Opinion
G044704 Super. Ct. No. 30-2010-00424435
09-06-2011
MOISEY FRIDMAN et al., Plaintiffs and Appellants, v. BEACH CREST VILLAS HOMEOWNERS ASSOCIATION, Defendant and Respondent.
Darling & Risbrough, Robert C. Risbrough, Robert M. Yoakum and Graham M. Cridland for Plaintiffs and Appellants. Gates, O'Doherty, Gonter & Guy and K. Robert Gonter, Jr., for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
OPINION
Appeal from an order of the Superior Court of Orange County, Derek W. Hunt, Judge. Reversed.
Darling & Risbrough, Robert C. Risbrough, Robert M. Yoakum and Graham M. Cridland for Plaintiffs and Appellants.
Gates, O'Doherty, Gonter & Guy and K. Robert Gonter, Jr., for Defendant and Respondent.
INTRODUCTION
Moisey Fridman and Rosa Fridman (the Fridmans) obtained a judgment against the Beach Crest Villas Homeowners Association (Beach Crest). Beach Crest appealed, and we dismissed its appeal one year ago. Beach Crest has refused to pay the judgment. Accordingly, the Fridmans filed a petition for a writ of mandate, asking the trial court to order Beach Crest to levy a special assessment against its members in order to satisfy the judgment. The trial court sustained Beach Crest's demurrer to the petition.
We reverse. Civil Code section 1366 authorizes a homeowners association to levy a special assessment to satisfy a legal judgment against it. Under established law, the petition filed by the Fridmans alleged the necessary requirements for issuance of a writ of mandate ordering Beach Crest to levy a special assessment to satisfy the Fridmans' judgment. The trial court erred by determining, as a matter of law, that the Fridmans had failed to make the required allegations.
STATEMENT OF FACTS AND PROCEDURAL HISTORY
The Fridmans and Beach Crest stipulated to have their competing claims resolved through binding arbitration. The arbitrator concluded neither party had established any of its causes of action, but nevertheless found the Fridmans were the prevailing party, and awarded them attorney fees in the amount of $110,000. The trial court confirmed the arbitration award, and entered judgment in favor of the Fridmans in the amount of $128,821.98.
Beach Crest appealed the judgment confirming the arbitration award; this court concluded Beach Crest had waived the right to appeal from the judgment in the stipulation to arbitrate, and therefore dismissed the appeal. (Fridman v. Beach Crest Villas Homeowners Assn. (Aug. 4, 2010, G042757) [nonpub. opn.].) After issuance of the remittitur, the trial court awarded the Fridmans their costs and attorney fees incurred on appeal, in the amount of $20,729.
While the appeal was pending, the Fridmans brought a motion for the appointment of a receiver, for the purpose of collecting a special assessment to pay the judgment. The motion was denied.
After the remittitur from the appeal issued, the Fridmans filed a petition for a writ of mandate, asking the trial court to compel Beach Crest to levy a special assessment to satisfy the underlying judgment. Beach Crest demurred to the petition; the trial court sustained the demurrer without leave to amend. The Fridmans appealed from the minute order sustaining the demurrer, which is not an appealable order. (Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1386, 1396.) An order of dismissal was signed by the court and filed on February 14, 2011. We will liberally construe the Fridmans' appeal to have been taken from the order of dismissal. (Los Altos Golf & Country Club v. County of Santa Clara (2008) 165 Cal.App.4th 198, 202-203; Cal. Rules of Court, rule 8.104(d)(2).)
On our own motion, we augment the record on appeal with the order of dismissal, filed in the case of Fridman v. Beach Crest Villas Homeowners Assn. (Super. Ct. Orange County, No. 30-2010-00424435) on February 14, 2011. (Cal. Rules of Court, rule 8.155(a)(1)(A).)
