a pending bankruptcy or otherwise, recordation of a notice of rescission of the trustee’s deed … shall restore the condition of record title to the real property described in the trustee’s deed and the existence and priority of all lienholders to the status quo prior to the recordation of the trustee’s deed upon sale….”

[3] Unless otherwise noted, all further statutory citations and references are to the Code of Civil Procedure.

[4] Defendants filed objections to numerous aspects of Rahim Multani’s deposition. The record, however, does not indicate whether the court ruled on the objections, and defendants have not asserted there were any erroneous evidentiary rulings.

[5] The record indicates that, several months prior to the hearing on the motion for summary judgment or adjudication, the trial court had sustained a demurrer to plaintiffs’ claims alleging violations of the Rosenthal Fair Debt Collection Practices Act and RICO. Appellants do not challenge that ruling.

[6] Plaintiffs sought to set aside the foreclosure in four separate claims: declaratory relief, quiet title, wrongful foreclosure and rescission. We refer collectively to these four claims as the “foreclosure claims” or as “claims seeking to set aside the foreclosure.” Plaintiffs also pleaded a claim for cancellation of deed against ProValue, which is not a party to this appeal.

[7] Plaintiffs’ notice of appeal and portions of their appellate brief also allude to the trial court’s order granting the Association’s motion for judgment on the pleadings. As discussed in more detail below, however, the brief contains insufficient legal analysis of any of the three claims dismissed in that order. Plaintiffs have therefore abandoned any claim of error regarding the trial court’s order granting defendants’ motion for judgment on the pleadings. (Reyes v. Kosha (1998) 65 Cal.App.4th 451, 466, fn. 6 [76 Cal.Rptr.2d 457] (Reyes).)

[8] Plaintiffs raise numerous additional arguments as to why we should reverse the trial court’s dismissal of their foreclosure claims. Because we reverse the dismissal of those claims based on defendants’ failure to provide evidence demonstrating compliance with section 729.050, we need not address plaintiffs’ additional arguments.

[9] The parties do not dispute that the Multanis’ condominium unit was part of a common interest development governed by the Act.

[10] Civil Code section 1367.4 imposes various other conditions on an association’s use of nonjudicial foreclosure. First, “[p]rior to initiating [the] foreclosure,” the association must “offer the owner and, if so requested by the owner, participate in” various, enumerated forms of alternative dispute resolution, including binding arbitration. (Civ. Code, § 1367.4, subd. (c)(1).) Second, the statute requires that the decision to initiate foreclosure must be made by the association’s board of directors in an open vote. (Civ. Code, § 1367.4, subd. (c)(2).) Third, the board must provide the owner notice of its decision. (Civ. Code, § 1367.4, subd. (c)(3).)

[11] A judicial foreclosure involves significant “court oversight” (Arabia v. BAC Home Loans Servicing, L.P. (2012) 208 Cal.App.4th 462, 470 [145 Cal.Rptr.3d 678]) and provides the creditor and the debtor certain rights that are generally not available in nonjudicial foreclosure: “In a judicial foreclosure, if the property is sold for less than the amount of the outstanding indebtedness, the creditor may seek a deficiency judgment, or the difference between the amount of the indebtedness and the fair market value of the property, as determined by a court, at the time of the sale. [Citation.] However, the debtor has a statutory right of redemption … for a period of time after foreclosure. [Citation.]” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1236 [44 Cal.Rptr.2d 352, 900 P.2d 601] (Alliance).) By contrast, in a nonjudicial foreclosure, there “is no oversight by a court, … the debtor has no postsale right of redemption[,] … [and] the creditor may not seek a deficiency judgment.” (National Enterprises, Inc. v. Woods (2001) 94 Cal.App.4th 1217, 1226 [115 Cal.Rptr.2d 37].)

[12] Plaintiffs argue that the notice of sale was ineffective because there is a triable issue of fact as to whether defendants sent it to the correct address. For the purpose of our analysis, however, we need not resolve that dispute.

[13] The Civil Code has since been amended to require that, as of January 1, 2011, “whenever a sale is postponed for a period of at least 10 business days pursuant to Section 2924g, a mortgagee, beneficiary, or authorized agent shall provide written notice to a borrower regarding the new sale date and time, within five business days following the postponement.” (Civ. Code, § 2924, subd. (a)(5).)

[14] Defendants also argue that plaintiffs were not harmed by the trustee’s failure to comply with section 729.050 because, shortly after the foreclosure sale, the trustee recorded a certificate of sale referencing the date of the sale and the 90-day redemption period. According to defendants, the trustee’s recording of the certificate provided plaintiffs “constructive notice of the right to redemption.” This argument fails for the same reasons discussed above. First, the argument presumes that plaintiffs had a duty to monitor whether a certificate of sale was recorded against their property. The Legislature relieved CID owners of any such duty by requiring that the trustee provide notice of the redemption period promptly after the sale pursuant to section 729.050. Second, the trustee’s act of recording a certificate of sale that included the sale date and a statement regarding the right to redemption was statutorily mandated under section 729.040. Thus, defendants argue that a trustee who complies with section 729.040’s recording requirements need not comply with section 729.050’s postsale notice requirements. Such an outcome would be inconsistent with the legislative scheme.

[15] Although plaintiffs’ brief references their “eight through twentieth causes of action,” the second amended complaint only contains 18 claims.

[16] The final paragraph of plaintiffs’ brief asserts that “Respondents were awarded attorneys’ fees as prevailing parties” and requests that the “award of costs and attorney’s fees … be vacated.” This portion of the brief does not contain any citation to legal authority or the record. Moreover, plaintiffs failed to include a copy of the order awarding fees and costs in the appellate record. Without such materials, we have no basis to review the order. (Bennett v. McCall (1993) 19 Cal.App.4th 122, 127 [23 Cal.Rptr.2d 268], citing Buckhart v. San Francisco Residential Rent Etc., Bd. (1988) 197 Cal.App.3d 1032, 1036 [243 Cal.Rptr. 298] [“The appellant must affirmatively demonstrate error by an adequate record.”].)

Diamond v. Superior Court

(2013) 217 Cal.App.4th 1172

[Assessment Collection; Notice Requirements] A HOA must strictly adhere to the statutory lien and foreclosure notice requirements in order to perfect an assessment lien and foreclose on a homeowner’s property.

Law Offices of Louis Spitters and Laurence Louis Spitters for Petitioner.
Barbara A. Jones as Amicus Curiae on behalf of Petitioner AARP.
Edward F. Cullen; Law Offices of Charles L. Morrone and Charles L. Morrone for Real Party in Interest.

OPINION

BAMATTRE-MANOUKIAN, J. —

I. INTRODUCTION

Petitioner Arlyne M. Diamond owns a townhouse-style unit in the Casa Del Valle common interest development, which is managed by real party in interest Case Del Valle Homeowners Association (Association). After Diamond failed to pay a $9,750 special assessment by the due date, the Association’s collection efforts included recording an assessment lien on her townhouse property and filing the instant action for judicial foreclosure. Diamond moved for summary judgment on the ground that the Association could not foreclose because the assessment lien was not valid, since the Association had not complied with the prelien and preforeclosure notice requirements set forth in the Davis-Stirling Common Interest Development Act (Davis-Stirling Act), Civil Code sections 1367.1 and 1367.4.^[1] The trial court denied the summary judgment motion, finding that the Association had substantially complied with the statutory notice requirements.

On appeal, Diamond argues that a homeowners association must strictly comply with the notice requirements of sections 1367.1 and 1367.4 in order [1177] to perfect an assessment lien and foreclose on a homeowner’s property in a common interest development. For the reasons stated below, we agree. Since the Association’s failure to strictly comply with all of the statutory notice requirements is undisputed, we will issue a peremptory writ of mandate directing the trial court to vacate its order denying Diamond’s motion for summary judgment and enter a new order granting the motion.

II. FACTUAL BACKGROUND

Our factual summary is drawn from Diamond’s separate statement of facts, the Association’s response, and the evidence submitted by the parties in connection with Diamond’s motion for summary judgment.

In 1978, Diamond purchased a unit in the Casa Del Valle common interest development, which is managed by the Association through its board of directors (Board). The Association’s current governing documents are the “1998 Amended and Restated Covenants, Conditions and Restrictions” (CC&Rs). The CC&Rs provide that the Board may levy a special assessment to raise funds for “unexpected operating or other costs … or such other purposes as the Board in its discretion considers appropriate.” Where a levied assessment is delinquent, the CC&Rs also provide that the Association “may record a notice of delinquent Assessment and establish a lien against” the owner’s lot and may enforce the assessment lien by any manner permitted by law, including judicial foreclosure.

In 2006, the Board decided to replace all of the roofs in the development and engage in other repair projects. Since the Association’s reserve funds were insufficient, the Board determined that a special assessment was needed to raise funds to pay for the roof replacement and the repair projects. In March 2007, a special assessment in the amount of $9,750 per unit was approved in a special election by a majority of the voting members of the Association.

Due to her financial situation, Diamond was unable to pay the special assessment by the May 2007 due date. She then attempted to negotiate a payment plan by contacting members of the Board. According to Diamond, her communications with the Board’s president resulted in a payment plan agreement that was reached during their meeting on May 14, 2007. Diamond believed that payment plan agreement required her to execute a promissory note for $9,750 plus interest, make a downpayment of $1,000, and make monthly payments of $100 until her financial situation improved and she could make larger monthly payments.

After Diamond made the $1,000 downpayment and a couple of monthly payments, she received a June 19, 2007 prelien letter from the Association’s [1178] attorney. The letter did not refer to the payment plan that Diamond believed she had negotiated with the Board president. Instead, the letter stated in part: (1) the total outstanding charges were $10,225; (2) the Association would “record a Notice of Assessment (lien claim)” against her “condominium unit” if her account was not brought current within 30 days; (3) she was entitled to inspect the Association’s accounting books and records; (4) she could submit a written request to the Board to discuss a payment plan; (5) she had the right to dispute the assessment debt by submitting a written request for dispute resolution to the Association pursuant to the Association’s “`meet and confer’ program” or, alternatively, she could request alternative dispute resolution with a neutral third party pursuant to section 1369.510; and (6) “IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOUR ARE [sic] BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION.”

Diamond responded to the prelien letter by sending the Association’s attorney a letter dated July 18, 2007, in which she stated that the Board president had agreed to a payment plan due to her hardship situation, she had complied with the payment plan, and she had offered to sign a promissory note “in lieu of a lien.” She also advised that she could not pay the special assessment without the payment plan.

