Aharoni v. MalibuLakeMountain Club

Filed 10/16/07 Aharoni v. Malibu Lake Mountain Club CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, Rita A. Miller, Judge. Affirmed in part; reversed in part and remanded.

Horvitz & Levy, Julie L. Woods, Nina E. Scholtz; and James C. Fedalen for Plaintiffs and Appellants.

White & Case, John A. Sturgeon, and Aalok Sharma for Defendant and Respondent.

In this action for injunctive relief and damages, the trial court denied plaintiffs request for a jury trial and, after conducting a bench trial on the parties dispute over the express or implied contractual right to use an access road, entered judgment for defendants. We conclude that plaintiffs were not entitled to a jury trial of the contract dispute, and that portion of the judgment is affirmed. As for the fourth and ninth causes of action for tort damages, which were not tried, that portion of the judgment is reversed for the limited purpose of allowing the plaintiffs to present any additional evidence.

INTRODUCTION

Defendant Malibou Lake Mountain Club, Ltd. (the Club), was established in 1926 as a for-profit corporation to serve its members residential, social, and recreational needs. It holds legal title to all Club land and improvements at its Agoura facility, including a dam, lake, clubhouse, roads, and recreational areas.

Plaintiffs Michael and Bonnie Aharoni have been licensee members of the Club since the late 1980s. They hold six shares of stock in the Club.

I. Club Licenses

About 70 to 75 percent of the Clubs shareholders are licensee members who own a license to develop a residence on a particular Club parcel. Licensee members do not own the land that is licensed to them, which remains the property of the Club. The license allows the member to use a particular residential site or parcel as shown on a survey in the principal office of the Club, and to erect, occupy, and possess a residence and other improvements thereon. Licenses granted to [l]icensee [m]embers are irrevocable. The license gives a member most of the rights afforded to a fee owner of real property but does not create a fee interest. The bylaws provide that although a licensee may sell his or her license, the Club conducts the actual transfer of the license, which is contingent upon the Clubs approval of the prospective licensee as a member.

Before the Club transfers a license to a particular parcel, it issues a survey of that parcel. A license conveys the exclusive use of a parcel as described in the Clubs survey for that parcel, subject to the Club bylaws and rules. The Clubs unlicensed parcels are designated as common areas for the use of all Club members.

II. The Dozer Road Dispute

In 2000, plaintiffs entered into an agreement to purchase Club member Mary Rogerss license to Club parcels 81 and 82, which are undeveloped lakefront lots. Plaintiffs signed the Clubs license agreement and acknowledgments, and received the Clubs 1991 survey of lots 81 and 82. The survey also depicted plaintiffs access road for lots 81 and 82, which has yet to be built, along the side of lot 80A (the lot 80A roadway) closest to South Lakeshore Drive.

Plaintiffs, however, do not want to build their access road along their designated lot 80A roadway. Instead, they wish to build it along an existing dirt path (the Dozer Road) that was not depicted in the 1991 survey or mentioned in their license agreement documents. The Dozer Road crosses lots 88 and 89, which are undeveloped and unlicensed parcels that belong to the Club, and has long been used by Club members as a footpath to the lake. The Dozer Road begins at South Lakeshore Drive, curves through and bisects lot 88, crosses a small area of lot 89, and terminates at lots 81 and 82. This litigation has many causes but clearly a main ingredient was plaintiffs desire to build their access road along the Dozer Road, rather than along their designated lot 80A roadway.

III. Procedural History

In 2003, plaintiffs filed this lawsuit against the Club, raising 13 causes of action, several of which concerned the Dozer Road dispute. Over plaintiffs objection, the trial court bifurcated the issues after granting the Clubs motion in limine to deny a jury trial on the Dozer Road dispute, which it deemed to be equitable in nature because plaintiffs were seeking injunctive relief.

The Dozer Road claim was tried without a jury. As relevant to this appeal, the primary dispute was whether plaintiffs, as licensees of lots 81 and 82, owned the right to build their access road along the Dozer Road.[1] The trial court concluded that no such right existed and, accordingly, denied their first cause of action for injunctive relief, third cause of action for breach of fiduciary duties, and fifth cause of action to quiet title.

