CHAPALA
MANAGEMENT CORPORATION v. STANTON >













Filed 7/29/10











CERTIFIED
FOR PARTIAL PUBLICATION*



COURT
OF APPEAL, FOURTH APPELLATE DISTRICT



DIVISION
ONE



STATE
OF CALIFORNIA






>

CHAPALA MANAGEMENT CORPORATION, Plaintiff and Respondent, v. THOMAS STANTON et al., Defendants and Appellants.

D055532 (Super. Ct. No. 37-2008-00079704-CU-OR-CTL)

APPEAL from
a judgment and postjudgment order of the Superior
Court of San Diego
County, Steven R. Denton, Judge, and related writ petition. Judgment and postjudgment orders
affirmed. Petition for writ of
supersedeas granted.



Lynn &
Fortune, Robert H. Lynn; Mugglebee & Mugglebee and Stephen T. Mugglebee for
Defendants and Appellants.

Epsten
Grinnell & Howell, Rian W. Jones and Carrie M. Timko for Plaintiff and
Respondent.

Defendants
and appellants Thomas Stanton and Donna Stanton replaced two windows in their
condominium with "sandtone" colored windows after the condominium
association, Chapala Management Corporation (Association), had denied their
application for those improvements on grounds they were not an approved
color. Association thereafter filed suit
and, following a bench trial, obtained a judgment against the Stantons for injunctive and declaratory relief
declaring them in violation of Association's amended and restated declaration
of covenants, conditions and restrictions (CC&Rs) and requiring them to
modify or replace their windows under the approval of Association's
architectural review committee (at times hereafter the ARC). The trial court ordered the Stantons
to pay attorney fees and thereafter ordered them to post a bond or undertaking
to stay the collection of the attorney fee award. The Stantons
appealed from the judgment without filing an appeal bond or other
undertaking.

On appeal
from the judgment, the Stantons contend the trial court erred by (1) granting
an injunction when Association had specific and adequate legal remedies under
the CC&Rs; (2) ignoring Civil Code requirements granting defendants a
hearing before Association's board of directors (the Board); (3) holding that
the term "aesthetic" permits the architectural review committee to
disregard provisions of the CC&Rs as to window color; and (4) finding that
the architectural review committee's actions were not arbitrary, capricious or
discriminatory. The Stantons
further appeal from the order awarding attorney fees, asking us to vacate the order
if they prevail on appeal.

In their
subsequently filed writ petition, the Stantons
contend an undertaking is not required to stay an award of costs made in
connection with a judgment for injunctive relief. They asked for an immediate stay of the order
requiring that they post an undertaking.
We issued the stay, ordered that the arguments in the petition and
response be considered with this appeal, and deferred ruling on the petition
until disposition of the appeal.

We affirm
the judgment and postjudgment order awarding attorney fees. As we explain below, we dissolve the stay and
grant the Stantons' petition for
writ of supersedeas.

FACTUAL AND
PROCEDURAL BACKGROUND

The factual
background is taken from the facts and evidence in the record and the trial
court's statement of decision. We view
the facts most favorable to the judgment under the principle requiring us to
presume the lower court's judgment is correct and draw all inferences and
presumptions necessary to support it. (In
re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133; Ermoian v. Desert Hosp. (2007) 152 Cal.App.4th 475, 494.) " 'Where [a trial court's] statement of
decision sets forth the factual and legal basis for the decision, any conflict
in the evidence or reasonable inferences to be drawn from the facts will be
resolved in support of the determination of the trial court decision.'
" (In re Marriage of Ruelas (2007) 154 Cal.App.4th 339, 342.) If the statement of decision is ambiguous or
omits material factual findings, we will infer any factual findings necessary
to support the judgment. ( >Ermoian v. Desert Hosp., > at p.

494.)[1]

In December 2006, the
Stantons, owners of a unit located in the Association, submitted to Association
a series of applications seeking the architectural review committee's approval
of exterior improvements consisting of the replacement of two casement windows
on the south side of their unit, facing the common area. They sought to use windows that were
"sandtone" in color.

Association's
CC&Rs, recorded in 1996, require that the location and plans and
specifications of improvements to any unit's exterior be approved by
Association's three-member architectural review committee.[2] The CC&Rs state the "ARC shall
review and approve or disapprove all plans submitted to it for any proposed
improvement, alteration or addition, solely on the basis of aesthetic
considerations and the overall benefit or detriment which would result to the
immediate vicinity and the Project generally.
The ARC shall take into consideration the aesthetic aspects of the
architectural designs, placement of buildings, topography, landscaping, color
schemes, exterior finishes and materials and similar features . . .
." (CC&Rs, art. XV, § 11.)