DISCUSSION
Standard of Review
Because the trial court disposed of the petition by means of demurrer, "[w]e independently review the ruling . . . and determine de novo whether the pleading alleges facts sufficient to state a cause of action. [Citation.] We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded, and matters of which judicial notice has been taken. [Citation.] We construe the pleading in a reasonable manner and read the allegations in context. [Citation.] 'We affirm the judgment if it is correct on any ground stated in the demurrer, regardless of the trial court's stated reasons. [Citation.]' [Citation.]" (Entezampour v. North Orange County Community College Dist. (2010) 190 Cal.App.4th 832, 837.)
Beach Crest correctly notes that the issuance or denial of a writ of mandate lies within the discretion of the trial court when the matter proceeds to trial. (County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 593.) Because the court here decided the matter on demurrer, however, the de novo standard of review applies.
Verification of the Petition
Beach Crest first argues that the petition fails for lack of verification. A petition for a writ of mandate must be verified by the party beneficially interested. (Code Civ. Proc., § 1086.) The lack of a verification, however, is not a jurisdictional defect, and may be cured through later amendment. (United Farm Workers of America v. Agricultural Labor Relations Bd. (1985) 37 Cal.3d 912, 915; Board of Trustees v. Superior Court (2007) 149 Cal.App.4th 1154, 1163-1164; Ware v. Stafford (1962) 206 Cal.App.2d 232, 237.) The Fridmans' verifications were filed before the hearing on Beach Crest's demurrer.
Requirements for Issuance of a Writ of Mandate by the Trial Court
"A writ of mandate may be issued by any court to any . . . corporation . . . to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station . . . ." (Code Civ. Proc., § 1085, subd. (a).) "The writ must be issued in all cases where there is not a plain, speedy, and adequate remedy, in the ordinary course of law. It must be issued upon the verified petition of the party beneficially interested." (Id., § 1086.) "'What is required to obtain writ relief is a showing by a petitioner of "(1) A clear, present and usually ministerial duty on the part of the respondent . . . ; and (2) a clear, present and beneficial right in the petitioner to the performance of that duty . . . ."' [Citation.] 'A writ cannot be used to control a matter of discretion. [Citation.] Where a statute leaves room for discretion, a challenger must show the official acted arbitrarily, beyond the bounds of reason or in derogation of the applicable legal standards.' [Citation.]" (Entezampour v. North Orange County Community College Dist., supra, 190 Cal.App.4th at p. 838, fn. omitted.)
Analysis
The special assessment to pay the judgment is a clear, present, and ministerial duty on the part of Beach Crest. Civil Code section 1366 requires a homeowners association, such as Beach Crest, to levy assessments necessary for the association to perform its legal obligations, as follows: "(a) Except as provided in this section, the association shall levy regular and special assessments sufficient to perform its obligations under the governing documents and this title. . . . [¶] (b) Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not . . . impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association . . . . For the purposes of this section, quorum means more than 50 percent of the owners of an association. This section does not limit assessment increases necessary for emergency situations. For purposes of this section, an emergency situation is any one of the following: [¶] (1) An extraordinary expense required by an order of a court." (Civ. Code, § 1366, subds. (a), (b).) If the allegations of the Fridmans' petition are true, Beach Crest is required by Civil Code section 1366 to levy a special assessment to satisfy the Fridmans' judgment against it. The existence of a clear, present, and ministerial duty on the part of Beach Crest was sufficiently alleged.
The Fridmans have also alleged a clear, present, and beneficial right in the levying of a special assessment by Beach Crest. Unlike an individual or a corporation, a homeowners association has no assets that can be reached to satisfy a judgment against it, but rather "finances its operations by levying assessments on its members." (11 Cal. Real Estate Law and Practice (2011) Homeowners' Associations, ch. 385, § 385.70[1], p. 385-75 (rel. 88-3/2009).) Regular assessments cannot be reached to satisfy a judgment if doing so would prevent the association from performing essential services. (Civ. Code, § 1366, subd. (c).) Because the association cannot act without the payment of assessments by its members, the relevant statutes permit the association to easily obtain relief against a member who fails to promptly pay his or her assessment. "[Civil Code sections 1366 and 1367] reflect the Legislature's recognition of the importance of assessments to the proper functioning of condominiums in this state. Because homeowners associations would cease to exist without regular payment of assessment fees, the Legislature has created procedures for associations to quickly and efficiently seek relief against a nonpaying owner." (Park Place Estates Homeowners Assn. v. Naber (1994) 29 Cal.App.4th 427, 432.) In their petition, the Fridmans adequately alleged the existence of a clear, present, and beneficial right to the remedy they sought.
