Sher v. San Diegueno Hills Homeowners Assn

Filed 4/11/06 Sher v. San Diegueno Hills Homeowners Assn. CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Richard G. Cline, Judge. Affirmed.

In 2001, plaintiffs Charles and Donna Sher (together the Shers) acquired Lot 45 in the Rancho Diegueno Estates (Estates), a common interest development subject to a recorded Declaration of Covenants, Conditions & Restrictions (CC&R's). The Shers began pursuing approval from the County of San Diego (County) to subdivide Lot 45, but neighbors objected and defendant San Diegueno Hills Homeowners Association (HOA) initiated an amendment to the CC&R's to prohibit subdivision of lots. The members of the HOA adopted the amendment. The Shers filed a complaint against the HOA and others seeking a declaration that the amendment was invalid and the CC&R's prior to the amendment did not require approval by the HOA of the Shers' lot subdivision. The HOA cross-complained, seeking a declaration that the CC&R's precluded the Shers from subdividing Lot 45 and an injunction requiring them to cease efforts to subdivide Lot 45. The HOA asserted that amendment to the CC&R's was validly adopted and may be enforced to preclude the Shers from subdividing Lot 45. The trial court found in favor of the HOA, and enjoined the Shers from subdividing Lot 45. The Shers timely appealed.

I

FACTUAL BACKGROUND

A. The Development

The HOA is a nonprofit mutual benefit corporation, the members of which are owners of lots in the Estates, a common interest development established under Civil Code section 1350 et seq. in 1984 when the CC&R's were recorded. The zoning for the Estates requires a minimum lot size of two acres, but a Major Use Permit (MUP) for the Estates allowed "lot averaging" and permitted individual lots as small as one acre provided the average density for the Estates as a whole was at least two acres per residential unit. The tentative map and use permit for the Estates originally depicted 53 lots, but the final map was approved for only 51 lots because of on-site private sewage disposal problems. The reduction from 53 to 51 lots was accomplished by creating two lots (Lots 44 and 45) on the final map, which replaced four lots depicted on the tentative map.

B. The Shers' Lot Subdivision

Before the Shers purchased Lot 45, public sewer service became available to the Estates. While the Shers' acquisition of Lot 45 was in escrow, Mr. Sher informed defendant Mr. Freeberg (then President of the HOA's Board of Directors) of their wish to subdivide Lot 45. Freeberg told Mr. Sher that a lot subdivision would be difficult because it would require an amendment of the CC&R's by the members of the HOA and it would be a "very tough sell." Freeberg told the Shers many people had lived in the Estates for a long time and understood and expected the number of lots to be limited to those depicted on the final map, and Sher should not purchase the lot with the expectation that it could be subdivided.

In the spring of 2002, when construction of the Shers' residence on the easterly portion of Lot 45 was nearing completion, the Shers informed the HOA that they had contacted the County and the Fire Department about the feasibility of subdividing Lot 45 and had obtained preliminary approvals for their plan. The Shers stated their review of the CC&R's did not reveal any provision barring a lot subdivision, and stated they would attend the May 2002 HOA Board meeting to present and discuss their preliminary studies for site grading and a site plan for a home on the westerly portion of Lot 45. The Shers offered to pay the legal costs required to amend the CC&R's to reflect the addition of another lot to the Estates, and proposed to contribute an amount to the HOA maintenance fund to mitigate the impacts on the streets from the added home. At the May 15, 2002 meeting, the reaction of the HOA's Board to the Shers' plan was generally favorable. However, Freeberg cautioned that the entire community would need to "speak on the issue" because the CC&R's would need to be amended to allow a lot subdivision, and it would be difficult to schedule a community-wide meeting before the end of summer; the Shers should talk to their immediate neighbors in the interim to gauge their feelings about it.

