2016 ls powerpoint new case law2 - cacm sessions/new case law handout ppt.pdf · 1/29/2016 2...

New Case Law

©2015 CACM, Inc. - Law Seminar - All rights reserved. Page | 1

PPT SLIDE HANDOUT

NEW CASE LAW

THURSDAY CONCURRENT SESSION 1:45 – 3:00 PM

SPEAKERS

Northern California: Sandra Gottlieb, Esq., Steven Weil, Esq., Southern California: Matt Ober, Esq., Jeffrey Beaumont, Esq.,

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New California Case Law

Jeffrey A. Beaumont, Esq., CCAL, Beaumont Gitlin TashjianSandra L. Gottlieb, Esq., CCAL , SwedelsonGottlieb

Attorney’s Fees

Empowering Managers. Enriching Communities.

Patterson Sherwood Valley Homeowners Association

(Unpublished – 2015)

Facts

• An association was sued by a non member claiming a CC&R violation

• Alleged improper maintenance impeded her views

• Plaintiff’s amended lawsuit sued under

CC&Rs that did not govern a CID


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(continued)• Holding

• Owner’s property not subject to the CC&Rs so she lacked standing to sue;

• No right to a view

Association prevailed but not entitled to attorney’s fees since…

The CC&Rs did not govern a CID



(continued)• Typical Attorney’s Fee Provisions

• In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs. Civil Code §5975(c)

• If legal action is instituted by the association, any judgment rendered shall include all appropriate additional charges (as defined)(CC&Rs)

• In any action brought because of any alleged breach or default of this Declaration by any owner, the association or other party hereto, the Court may award to the prevailing party such attorneys' fees and other costs as it may deem just and reasonable (CC&Rs)



(continued)• Cause of Conflict

• No attorney fees clause in CC&Rs

• DSA did not apply to “fill in” attorney’s fee award gap


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(continued)• Significance

• The “American Rule” of attorney’s fees; what about “costs”?

• This case is unpublished – not binding

• The amended complaint enhanced the owner’s defense against recovery of attorney fees

• The case would be decided differently today


Tract 1905 Homeowners Association v Kemp

(2015 – California Supreme Court)

• Facts

• Association sought to enforce building requirements in CC&Rs

• Association lost since not a CID

• Argued that owner not entitled to fees since the development was not a CID



(continued)• Holding

• Owner was prevailing party and so, per statute, entitled to fees

• Suit was to enforce CID CC&Rs; CID status itself is irrelevant

• Association would have recovered if it prevailed

• Mutuality of recovery is key to recovery in non-CID cases


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• It is an anomaly to obtain a prevailing party award when…

• The statute on which award is based does not apply to non-CIDs

• Contracts or CC&Rs may authorize recovery anyway



(continued)

• Significance

• Case “overrules” Sherwood Valley

• Prevailing party provisions are double-edged


Sui v 276 Pacific Homeowners Association

(2015 Unpublished)

• Facts

• Owners sued association

• Sui’s case dismissed with prejudice by BK Trustee

• Seeks recovery of attorney’s fees as “prevailing party”


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Sui v 276 Pacific Homeowners Association (continued)

• Holding



(continued)

• Cause of Conflict

• The prevailing party is entitled to an attorney’s fee award

• A dismissal with prejudice is not “prevailing”



(continued)

• Significance

• How a case is resolved can have long term consequences!


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Hooker v Varley (2015 unpublished)

• Facts

• Dock in disrepair; owners share access

• Plaintiff gets ACC approval to modify

• Modification much more than “as approved” Plaintiff sues for contribution

• Defendant sues for access


Hooker v Varley (continued)

• Holding

• Defendant ordered to pay for dock

• But, dock had to be moved so

• Defendant prevailed

• Entitled to attorney’s fee under CC&Rs

• “Prevailed on a practical level”

• Fee award mandatory




• Construction violated ACC approval

• Parties competed for dock access

• Why should I pay when you destroyed my dock?


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• Significance

• CC&Rs were essential to dock modifications

• Construction beyond approval is risky

• Ask for permission, not forgiveness!


Governing Documents and Enforcement


Watts v. Oak Shores Community Assn., 235 Cal.

App. 4th 466 (2015) • Issue

• Can an association’s rules and regulations alone govern rental restrictions (and other conditions relating to the use of an owner’s separate interest) as long as the CC&Rs do not contain any inconsistent requirements?