On July 26, 2007, the Association recorded a notice of assessment against Diamond’s townhouse property, which stated that the amount of the assessment lien was $12,010.23. The Association sent a copy of the recorded notice of assessment to Diamond 28 days later as an enclosure in the August 22, 2007 letter mailed to her by the Association’s attorney. The August 22, 2007 letter also informed Diamond that the Board had approved a 12-month payment plan that consisted of a monthly payment of $989.17 and maintenance of the assessment lien on her property until her account was paid in full.

Diamond met with the Association’s attorney on September 10, 2007, regarding her proposal for a payment plan. As indicated in the September 13, 2007 letter to Diamond, the Association’s attorney requested that Diamond supply documentation regarding her financial condition and corroboration of her claim that she had previously reached a payment plan agreement with the Board president. Thereafter, the Board offered Diamond a different payment plan, as stated in the October 18, 2007 letter from the Association’s attorney. Although the copy of the October 18, 2007 letter included in the record is incomplete, it appears that the Board accepted Diamond’s prior downpayment of $1,000, her prior monthly payments of $100 for five months in 2007, and agreed to accept monthly payments of $250 for the two months remaining in 2007. The balance of the proposed payment plan is not reflected in the record.

[1179] Now represented, Diamond sent an October 23, 2007 letter to the Association’s attorney requesting that the parties meet and confer and stating that if the matter could not be resolved, she requested alternative dispute resolution, specifically mediation, as provided in section 1367.1, subd. (c)(1)(B). The Association rejected Diamond’s request to meet and confer and also rejected her request for alternative dispute resolution, stating in its letter of November 21, 2007, that “the [Association] has already met and conferred with Dr. Diamond on September 10, 2007. Dr. Diamond is entitled to either meet and confer with the [Association] or engage in Alternative Dispute Resolution, but not both.” The November 21, 2007 letter also returned three $100 checks that Diamond had sent to the Association.

The Board met in executive session on November 7, 2007, to vote on whether to initiate foreclosure proceedings on Diamond’s property. Foreclosure proceedings were approved by a majority vote, as stated in the minutes of the executive session.

III. PROCEDURAL BACKGROUND

A. The Complaint

On November 15, 2007, the Association filed a complaint against Diamond seeking judicial foreclosure on her Casa Del Valle property and application of the sales proceeds to pay a judgment in the amount of $10,064.88 plus costs, interest, and attorney’s fees. The Association personally served the summons, complaint, and notice of Board action (decision to initiate foreclosure proceedings) on Diamond on December 9, 2007.

B. The Motion for Summary Judgment

Diamond subsequently filed a motion for summary judgment, combined with a “motion to expunge lien,” in April 2012. She generally argued that it was undisputed that the Association had failed to comply with all of the notice requirements set forth in sections 1367.1 and 1367.4 that a homeowners association must meet in order to perfect an assessment lien and foreclose on a homeowner’s property, and absent compliance with the statutory notice requirements, the Association’s foreclosure action lacked merit as a matter of law.

Specifically, Diamond asserted that the Association had (1) failed to send her a copy of the recorded notice of delinquent assessment by certified mail within 10 days of the recording (§ 1367.1, subd. (d)); (2) failed to give her a preforeclosure notice of her right to demand alternative dispute resolution (§§ 1367.1, subd. (c)(1)(B), 1367.4, subd. (c)(1)); (3) failed to record the [1180] Board’s executive session vote to initiate foreclosure proceedings on her property in the minutes of the next meeting of the Board open to all members (§ 1367.4, subd. (c)(2)); and (4) failed to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action (§ 1367.4, subd. (c)(3)).

Since the Association had failed to comply with these statutory notice requirements, Diamond argued that the lien was “invalid to the extent it includes any sum other than the principal amount of the lien, less all sums paid to date by [Diamond]” and therefore the lien should be expunged and summary judgment granted.

C. Opposition to the Motion for Summary Judgment

In opposition to the motion for summary judgment, the Association argued that the evidence showed that it had sufficiently complied with the statutory notice requirements and therefore the motion should be denied.

First, although the Association admitted that it had not sent Diamond a copy of the recorded notice of delinquent assessment by certified mail within 10 days of the recording, as required by section 1367.1, subdivision (d), the Association argued that this was a “technical violation” because Diamond had received actual notice and the Civil Code did not provide any consequences for the violation.

Second, the Association argued that it had given Diamond adequate preforeclosure notice of her right to demand alternative dispute resolution, as required by sections 1367.1, subdivision (c)(1)(B), and 1367.4, subdivision (c)(1), in its prelien letter of June 19, 2007. According to the Association, the Civil Code does not require separate notices of the right to prelien or preforeclosure alternative dispute resolution.

Third, the Association also admitted that it had failed to record the Board’s executive session vote to initiate foreclosure proceedings on Diamond’s property in the minutes of the next meeting of the Board open to all members, as required by section 1367.4, subdivision (c)(2). However, the Association contended that under the circumstances of this matter, including its efforts to negotiate a payment plan with Diamond, “this technical violation should be excused by the court.”

Finally, the Association disputed Diamond’s claim that it had failed to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action, as required by section 1367.4, subdivision (c)(3). The Association explained that it had complied with this [1181] requirement by personally serving her with the notice of the Board’s vote to foreclose along with the summons and complaint on December 9, 2007. The Association further explained that section 1367.4, subdivision (c)(3) does not specify the timing for serving the notice of the Board’s vote to foreclose.

D. The Trial Court’s Order

The record on appeal does not contain a signed and filed court order ruling on Diamond’s motion for summary judgment. The only record we have of the trial court’s ruling is a copy of the undated tentative ruling and the reporter’s transcript of the August 16, 2012 hearing on the motion. However, the parties have not raised any issues with respect to the omission of a signed and filed order denying the motion for summary judgment.

In its tentative ruling, the trial court denied the motion for summary judgment and the motion to expunge the lien, stating in part: “[Diamond] fails to meet her initial burden to produce evidence that [the Association’s] action is barred by the provisions of Civil Code sections 1367.1 and 1367.4. [The Association] substantially complied with the requirements of section 1367.1, subdivision (d) because [Diamond] received actual notice of the fact that a lien was recorded on her property in sufficient time to allow her to work with [the Association] to resolve this dispute before [the Association’s] lawsuit was filed. [Citations.] Prior to initiating this action, [the Association] also complied with the requirement of sections 1367.1, subdivision (c)(1)(B) and 1367.4, subdivision (c)(1) to provide notice of [Diamond’s] right to meet and confer or participate in ADR. [Citation.] Additionally, [the Association] complied fully with section 1367.4, subdivision (c)(3)’s requirement that [Diamond] receive notice of the board’s decision to initiate the action. [Citation.] Finally, insofar as [the Association] failed to comply strictly with the requirements of section 1367.4, subdivision (c)(2), the statutory purpose to protect [Diamond’s] right to privacy was not frustrated by the failure of the board to note its decision to foreclose in the minutes of a regular board meeting. Insofar as subdivision (c)(2) also functions to effectuate the requirements of Civil Code section 1363.05, subdivision (c), [Diamond] was not aggrieved by the board’s omission any differently than any other member of the association, and her remedy as a member of the association was to pursue a timely action under Civil Code section 1363.09.”

The trial court adopted its tentative ruling at the conclusion of the August 16, 2012 hearing on the motion for summary judgment.

IV. DISCUSSION

After the trial court denied her motion for summary judgment, Diamond filed a petition for a writ of mandate directing the trial court to vacate its [1182] order and enter a new order granting her motion for summary judgment. The Association filed preliminary opposition to the petition, to which Diamond replied. We issued an order to show cause why a peremptory writ should not issue as requested in the petition for a writ of mandate and a temporary stay of all trial court proceedings while the writ petition was pending. Having received further briefing from the parties and granted the application of the AARP for leave to file an amicus curiae brief in support of petitioner and having provided an opportunity for oral argument, we turn to the merits of the writ petition, beginning with our standard of review.

A. Propriety of Writ Relief and the Standard of Review

An order denying a motion for summary judgment may be reviewed by way of a petition for a writ of mandate. (Code Civ. Proc., § 437c, subd. (m)(1).) “Where the trial court’s denial of a motion for summary judgment will result in a trial on nonactionable claims, a writ of mandate will issue. [Citation.]” (Prudential Ins. Co. of America, Inc. v. Superior Court (2002) 98 Cal.App.4th 585, 594 [119 Cal.Rptr.2d 823] (Prudential).)

The standard of review for an order granting or denying a motion for summary judgment is de novo. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 [107 Cal.Rptr.2d 841, 24 P.3d 493] (Aguilar).) The trial court’s stated reasons for granting summary judgment are not binding on the reviewing court, “which reviews the trial court’s ruling, not its rationale. [Citation.]” (Ramalingam v. Thompson (2007) 151 Cal.App.4th 491, 498 [60 Cal.Rptr.3d 11].)

In performing its independent review, the reviewing court applies the same three-step process as the trial court. “Because summary judgment is defined by the material allegations in the pleadings, we first look to the pleadings to identify the elements of the causes of action for which relief is sought.” (Baptist v. Robinson (2006) 143 Cal.App.4th 151, 159 [49 Cal.Rptr.3d 153] (Baptist).)

“We then examine the moving party’s motion, including the evidence offered in support of the motion.” (Baptist, supra, 143 Cal.App.4th at p. 159.) A defendant moving for summary judgment has the initial burden of showing that a cause of action lacks merit because one or more elements of the cause of action cannot be established or there is a complete defense to that cause of action. (Code Civ. Proc., § 437c, subd. (o); Aguilar, supra, 25 Cal.4th at p. 850.)

If the defendant fails to make this initial showing, it is unnecessary to examine the plaintiff’s opposing evidence and the motion must be denied. [1183] However, if the moving papers make a prima facie showing that justifies a judgment in the defendant’s favor, the burden shifts to the plaintiff to make a prima facie showing of the existence of a triable issue of material fact. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, 25 Cal.4th at p. 849; Kahn v. East Side Union High School Dist.(2003) 31 Cal.4th 990, 1002-1003 [4 Cal.Rptr.3d 103, 75 P.3d 30].)