In early June, the Shers submitted additional applications to the County for processing the lot subdivision. However, they did not contact neighbors about the proposed lot subdivision during the summer of 2002. Instead, the Shers' application to the County triggered the sending of notices of the proposed lot subdivision to immediately adjacent lot owners. Several neighbors contacted the Board to express opposition to the lot subdivision. In mid-August 2002, Freeberg informed the Shers that, because of the outcry against the proposed lot subdivision,^[1] the HOA would be holding a membership meeting on the issue to obtain community input about the Shers' proposed lot subdivision, and the Shers should be prepared to present information regarding how many other lots in the Estates could be subdivided if the Board approved the request to subdivide their lot.

The Shers responded by expressing their opinion that the CC&R's did not preclude subdividing Lot 45. Freeberg replied that HOA approval of the subdivision was at least implicit from the CC&R's, and if the Shers did not suspend further processing of the lot subdivision through the County until after the HOA members had the opportunity to respond, the Board would deny the Shers' request rather than risk waiving the issue. The Shers continued to pursue their County application for a lot subdivision.

A meeting of the HOA members was set for November 5, 2002, to provide the Shers the opportunity to solicit support for approval of the lot subdivision. Over 20 HOA members attended the meeting, a relatively high attendance percentage, and the vast majority of those present expressed opposition to permitting the lot subdivision. Although the Shers made a presentation at the meeting,^[2] they reiterated their contention that they were not seeking approval for the lot subdivision because the CC&R's did not mandate they obtain HOA approval for a lot subdivision. There was some discussion of whether other lots might be able to be subdivided, with Sher responding that "anything is possible," and Freeberg expressed concern the Estates might become "another Carmel Valley" with high densities.

C. The Amendment to the CC&R's

On November 14, 2002, the Shers made a presentation concerning their proposed lot subdivision to a meeting of the San Dieguito Planning Group (SDPG), a community advisory board. HOA members, including members of the HOA's Board, attended the meeting and spoke against the subdivision proposal, and SDPG unanimously rejected the proposal. After the meeting, the HOA Board members discussed the evening's events. The Board was "taken aback" by the Shers' determination to move forward and their comment that the SDPG's rejection was merely advisory, and there was concern that County approval of the lot subdivision might be imminent. The Board then convened an emergency meeting to discuss what actions should be taken, and ultimately decided (1) to authorize its attorneys to prepare solicitation materials for a proposed amendment to the CC&R's to clarify that subdivision of existing lots in the Estates was prohibited, and (2) to contact the County with formal opposition to the proposed lot subdivision. The Board subsequently sent a letter on November 27, 2002, to all HOA members articulating the reasons it was opposing the Lot 45 subdivision at the County level, but this letter did not mention the proposed amendment to the CC&R's. The Board did not advise the Shers it had authorized its attorneys to initiate the proposed amendment to the CC&R's.

On December 6 the attorneys sent a letter to all HOA members, enclosing a proposed amendment to the CC&R's (the amendment) and a ballot for voting on the amendment, and explained the Board sought a favorable vote on the amendment to eliminate any ambiguity on whether subdivision of a lot was permissible. The amendment provided, "No Owner shall partition or further subdivide his or her Lot, including without limitation, any division of the Lot into time share estates or time-share uses."

A group of HOA members opposed to the lot subdivision, including Board members, solicited other HOA members to vote in favor of the amendment. The Shers contacted numerous HOA members to urge them to either cast a "no" vote or to refrain from voting. However, when the votes were tallied, 43 votes were cast in favor of the amendment, representing more than 84 percent of the HOA's membership.^[3] Because the CC&R's provide that amendments require 75 percent of the vote, the vote was certified and the amendment recorded on December 13, 2002.

II

TRIAL COURT DECISION

The trial court ruled that, although the Shers' evidence showed the Board took actions leading to the adoption of the amendment that were secretive and unfair and deprived them of a reasonable opportunity to lobby against the amendment, they had not shown the Board coerced or misled any member or that the vote would have been different had the Shers been provided an opportunity to lobby against the amendment. The court also rejected the Shers' claims that most of the ballots should have been invalidated on procedural grounds, and the voting process should be invalidated because of alleged privacy violations in the balloting process. Finally, the court rejected the Shers' claim that the substance of the amendment was unenforceable as unreasonable.