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Watts (continued)• Facts

• Rules and regulations contained limitations on short-term rentals:

• Minimum lease term of 7 days; and

• $325 annual fee charged to all owners who rent their homes

• CC&Rs contained broad powers granting the board authority to adopt rules relating to the use of the development

• Expert testimony:

• Presence of short term renters resulted in increased administrative expenses which warranted reasonable fees and regulations to be imposed on owners who rent


Watts (continued)• Holding

• The court held that the CC&Rs authorized the association to adopt reasonable rules and impose a fee for certain members relating to short-term rentals of units


Watts (continued)

• Holding

• Short term renters have a significant impact on the enjoyment of the premises by other residents and cost an association more money than long-term renters/permanent residents, which is why imposing a fee against owners who rent short-term was proper


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Watts(continued)• Cause of Conflict

• Can restrictions on the use of units be solely included in operating rules?

• Do such rules have to have a significant impact on the entire development?

• Is it a conflict if the rules are more restrictive than what is included in the CC&Rs?


Watts (continued)

• Trend / What’s Changed

• Can the association impose fees only on some owners and in the amounts it did?

• Discriminatory?

• Violation of Civil Code § 5600?

• Does a “rough proportionality” between the fees imposed and the costs for which they were required satisfy § 5600?

• Surprisingly, yes!


Watts (continued)• How to avoid/manage risk?

• Amend CC&Rs to include the desired restriction

• What if you cannot amend the CC&Rs, and plan to adopt rules only?

• Ensure the authority to adopt rules is clear in the CC&Rs

• Ensure the CC&Rs do not contain contradictory language inconsistent with the proposed rule(s)


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Watts (continued)

• How to avoid/manage risk?

• Communicate with the board: restricting the use of a unit will be subject to owner challenge

• Accounting/correlation of a proposed fee in relation to the cost giving rise to such fee

• Don’t blindly rely on or be a test case for the “rough proportionality” standard, or the standard that rules alone can govern use restrictions


Watts(continued)

• Interesting Points

• Possible extension of Friars Village (2013) where election rules contained a rule more restrictive than the bylaws

• Friars Village, which was about director qualifications, was in part governed by the Open Meeting Act unlike Wattswhich is about general use restrictions

• Could this distinction be important?


Ryland Mews Homeowners Association v. Munoz, 234

Cal. App. 4th 705 (2015)• Facts

• CC&Rs had express nuisance provisions and prohibition on interfering with quiet enjoyment and increase sound transmission

• Floor modification caused a significant increase in sound transfer and noise to the unit below

• Association sued to enforce CC&Rs and bring owner into compliance


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Ryland Mews Homeowners Association

v. Munoz (continued)• Holding

• Court granted relief issuing preliminary injunction against owner and requiring interim measures.


Ryland Mews Homeowners Association v. Munoz


• Conflict was the direct result of an owner not following the express CC&Rs requirements prior to modifying their flooring (not to mention the noise and sound transfer that resulted from that unapproved modification.)


Ryland Mews Homeowners Association v. Munoz

(continued)

• Significance of Case

• The importance of clearly stated CC&Rs provisions when seeking judicial enforcement, particularly with noise and sound transfer matters.

• Consider alternative or interim solutions as a way to resolve disputes between neighbors


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The Villas in Whispering Palms v. Richard M.

Tempkin (Unpublished)

• Issue / Topic

• Is a board’s decision to strictly enforce a pet restriction after several years of granting variances (to allow more than one pet) reasonable?

• Selective enforcement

• Waiver of enforcement/authority


The Villas in Whispering Palms (continued)

• Facts

• CC&Rs (effective 1979) contained a one pet restriction; which was not strictly enforced historically

• 2005: board determined to begin enforcing the restriction, but granted variances to owners who had 2 dogs at the time (conditioned)

• CC&Rs specifically permitted the granting of variances

• Defendant requested variance in 2010 – board denied request



• Holding

• No evidence to suggest that selective or arbitrary enforcement of the restriction existed

• Once the board reassessed the pet restriction issue in 2005 and determined it must enforce the one pet rule, subject to the granting of variances for a particular circumstance, the board was not selective in enforcing the one pet rule against the owner in 2010 or for failing to grant a variance to the owner


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• Deciding to enforce a pet restriction after years of a historical practice doing things a different way

• Should a board draw a line in the sand when it comes to enforcement of the CC&Rs in spite of historical practices?

• Will prior owners seek retroactive remedies once they find out that a change in policy has been implemented, which was handled differently for them?




• Drawing a line in the sand

• Uniform enforcement is better late than never

• Consistent and uniform evaluation/administrative process




• “Variance” vs. “waiver”

• The association was awarded its attorney’s fees for this case

• Villas is unpublished and cannot be cited as law but is instructive as to how the court sees this issue.