Before the trial court announced its ruling on the Dozer Road issues, plaintiffs waived a jury trial of the remaining bifurcated issues. Without taking additional evidence and over plaintiffs objection, the trial court issued a tentative decision in favor of the Club on all issues, including the bifurcated claims for negligence (fourth cause of action) and intentional infliction of emotional distress (ninth cause of action).[2]

Plaintiffs moved for a new trial, arguing that they were entitled to present additional evidence on the bifurcated issues, but their motion was denied. The trial court issued an amended statement of decision and entered judgment for the Club, incorporating its earlier summary adjudication of the seventh, tenth, and eleventh causes of action for violation of the Davis-Stirling Common Interest Development Act. (Civ. Code, 1350 et seq. [the Davis-Stirling Act or the Act].)[3] The trial court also awarded the Club its costs and contractual attorney fees.

Plaintiffs have appealed from the judgment. In their appeal, they challenge: (1) the denial of a jury trial of the Dozer Road dispute, the gist of which they contend is legal, not equitable; (2) the entry of judgment, without taking any additional evidence, on the bifurcated negligence and intentional infliction of emotional distress claims; (3) the summary adjudication of the Davis-Stirling Act claims; and (4) the $883,090.50 attorney fee award.[4]

DISCUSSION

I. The Right to Jury Trial

The constitutional right to a jury trial in civil cases applies only as the right existed at common law in 1850, when the Constitution was adopted. (Martin v. County of Los Angeles (1996) 51 Cal.App.4th 688, 694; Cal. Const., art. I, 16.) Whether the right to a jury trial of a particular cause of action existed at common law in 1850 is a purely historical question. (Frahm v. Briggs (1970) 12 Cal.App.3d 441, 444.) In determining whether the action was one triable by a jury at common law, the court is not bound by the form of the action but rather by the nature of the rights involved and the facts of the particular case--the gist of the action. A jury trial must be granted where the gist of the action is legal, where the action is in reality cognizable at law. (Ibid.)

In 1850, a party seeking relief from the interference with or obstruction of a right of way or easement could bring what was called an action on the case, for which the right to jury trial existed at common law. (Frahm v. Briggs, supra, 12 Cal.App.3d at p. 445.) Plaintiffs contend that because they were seeking relief from interference with an easement, they were entitled to a jury trial of the Dozer Road dispute. (Ibid.; Arciero Ranches v. Meza (1993) 17 Cal.App.4th 114, 124.) If the gist of the action as framed by the pleadings is such that the issues raised would have been triable on the law side before 1850, a trial by jury is a matter of right. (Grossblatt v. Wright [(1951)] 108 Cal.App.2d 475, 483.) (Ripling v. Superior Court (1952) 112 Cal.App.2d 399, 402.)

A. The Issues Framed by the Pleadings

The complaint alleged that plaintiffs right to use the Dozer Road was created by an express or implied grant of an appurtenant easement to a prior licensee, Mary Rogers, which plaintiffs acquired upon purchasing the license to lots 81 and 82. In opposition to the Clubs motion to deny a jury trial, plaintiffs argued that, given the ambiguity in their license agreement, survey, and related documents regarding the location of their roadway easements, plaintiffs were entitled to present extrinsic evidence at trial to establish their right to use the Dozer Road. They pointed out that although the only access road depicted on their survey was the lot 80A roadway, the lot 80A roadway never existed, whereas the Dozer Road had existed for decades and had been used by Rogers, with the Clubs permission, as an access road. They further indicated that both Rogers and the Clubs manager, Steve Sohus, believed that plaintiffs, upon acquiring the license to lots 81 and 82, would have the same rights as Rogers to use the Dozer Road. In short, they argued that they were entitled to a jury trial on the disputed factual issues regarding the existence of an easement to use the Dozer Road.