III

ANALYSIS

A. Standard of Review

When a party challenges a judgment on sufficiency of evidence grounds, the reviewing court must determine whether, on the whole record, there is substantial evidence, contradicted or uncontradicted, supporting the trial court's determination. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873- 874.) A reviewing court must view the evidence most favorably to the prevailing party, resolve all evidentiary conflicts in favor of the prevailing party, and indulge all reasonable inferences to uphold the judgment. (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1254-1255.) The issue is not whether there is other evidence in the record to support a different finding (Rupf v. Yan (2000) 85 Cal.App.4th 411, 429-430, fn. 5), but is instead whether there is some evidence that, if believed, would support the findings of the trial court.

B. The Validity of the Amendment

The Shers argue the trial court erroneously found the HOA's members validly adopted the amendment to the CC&R's, and assert three distinct reasons for voiding the amendment.

The Shers first argue the Board's secretive and unfair actions should invalidate the adoption of the amendment. They argue that, if they had not been precluded from lobbying against the amendment by these secretive actions, they would have been able to convince enough HOA members to vote against the amendment (or to abstain from voting) that the amendment would not have received the 75 percent of the vote required for passage.^[4] However, the evidence supports the trial court's conclusion that no one coerced or misled any member to vote for the amendment.^[5] Moreover, the evidence supports the finding that the vote would not have been different even had the Shers been provided an opportunity to lobby against the amendment. They presented their plan for the lot subdivision to both an HOA members meeting (on November 5) and to a meeting of an advisory board (on November 14), both of which were attended by numerous HOA members, yet these presentations were apparently unable to stem the sentiment against the proposed lot subdivision.^[6] There was no evidence that any member who voted in favor of the amendment might have voted differently had the Shers been provided another opportunity to lobby for their lot subdivision, much less that four or five of those voting in favor of the amendment would have altered their votes. Substantial evidence supports the conclusion that the result of the voting would not have been different absent the Board's secretive and unfair actions.

The Shers next assert the majority of the ballots cast in favor of the amendment must be disqualified because they were signed by only one of the owners of some lots. They rely on King v. Oakmore Homes Assn. (1987) 195 Cal.App.3d 779 to argue Article IV, section 3 of the CC&R's, which provides "[t]he vote for such lot shall be exercised as its Owners collectively determine . . . .", requires disqualification of all ballots not signed by all record owners of a lot. In King, the court considered a bylaw that provided, " 'When a building site is owned of record in joint tenancy or tenancy-in-common, the membership as to such building site shall be joint, and the rights of such membership (including the voting power arising therefrom) shall be exercised only by the joint action of all owners of such building site.' " (Id. at p. 782, italics added.) The court was required to reconcile the express language of the bylaw with the contrary provisions of the Corporations Code, which provided that where an interest is jointly held, the vote of one was binding on all "unless the secretary of the corporation is given written notice to the contrary . . . ." (Corp. Code, § 704; accord, Corp. Code, § 7612.) The King court held that:

"The key phrase of the bylaw is 'joint action.' The most reasonable interpretation of the joint action requirement is that for a vote to be valid, it must reflect the joint action of all cotenants of the property, and joint action means that each and every lot owner's position must be reflected, either by that person's actual vote or by authorization of a cotenant to vote as his or her representative." (King, at p. 782.)

King reconciled these conflicting provisions by holding the bylaws "constitute[d] 'written notice to contrary' to the secretary" that only jointly executed ballots were valid under the bylaws. (Id. at p. 784.) King is not controlling because the CC&R's here do not require the vote be exercised "only by . . . joint action," but instead merely provide the vote attributed to a lot must be exercised "as its Owners collectively determine."^[7] Although the owners of a lot must collectively determine how their single vote for that lot will be cast, the CC&R's do not require the ballot be exercised by a joint action (e.g. signature) of all owners of the lot. Because the CC&R's here do not provide " 'written notice to the contrary' " to the secretary, the signature of a single owner is sufficient to vote for that lot. (See Corp. Code, § 7612, subd. (a).)