In sustaining the demurrer, however, the trial court impliedly found, as a matter of law, that the Fridmans had a plain, speedy, and adequate remedy at law. That conclusion was not correct. As noted ante, the enforcement remedies available to a judgment creditor of a homeowners association are worthless unless and until the homeowners association levies a special assessment against its members. The trial court made clear its belief that the Fridmans were to be treated as any other judgment creditors. But, as the appellate court explained in James F. O'Toole Co., Inc. v. Los Angeles Kingsbury Court Owners Assn. (2005) 126 Cal.App.4th 549 (O'Toole), judgment creditors of homeowners associations are not treated the same as judgment creditors of individuals, corporations, or other types of associations.
As the court in O'Toole explained: "The relationship between individual homeowners and the managing association of a common interest development is complex [citation], and their respective rights depend upon the nature of the particular dispute. [¶] . . . [T]he Supreme Court has differentiated between (1) the situation where, for the sake of maximizing the value of the homeowner's investment, each individual owner has an economic interest in the proper management of the development as a whole, and the relationship between the owner and the association is analogous to that of a shareholder to a corporation, and (2) the situation where an individual owner who resides in the development has a personal, 'not strictly economic,' interest in the appropriate management of the development in a manner that will keep the property secure from risks of physical injury, in which sense the relationship is analogous to that between a tenant and landlord. [Citation.] [¶] This case—where the homeowners' interests are strictly economic—is plainly one in which the relationship of the Association to the homeowners is akin to that of a corporation to its shareholders." (O'Toole, supra, 126 Cal.App.4th at pp. 553-554.) In this case, too, the relationship between Beach Crest and the homeowners is an economic one.
Beach Crest's purpose and powers are set forth in the declaration of restrictions for the condominium complex: "WHEREAS, [the developer of the complex] deems it desirable for the efficient enforcement, protection and preservation of the value, desirability and attractiveness of the Project to create a corporation which shall be delegated and assigned the powers of administering and enforcing [the complex's] covenants, conditions and restrictions."
In O'Toole, the homeowners association entered into a contract with an insurance adjuster, by which it agreed to pay the adjuster 10 percent of the proceeds paid by its insurer for damage caused by the Northridge earthquake. (O'Toole, supra, 126 Cal.App.4th at p. 551.) The association recovered $1.4 million in insurance proceeds, but refused to pay the adjuster, which sued the association for breach of contract. (Ibid.) Judgment was entered in favor of the adjuster, but the association refused to satisfy it. (Id. at pp. 551-552.) The adjuster obtained a writ of execution, recorded an abstract of judgment, and sought an order directing the association to assign all regular and special assessments to it. (Id. at p. 552.) The trial court ruled that all regular assessments were exempt from execution, but ordered the association to convene a meeting of its members to approve a special assessment. (Ibid.)
At the meeting ordered by the trial court, the association's members refused to levy a special assessment, and the adjuster then filed a motion asking the trial court to order the association to levy the assessment, or to appoint a receiver to levy and administer the assessment. (O'Toole, supra, 126 Cal.App.4th at p. 552.) The trial court granted the motion for the appointment of a receiver, and the association appealed. (Id. at pp. 552-553.)