Association
utilizes a document entitled "Architectural and CC&R Guidelines for
Homeowners" (Guidelines) stating that "[a]ll changes or additions
either to the exterior of your Living Unit or to your Exclusive Use Area
require ARC approval." In part, the
Guidelines state: "No building or
other structure or improvement, including landscaping, shall be erected, placed
or altered upon any Exclusive Use Area or Common Area nor shall the exterior of
any Living Unit be changed or altered unless the ARC has reviewed and approved
the changes in accordance with the guidelines." (Bold and italics omitted.) The Guidelines contain an "Architectural
Concept" section that explains that Association's architecture is a
homogenous Spanish style reminiscent of California
early days, and minor architectural changes may be considered that maintain the
integrity of that architectural style.
According to the Guidelines, "[a]reas allowing the largest
possibility for individual expression are the Exclusive Use Areas appurtenant
to the rear of such Living Unit and intended for the exclusive use of its
inhabitants. [¶] These areas are actually Common Areas and
shall be landscaped and maintained by the home owner." (Bold and italics omitted.) The CC&Rs define the exclusive use areas.


Before
January 2007, Association's architectural review committee had a policy of
maintaining a dark shade of brown color for windows that generally faced the
street within the community, other than the garage windows. The committee had a different policy with
respect to windows that did not face the street. The Stantons
were aware of this policy since at least 1999, when the existing architectural
review committee denied their application to install sandtone colored windows
due to the color variation.

In January
2007, the members of the architectural review committee met with the Stantons
at their property and explained that their window color was unacceptable. On January
31, 2007, Association advised the Stantons
by letter that their application had been disapproved because, among other
deficiencies, the window frame color specified on the application was
incorrect. In February 2007, the Stantons
submitted two additional applications again requesting approval of sandtone
colored windows.

The
following month, the Association's manager on the Board's behalf advised the Stantons
that the architectural review committee had denied their application
"because the casement windows must be brown in color." In April 2007, Thomas Stanton wrote to
Association's legal counsel and, among other things, accused the architectural
review committee of acting in an arbitrary and capricious manner in its color
approvals. At the conclusion of the
letter, he wrote, "New non-standard color windows will be installed in our
home this week!" The Stantons
thereafter installed the sandtone-colored windows.

In May
2007, Association offered to resolve the dispute with the Stantons
through mediation in accordance with Civil Code section 1369.520. The Stantons
declined mediation.

Association
thereafter filed a verified complaint against the Stantons
containing causes of action for declaratory and injunctive relief based on the Stantons'
violation of the CC&Rs. It sought a
permanent injunction requiring the Stantons
to modify their windows by painting them a color approved by the architectural
review committee, or alternatively requiring them to remove and replace the
existing windows with windows in an approved color after submitting plans and
specifications under the Guidelines and obtaining the committee's
approval. It also sought a judicial
declaration of the rights, duties and obligations of the parties under the
CC&Rs pertaining to the Stantons'
unit and an order directing them to comply with all other provisions of the
CC&Rs. Association prayed for costs
and attorney fees.

The matter
proceeded to a bench trial, after
which the trial court issued a written statement of decision determining
Association to be the prevailing party.
The court made detailed legal and factual findings in part as follows:

"The
Association has maintained a color scheme with approved and recommended colors
for windows in the community, which is reflected in Exhibit 21. . . . [T]he Association's Architectural
Guidelines . . . reference[] the general policy with respect to the ARC and the
standards to be maintained within the community. . . .
[¶]

. . . [T]he color to
be applied to the exterior surfaces of the building are included and controlled
by both the CC&Rs and derivatively by the Architectural Guidelines . . .
. [¶]
. . .

". .
. The windows on the front of the units
in Chapala are generally referred to as 'casement
windows,' all of which were stained and varnished a dark shade of brown upon
the original construction of the project.
The Association has, over the years, consistently required that the
casement windows on the front, street-facing side of the units in Chapala
be brown in color, ranging from a medium to dark brown depending on whether the
windows were varnished wood, painted wood, or vinyl. . . .

". .
. The color the Defendants installed on
the Subject Property was a lighter, gray-based earth-tone color rather than a
medium to dark brown that the Association had previously approved. This color is substantially different from
the otherwise uniform look of the windows which had been installed in the
community. Lighter colored windows have
over the years been allowed by the Association for windows located in the rear
or side of units. No such window colors
have been ARC-approved in areas where the Defendants have installed their
windows. On one residence, the Finneran
home, there is a slightly lighter shade of brown that was approved. This approval was not so inconsistent with
the prior policy to constitute any bar to the Stanton
rejection by the ARC. [¶] . . .