The Shers finally assert the HOA should be deemed a quasi-municipality and therefore the validity of its land-use restrictions should be tested by the same standards applicable to land use regulations adopted by governmental entities.^[8] However, a homeowners association is not a quasi-municipality. It does not perform most of the functions of a municipality (such as providing police and fire services, schools, libraries and utility services), and those limited functions it performs that resemble municipal functions (levying assessments, maintaining common areas, enforcing rules) are also performed by entities (such as corporations or private recreational clubs) that are not governmental entities. Moreover, a municipality enjoys privileges and immunities not available to a homeowners association. (See Gov. Code, § 815 et seq.)

The three cases cited by the Shers that have analogized a homeowners association to a municipality do not convince us a homeowners association should be deemed a municipality. In Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, the court merely concluded that a homeowners association owes to its members fiduciary obligations that can be violated if it does not act in good faith when it approves or disapproves planned improvements, and the discussion of the parallels between a homeowners association and a municipality was dicta. (Id. at pp. 647-654.) The second case, Park Redlands Covenant Control Committee v. Simon (1986) 181 Cal.App.3d 87, does not support the Shers' claim. In Park Redlands, the issue was whether a restriction on the number of occupants violated the right of privacy protected under the California Constitution. The Park Redlands court, relying on Justice Staniforth's concurring opinion in Welsch v. Goswick (1982) 130 Cal.App.3d 398, concluded the right of privacy could be violated by a private restrictive covenant if there was state action involved in enforcing that covenant, and that state action is present when there is judicial enforcement of that covenant. (Park Redlands, at pp. 98-99.) However, subsequent Supreme Court authority has declared state action is not present merely because a court injunction is issued to enforce a private restrictive covenant (see Golden Gateway Center v. Golden Gateway Tenants Assn. (2001) 26 Cal.4th 1013, 1034), which effectively eviscerates the foundation for the Park Redlands analysis and holding.

The final case, Laguna Publishing Co. v. Golden Rain Foundation (1982) 131 Cal.App.3d 816 (disapproved on other grounds by Katzberg v. Regents of University of California (2002) 29 Cal.4th 300, 328, fn. 30), addressed whether a private homeowners association could discriminate in enforcing a ban on newspaper distribution. The Golden Gateway court, after concluding the actions of a private association without more do not constitute state action, noted that whether the discriminatory enforcement addressed in Laguna Publishing was improper was an issue it declined to reach. (Golden Gateway Center v. Golden Gateway Tenants Assn., supra, 26 Cal.4th at p. 1035.) Although the Shers invite us to hold the HOA to the same standards as a municipality, they do not explain how to reconcile such a holding with the "no state action" analysis of Golden Gateway. We conclude a private homeowners association, at least to the extent it adopts and equally enforces the restrictions, is not subject to the same standards applicable to governmental entities.

C. The Enforceability of the Amendment

The Shers' final challenge asserts the CC&R's restriction on subdividing lots is unenforceable because the burden on the use of the affected land substantially outweighs the benefits from the restriction and there was no substantial evidence to support the trial court's contrary finding.

Under Civil Code section 1354, recorded restrictions in a common interest development are equitable servitudes that are enforceable unless they are unreasonable. Because these restrictions are crucial to ensuring a stable and predictable living environment in a common interest development, the restrictions are presumptively valid and the burden is on the challenger to demonstrate, considering the deferential standard applicable to equitable servitudes, that the restriction is unreasonable. (Nahrstedt, supra, 8 Cal.4th 361, 368.) Accordingly, a restriction will be enforced uniformly against all residents of the common interest development unless the challenger can show the restriction is arbitrary, violates a fundamental public policy, or otherwise imposes burdens that substantially outweigh the restriction's benefits to the development's residents. (Id. at p. 386.) Courts are "disinclined to question the wisdom" of such restrictions (id. at p. 381), and a court does not assess the reasonableness or unreasonableness of a restriction by examining whether a particular owner's "peculiar circumstances or hardships" provide grounds for a "personal [exemption] from the restrictions" (id. at p. 383), but instead must assess whether the harm to the common interest development as a whole is so disproportionate to its benefits that it should not be enforced. (Id. at p. 386.)