In determining whether the parties have met their respective burdens, “the court must `consider all of the evidence’ and `all’ of the `inferences’ reasonably drawn therefrom [citation], and must view such evidence [citations] and such inferences [citations], in the light most favorable to the opposing party.” (Aguilar, supra, 25 Cal.4th at p. 843.) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Id. at p. 850, fn. omitted.) Thus, a party “cannot avoid summary judgment by asserting facts based on mere speculation and conjecture, but instead must produce admissible evidence raising a triable issue of fact. [Citation.]” (LaChapelle v. Toyota Motor Credit Corp.(2002) 102 Cal.App.4th 977, 981 [126 Cal.Rptr.2d 32].)

In the present case, defendant Diamond moved for summary judgment on the ground that the foreclosure action lacks merit because the Association cannot establish a valid assessment lien that is enforceable in a foreclosure action, due to its undisputed failure to comply with all of the notice requirements set forth in sections 1367.1 and 1367.4. Our independent review of the merits of the summary judgment motion therefore begins with an overview of the statutory requirements for foreclosure under the Davis-Stirling Act, including the statutory notice requirements.

B. Foreclosure Under the Davis-Stirling Act

1. The Association’s Authority to Collect an Assessment Debt

“In 1985, the Legislature enacted the [Davis-Stirling Act] as division 2, part 4, title 6 of the Civil Code, `Common Interest Developments’ ([§§] 1350-1376; Stats. 1985, ch. 874, § 14, pp. 2774-2787), which encompasses community apartment projects, condominium projects, planned developments and stock cooperatives ([§] 1351, subd. (c)).[^[2]] `A common interest development shall be managed by an association which may be incorporated or [1184] unincorporated. The association may be referred to as a community association.’ ([§] 1363, subd. (a).)” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 252-253, fn. 1 [87 Cal.Rptr.2d 237, 980 P.2d 940].)

(1) An association’s authority to levy assessments is set forth in section 1366, subdivision (a), which provides, with certain exceptions not relevant here, that “the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and [title 6].” “A condominium assessment becomes a debt of the owner when the assessment is levied by the condominium association. ([§] 1367.1, subd. (a).) `The debt is only a personal obligation of the owner, however, until the community association records a “notice of delinquent assessment” against the owner’s interest in the development. Recording this notice creates a lien and gives the association a security interest in the lot or unit against which the assessment was imposed.’ ([Citation]; see [§] 1367, subd. (d).)” (Diamond Heights Village Assn., Inc. v. Financial Freedom Senior Funding Corp. (2011) 196 Cal.App.4th 290, 300-301 [126 Cal.Rptr.3d 673] (Diamond Heights).) “It is generally understood that a lien is not a debt but acts as `security for payment of a debt or other obligation.’ ([Citation]; see [§] 2872.) … An assessment lien may be enforced `in any manner permitted by law,’ including judicial foreclosure. ([§] 1367, subd. (e).)”^[3] (Diamond Heights, supra, 196 Cal.App.4th at p. 301.)

(2) Where, as here, the assessment lien was recorded after January 1, 2003, sections 1367.1 and 1367.4 expressly impose certain conditions that an association must satisfy before the assessment lien may be enforced by judicial foreclosure. (§ 1367.1, subd. (m).) These conditions include notice requirements, beginning with the prelien notice mandated by section 1367.1, subdivision (a). The association may initiate foreclosure of a lien for a delinquent assessment only where the lien “has been validly recorded.” (§1367.4, subd. (c)(2).)

2. Prelien Notice

After January 1, 2006, “the decision to record a lien for delinquent assessments shall be made only by the board of directors of the association…. The board shall approve the decision by a majority vote of the board members in an open meeting. The board shall record the vote in the minutes of that meeting.” (§ 1367.1, subd. (c)(2).)

[1185] Before recording a lien for a delinquent assessment, the association must give the homeowner an opportunity to engage in dispute resolution. Section 1367.1, subdivision (c)(1)(A) provides: “Prior to recording a lien for delinquent assessments, an association shall offer the owner and, if so requested by the owner, participate in dispute resolution pursuant to the association’s `meet and confer’ program required in Article 5 (commencing with Section 1363.810) of Chapter 4.” (§ 1367.1, subd. (c)(1)(A).)

The association must also give the homeowner a prelien notice as specified by section 1367.1. Subdivision (a) of section 1367.1 provides: “At least 30 days prior to recording a lien upon the separate interest of the owner of record to collect a debt that is past due …, the association shall notify the owner of record in writing by certified mail of the following: [¶] (1) A general description of the collection and lien enforcement procedures of the association…. [¶] (2) An itemized statement of the charges owed by the owner, including items on the statement which indicate the amount of any delinquent assessments…. [¶] (3) A statement that the owner shall not be liable to pay the charges, interest, and costs of collection, if it is determined the assessment was paid on time to the association. [¶] (4) The right to request a meeting with the board as provided by paragraph (3) of subdivision (c) [(meeting to discuss a payment plan)]. [¶] (5) The right to dispute the assessment debt by submitting a written request for dispute resolution to the association pursuant to the association’s `meet and confer’ program…. [¶] (6) The right to request alternative dispute resolution with a neutral third party … before the association may initiate foreclosure against the owner’s separate interest, except that binding arbitration shall not be available if the association intends to initiate a judicial foreclosure.”

3. Notice After Recording the Assessment Lien

(3) The lien (for the amount of the delinquent assessment, costs of collection, late charges, and interest) is recorded when the association causes a notice of delinquent assessment to be recorded with the county recorder in the county in which the owner’s separate interest is located. (§ 1367.1, subd. (d).)

The method and timing of the transmission of the notice of delinquent assessment to the homeowner is specified in section 1367.1, subdivision (d): “A copy of the recorded notice of delinquent assessment shall be mailed by certified mail to every person whose name is shown as an owner of the separate interest in the association’s records, and the notice shall be mailed no later than 10 calendar days after recordation.”

[1186] 4. Preforeclosure Notices

(4) To collect a delinquent special assessment secured by a lien on the owner’s property, an association may use judicial foreclosure, subject to several conditions. (§ 1367.4, subd. (c).)

First, an association must offer dispute resolution before initiating foreclosure. “Prior to initiating a foreclosure on an owner’s separate interest, the association shall offer the owner and, if so requested by the owner, participate in dispute resolution pursuant to the association’s `meet and confer’ program… or alternative dispute resolution…. The decision to pursue dispute resolution or a particular type of alternative dispute resolution shall be the choice of the owner….” (§ 1367.4, subd. (c)(1); see § 1367.1, subd. (c)(1)(B).)

Second, the board of directors of the association must vote to approve foreclosure. “The decision to initiate foreclosure of a lien for delinquent assessments that has been validly recorded shall be made only by the board of directors of the association…. The board shall approve the decision by a majority vote of the board members in an executive session. The board shall record the vote in the minutes of the next meeting of the board open to all members. The board shall maintain the confidentiality of the owner or owners of the separate interest by identifying the matter in the minutes by the parcel number of the property, rather than the name of the owner or owners….” (§ 1367.4, subd. (c)(2).)

Third, the board must provide notice of the board’s decision to initiate foreclosure to the homeowner in the manner specified by section 1367.4, subdivision (c)(3): “The board shall provide notice by personal service in accordance with the manner of service of summons … to an owner of a separate interest who occupies the separate interest or to the owner’s legal representative, if the board votes to foreclose upon the separate interest….”

5. Remedies for Failure to Comply

Section 1367.1 provides remedies for an association’s failure to comply with the mandatory prelien and preforeclosure procedures and notice requirements set forth in sections 1367.1 and 1367.4.

Where the assessment lien has not yet been recorded: “An association that fails to comply with the procedures set forth in this section [(§ 1367.1)] shall, prior to recording a lien, recommence the required notice process.” (§ 1367.1, subd. (l)(1).)

[1187] After the assessment lien has been recorded: “If it is determined that a lien previously recorded against the separate interest was recorded in error, the party who recorded the lien shall, within 21 calendar days, record or cause to be recorded in the office of the county recorder in which the notice of delinquent assessment is recorded a lien release or notice of rescission and provide the owner of the separate interest with a declaration that the lien filing or recording was in error and a copy of the lien release or notice of rescission.” (§ 1367.1, subd. (i).)

C. The Association’s Failure to Comply with Statutory Notice Requirements

1. The Parties’ Contentions

In her writ petition, Diamond reiterates her contentions below that it is undisputed that the Association failed to comply with the Davis-Stirling Act’s statutory notice requirements by (1) failing to send her a copy of the recorded notice of delinquent assessment by certified mail within 10 days of the recording (§ 1367.1, subd. (d)); (2) failing to give her a preforeclosure notice of her right to demand alternative dispute resolution (§§ 1367.1, subd. (c)(1)(B), 1367.4, subd. (c)(1)); (3) failing to record the Board’s executive session vote to initiate foreclosure on her property in the minutes of the next meeting of the Board open to all members (§ 1367.4, subd. (c)(2)); and (4) failing to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action (§ 1367.4, subd. (c)(3)).

Diamond further contends that the Legislature intended, in enacting sections 1367.1 and 1367.4, to protect homeowners from abuse of the foreclosure process by homeowners associations. For that reason, she argues that strict compliance with the statutory notice requirements is necessary and the trial court erred in deeming substantial compliance to be sufficient for a valid assessment lien and enforcement of the lien in a judicial foreclosure action.

The Association responds that (1) although it failed to send Diamond a copy of the recorded notice of delinquent assessment within 10 days of the recording as required by section 1367.1, subdivision (d), it is anticipated that the evidence will show Diamond was out of the country during the 10-day period and therefore timely notice was not possible; (2) its prelien letter of June 19, 2007, advising Diamond of her right to request dispute resolution constituted preforeclosure notice of Diamond’s right to demand alternative dispute resolution as required by sections 1367.1, subdivision (c)(1)(B) and 1367.4, subdivision (c)(1); (3) its admitted failure to record the Board’s executive session foreclosure vote in the minutes of the next Board meeting [1188] open to all members, as required by section 1367.4, subdivision (c)(2) “is of no consequence” because Diamond was aware that if she did not accept the Association’s proposal for a payment plan, a foreclosure action would be filed; and (4) it did not violate section 1367.4, subdivision (c)(3) by personally serving Diamond with the notice of the Board’s vote to foreclose at the same time it personally served her with the summons and complaint for the foreclosure action, since she “did not lose a single second of time in which to defend her interests.”