". .
. [T]he Association may validly permit
for color approval differences between the generally front-facing doors and
windows and those that generally face the rear and are contained in what has
been described in the testimony and exhibits in this matter as the 'exclusive
use common area.' These different
standards, as applied to those generally-accepted areas, are neither arbitrary
nor capricious, in fact or as applied.
To the extent that the Finneran windows were approved in a lighter shade
than what has been described as 'bison' brown, such prior approval is not such
that the Stanton disapproval was
arbitrary, capricious or discriminatory.
. . .

"A
presumption of reasonableness exists as to the enforcement of restrictions in
common interest developments such as Chapala Management Corporation. . . .
The provisions in the CC&Rs dealing with architectural approval are
presumed reasonable. The Court finds
that the architectural provisions included in Article XV, Section 2 of the
CC&Rs do not violate any public policy, and are not internally
arbitrary. The purpose of the CC&Rs
[is] in part for enhancing and perfecting the value, desirability, and
attractiveness of the property. The
CC&Rs and the requirements contained therein are enforceable as to the
residents of the Association, including the Defendants.

"The
applicable provisions of the CC&Rs require that Defendants obtain the
approval of the ARC before making any architectural modifications to the
Subject Property. Defendants in this
instance breached the CC&Rs by installing the sandtone windows at the
Subject Property after they received express, written disapproval of their
application from the ARC. Defendant
Thomas Stanton testified that he knew at the time of the installation that he
was violating the CC&Rs by what he did, but felt that he was violating them
with what he considered to be good cause.

"The
ARC acted within the scope and power granted by the CC&Rs in disapproving
the Defendants' architectural application for the installation of the sandtone
windows. The standard for the ARC's
approval or disapproval of architectural application, as set forth in Article
XV, Section 11 of the CC&Rs, requires the ARC to make those decisions on
the basis of aesthetic considerations and the overall benefit or detriment
which would result to the immediate vicinity of the Project, generally taking
into consideration the aesthetic aspects of the color schemes. This does not mean, nor should it be
interpreted to imply, that each decision of the ARC solely involves the
neighbors in the immediate vicinity of the affected property, nor is a
plebiscite intended on each and every disputed call that is made by the ARC.

"The
disapproval in this instance constituted an extension of a longstanding architectural aesthetic color
scheme as applied to the homes in the Association and was not arbitrary or
capricious as applied to any portion of the community (including the Stanton
home), nor did it violate any public policy.
. . .

"Decisions
made by an architectural committee to approve or deny architectural
applications may be based on the subjective judgment of those entities as
reasonably applied and as reviewed from time to time by the board of directors
of an association. The ARC in this case
was empowered to make decisions on architectural applications on the basis of
aesthetic considerations. The ARC acted
within its scope of discretion provided under the CC&Rs in disapproving the
Defendants' application for sandtone windows based on a longstanding color
scheme that has been substantially followed throughout the existence of the
Association.

". .
. [T]he ARC completed a reasonable
investigation by meeting with the Defendants to discuss the color of the
windows, and by comparing the sandtone windows to the Association's paint
standards for similarly situated windows in Chapala. . . . Exhibit 21 . . . was acknowledged in
correspondence by Mr. Stanton to have been the color standards of the
Association, of which he was in possession . . . and [of which he] had
knowledge . . . . [T]he colors set forth
in Exhibit 21 represent a reflection of the approved color standard with
respect to garage doors, street-facing windows and other applicable structures
within the community and served as a guide available to the homeowners for
those colors that were considered appropriate for replacement windows,
replacement garage doors and/or repainting existing structures in the community
as necessary."

The court
entered judgment in Association's favor.
It ordered the Stantons to
modify their sandtone windows by painting them a color approved by the ARC or
alternatively remove and replace them with windows of an approved color, after
submitting plans and specifications to the ARC under its guidelines and
obtaining its approval. It granted
Association the right to enter the property to modify the windows if the Stantons
failed to comply with specified time deadlines for the above acts. It ordered Association to recover its
reasonable attorney fees with interest and costs.