Judged against this deferential standard, there is substantial evidence supporting the conclusion that the harm to the community from the amendment to the CC&R's did not substantially outweigh its benefits.^[9] There are numerous benefits to the owners from precluding subdivision of lots, including the economic and aesthetic benefits of maintaining low densities in their surrounding neighborhood, reduced noise and traffic (both from construction activities as well as from a higher density neighborhood), reduced demands on association-maintained roads and common areas, negative impacts on open space and view corridors, and undiluted voting power on association matters. The Shers argue there is no evidence that allowing lots to be subdivided would negatively impact the character of the Estates community. However, the open character of the community would be eroded if lots could be subdivided: the addition of a home to the western half of the Shers' lot would immediately reduce the open space currently enjoyed by the several lots adjacent to their proposed building site, and similar impacts would reverberate if others followed the Shers' lead and sought to build additional homes on their larger lots.^[10] Moreover, there is some evidence that existing owners relied on the configuration of the existing lots when they purchased and built their homes,^[11] and the amendment promotes the stable and predictable living environment relied on by residents of a common interest development.

In effect, the Shers' argument is that the restriction is invalid because it imposes economic impacts on them, depriving them of the ability to profit from the development and sale of a separate home on the subdivided lot, and because of the unique quality of their lot they should not be restrained by the restriction. However, their argument runs afoul of Nahrstedt's framework, and we will not declare a presumptively valid restriction to be unreasonable by reference to whether a particular owner's "peculiar circumstances or hardships" provide grounds for a "personal [exemption] from the restrictions." (Nahrstedt, supra, 8 Cal.4th 361 at p. 383.)

D. The Breadth of the Injunction

The Shers finally argue that, even if the amendment is enforceable, the injunction employs language that is overbroad because it can be construed to preclude them from recording the County-approved Parcel Map finalizing the lot subdivision. The amendment provides that "[n]o Owner shall partition or further subdivide his or her Lot." Injunctive relief is proper to enforce a restrictive covenant, even without a showing that the violation is causing substantial damages (Biagini v. Hyde (1970) 3 Cal.App.3d 877, 880; Seaton v. Clifford (1972) 24 Cal.App.3d 46), and the present injunction extends no further than to enforce the restriction by precluding the Shers from finalizing the subdivision of Lot 45. Although they assert the impact of the injunction will require them to forfeit the investment made to pursue the lot subdivision, while providing minimal benefit to the HOA, that loss does not render the injunction improper. (See Morgan v. Veach (1943) 59 Cal.App.2d 682, 690.)

DISPOSITION

The judgment is affirmed. Defendants are entitled to costs on appeal.

McDONALD, J.

WE CONCUR:

HUFFMAN, Acting P. J.

AARON, J.

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Analysis and review provided by Escondido Apartment Manager Attorneys.

^[1] At least two nearby lot owners contacted Freeberg, and some neighbors also contacted the County to express their objections to the lot subdivision.

^[2] The Shers perceived the purpose of their presentation was to persuade the HOA on the merits of what they planned to build on the new lot, not to persuade the HOA to approve the lot subdivision itself.

^[3] There is some discrepancy on the total votes cast for the amendment. A count held on December 13, 2002, found 41 favorable votes, but a March 2003 report stated there were 43 votes in favor of the amendment. Because the attorneys' cover letter had indicated the ballot could be cast through December 30, the discrepancy may reflect the late arrival of a few ballots.