In light of the Association’s admission that it did not comply with all of the notice requirements of sections 1367.1 and 1367.4, the crucial issue in this case is whether, as the trial court ruled, substantial compliance is sufficient for the assessment lien on Diamond’s property to be valid and enforceable in a judicial foreclosure action. To resolve the issue, we must construe the relevant provisions of sections 1367.1 and 1367.4 under the rules governing statutory interpretation.

2. Rules of Statutory Interpretation

Statutory interpretation involves purely legal questions to which we apply the independent standard of review. (Burden v. Snowden (1992) 2 Cal.4th 556, 562 [7 Cal.Rptr.2d 531, 828 P.2d 672]; accord, Jacobs Farm/Del Cabo, Inc. v. Western Farm Service, Inc. (2010) 190 Cal.App.4th 1502, 1521 [119 Cal.Rptr.3d 529].) In performing our independent review, we apply well-settled rules.

(5) “[O]ur fundamental task is to ascertain the Legislature’s intent so as to effectuate the purpose of the statute. [Citation.] We begin with the language of the statute, giving the words their usual and ordinary meaning. [Citation.] The language must be construed `in the context of the statute as a whole and the overall statutory scheme, and we give “significance to every word, phrase, sentence, and part of an act in pursuance of the legislative purpose.”‘ [Citation.] In other words, `”we do not construe statutes in isolation, but rather read every statute `with reference to the entire scheme of law of which it is part so that the whole may be harmonized and retain effectiveness.’ [Citation.]”‘ [Citation.] If the statutory terms are ambiguous, we may examine extrinsic sources, including the ostensible objects to be achieved and the legislative history. [Citation.] In such circumstances, we choose the construction that comports most closely with the Legislature’s apparent intent, endeavoring to promote rather than defeat the statute’s general purpose, and avoiding a construction that would lead to absurd consequences. [Citation.]” (Smith v. Superior Court (2006) 39 Cal.4th 77, 83 [45 Cal.Rptr.3d 394, 137 P.3d 218].)

[1189] (6) Additionally, we may “`examine the history and background of the statutory provision in order to ascertain the most reasonable interpretation of the measure.’ [Citation.]” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 543 [67 Cal.Rptr.3d 330, 169 P.3d 559] (Doe).) Even where the plain language of the statute dictates the result, the legislative history may provide additional authority confirming the court’s interpretation of the statute. (Id. at p. 544.)

3. Analysis

Having reviewed the statutory provisions in question, for reasons that we will discuss we determine that the plain language of sections 1367.1 and 1367.4 and the legislative history show that the Legislature intended the notice requirements to be strictly construed. We will address in turn each of the four notice requirements that Diamond asserts the Association did not satisfy.

Failure to Properly Transmit Notice of Recorded Assessment Lien

Section 1367.1, subdivision (d) provides in part, “A copy of the recorded notice of delinquent assessment shall be mailed by certified mail to every person whose name is shown as an owner of the separate interest in the association’s records, and the notice shall be mailed no later than 10 calendar days after recordation.”

It is undisputed that the notice of delinquent assessment in this case was recorded on July 26, 2007, and the Association mailed Diamond a copy of the recorded notice of assessment to Diamond 28 days later as an enclosure in the August 22, 2007 letter. The Association admits that it did not comply with section 1367.1, subdivision (d) because it did not send a copy of the recorded notice of delinquent assessment to Diamond either by certified mail or within 10 calendar days after the recordation.

The trial court ruled that the Association had substantially complied with the requirements of section 1367.1, subdivision (d) because Diamond received actual notice of the recorded assessment lien in sufficient time to allow her to resolve the assessment dispute with the Association before the foreclosure action was filed.

(7) To determine whether substantial compliance is sufficient, we first examine the plain language of the statute. Section 1367.1, subdivision (d), states that the recorded notice of delinquent assessment “shall be mailed by certified mail,” and that the notice “shall be mailed no later than 10 calendar [1190] days after recordation.” (Italics added.) The California Supreme Court has stated the general rule regarding the interpretation of the word “shall”: “[T]he word `shall’ in a statute is ordinarily deemed mandatory, and `may’ permissive. [Citation.]” (California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1143 [43 Cal.Rptr.2d 693, 899 P.2d 79] (Peace Officers).) The general rule therefore requires that section 1367.1, subdivision (d), be strictly construed to mandate that the homeowner receive a copy of the recorded notice of delinquent assessment by certified mail within 10 calendar days after the recordation and that substantial compliance is insufficient.

(8) “Nonetheless, in construing the statute, the court must ascertain the legislative intent. `”In the absence of express language, the intent must be gathered from the terms of the statute construed as a whole, from the nature and character of the act to be done, and from the consequences which would follow the doing or failure to do the particular act at the required time. [Citation.] When the object is to subserve some public purpose, the provision may be held directory or mandatory as will best accomplish that purpose [citation]….” [Fn. omitted.]’ [Citation.]” (Peace Officers, supra, 10 Cal.4th at p. 1143.)

We find an expression of the Legislature’s intent regarding the public purpose of sections 1367.1 and 1367.4 and the statutory notice requirements in the legislative history. Section 1367.1 was added to the Civil Code in 2002 (Stats. 2002, ch. 1111, § 8, p. 7126) and amended in 2005, when section 1367.4 was added (Stats. 2005, ch. 452, § 5, p. 3649). In 2005, the Senate Judiciary Committee’s bill analysis stated: “This bill protects owners’ equity in their homes when they fail to pay relatively small assessments to their common interest development associations.” (Sen. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) Mar. 29, 2005, p. 1.)

The Assembly Committee on Judiciary similarly stated: “This bill goes to the heart of home owner rights, touching upon the key issue of when, if ever, a homeowners’ association should have the right to force the sale of a member’s home when the home owner falls behind on paying overdue assessments or dues…. [¶] … [This bill] [s]eeks to protect a condominium owner’s property and equity when he or she misses payment on relatively small assessments imposed by their common interest development (CID) association.” (Assem. Com. on Judiciary, Analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) as amended Apr. 5, 2005, pp. 1-2.)

Thus, the legislative history indicates that the public purpose of sections 1367.1 and 1367.4, including the notice requirements, was to protect the interest of a homeowner who has failed to timely pay an assessment levied by [1191] a homeowners association. The legislative history further indicates that to accomplish this purpose, the notice requirements were intended to be mandatory.

The Senate Judiciary Committee’s bill analysis, prepared before section 1367.1 was enacted in 2002, states: “This bill [(Assem. Bill No. 2289)] would make numerous changes to the procedures followed by homeowners’ associations when a homeowner is delinquent on fees and assessments. These changes would include a waiting period prior to the notice of recordation of a lien, a meeting by the association’s board with the homeowner to discuss the matter upon the homeowner’s request, and additional mandatory disclosures and notices throughout the process.” (Sen. Com. on Judiciary, Analysis of Assem. Bill No. 2289 (2001-2002 Reg. Sess.) as amended June 19, 2002, p. 1, italics added.) In 2005, when section 1367.1 was amended and section 1367.4 was added, the Senate Floor Analysis stated, “This bill also requires the owner to be notified in specified ways if the board has voted to foreclose.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 137 (2005-2006 Reg. Sess.) as amended Apr. 5, 2005, p. 2, italics added.)

Since the legislative history shows that the Legislature’s intent in enacting sections 1367.1 and 1367.4 was to protect the homeowner’s interest by, among other things, requiring that a homeowners’ association give mandatory notices to the homeowner before foreclosing on an assessment lien, it provides additional authority confirming our determination that the plain language of section 1367.1 and its notice requirements be strictly construed. (See Doe, supra, 42 Cal.4th at p. 544.) We have found no indication in the legislative history that the Legislature intended that substantial compliance with the statutory notice requirements would be sufficient to protect the homeowner’s interest.

(9) Also supporting our strict construction of section 1367.1, subdivision (d) is the inclusion in the statute of a penalty for failure to comply with the postlien notice requirements. “[T]ime limits are generally directory, but when the statute provides a consequence or penalty for failure to act within the prescribed time, they have been construed as mandatory. [Citation.]” (Peace Officers, supra, 10 Cal.4th at p. 1143.)

Here, section 1367.1, subdivision (i) provides the penalty: “If it is determined that a lien previously recorded against the separate interest was recorded in error, the party who recorded the lien shall, within 21 calendar days, record or cause to be recorded in the office of the county recorder in which the notice of delinquent assessment is recorded a lien release or notice [1192] of rescission and provide the owner of the separate interest with a declaration that the lien filing or recording was in error and a copy of the lien release or notice of rescission.”

(10) The legislative history further indicates the Legislature’s intent that a lien “recorded in error” (§ 1367.1, subd. (i)) and therefore subject to release or rescission includes a lien recorded without strict compliance with the statutory notice requirements. Prior to the enactment of section 1367.1 in 2002, the Assembly bill analysis stated: “[I]f that lien were placed [sic] and any of the notification requirements of this bill were not met the association would have to rescind the lien, re-notify and wait 30 days to replace the lien.” (Assem. Conc. Sen. Amends. to Assem. Bill No. 2289 (2001-2002 Reg. Sess.) as amended Aug. 21, 2002, pp. 3-4.) We therefore determine that unless a homeowners association strictly complies with the notice requirements of section 1367.1, the assessment lien is not valid, was recorded in error, and may not be enforced by judicial foreclosure. (§1367.4, subd. (c)(2) [foreclosure action may be initiated only where assessment lien was validly recorded].)

(11) The trial court relied on section 4 in determining that substantial compliance with the statutory notice requirements is sufficient. Section 4 provides: “The rule of the common law, that statutes in derogation thereof are to be strictly construed, has no application to this Code. The Code establishes the law of this State respecting the subjects to which it relates, and its provisions are to be liberally construed with a view to effect its objects and to promote justice.” However, the California Supreme Court has instructed that “`[e]ven as to the [Civil] code, “liberal construction” does not mean enlargement or restriction of a plain provision of a written law. If a provision of the code is plain and unambiguous, it is the duty of the court to enforce it as it is written.'” (Li v. Yellow Cab Co. (1975) 13 Cal.3d 804, 815 [119 Cal.Rptr. 858, 532 P.2d 1226].)