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Rio Vista Landscape Maintenance Association v.

City of Oceanside, 2015 Cal. App. Unpub.

LEXIS 2308 • What is this case about?

• Is an association required to maintain non-common area land outside of the association’s development if required to do so by a municipality, even if the name of the area to be maintained is not explicit in the association’s CC&Rs?


Rio Vista (continued)• Facts

• City conditions imposed in exchange for certain development approvals:

• Association was obligated to build and maintain a median on an adjacent public street

• CC&Rs:

• Referenced median (although not by name)

• City ordinances were incorporated by reference into the CC&Rs

• Admissions by association and cost-sharing agreement for the median with a new development prior to the case against the city


Rio Vista (continued)

• Holding

• The association was obligated to maintain the median

• The City requirement was:

• A city/contractual duty

• A covenant running with the land

• Clearly contained in the CC&Rs


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• Can an association be obligated to perform maintenance for an item not within the association’s development or common area?

• Cities may pass on maintenance costs/responsibilities to private developers/associations – are associations simply stuck with this maintenance obligation?



• How to avoid / manage risk

• Investigate the governing documents to determine if any unique obligations exist which may be applicable to the association

• Consult with legal counsel prior to amending governing documents, etc. to evaluate if any city or other special approval requirements are in existence




• Citations = $300 total,

• But the city was awarded attorney’s fees as the prevailing party = in excess of $39,000

• City was effectively deemed a third party beneficiary which could avail itself of the general attorney’s fees provision of the CC&Rs


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• A request was made to the California Supreme Court to publish this case, and that request was denied. This case is unpublished and cannot be cited as law but is instructive as to how the court sees this issue


Kraus v. Grilli, 2015 Cal. App. Unpub.

LEXIS 846

• Facts

• Morro Bay Municipal Code provided: “Fences, walls, and hedges not exceeding six feet, six inches in height may occupy and side or rear yard area.”

• Grilli removed a row of eucalyptus trees and replaced it with a row of fast growing shrubs between his lot and his neighbor Robert Kraus’s


Kraus v. Grilli (continued)

• Facts

• The hedges grew to a height of 23 feet and a width of 50 feet

• Kraus asked Grilli to trim the hedge and offered to share the cost. Grilli refused

• Kraus’s Complaint was rejected by the City Attorney resulting in Kraus filing a civil action


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• Holding

• Trial court:

• Row of plants in question constituted a hedge and fence within the Municipal Code and that the hedge was a private nuisance and a violation of the Code

• Appellate Court

• Affirmed ordering the hedge removed entirely or to remove at least 5 feet per year to a maximum height of six feet, six inches




• Inability of neighboring landowners to resolve disputes in a reasonable manner or consider compromise




• Neighbor to neighbor disputes

• Inability of owners to set aside their emotions and reach compromise

• City’s decision to stay out of the matter and leave it to the neighbors to resolve may have escalated the matter

• An association can play a role in facilitating the resolution of disputes between neighbors even if it decides not to take enforcement actions

• Look to local ordinances as a secondary source of enforcement authority


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Developer Issues


Trilogy at Glen Ivy Maintenance Association v. Shea Homes, Inc.,

235 Cal. App. 4th 361

• Issue / Topic

• Was the association’s lawsuit brought to chill Shea Homes’ First Amendment rights?

• If the injury causing conduct alleged by a plaintiff is not based on protected speech, collateral or incidental circumstances of protected activity the California anti-SLAPP statute does not apply


Trilogy at Glen Ivy (continued)

• Facts

• A developer ran board entered into an exclusive contract with a cable company in which easements were granted to the cable company in exchange for compensation to the association

• After transition from the developer to the association, the association learned, 4 years later, that significant payments were not being applied to the association’s accounts


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Trilogy at Glen Ivy

(continued)• More facts

• Association filed lawsuit

• Developer claimed it had permanent control and exclusive rights to the profit of the telecommunication contract/services

• Association amended its complaint to add a breach of fiduciary duty claim because of the developer board’s actions

• Developer filed an anti-SLAPP motion arguing that the association would not have included the breach of fiduciary duty claim but for the claim made by the developer that it had permanent control and exclusive rights to the profit of the telecommunications contract (i.e., this was protected conduct/speech exercised during the litigation)



• Holding

• The breach of fiduciary claim by the association did not arise from protected conduct/speech; rather it arose from the developer’s actual breach of fiduciary duties when it controlled the board




• Anti-SLAPP lawsuits are becoming an increasingly popular way to attempt to strike a lawsuit or claim