^[4] The Shers also assert the amendment would never have been adopted if the Board had not initiated the amendment process. However, they cite no authority holding that an amendment validly adopted by the membership, and otherwise enforceable (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, (Nahrstedt) and applied in a fair and nondiscriminatory manner (Ironwood Owners Assn. IX v. Solomon (1986) 178 Cal.App.3d 766, 772), can be invalidated because the sponsor of the amendment engaged in secretive or unfair conduct.

^[5] The Shers suggest, apparently for the first time in their reply brief on appeal, that Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914 has sub silencio created a "presumption" of intimidation when, as here, the ballot of a homeowner will be viewable by a proponent of the measure, and this evidentiary presumption should have shifted the burden to the HOA to produce affirmative evidence of a lack of coercion or intimidation. It appears this issue is waived because it was not presented to the trial court (Royster v. Montanez (1982) 134 Cal.App.3d 362, 367) and was not raised in the Shers' opening brief. (Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3 [withholding of a point until the reply brief deprives the respondent of an opportunity to answer it].) Even assuming the issue is preserved, there was evidence the proponents did not intimidate voters into voting for the amendment. Mr. Greenberg testified his vote was solicited by Ms. Brady, a proponent of the amendment, during a conversation at his home. Greenberg described the conversation as "very pleasant," and ultimately decided to abstain from voting. This testimony provides affirmative evidence to support the conclusion the proponents did not intimidate or coerce voters to support the amendment.

^[6] Moreover, the Shers apparently sent out a December 8 letter to HOA members in response to the Board's letter of November 27 in which the Board articulated its reasons for opposing the lot subdivision at the County level. The Shers' December 8 letter was apparently unpersuasive to HOA members on the merits of permitting the subdivision of Lot 45.

^[7] We are also unpersuaded by King for another reason. King concluded the "joint action" requirement protected the community property rights of nonsigning spouses by preventing a signing spouse from encumbering the jointly held property. However, King overlooked that an encumbrance signed by one spouse is not void but is only voidable by action of the nonsigning spouse, and third parties do not have standing to void the instrument. (See Clar v. Cacciola (1987) 193 Cal.App.3d 1032, 1035-1037.) Thus, even if the nonsigning spouse in this case had not agreed to the action taken by the signing spouse, only the nonsigning spouse--not the Shers--would have standing to void the ballot.

^[8] The Shers cite numerous cases holding that governmental entities may not validly adopt a restriction targeted at frustrating a citizen's intended development, and the amendment adopted by the HOA must similarly be deemed invalid. We do not discuss these cases because we conclude the HOA is not subject to the same standards applicable to a municipality.

^[9] The Shers, citing Laguna Royale Owners Assn. v. Darger (1981) 119 Cal.App.3d 670 and Portola Hills Community Assn. v. James (1992) 4 Cal.App.4th 289, appear to argue that only a few of the owners (e.g. those adjoining or with immediate sightlines to the Sher property) benefit from the amendment, and the benefits to these few cannot justify restricting their plans. However, Nahrstedt expressly disapproved the approach employed by Portola Hills to evaluate the enforceability of the restriction (Nahrstedt, supra, at p. 386), and it appears the approach employed in Laguna Royale is inconsistent with the approach announced in Nahrstedt.

^[10] The Shers suggest that because any significant increase in density would face legal and logistical hurdles, the amendment provides no benefit to preserving the open character of the community because it is superfluous. However, at least one other lot (the Talkes) appears susceptible to easy subdivision, which would further crowd the cul de sac where the Shers wish to build, and other lots of two acres or more (of which there are at least 13) might be eligible for subdivision if open space and setback concerns were mitigated.

^[11] Mr. Suppa testified that at the November 5, 2002 meeting of the HOA members at which the Shers solicited support for approval of the lot subdivision, the owners of a lot stated they would not have placed their home on their lot in its current configuration if they had known the Shers would be placing a new home on the subdivided lot. Suppa also testified that, although the Shers' proposed additional house did not impact Suppa's lot, Suppa did buy his lot in reliance on the existing configuration and might have been dissuaded from buying if he had known that additional lots could be permitted in a manner that could negatively impact his lot.