Thereafter,
Association moved for an award of $83,027.50 in attorney fees and $4,298.72 in
costs as the prevailing party in the matter.
In part, it argued its action was one to enforce the CC&Rs and
obtain declaratory relief for the Stantons'
breach of the CC&Rs, and thus Civil Code section 1354 as well as article
XIX, section 5 of the CC&Rs[3]
entitled it to recover its reasonable attorney fees. The Stantons
opposed the motion on grounds Association was not entitled to fees under Civil
Code section 1354 because its action was not one to enforce any specific
provision of its governing documents.
They further argued Association's action was at most a limited civil
case because damages were well below $25,000, and thus it was controlled by
Code of Civil Procedure section 1033, limiting Association's recovery to its
actual cost of the filing fee and service of process. Finally, the Stantons
argued Association did not demonstrate its claimed attorney fees were
reasonable.

The trial
court granted Association's motion in part, awarding it $59,122.50 in attorney
fees and $4,298.72 in costs. The court
pointed out it had already ruled Association's action was one to enforce
express provisions in its CC&Rs, the action was not a limited civil case as
it contained a cause of action for injunctive relief, and the hourly rates of
Association's counsel were reasonable.
Association filed a motion for an undertaking to stay enforcement of the
$63,421.22 judgment and the Stantons
moved to stay all costs, including attorney fees, pending resolution of the
appeal. The trial court tentatively
granted the Association's motion, finding attorney fees were not an ordinary or
routine cost such that an undertaking is required. It granted the Stantons'
motion in part, staying collection of "ordinary" costs only. The Stantons
filed a petition for writ of mandate, supersedeas or other appropriate relief,
contending no undertaking was required and asking us to stay the trial court's
order. We issued an immediate stay of
the order requiring an undertaking and ordered that the writ be considered with
the Stantons' appeal from the
judgment and postjudgment order awarding attorney fees and costs.

DISCUSSION

I. Propriety
of Injunctive Relief

Pointing
out that an injunction may be granted only when the plaintiff has no adequate
remedy at law, the Stantons contend
Association had two specific and adequate legal remedies in its CC&Rs to
enforce unauthorized additions or changes to a unit's exterior. They argue that under article XV, section 4
of the CC&Rs, the Association could remedy the violation and collect its
costs for doing so in an action at law.
The Stantons maintain
Association's remedy for noncompliance was to remove the noncomplying
improvement or remedy the noncompliance, assess the owner for the cost, and
collect any unpaid assessment by an action at law in small claims court. Alternatively, they argue that under the
CC&Rs, their nonstandard windows were deemed approved because the architectural review committee did not
timely notify them of any discrepancy after the Stantons
advised it they were completing work "for which approved plans are
required. . . ."

In
response, Association argues the Stantons
did not raise these arguments in the trial court other than by demurrer (to
argue the superior court lacked subject matter jurisdiction), and we should
disregard them as "beyond the scope of this appeal." Association also attacks these arguments on
their merits. It maintains article XV,
section 4 of the CC&Rs gives it the right and authority, but not the duty,
to enter a unit owner's property and correct a violation. It contends it retains the option under the
CC&Rs to pursue any legal remedy to gain compliance with the CC&Rs,
including by "appropriate proceedings in law or equity." It further argues the Board exercised its
business judgment to file suit to enforce its governing documents; that its
decision as to what enforcement method to pursue under a given circumstance is
entitled to deference because it is a decision made in good faith to further
the purpose of the Association, is consistent with the Association's governing
documents, and complies with public policy.
Finally, Association sets forth various reasons why the Stantons'
unauthorized installation of their windows was not deemed approved under the
CC&Rs.

A. >Standard of Review

As we have
explained, the Stantons bear the
burden of overcoming the presumption that an appealed judgment or order is
correct. (Ekstrom v. Marquesa at >Monarch > Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1121 ( >Ekstrom).) "Generally, the trial court's decision
to grant or deny [declaratory or injunctive relief] will not be disturbed on
appeal unless it is clearly shown its discretion was abused." (Ibid.)

" 'A decision will be reversed for an abuse of
discretion only when it exceeds the bounds of reason or disregards
uncontradicted evidence.
[Citation.] The burden rests with
the party challenging an injunction to make a clear showing of abuse.'
" (Clear Lake > Riviera Community Assn. v. Cramer (2010) 182 Cal.App.4th 459, 471.)

Where the
decisive underlying facts are undisputed, we are confronted with questions of
law in reviewing the propriety of the trial court's decision to grant
relief. (Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974
(Dolan-King I); see >Ekstrom, supra, 168 Cal.App.4th at p. 1121.)
To the extent our review of the judgment involves an interpretation of
the CC&Rs, that too is a question of law we address de novo. (Dolan-King
I, at p. 974; Ekstrom, at p.
1121.)





TO BE CONTINUED AS PART II….





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* Pursuant to California Rules of Court,
rule 8.1110, this opinion is certified for publication with the exception of
parts I, II, III, IV, and V.