The trial court also relied on the decision in Kim v. JF Enterprises (1996) 42 Cal.App.4th 849 [50 Cal.Rptr.2d 141] (Kim), which concerned mechanic’s liens, as support for the liberal construction of the sections 1367.1 and 1367.4 statutory notice requirements. In Kim, the issue was whether the plaintiffs’ failure to serve and file a preliminary 20-day notice, as required by former section 3097, prevented them from foreclosing on their mechanics’ liens. (Kim, supra, 42 Cal.App.4th at pp. 854-855.) The court stated that “[s]trict compliance with [former] section 3097 is required.” (Id. at p. 855.) Rejecting the plaintiffs’ contention that they were not required to give a preliminary notice under the former section 3097, subdivision (a) exception for a claimant “`under direct contract with the owner,'” the court ruled that this exception only applies where the owner has actual knowledge of the construction. (Kim, supra,at pp. 855, 859.)

[1193] Since the decision in Kim concerned the express statutory exception set forth in former section 3097, subdivision (a) to the preliminary notice requirement for a valid mechanic’s lien, and there is no analogous statutory exception to the section 1367.1 notice requirements, Kim is inapplicable here. We also observe that in the mechanic’s lien context it has been held that “where the Legislature has provided a detailed and specific mandate as to the manner or form of serving notice upon an affected party that its property interests are at stake, any deviation from the statutory mandate will be viewed with extreme disfavor.” (Harold L. James, Inc. v. Five Points Ranch, Inc. (1984) 158 Cal.App.3d 1, 6 [204 Cal.Rptr. 494]; see Casa Eva I Homeowners Assn. v. Ani Construction & Tile, Inc. (2005) 134 Cal.App.4th 771, 780 [36 Cal.Rptr.3d 401] [judgment lien statutes are strictly construed]; Bank of America v. Salinas Nissan, Inc. (1989) 207 Cal.App.3d 260, 270 [254 Cal.Rptr. 748] [statutes governing attachment of property are strictly construed]; San Joaquin Blocklite, Inc. v. Willden (1986) 184 Cal.App.3d 361, 365-366 [228 Cal.Rptr. 842] [former § 3098’s preliminary notice requirement for recovery under a stop notice strictly construed].) These decisions are consistent with the California Supreme Court’s long-ago ruling that “`a lien which is the creature of statute can be enforced only in the manner prescribed by the statute.’ [Citation.]” (Chase v. Putnam (1897) 117 Cal. 364, 367-368 [49 P. 204].)

(12) We therefore determine that the notice requirements of sections 1367.1 and 1367.4 are mandatory. Pursuant to section 1367.1, subdivision (d), the Association was required to send Diamond a copy of the recorded notice of delinquent assessment by certified mail no later than 10 calendar days after the recordation. Since the Association admittedly failed to satisfy this notice requirement, the assessment lien recorded on Diamond’s property is not valid and may not be enforced in a judicial foreclosure action. (§1367.4, subd. (c)(2).)

Failure to Give Notice of the Preforeclosure Right to Demand Alternative Dispute Resolution

Diamond contends that the Association failed to give her the preforeclosure notice of her right to demand alternative dispute resolution that is mandated by the statutory scheme for foreclosure on an assessment lien. The Association contends that its prelien letter of June 19, 2007, was sufficient to comply with the statutory requirements for notification of the right to alternative dispute resolution.

(13) Section 1367.1, subdivision (a) expressly requires an association to give the homeowner the written notice specified in the statute at least 30 days [1194] before recording an assessment lien on a homeowner’s separate interest. The dispute resolution notice requirements are set forth in subdivision (a)(5) and (6) of section 1367.1.

Subdivision (a)(5) of section 1367.1 requires the notice to notify the owner of the following: “The right to dispute the assessment debt by submitting a written request for dispute resolution to the association pursuant to the association’s `meet and confer’ program required in Article 5 (commencing with Section 1363.810) of Chapter 4.”

Subdivision (a)(6) of section 1367.1 requires the notice to also notify the owner of the following regarding alternative dispute resolution: “The right to request alternative dispute resolution with a neutral third party pursuant to Article 2 (commencing with Section 1369.510) of Chapter 7 before the association may initiate foreclosure against the owner’s separate interest….”

(14) The notice requirements set forth in subdivision (a)(5) and (6) of section 1367.1 are not stated in the disjunctive; the word “or” does not appear. Section 1367.1, subdivision (a) expressly requires that the homeowner be notified “of the following,” without indicating that any of the notice requirements are in the alternative or otherwise optional. Consequently, to satisfy the notice requirement of section 1367.1, subdivision (a), the prelien notice to the homeowner must include (1) notice of the right to meet and confer as provided by subdivision (a)(5) and (2) notice of the right to alternative dispute resolution with a neutral third party as provided by subdivision (a)(6).

We find that the June 19, 2007 prelien letter did not comply with the section 1367.1, subdivision (a)(5) and (6) notice requirements. The June 19, 2007 letter states in pertinent part: “You have the right to dispute the assessment debt by submitting a written request for dispute resolution to the Homeowners’ Association pursuant to the Homeowner’s Association’s `meet and confer’ program, or as an alternative, you have the right to request alternative dispute resolution with a neutral third party as set forth in the Civil Code beginning with … [s]ection 1369.510.” (Italics added.) Thus, the June 19, 2007 letter incorrectly notified Diamond that her right to dispute resolution consisted of (1) meet and confer to dispute the assessment debt pursuant to the Association’s meet and confer program or (2) alternative dispute resolution with a neutral third party.

Since the June 19, 2007 letter did not satisfy the statutory prelien notice requirements of section 1367.1, subdivision (a), we determine for this additional reason that the assessment lien is not valid and may not be enforced in a judicial foreclosure action. (§1367.4, subd. (c)(2).)

[1195] Failure to Properly Record the Board’s Executive Session Vote to Initiate Foreclosure

Section 1367.4, subdivision (c)(2) provides: “The decision to initiate foreclosure of a lien for delinquent assessments that has been validly recorded shall be made only by the board of directors of the association and may not be delegated to an agent of the association. The board shall approve the decision by a majority vote of the board members in an executive session. The board shall record the vote in the minutes of the next meeting of the board open to all members. The board shall maintain the confidentiality of the owner or owners of the separate interest by identifying the matter in the minutes by the parcel number of the property, rather than the name of the owner or owners. A board vote to approve foreclosure of a lien shall take place at least 30 days prior to any public sale.” (Italics added.)

The Association admits that it failed to record the Board’s executive session foreclosure vote in the minutes of the next Board meeting open to all members, as required by section 1367.4, subdivision (c)(2). However, the Association contends that its failure “is of no consequence” because Diamond was aware that a foreclosure action would be filed if she did not accept the Association’s proposal for a payment plan.

The Association provides no authority for the proposition that it may disregard the notice requirement of section 1367.4, subdivision (c)(2) where the homeowner has actual knowledge that foreclosure is a possibility. To the contrary, as we have determined, the plain language of section 1367.4 and its legislative history shows that the statute’s notice requirements are mandatory. We reiterate that prior to the enactment of section 1367.4 in 2005, the Senate Floor Analysis stated, “This bill alsorequires the owner to be notified in specified ways if the board has voted to foreclose.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 137, supra, as amended Apr. 5, 2005, p. 2, italics added.)

Since the Association did not comply with the notice requirement of section 1367.4, subdivision (c)(2), for that additional reason the assessment lien on Diamond’s property is not valid and may not be enforced in a judicial foreclosure action.

Failure to Properly Serve Notice of the Board’s Foreclosure Vote

Diamond contends that the Association failed to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action (§ 1367.4, subd. (c)(3)). The Association responds that it [1196] complied by personally serving Diamond with the notice of the Board’s vote to foreclose at the same time it personally served her with the summons and complaint for the foreclosure action, since she “did not lose a single second of time in which to defend her interests.”

Section 1367.4, subdivision (c)(3) provides in part: “An association that seeks to collect delinquent regular or special assessments … may use judicial or nonjudicial foreclosure subject to the following conditions: [¶] … [¶] … The board shall provide notice by personal service in accordance with the manner of service of summons in Article 3 (commencing with Section 415.10)[^[4]] of Chapter 4 of Title 5 of Part 2 of the Code of Civil Procedure to an owner of a separate interest who occupies the separate interest … if the board votes to foreclose upon the separate interest.”

According to Diamond, the notice requirement of section 1367.4, subdivision (c)(4) is a condition precedent to filing a judicial foreclosure action, and since the Association personally served the notice on her after it filed the instant judicial foreclosure action, it failed to comply with section 1367.4, subdivision (c)(4). Diamond relies upon the definition of “condition precedent” set forth in section 1436: “A condition precedent is one which is to be performed before some right dependent thereon accrues, or some act dependent thereon is performed.”

(15) We agree that personal service on the homeowner of the board’s vote to foreclose on the homeowner’s separate interest is a statutory condition precedent to the filing of an action for judicial foreclosure on an assessment lien. Section 1367.4, subdivision (c)(3) expressly provides that an association may use judicial foreclosure “subject to the following conditions,” which include “personal service in accordance with the manner of service of summons … to an owner of a separate interest who occupies the separate interest … if the board votes to foreclose upon the separate interest.” (16) Thus, the plain language of section 1367.4, subdivision (c)(4), which we must strictly construe, requires an association to satisfy certain conditions before filing a judicial foreclosure action, including personal service of the notice of the board’s vote to foreclose. (See, e.g., Center for Self-Improvement & Community Development v. Lennar Corp. (2009) 173 Cal.App.4th 1543, 1551 [94 Cal.Rptr.3d 74] [statutory notice is a mandatory condition precedent to establishing a citizen’s right to commence a Prop. 65 enforcement action in the public interest].)

[1197] In the present case, the Association filed the instant judicial foreclosure action on November 15, 2007. It personally served notice of the Board’s November 7, 2007 vote to foreclose on the assessment lien on Diamond’s property nearly one month later, on December 9, 2007. Since it is undisputed that the Association did not personally serve the notice required by section 1367.4, subdivision (c)(4) before filing the judicial foreclosure action, the lack of compliance with this statutory condition precedent is fatal to the judicial foreclosure action. (See, e.g., In re Franklin (2008) 169 Cal.App.4th 386, 392 [86 Cal.Rptr.3d 702] [absence of the statutory condition precedent to lawful sexually violent predator civil commitment proceeding is a fatal flaw].)