B. Admissibility of Extrinsic Evidence

Grants are to be interpreted in like manner with contracts in general . . . . (Civ. Code, 1066; Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 521.) If [t]he interpretation of an easement . . . does not depend on conflicting extrinsic evidence[, it presents] a question of law. [Citations.] (Beyer v. Tahoe Sands Resort (2005) 129 Cal.App.4th 1458, 1470.)

The right to a jury trial applies only to issues of fact. (Dorsey v. Barba (1952) 38 Cal.2d 350, 356, overruled on other grounds in Jehl v. Southern Pac. Co. (1967) 66 Cal.2d 821, 828; see 7 Witkin, Cal. Procedure (4th ed. 1997) Trial, 91, p. 111.) Even in a jury trial, the trial court must decide the legal issues, for it is well established that it is reviewable error to submit to the jury an issue of law as a question of fact. (Martin v. Hall (1971) 20 Cal.App.3d 414, 421.) Accordingly, unless the interpretation of plaintiffs license agreement depends on conflicting extrinsic evidence, it presents a question of law for which no right to jury trial exists. (Oceanside 84, Ltd. v. Fidelity Federal Bank (1997) 56 Cal.App.4th 1441, 1448, 1451.)

As we earlier indicated, although the Club bylaws allow a license to be sold by a licensee member, any such sale is contingent upon the Clubs approval of the prospective licensee, and the scope of the license is established by the Clubs survey of the licensed parcel. In this case, after plaintiffs entered into a purchase agreement with the prior licensee, Mary Rogers, plaintiffs executed a new Club license agreement that incorporated the Club bylaws and the 1991 survey for lots 81 and 82. Plaintiffs license agreement stated in relevant part: The license grants exclusive use to that parcel as described in the survey, subject to the CONDITIONS, COVENANTS AND RESTRICTIONS in our By-laws and Club rules. Plaintiffs also signed a separate document acknowledging their receipt of the bylaws, rules, and the 1991 survey, which they agreed was the true representation of the licensed parcel.

In this case, because the license agreement stated that plaintiffs exclusive use of lots 81 and 82 was subject to the bylaws, the bylaws were expressly incorporated into the agreement. Civil Code section 1642 provides that [s]everal contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together. The license agreement documents, which included the signed acknowledgements, 1991 survey, and certificate of membership, must be read in conjunction with the bylaws. The documents and bylaws comprised an integrated agreement between the parties.

Significantly, because the bylaws require that the actual transfer of a license must be conducted by the Club, which may withhold its approval, the transfer was not from Rogers to plaintiffs, but from Rogers to the Club. The license reverted to the Club as the fee owner of the licensed parcels. The Club then transferred the license to plaintiffs, subject to the bylaws and the 1991 survey. Due to the involvement of the Club, this was not an ordinary sale of real property between two parties, but a regulated, three-party transfer of a license pursuant to the Club bylaws. Under the bylaws, the license that was transferred to plaintiffs could not have included any prior rights granted to Rogers to use the Dozer Road, because the license only transferred what was depicted on the 1991 survey, which did not include the Dozer Road. The usual rules regarding easements must be applied in conjunction with the bylaws, which specify that when the Club transfers a license to a new licensee, only those easements that are depicted in the accompanying survey will survive as appurtenant to the property.

Moreover, we must also consider the acknowledgments that were signed by plaintiffs as part of the license agreement. The acknowledgments included an express representation that the Club was providing no assurances, express or implied, regarding the feasibility of building a home on the licensed parcels, and that any such assurances given by Rogers were per agreement, between Rogers and plaintiffs only. The only reasonable construction of the acknowledgments is that the license agreement did not include any promises made by Sohus or by Rogers regarding the Dozer Road.