• Evaluate the underlying reasons behind a possible claim in anticipation of an anti-SLAPP motion from a potential adversary in litigation

• As it relates to the developer-association transitions, developer-run boards owe fiduciary duties to the association


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• Developers may not always provide adequate or ample information relating to the association’s vendors, contracts, etc. in the course of a transition




• Evaluate the CC&R provisions which govern transition and evaluate whether a developer-run board makes decisions in the developer’s interests as opposed to the best interests of the association




• Review BRE file for the association’s development

• Obtain all bank statements for the association


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• The first check/payment discovered by the association for the easement compensation was for an amount of $175,000, and there were several other checks/payments owed, presumably in similar amounts


Belasco v Hatch (2015 California Court

of Appeal)

• Issue/Topic

• Can an owner successfully sue for construction defects under SB 800 after accepting a cash settlement releasing the developer for all known and unknown claims? (No)


Belasco v Hatch (continued)

• Facts

• Owner initiated CLB arbitration for construction defects

• Parties settled dispute

• Builder paid owner $25,000

• Owner signed release (Civil Code § 1542)

• Re: “known and unknown’ claims


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What is a “1542 Release”?

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

Waive it or lose your settlement!



• Holding

• Title 7 Right to Repair bans releases

• Here there was no repair, only $

• Voluntary complete release not improper



• Significance

• Title 7 has special release rules

• Recommend CID does “due diligence”

• Releases can be lethal

• CIDs need the right advice


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• Note…

The owner was an attorney who made a bad decision about his own home


Anti-SLAPP


Glassner v Smith,2015 Cal. App. Unpub.

LEXIS 3201• Issue/Topic

• Action by a recalled board member against other board members for defamation

• The defendants filed a special motion to strike the complaint under CCP §425.16 (the anti-SLAPP statute)


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Glassner v Smith (continued)

• Facts

• Recall prompted by board member rouge actions

• Recall campaign resulted in several written and oral statements about board member

• Recalled board member sued several board members and owners for defamation arising from the statements posted on a website and made during a board meeting



• Holding

• Anti-SLAPP motion should have been granted in full as to all defendants

• Claims arose from protected activity or speech

• Limited public figure: requires proof of malice

• “Substantial truth” is a defense to the defamation claim

• Plaintiff was unable to show probability of success to survive the anti-SLAPP motion




• Avoid any appearance of endorsing or sponsoring any particular statement or position for or against an individual running for the board or opposing a recall effort

• Efforts should be made to keep recall related comments and discussions neutral at board level

• Discourage personal attacks against candidates at meetings or through social media

• Work to resolve disputes before they are aired in the public square if at all possible


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Creger v. Hudson 141 Homeowners Ass’n, 2015

Cal. App. Unpub. LEXIS 826• Facts

• Owner of a mixed-use unit condominium was improperly assessed

• Payment plan for reduced assessment and offset assessments pending CC&Rs revision and/or defect litigation resolution

• Owner defaults on assessment payment obligation resulting in assessment collections and lien

• Minutes do not reflect lien approved by board

• Owner sues for breach of fiduciary duty; violation of Civil Code


Creger (continued)

• Holding

• Granted anti-SLAPP motion

• Liens are protected activity

• Unlawful activity is still protected unless illegal

• Plaintiff did not establish probability of prevailing on claims against the association or management


Creger (continued)


• Management does not owe a fiduciary duty to individual owners unless imposed by contract or law

• Litigation privilege extends to assessment liens

• Failure to comply with Davis-Stirling does not override the litigation privilege

• Privilege protects the recording of assessment liens even if fraudulent

• No offsets for assessments

• All actions regarding assessment collections must be properly agenized and reflected in minutes


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In re Davenport,534 B.R. 1 (2015)

• Issue / Topic

• Effect of bankruptcy (“BK”) on collection of delinquent assessments

• Whether post-petition debts are dischargeable


In re Davenport (continued)

• Facts

• 2009: homeowner purchased real property (Arkansas)

• 2010: homeowner filed a Chapter 13 petition - failed to make further payments

• CC&Rs provide they “shall run with the land”

• Post-petition debts were not included in the Chapter 13 plan


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• Holding

• Post-petition debt was NOT dischargeable:

• Debt runs with land

• No proof of claim for post-petition debt filed




• Statutory/Code interpretation: enumerated statutory exceptions did not limit applicability of other provisions of the Bankruptcy Code

• CC&Rs – Equitable servitudes or contract?