4. Conclusion

In summary, we have determined that the notice requirements set forth in the Davis-Stirling Act at sections 1367.1 and 1367.4 for judicial foreclosure on an assessment lien must be strictly construed, pursuant to the plain language of the statutes and their legislative history. We have also determined on the undisputed facts that the Association failed to comply with the Davis-Stirling Act’s statutory notice requirements by (1) failing to send Diamond a copy of the recorded notice of delinquent assessment by certified mail within 10 days of the recording (§ 1367.1, subd. (d)); (2) failing to give her the required prelien notice of her right to demand alternative dispute resolution (§ 1367.1, subds. (a)(5), (a)(6)); (3) failing to record the Board’s executive session vote to initiate foreclosure on her property in the minutes of the next meeting of the Board open to all members (§ 1367.4, subd. (c)(2)); and (4) failing to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action (§ 1367.4, subd. (c)(3)).

(17) Since the Association failed to strictly comply with all of the mandatory notice requirements, the assessment lien that the Association recorded on Diamond’s property is not valid and may not be enforced in a judicial foreclosure action. (§1367.4, subd. (c)(2).) The instant judicial foreclosure action therefore lacks merit as a matter of law and Diamond’s motion for summary judgment should be granted.

To prevent a trial on nonactionable claims, we will grant Diamond’s petition for a writ of mandate and direct the trial court to vacate its order denying Diamond’s motion for summary judgment and to enter a new order granting the motion. (See Prudential, supra, 98 Cal.App.4th at p. 594.) Our ruling is without prejudice to further proceedings in the trial court with respect to the assessment lien.

[1198] V. DISPOSITION

Let a peremptory writ of mandate issue directing respondent court to vacate the order denying petitioner Arlyne M. Diamond’s motion for summary judgment and to enter a new order granting the motion. Upon finality of this decision, the temporary stay order is vacated. Costs in this original proceeding are awarded to petitioner.

Premo, Acting P. J., and Grover, J., concurred.

[1] All further statutory references are to the Civil Code unless otherwise indicated.

[2] Effective January 1, 2014, the Davis-Stirling Act has been comprehensively reorganized and recodified, including the repeal of sections 1367.1 and 1367.4. (Stats. 2012, ch. 180, § 1; Legis. Counsel’s Dig., Assem. Bill No. 805 (2011-2012 Reg. Sess.).)

[3] The association may not foreclose on an assessment lien unless the amount of the delinquent assessment secured by the lien exceeds $1,800 or the assessment is more than 12 months delinquent. (§ 1367.4, subd. (b)(2).)

[4] Code of Civil Procedure section 415.10 provides: “A summons may be served by personal delivery of a copy of the summons and of the complaint to the person to be served. Service of a summons in this manner is deemed complete at the time of such delivery. [¶] The date upon which personal delivery is made shall be entered on or affixed to the face of the copy of the summons at the time of its delivery. However, service of a summons without such date shall be valid and effective.”

Huntington Continental Townhouse Association, Inc. v. Miner

(2014) 230 Cal.App.4th 590

[Assessments & Collection; Partial Payments] An association is required to accept partial payments made by a delinquent homeowner and allocate them in accordance with Civil Code Section 5655, even after the association has recorded an assessment lien.

Sam Walker for Defendant and Appellant.
Barbara Jones for AARP as Amicus Curiae on behalf of Defendant and Appellant.
Noah Zinner for Housing and Economic Rights Advocates as Amicus Curiae on behalf of Defendant and Appellant.
Kent Qian for National Housing Law Project as Amicus Curiae on behalf of Defendant and Appellant.
Feldsott & Lee, Stanley Feldsott and Jacqueline Pagano for Plaintiff and Respondent.
Law Offices of Tom Fier and Tom Fier as Amicus Curiae on behalf of Plaintiff and Respondent.
Larry Rothman & Associates and Larry Rothman as Amicus Curiae on behalf of Plaintiff and Respondent.
SwedelsonGottlieb and Joan Lewis-Heard for ALS Lien Services as Amicus Curiae on behalf of Plaintiff and Respondent.

OPINION

FYBEL, J. —

INTRODUCTION

The Orange County Superior Court, after a decision by the appellate division (Huntington Continental Town House Assn., Inc. v. Miner (2014) 222 Cal.App.4th Supp. 13 [167 Cal.Rptr.3d 609] (Huntington Continental)), certified this case for transfer to this court pursuant to rule 8.1005(a)(1) of the California Rules of Court to address a single question. The question is whether a homeowners association is required by the Davis-Stirling Common Interest Development Act (Civ. Code, § 4000 et seq.) (the Davis-Stirling Act) to accept partial payments from an owner of a separate interest, who is delinquent in paying his or her assessments, after a lien has been recorded against the owner’s separate interest to secure payment of delinquent assessments and other charges. We ordered the case transferred to this court for hearing and decision.

We agree with the decision of the appellate division of the superior court in Huntington Continental, and hold that under Civil Code section 5655, subdivision (a) (section 5655(a)), a homeowners association (an association) must accept a partial payment made by an owner of a separate interest in a common interest development and must apply that payment in the order prescribed by statute. The obligation to accept partial payments continues after a lien has been recorded against an owner’s separate interest for collection of delinquent assessments. The remedies available to an association under Civil Code section 5720 depend upon the amount and the age of the balance of delinquent assessments following application of the partial payment.

[596] FACTS AND PROCEDURAL HISTORY

Joseph A. Miner, as trustee of The JM Trust, Dated January 1, 2005 (the Trust), owns a separate interest in a common interest development subject to the management of the Huntington Continental Townhouse Association, Inc. (HCTA), which is an association within the meaning of Civil Code section 4080.^[1] HCTA charges owners of separate interests regular assessments, which are due on the first day of each month.

For nearly every month from 2003 to the beginning of 2009, Miner timely paid HCTA assessments for the Trust’s separate interest. He failed to pay the assessment due on April 1, 2009, and, thereafter, the Trust was delinquent in paying assessments. On October 13, 2010, HCTA sent a letter to the Trust, notifying it that assessments were delinquent in the amount of $3,864.96. Receiving no response to the letter, HCTA’s board of directors adopted a resolution to record a lien against the Trust’s separate interest for the delinquent assessments. A lien in the amount of $4,827.81 was recorded on January 7, 2011. Of that amount, $4,136 was for unpaid assessments and the rest was for late charges, interest, collection costs, and a returned check fee.

Four days after the lien was recorded, HCTA sent a notice to the Trust that the matter would be forwarded to legal counsel if the entire balance of the account was not paid within 30 days. On January 25, 2011, HCTA’s board of directors adopted a resolution to foreclose the delinquent assessment lien. Two months later, HCTA’s attorneys, Feldsott & Lee (Feldsott), sent a letter to the Trust, notifying it of HCTA’s intent to initiate foreclosure proceedings. The letter stated the total amount of delinquency was $6,197.11, of which $5,434.11 was for delinquent assessments and the rest was for attorney fees, costs, release of lien fee, and “file set up” fees.

On April 13, 2011, HCTA filed a limited jurisdiction complaint against the Trust and Miner, as trustee, asserting causes of action for account stated (first cause of action), open book account (second cause of action), and foreclosure of assessment lien (third cause of action). (Later, an amendment to the complaint named Miner as a defendant in his individual capacity.) Soon after the complaint was filed, Miner requested and received from Feldsott an itemized statement of the sums due for delinquent assessments and other fees. According to the itemized statement, the total due as of May 2, 2011, was $8,012.58, of which $5,923.58 was for delinquent assessments through May 31, 2011.

On May 6, 2011, Miner sent an e-mail to HCTA, proposing a payment plan under which the Trust would make monthly payments of $1,500 to $2,000. [597] He sent a $2,000 check to HCTA, which accepted it. Feldsott drafted a payment plan agreement calling for an initial payment of $2,000 followed by monthly payments of $1,500. The agreement was sent to the Trust, but Miner never signed it. The Trust thereafter made two payments totaling $1,500.

On October 17, 2011, Feldsott notified Miner that the Trust had failed to make the September and October payments under the payment plan agreement and failure to make those payments or reinstate the plan within 10 days would lead to its cancellation.

On several occasions, Miner requested a line-item accounting from the HCTA. On November 15 and December 12, 2011, Miner tendered the regular monthly assessments of $188. On December 16, Feldsott returned the checks on the ground it was “unable to accept partial payments.” Three days later, Feldsott provided Miner a statement of delinquent assessments and fees, according to which the total due was $6,418.47.

Miner mailed a cashier’s check for $3,500, dated December 29, 2011, to the home address of the HCTA president. On January 3, 2012, the HCTA president told Miner he would have Feldsott apply the $3,500 payment to the Trust’s account and have the HCTA provide the Trust with an updated accounting. In a letter dated January 5, 2012, Feldsott informed Miner the $3,500 check was being returned because “[o]ur office is unable to accept partial payments without first establishing a payment plan approved by the Board of Directors.” This letter included an account statement reflecting a total of $9,226.13 in charges, $3,568 in payments (not including the returned check for $3,500), and a balance of $5,658.13. On February 15, 2012, Feldsott sent a new account statement showing a total due of $6,837.68.

After a bench trial, the trial court found the Trust owed HCTA $5,715.39 as of September 2012, and HCTA had complied with the relevant statutory requirements to foreclose its lien. The judgment awarded HCTA damages of $5,715.93 on the first and second causes of action and ordered foreclosure of its lien under the third cause of action. The Trust and Miner timely filed a notice of appeal.

The superior court appellate division, in a unanimous opinion authored by Judge Griffin, reversed the judgment as to the third cause of action and reversed and remanded as to the first and second causes of action. (Huntington Continental, supra, 222 Cal.App.4th at pp. Supp. 17, 18.) The appellate division concluded the Davis-Stirling Act compelled HCTA to accept the $3,500 check even though it constituted a partial payment of the total amount owed on the account. (Huntington Continental, supra, at pp. Supp. 15, 17.) Under the Davis-Stirling Act, an association may not seek to collect through [598] judicial or nonjudicial foreclosure delinquent assessments in an amount less than $1,800. (Civ. Code, § 5720, subd. (b) (section 5720(b)). If HCTA had accepted the $3,500 check when tendered in December 2011, the total amount of unpaid assessments would have been less than $1,800. Therefore, the appellate division held HCTA could not pursue foreclosure of the assessment lien. (Huntington Continental, supra, at p. Supp. 17.)