We therefore conclude, as a matter of law, that plaintiffs license agreement documents are not reasonably susceptible of the interpretation that the Club expressly or implicitly[5]transferred, with the license to lots 81 and 82, an appurtenant easement to the Dozer Road, because that road was not mentioned in the license documents or depicted in the 1991 survey. Extrinsic evidence should not have been admitted on that point because the license documents are not ambiguous. It is only [i]f a contract is capable of two different reasonable interpretations[ that a] contract is ambiguous. [Citation.] (Oceanside 84, Ltd. v. Fidelity Federal Bank, supra, 56Cal.App.4th at p. 1448.) Although extrinsic evidence is not permitted in order to add to, detract from, or vary the terms of an integrated written agreement, extrinsic evidence is admissible in order to explain what those terms are. [Citations.] Therefore, extrinsic evidence as to the circumstances under which a written instrument was made has been held to be admissible in ascertaining the parties expressed intentions, subject to the limitation that extrinsic evidence is not admissible in order to give the terms of a written instrument a meaning of which they are not reasonably susceptible. [Citations.] (Continental Baking Co. v. Katz, supra, 68 Cal.2d at pp. 521-522.)

C. There Was No Right to Jury Trial

Where, as here, [t]he interpretation of an easement . . . does not depend on conflicting extrinsic evidence[, it presents] a question of law. [Citations.] (Beyer, supra, 129 Cal.App.4th at p. 1470.) In light of our discussion above, it necessarily follows that the interpretation of the license documents and survey presented only issues of law, for which no right to jury trial exists. (See Martin v. Hall, supra, 20 Cal.App.3d at p. 421; Oceanside 84, Ltd. v. Fidelity Federal Bank, supra, 56 Cal.App.4th at p. 1451.) We distinguish Arciero Ranches v. Meza, supra, 17 Cal.App.4th 114, in which the right to jury trial existed because of the triable issues of fact regarding the existence of a prescriptive easement. In this case, the complaint did not allege a prescriptive easement claim and the written contract is not ambiguous.

II. Negligence and Emotional Distress Claims

After trying the Dozer Road easement dispute, the trial court, without taking additional evidence and over plaintiffs objection, entered judgment for the Club on all issues including the bifurcated claims for tort damages. Plaintiffs contend on appeal that their procedural due process rights were violated because they were not allowed to present additional evidence on their bifurcated tort claims for negligence (fourth cause of action) and intentional infliction of emotional distress (ninth cause of action). They argue that although the trial court received overlapping evidence on the contract and tort claims during the Dozer Road trial, they were not given a full and fair opportunity to present additional evidence regarding the non-easement issues covered by the tort claims. For instance, the emotional distress cause of action alleged both that the Clubs conduct pertaining to the easement was outrageous and that other conduct not pertaining to the existence of the easement (e.g., failing to investigate, prevent or punish harassment of Plaintiffs by their neighbors[)] was outrageous as well. . . . Similarly, the negligence cause of action alleged that the Club failed to maintain and repair the common areas of the Club. . . . Although the common areas of the Club included the Dozer Road, nothing alleged in the fourth cause of action suggests that it was based solely upon the theory that the Club had a duty to maintain the Dozer Road because the Aharonis had an easement over the Dozer Road.

Given the state of the record, it would be speculative for us to conclude that plaintiffs, who preserved their objection below, were given a full and fair trial. Plaintiffs argue that the error is reversible per se. On this record, we are compelled to agree. [W]here the error results in denial of a fair hearing, the error is reversible per se. Denying a party the right to testify or to offer evidence is reversible per se. (Fewel v. Fewel (1943) 23 Cal.2d 431, 433; Guardianship of Waite (1939) 14 Cal.2d 727, 729; Caldwell v. Caldwell (1962) 204 Cal.App.2d 819, 821.) (Kelly v. New West Federal Savings (1996) 49 Cal.App.4th 659, 677.)

We therefore grant a partial reversal of the judgment only as to the fourth and ninth causes of action, which are remanded for the limited purpose of allowing plaintiffs to present further evidence. In the event of a further trial, plaintiffs shall be held to their prior waiver of a jury trial. (See Spaulding v. Cameron (1954) 127 Cal.App.2d 698, 702 [where the cause is remanded on appeal for further proceedings and the determination of issues that could have been decided originally, a waiver of jury tr[ia]l is binding as to the subsequent proceedings]; Wegner, Fairbank, and Epstein, Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2006) 2:303, p. 2-51 (rev. # 1, 2003).)