• Contractual = dischargeable

• Covenant = non-dischargeable




• More and more homeowners filing bankruptcy

• BK creates roadblock


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• How to Avoid / Manage Risk

• Timely transfer file to attorney once owner files BK

• Legal counsel will monitor and take action to protect association’s interest

• Confirm CC&Rs run with the land!


Procedure, Etc.


Castaic Lake Water Agency v. Newhall Cnty. Water Dist.,

(2015) 238 Cal. App. 4th 1196 • Topic

• Brown Act (Government Code § 54950 et seq.): applies to government, not CIDs

• But, can provide guidance for conducting board meetings.

• Associations are governed by the Open Meeting Act (Civil Code §§ 4900-4955)

• Issue

• Error in notice and agenda


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Castaic Lake Water Agency (continued)

• Facts

• Newhall (county water district) posted a notice and agenda for closed session meeting “to discuss potential litigation.”

• Board met with legal counsel in closed session and authorized litigation against Castaic, public water wholesaler, to challenge the approval of new water rates

• Castaic sent Newhall a letter asserting violation of the Brown Act

• Argued the description referenced subdivision (c) of the Gov. Code § 54956.9 (incorrect) rather subdivision (d) (correct)



• Holding

• Notice substantially compiled with the Brown Act

• Notice adequately advised the public that the board would be meeting in closed session with legal counsel on a particular date to discuss potential litigation.




• Substantial compliance vs. strict compliance

“Form Over Substance” or …

…“Substance Over Form”?


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• Mistaken agenda references do not prevent holding closed sessions if the agenda item is clear and will not mislead or confuse




• Communicate with board members for agenda items

• Know “when” and “how” to meet in executive session

• CAUTION: only minor mistakes

• Correct agenda items that may mislead or confuse


Bel Air Ridge Homeowners Ass’n v. Rosenberg

(Unpublished)

• Issue / Topic

• Civil Code §4275 petition –opposition by declarant and members


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Bel Air Ridge HOA (continued)

• Facts

• Original CC&RS required member approval by supermajority and lender approval to amend

• Multiple attempts to amend:

• Voter apathy

• Extension of deadline to return ballots

• Lender approval: failure to return ballot within specified time period = approval

• Opponents claimed proposed CC&Rs contained unreasonable provisions



• Holding(s)

• Davis-Stirling CID Act does not contain restrictions on extensions – extension of deadline to return ballots is permitted

• Lender approval efforts were reasonably diligent

• Burden is on the members to show that the CC&R provisions are unreasonable; burden is not on the association to show reasonableness




• Voter apathy and supermajority required to amend CC&Rs


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• Amendments to CC&Rs are being upheld since there is a need to rewrite CC&Rs to modernize them and make them consistent with the provisions of the Davis-Stirling CID Act


Bel Air Ridge HOA v. Rosenberg


• Reasonable attempts to solicit the return of secret ballots

• As required by CC&Rs

• As required by law

• Lender approval required?

• Properly document attempts:

• Notices, flyers, mailers, agendas and meeting minutes.

• Regularly review CC&Rs and, if necessary, update/amend


Beacon Residential Community Ass’n v. Catellus Third & King

(Unpublished) • Issue / Topic

• Whether an association can certify a class of its members with respect to certain aspects of an underlying construction defect lawsuit


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Beacon Residential Community Ass’n

(continued) • Facts

• Association, on behalf of the members, brought lawsuit against developer for construction defect, including a claim for defective windows which transfer high amount of solar heat

• Attempt to “certify” class of members class-action lawsuit against the developer

• Excessive heat buildup (aka “heat gain”) and ventilation caused by the windows varied among the units

• Several of the units did not experience any heat



(continued) • Holding

• Commonality = assessments for the cost of the heat gain related repairs to the common area



(continued) • Cause of Conflict

• Commonality where some owners did not experience heat gain?

• Association’s standing to sue (Civil Code § 5980.)


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(continued) • Trend / What’s

Changed

• This case highlights that there may be limits to the application and utilization of the class action process (i.e. lack of standing and commonality issues)



(continued)


• Carefully review the CC&Rs - distinguish between association and owner maintenance and repair responsibilities

• Determine whether an owner’s complaint is personal and specific only to the owner or whether it’s a common issue to all owners


THANK YOU!


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Next Up


Time Event Location

3:00 - 3:30 pm Break

3:30 - 4:45 pmLender Certifications Do’s & Don’ts

Salon A-C

3:30 - 4:45 pm Large Scale Governance Salon D-E

3:30 - 4:45 pmHigh Rise Community Engagement

Salon F-H

3:30 pm - 4:45 pmThe Dawn of the Smart Community

Junior Ballroom (second floor)