At trial, HCTA’s counsel had conceded that “had that $3500 payment been applied to the account, the remaining balance would have been $760 and change.” Based on exhibits presented at trial, the appellate division of the superior court prepared an accounting of assessments only. (Huntington Continental, supra, 222 Cal.App.4th at p. Supp. 16, fn. 1.) According to that accounting, attached as an appendix to the appellate division’s opinion, as of December 1, 2011, the total amount of unpaid assessments was $2,704 and as of September 1, 2012, the total amount of unpaid assessments was $4,441. (Id. at pp. Supp. 19, 20.) Feldsott’s statement of account, dated December 19, 2011, showed total delinquent assessments of $7,264.57 and payment of $3,000 from funds held in trust.

DISCUSSION

Standard of Review and Principles of Statutory Interpretation

General standards of appellate review apply to appeals transferred from the superior court appellate division for decision in the Court of Appeal. (People v. Disandro (2010) 186 Cal.App.4th 593, 599 [111 Cal.Rptr.3d 857].) In resolving the issue certified to this court by the superior court, we must interpret provisions of the Davis-Stirling Act. We review issues of statutory interpretation de novo. (Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911, 916 [129 Cal.Rptr.2d 811, 62 P.3d 54].)

(1) The fundamental task of statutory interpretation is to ascertain the Legislature’s intent to effectuate the statute’s purpose. (Smith v. Superior Court (2006) 39 Cal.4th 77, 83 [45 Cal.Rptr.3d 394, 137 P.3d 218].) In ascertaining the Legislature’s intent, we first consider the language of the statute itself, giving the words used their ordinary meaning. (Ibid.) The statutory language must be construed in the context of the statute as a whole and the overall statutory scheme, giving significance to every word, phrase, sentence, and part of the statute. (Ibid.)

If the statutory language is unambiguous, the plain meaning controls and consideration of extrinsic sources to determine the Legislature’s intent is [599] unnecessary. (Kavanaugh v. West Sonoma County Union High School Dist., supra,29 Cal.4th at p. 919.) “When the words are susceptible to more than one reasonable interpretation, we consider a variety of extrinsic aids, including the statutory context and the circumstances of the statute’s enactment, in determining legislative intent.” (Levy v. Superior Court (1995) 10 Cal.4th 578, 582 [41 Cal.Rptr.2d 878, 896 P.2d 171].) We read the statute as a whole to harmonize and give effect to all parts. (Ste. Marie v. Riverside County Regional Park & Open-Space Dist. (2009) 46 Cal.4th 282, 289 [93 Cal.Rptr.3d 369, 206 P.3d 739].)

II.

Relevant Provisions of the Davis-Stirling Act

The Davis-Stirling Act is codified as part 5 of division 4 of the Civil Code. Articles 1, 2, and 3 of chapter 8 of part 5 of division 4 of the Civil Code (Civ. Code, §§ 5650-5740) set forth comprehensive rules, restrictions, and procedures for imposing, paying, collecting, and enforcing regular and special assessments.

The Davis-Stirling Act requires an association to levy regular and special assessments “sufficient to perform its obligations under the governing documents and this act.” (Civ. Code, § 5600, subd. (a).) Article 2 of chapter 8 of part 5 of division 4 of the Civil Code addresses payment and delinquency in payment of assessments. Civil Code section 5650, subdivision (a) (section 5650(a)) states: “A regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, if any, as determined in accordance with subdivision (b), shall be a debt of the owner of the separate interest at the time the assessment or other sums are levied.”

Civil Code section 5655 addresses allocation of payments against the debt. Section 5655(a) states: “Any payments made by the owner of a separate interest toward a debt described in subdivision (a) of Section 5650 shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney’s fees, late charges, or interest.” (Italics added.) This section does not state an association has the discretion to decline to follow the procedure set forth in the statute.

(2) Under Civil Code section 5675, the amount of the assessment, “plus any costs of collection, late charges, and interest assessed in accordance with subdivision (b) of Section 5650,” becomes a lien on the owner of record’s separate interest in the common interest development once the association [600] causes to be recorded a notice of delinquent assessment setting forth certain required information (Civ. Code, § 5675, subd. (a)), together with an itemized statement of charges (id., § 5675, subd. (b)). The board of an association may, by majority vote in an open meeting, decide to record a lien for delinquent assessments. (Id., § 5673.)

Before recording the lien, an association must provide the owner of record notice that includes the information set forth in subdivisions (a) through (f) of Civil Code section 5660, including the right to request a meeting with the board to request a payment plan under Civil Code section 5665. (Civ. Code, § 5660.) Payment plans do not impede an association’s ability to record a lien on the owner’s separate interest (id., § 5665, subd. (d)), and, “[i]n the event of a default on any payment plan, the association may resume its efforts to collect the delinquent assessments from the time prior to entering into the payment plan” (id., § 5665, subd. (e)).

(3) If an association and an owner of a separate interest dispute the validity of a charge or sum levied by the association, the owner may pay the disputed amount, including collection costs, and, in addition to pursuing alternative dispute resolution, may commence a small claims action to recoup the disputed amount paid. (Civ. Code, § 5658, subd. (a).)

(4) Article 3 of chapter 8 of part 5 of division 4 of the Civil Code concerns collection of assessments and enforcement of liens. Under Civil Code section 5700, subdivision (a), a lien created by Civil Code section 5675 may be enforced “in any manner permitted by law,” including judicial or nonjudicial foreclosure, after the expiration of 30 days following the recordation of the lien. (Civ. Code, § 5700, subd. (a).) The decision to initiate foreclosure of a lien for delinquent assessments must be made by a majority vote of the board of directors of an association in an executive session (id., § 5705, subd. (c)), and must be preceded by an offer to the owner to participate in dispute resolution (id., § 5705, subd. (b)).

In the event an association’s board decides to pursue nonjudicial foreclosure, “[a]ny sale by the trustee shall be conducted in accordance with Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trust.” (Civ. Code, § 5710, subd. (a).)

Particularly significant to this case is Civil Code section 5720, which places limits on foreclosure. Relevant parts of section 5720(b) state: “An association that seeks to collect delinquent regular or special assessments of an amount less than one thousand eight hundred dollars ($1,800), not including any accelerated assessments, late charges, fees and costs of collection, attorney’s fees, or interest, may not collect that debt through judicial or [601] nonjudicial foreclosure, but may attempt to collect or secure that debt in any of the following ways….”

(5) Section 5720(b) identifies three ways to collect or secure delinquent assessments in an amount less than $1,800. The first is “a civil action in small claims court….” (§ 5720(b)(1).) The second is “[b]y recording a lien on the owner’s separate interest upon which the association may not foreclose until the amount of the delinquent assessments secured by the lien, exclusive of any accelerated assessments, late charges, fees and costs of collection, attorney’s fees, or interest, equals or exceeds one thousand eight hundred dollars ($1,800) or the assessments secured by the lien are more than 12 months delinquent.” (§ 5720(b)(2).) The third is “[a]ny other manner provided by law, except for judicial or nonjudicial foreclosure.” (§ 5720(b)(3).)

The limitation on foreclosure of assessment liens for amounts under $1,800 does not apply to “[a]ssessments secured by a lien that are more than 12 months delinquent.” (Civ. Code, § 5720, subd. (c)(1).) (HCTA does not contend the assessments secured by its lien were more than 12 months delinquent at the time the Trust tendered the $3,500 check.)

III.

An Association Must Accept a Partial Payment Made by an Owner of a Separate Interest After a Lien Has Been Recorded.

Two statutes within the Davis-Stirling Act, section 5655(a) and Civil Code section 5720, are the focus of our analysis and central to our holding an association must accept a partial payment. Another, Civil Code section 5710, also warrants additional discussion.

A. Section 5655(a)

Section 5655(a) states: “Any payments made by the owner of a separate interest toward a debt described in subdivision (a) of Section 5650 shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney’s fees, late charges, or interest.” Two issues arise in interpreting section 5655(a). First, does it permit an owner to make a partial payment, that is, a payment which does not cover the owner’s entire debt under section 5650(a)? Second, does section 5655(a) require an association to accept a partial payment?

(6) On the first issue, the plain language of section 5655(a) unambiguously permits partial payments. The Davis-Stirling Act permits an association [602] to impose late charges, reasonable fees and costs of collection, reasonable attorney fees, if any, and interest on delinquent assessments. (§ 5650(a).) By creating an order of allocation, section 5655(a), in effect, recognizes a payment might not cover the full amount of the delinquency and other charges.

(7) On the second issue, the plain language of section 5655(a) requires an association to accept an owner’s partial payment. Section 5655(a) does not refer to any payment made by the owner and accepted by an association. Instead, section 5655(a) states, “[a]ny payments made by the owner” toward a debt described in section 5650(a) “shall” (italics added) be applied in the order set forth. (8) Use of the word “shall” connotes a mandatory act. “Under `well-settled principle[s] of statutory construction,’ we `ordinarily’ construe the word `may’ as permissive and the word `shall’ as mandatory, `particularly’ when a single statute uses both terms.” (Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538, 542 [121 Cal.Rptr.3d 312, 247 P.3d 542].) In Diamond v. Superior Court (2013) 217 Cal.App.4th 1172, 1189-1190, 159 Cal.Rptr.3d 110, the court concluded the word “shall” in the Davis-Stirling Act, Civil Code former section 1367.1, subdivision (d), created a mandatory obligation to serve an owner of a separate interest with notice of delinquent assessment. (9) Under the statutory language of section 5655(a), if an owner of a separate interest makes any payment, the association cannot reject it, but is required to (“shall”) apply that payment to the debt in the statutory order of allocation. Quite simply, an association does not have the discretion to refuse to follow the statute’s mandate.

(10) Nothing in the Davis-Stirling Act provides that the rights and duties under section 5655(a) end when an association takes action to record a lien. Although section 5655(a) is in article 2 of chapter 8 of part 5 of division 4 of the Civil Code, entitled “Assessment Payment and Delinquency,” and not in article 3, entitled “Assessment Collection,” the headings in the Davis-Stirling Act “do not in any manner affect the scope, meaning, or intent of this act” (Civ. Code, § 4005). In the order of allocation, section 5655(a) includes “costs of collection” and “attorney fees,” thereby recognizing an owner can make a partial payment after an association has commenced measures, such as recording a lien, to collect the delinquency.