III. The Davis-Stirling Act Claims

Plaintiffs argue that the summary adjudication was improper because triable issues of material fact existed. Initially, they contend that the trial court used the wrong test in determining the Club was not a stock cooperative. They argue the court focused on whether current shareholders have a right of exclusive occupancy. Plaintiffs point to the language of the statute and emphasize that the correct test is whether all or substantially all of the shareholders of the corporation receive a right of exclusive occupancy in a portion of the real property. (Civ. Code, 1351, subd. (m), italics added.) They assert the evidence showed that all shareholders receive the right of exclusive occupancy when they purchase their shares. Thus, plaintiffs claim the Club meets the statutory definition of a stock cooperative. They are incorrect.

As we have discussed, it is the license that allows a member to use a particular residential site and to erect, occupy, and possess a residence and other improvements thereon. Although plaintiffs assert that all shareholders receive a license at the time they purchase their shares, there is no evidence in the record to support their claim.[6] The evidence shows that there are a number of shareholders who currently do not have licenses, and there is nothing in the record that suggests those shareholders received licenses at any other time. We conclude the trial court correctly focused on the ratio of shareholders who have licenses and possess the right of exclusive occupancy and those shareholders who do not.

Plaintiffs contend that the evidence established that up to 75 percent of the Clubs stockholders have licenses. They argue a trier of fact could find that substantially all of the shareholders have been granted an exclusive right of occupancy. We disagree that this presents an issue of material fact. Issues of statutory construction present questions of law, calling for an independent review by an appellate court. [Citations.] (Botello v. Shell Oil Co. (1991) 229 Cal.App.3d 1130, 1134.) (Campbell v. Arco Marine, Inc. (1996) 42 Cal.App.4th 1850, 1855.)

Plaintiffs argue that the trial courts interpretation of the term substantially all was unduly narrow. They cite a number of cases that discuss the term substantially and one federal case that discusses the meaning of substantially all of a corporations assets. (Rose v. United States (9th Cir. 1981) 640 F.2d 1030, 1034.) None is particularly helpful.

We point out that the phrase used by the Legislature in Civil Code section 1351, subdivision (m) is all or substantially all. Thus, the term substantially all qualifies the absolute term all. A common sense reading of the language leads us to conclude that the phrase means 100 percent or some amount just short of it.

In trying to find a more exacting definition, we have examined other statutes which have used and defined substantially all in other contexts. In federal statutes, [s]ubstantially all is one of those phrases with a special legal meaning. Congress uses it all the time in tax statutes, and the Internal Revenue Service decodes it as meaning 85%. (Continental Can Company, Inc. v. Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent) Pension Fund (7th Cir. 1990) 916 F.2d 1154, 1158.) The court in Continental Can Company went on to list a number of examples in the Internal Revenue Code, and in all of the cases, with one exception, the regulations define the term to mean 85 percent or more. The only departure was a regulation that states the phrase means at least 90 percent. (Ibid.)

The phrase substantially all is also used in a number of California statutes. (See, e.g., Fin. Code, 4840, subd. (a); Fin. Code, 18660, subd. (b); Pen. Code,  653aa, subd. (a).) We were able to find one statute that defines the term. Revenue and Taxation Code section 6010.30 sets forth when a transfer of art does not equate to a sale or transfer under the code. Revenue and Taxation Code section 6010.30, subdivision (b) states: For purposes of this section, substantially all means 80 percent or more.

While we do not suggest that a particular percentage meets the criteria of all or substantially all in Civil Code, section 1351, subdivision (m), we do conclude that 75 percent does not fall within the statutory definition.

The record, therefore, does not contain a triable issue of material fact regarding the Clubs status as a stock cooperative. Given that the stock cooperative is the only form of common interest development that is at issue under the Act, summary adjudication was properly granted. Accordingly, we need not discuss plaintiffs other contentions regarding the motion.