The appellate court affirmed. "[The adjuster] is doing precisely what he is by law obligated to do. It has obtained a judgment against the Association, and is now compelling the Association to look to its members, the homeowners, to create a fund to pay the debt incurred for their common benefit. When the special assessment is levied, the homeowners will be liable to the Association, not to [the adjuster], and it will be up to the Association to collect the money that is owed to it. [Citations.] [¶] It follows that the trial court correctly ordered the Association to impose a special emergency assessment and, in light of the Association's refusal to do so, correctly decided to appoint a receiver to carry out the court's order. [Citations.]" (O'Toole, supra, 126 Cal.App.4th at p. 560.)
The appellate court in O'Toole also considered the legislative history of Civil Code section 1366 in concluding the trial court's actions were appropriate. "Quite plainly, the Legislature did exactly what it set out to do—it protected regular assessments to the extent necessary to ensure that homeowners were not deprived of essential services, and at the same time protected the rights of judgment creditors . . . by allowing them to execute against an association's special emergency assessments and, where available, an association's excess (nonexempt) regular assessments. That is precisely what happened in this case, where the trial court granted the Association's request for an exemption covering all of its regular assessments and limited [the adjuster]'s right of recovery to a fund to be created out of a special emergency assessment." (O'Toole, supra, 126 Cal.App.4th at p. 559.)
Beach Crest argues the Fridmans failed to show the matter had been brought before the members of the homeowners association, as required by Beach Crest's covenants, conditions, and restrictions and Civil Code section 1366, subdivision (b). As noted, ante, however, section 1366 specifically permits a different mechanism for levying a special assessment in an "emergency" situation, which includes the need to satisfy a valid judgment. "The community association's board may impose assessment increases without membership approval, when 'necessary for emergency situations.' [Citation.]" (1 Sproul & Rosenberry, Advising Cal. Common Interest Communities (Cont.Ed.Bar 2003) § 5.7, p. 285 (rev. 3/08).)
Beach Crest's covenants, conditions, and restrictions mirror the language of Civil Code section 1366: "In any fiscal year, the Board of Directors may not, without the vote or written assent of a majority of the voting power of the Association residing in Members other than the Declarant levy special assessments to defray the costs of any action or undertaking on behalf of the Association which in the aggregate exceed five percent (5%) of the budgeted gross expenses of the Association for that fiscal year."
ECC Construction, Inc. v. Ganson (2000) 82 Cal.App.4th 572 (ECC) and Corporations Code section 7350, on which Beach Crest relies, are inapposite. ECC stands for the unremarkable proposition that individual homeowners are not personally liable to the creditors of the homeowners association of which they are members for the homeowners association's debts. (ECC, supra, at pp. 575-576.) But, as that court noted, this does not mean that the homeowners are not liable to the homeowners association. "In sum, the Corporations Code contemplates that third parties such as ECC Construction will recover damages, if at all, from the association. In turn, the association will look to its members, if necessary, to pay its debts." (Id. at p. 576, italics added.) In reaching its conclusion, the ECC court relied on Corporations Code section 7350, subdivision (a), which provides: "A member of a corporation is not, as such, personally liable for the debts, liabilities, or obligations of the corporation." In the present case, the Fridmans have not sued the individual homeowners; to the extent the holding of ECC is relevant in this case, it supports the Fridmans' position.
Beach Crest argues in its respondent's brief that ECC stands for the proposition that a contractor could not file mechanic's liens against individual members of the homeowners association. This is incorrect, but irrelevant to our decision. In ECC, the contractor filed a single lien against the individual homeowners. (ECC, supra, 82 Cal.App.4th at p. 577.) Because the contractor failed to apportion the total amount of the lien to each individual homeowner, it lost the ability to enforce the lien against the individual homeowners. (Id. at p. 578.) Contrary to Beach Crest's argument, the holding of ECC appears to permit the filing of a mechanic's lien against individual homeowners, based on work performed pursuant to a contract with the homeowners association, as long as the proper formalities are followed.
DISPOSITION
The order is reversed. Appellants to recover their costs on appeal.
FYBEL, J.
WE CONCUR:
O'LEARY, ACTING P. J.
ARONSON, J.