HCTA argues partial payments under section 5655(a) are permitted only when made pursuant to a payment plan under Civil Code section 5665. By its terms, section 5655(a) is not limited to payments made pursuant to a payment plan. To the contrary, section 5655(a) refers to payments “toward a debt described in subdivision (a) of Section 5650,” which describes a debt as “[a] regular or special assessment and any late charges, reasonable fees and costs of collection, reasonable attorney’s fees, if any, and interest, if any” [603] (§ 5650(a)). In a similar vein, HCTA asserts, “[i]f an association were required to accept partial payments at the whim of a delinquent homeowner, then there would be no reason for the [Davis-Stirling] Act to include various provisions relating to payment plans.” There are very good reasons for payment plans under section 5665, subdivision (a), notwithstanding an association’s obligation to accept partial payments. To the owner of a separate interest, a payment plan might reduce the monthly assessment obligation to an affordable amount, thereby avoiding further delinquency, reducing or eliminating late fees, and preventing the amount secured by the lien from increasing. To an association, the payment plan provides an income stream without having to undertake collection procedures.

(11) HCTA argues that permitting partial payments under section 5655(a) would be inconsistent with Civil Code section 5658, subdivision (a), which provides, “[i]f a dispute exists between the owner of a separate interest and the association regarding any disputed charge or sum levied by the association…, the owner of the separate interest may, in addition to pursuing dispute resolution …, pay under protest the disputed amount and all other amounts levied …, and commence an action in small claims court….” If the owner disputes a charge, HCTA asserts, “[t]he remedy is to pay all amounts in full, under protest, and to file a small claims suit or otherwise pursue resolution of the disputed sums.” Section 5658, subdivision (a) applies only when an owner disputes the validity or amount of a charge or sum, which is different from just not paying it. The Trust is not disputing any of the assessments or fees and, by not invoking the procedure of section 5658, subdivision (a), has forfeited any such claim. In other words, the Trust is not disputing it owes the assessments levied, but contends its tender of $3,500 reduced the balance of assessments owed to an amount lower than the threshold for HCTA to foreclose its lien.

B. Section 5720(b)

(12) Section 5720(b) prohibits an association from foreclosing a lien when the amount of delinquent assessments alone is less than $1,800. In this case, if HCTA had accepted the Trust’s check for $3,500, then the amount of delinquent assessments would have been less than $1,800 and, under section 5720(b), HCTA would not have been able to pursue foreclosure to collect the debt.

Civil Code section 5720 was added by statute in 2005 as Civil Code former section 1367.4. (Diamond v. Superior Court, supra, 217 Cal.App.4th at p. 1190.) The purpose of Civil Code former section 1367.4 was to protect the interest of an owner who has failed to timely pay an assessment levied by an association. (Diamond v. Superior Court, supra, at pp. 1190-1191.) “In 2005, [604] the Senate Judiciary Committee’s bill analysis stated: `This bill protects owners’ equity in their homes when they fail to pay relatively small assessments to their common interest development associations.'” (Id. at p. 1190.) “The Assembly Committee on Judiciary similarly stated: `This bill goes to the heart of home owner rights, touching upon the key issue of when, if ever, a homeowners’ association should have the right to force the sale of a member’s home when the home owner falls behind on paying overdue assessments or dues…. [¶] … [This bill] [s]eeks to protect a condominium owner’s property and equity when he or she misses payment on relatively small assessments imposed by their common interest development … association.'” (Ibid.)

Requiring an association to accept a partial payment reducing the amount of delinquent assessments to less than $1,800 is consistent with this stated legislative policy of protecting owners from losing their home equity over small amounts of delinquent assessments. Permitting an association to reject a partial payment could lead to the very situation the Legislature sought to avoid: foreclosure and loss of the owner’s equity in the home when the owner is delinquent in paying assessments in an amount under $1,800.

We disagree with the assertion made by HCTA and the amici curiae appearing on its behalf that requiring an association to accept partial payments will “seriously impede” an association’s ability to collect assessments. We recognize assessments are both necessary to the functioning of an association and required by the Davis-Stirling Act to be in an amount sufficient to perform an association’s obligations under the governing documents and the Davis-Stirling Act. (Civ. Code, § 5600, subd. (a); see Park Place Estates Homeowners Assn. v. Naber (1994) 29 Cal.App.4th 427, 432 [35 Cal.Rptr.2d 51] [associations “must assess fees on the individual owners in order to maintain the complexes”].)

An association has remedies, however, when the amount of delinquent assessments falls below $1,800. Section 5720(b) identifies three ways to collect or secure delinquent assessments in an amount less than $1,800 as well as to collect additional fees, collection costs, and interest: (1) “a civil action in small claims court”; (2) “recording a lien on the owner’s separate interest”; and (3) “[a]ny other manner provided by law, except for judicial or nonjudicial foreclosure.” (§ 5720(b)(1), (2) & (3).) Thus, in the situation presented by this case, an association would be able to maintain a lien on the owner’s separate interest and could pursue a small claims action to recover the debt. Although the lien could not be foreclosed until the conditions of section 5720(b)(2) had been met, the lien itself is a powerful coercion mechanism; for instance, the lien would have to be satisfied to permit the sale [605] of the home. Further, an association may foreclose a lien securing assessments in any amount that are more than 12 months delinquent. (Civ. Code, § 5720, subd. (c)(1).)

HCTA and the amici curiae appearing on its behalf assert that requiring an association to accept partial payments bringing the amount of delinquent assessments to less than $1,800 would permit delinquent owners to abuse the system by accepting the benefits of living in a common interest development at the expense of the other owners. It is possible for a situation to arise in which a clever and unscrupulous owner would be able to dodge foreclosure of a lien by making partial payments designed to bring the delinquent assessments under $1,800 in amount and less than 12 months in age. As we read the Davis-Stirling Act, the Legislature engaged in a balancing process and chose to accept that risk in order to protect owners from foreclosure and the loss of equity in their homes when the delinquent assessments are under $1,800 or less than 12 months delinquent. And, as we have explained, section 5720(b) grants an association various remedies to collect the debt.

C. Civil Code Section 5710

(13) In the event the board of an association decides to pursue nonjudicial foreclosure, “[a]ny sale by the trustee shall be conducted in accordance with Sections 2924, 2924b, and 2924c applicable to the exercise of powers of sale in mortgages and deeds of trust.” (Civ. Code, § 5710, subd. (a).) Under Civil Code section 2924c, subdivision (a)(1), the trustor or mortgagor may reinstate a loan once foreclosure proceedings have begun by paying the entire amount due — including principal, interest, taxes, assessments, and costs incurred in enforcing the obligation — at any time before entry of the decree of foreclosure.

HCTA argues, based on Civil Code section 5710, subdivision (a), that Civil Code section 2924c, subdivision (a)(1) applies to nonjudicial assessment lien foreclosures, requires payment in full to forestall foreclosure, and permits an association to decline partial payments after foreclosure has been initiated. Further, HCTA argues, an association’s right to decline partial payments must extend to judicial foreclosures, otherwise, as an unintended consequence, “[a]ssociations wishing to recover the fees and costs incurred in foreclosure would turn to private sale, which would undermine the objectives of the [Davis-Stirling] Act as well as the public interest served by promoting judicial foreclosures.”

(14) Civil Code section 5710, subdivision (a) states, in plain language, that “[a]ny sale by the trustee” (italics added) shall be conducted in accordance with the Civil Code sections applicable to the exercise of powers of [606] sale in mortgages and deeds of trust. In this case, HCTA pursued judicial foreclosure. The unintended consequence foretold by HCTA suggests not that the Legislature intended for an association to be able to decline partial payments. Instead, the Legislature intended for section 5655(a), requiring an association to accept partial payments, and section 5720(b), limiting foreclosure, to apply to both judicial and nonjudicial foreclosure and to prevail to the extent of any conflict with Civil Code section 2924c, subdivision (a)(1).

D. Policy Arguments

The parties and, in particular, the amici curiae raise policy considerations that are not based on statutory language. HCTA and the amici curiae appearing on its behalf assert the Trust is not a struggling homeowner but owns the home as an investment, and Miner made a calculated decision not to pay assessments. Amici curiae AARP, Housing and Economic Rights Advocates, and National Housing Law Project argue that “use of foreclosure as an enforcement tool on those having difficulty paying homeowner assessments can be both unjust and extremely damaging” and “[t]he consequences of foreclosure are particularly severe for older homeowners.”

The code sections of the Davis-Stirling Act dealing with assessment payments, delinquency, and assessment collection (Civ. Code, §§ 5650-5740) use the word “owner” or the term “owner of a separate interest” and do not distinguish between owners who occupy their separate interests and owners who do not. Nor do those code sections make any distinctions in treatment based on an owner’s age or wealth. Foreclosure of a lien is recognized by the Davis-Stirling Act as a legitimate means by which an association may seek to collect delinquent assessments, fees, charges, collection costs, and interest. The issues presented to us are a matter of statutory interpretation, and our task has been only to discern the Legislature’s intent through application of accepted principles of statutory construction.

IV.

Conclusion

(15) After considering the language of section 5655(a) and its context within the Davis-Stirling Act, we conclude an association must accept a partial payment made by an owner of a separate interest in a common interest development toward a debt described in section 5650(a) and must apply that payment first to assessments owed. That requirement continues after recordation of a lien pursuant to Civil Code sections 5673 and 5675.

(16) Accordingly, in this case, HCTA was required to accept the Trust’s check for $3,500 when tendered in December 2011. Had HCTA accepted the [607] check and applied it in the order prescribed by section 5655(a), the amount of delinquent assessments would have been less than $1,800. HCTA does not contend the assessments secured by its lien were more than 12 months delinquent at the time the Trust tendered the $3,500 check. Thus, under section 5720(b), HCTA could not pursue judicial foreclosure of the lien, and the trial court erred by issuing a decree of foreclosure.

The superior court appellate division’s opinion also addressed the sufficiency of the evidence to support the damages awarded under the first and second causes of action. (Huntington Continental, supra, 222 Cal.App.4th at p. Supp. 17.) The matter was not certified and transferred to this court to address that issue and, therefore, we decline to do so, and decline to address any other issues raised in the appellate briefs. (See Cal. Rules of Court, rule 8.1012(e).)

DISPOSITION

The judgment of the trial court is reversed as to the third cause of action and the matter is remanded with directions to enter judgment on that cause of action in favor of appellant. The judgment of the trial court as to the first and second causes of action is reversed and the matter is remanded in accordance with the judgment of the appellate division of the superior court. Appellant shall recover costs incurred on appeal.

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

[1] “`Association’ means a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development.” (Civ. Code, § 4080.)

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