IV. Attorney Fees

Plaintiffs contend that the Club should not have been awarded attorney fees under the provision in the bylaws that provides: In the event that any suit is instituted concerning or arising out of this Agreement between Malibou Lake Mountain Club, Ltd. and any Member, the prevailing party shall recover all of such partys costs, including, without limitation, the court costs and reasonable attorneys fees incurred in each and every such action, suit or proceeding, including any and all appeals or petitions therefrom.

Plaintiffs argue that their license agreement did not incorporate the bylaws. As we previously discussed, however, the license agreement, acknowledgements, 1991 survey, certificate of membership, and bylaws comprised an integrated license agreement between plaintiffs and the Club. (Civ. Code, 1641.) The bylaws attorney fee clause applies to this action because all of the rights, duties, and obligations sought to be enforced by the complaint are governed by and arise from the integrated agreement. Plaintiffs have failed to show that apportionment between the inextricably intertwined tort and contract claims was required. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111.)

Because we are remanding the matter for further proceedings on two causes of action, the attorney fee award must be vacated. The trial court will have to address the issue of attorney fees in light of the outcome of the trial.

DISPOSITION

As to the fourth and ninth causes of action only, the judgment is reversed, the attorney fee award is vacated as premature, and the cause is remanded for the limited purpose of allowing the plaintiffs to present any additional evidence. In all other respects, the judgment is affirmed. The parties are to bear their own costs and fees on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

SUZUKAWA, J.

We concur:

EPSTEIN, P. J. MANELLA, J.

Publication courtesy of San Diego pro bono legal advice.

Analysis and review provided by Poway Property line attorney.

[1] The trial court also rejected plaintiffs claim that they are entitled to build their access road along the Old Map Road, which is not an issue raised on appeal.

[2] Plaintiffs alleged that the Club negligently maintained the Dozer Road and thereby damaged lots 81 and 82 (fourth cause of action). Plaintiffs also alleged that the Club intentionally failed to investigate or protect them from harassment by their neighbors, fined them for parking a car on the Dozer Road, sent a bulldozer onto the Dozer Road to perform undisclosed work, drilled test holes on the Dozer Road, and accused them of interfering with an agreement to transfer lots 88 and 89 to a contractor who would, in return, develop a sewer system for the benefit of the surrounding lots, including lots 81 and 82 (ninth cause of action).

[3] In their Davis-Stirling Act claims (seventh, tenth, and eleventh causes of action), plaintiffs alleged that they were illegally denied access to the Clubs accounts, books, and records, and were illegally charged a 5 percent transfer fee for their sale of a different license in 2002.

[4] Before oral argument, we invited the parties to provide supplemental letter briefs on an issue that, although tangentially raised, was not fully briefed. That issue, which was based on evidence that a license is transferred through the Club, was whether an express or implied easement not specified in the license agreement and incorporated bylaws can exist. We received letter briefs from both parties, which we have considered and included in the record on appeal.

[5] The complaint alleged the existence of implied easement by grant, which ordinarily presents a question of fact regarding the intent of the parties. (See McCarty v. Walton (1963) 212 Cal.App.2d 39, 43.) According to Civil Code section 1104, A transfer of real property passes all easements attached thereto, and creates in favor thereof an easement to use other real property of the person whose estate is transferred in the same manner and to the same extent as such property was obviously and permanently used by the person whose estate is transferred, for the benefit thereof, at the time when the transfer was agreed upon or completed. As discussed above, the bylaws precluded the Club from transferring to plaintiffs a roadway not depicted on the accompanying survey. Accordingly, the bylaws preclude the creation of an easement by implication in the manner alleged by plaintiffs.

[6] Although plaintiffs submitted Michaels declaration in the trial court that the Club never issued stock to anyone who did not buy a License, the court sustained the Clubs objection. Plaintiffs relied on the same evidence in their opening brief, but acknowledged their error when the Club pointed out the trial courts evidentiary ruling in its brief.