FOX v. CORNICHE SUR MER HOMEOWNERS ASS'N
Fourth Appellate District, Division Three
Attorney(s) appearing for the Case
Wildish & Nialis, N. Ramsey Barcik, Daniel R. Wildish and Miguel F. Fagiani for Defendant and Appellant.
Maleki & Associates and Joseph A. Maleki for Plaintiffs and Respondents.
Corniche Sur Mer is a common interest development governed by the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350, et. seq.). It is comprised of single family homes in the Ritz Pointe development of Dana Point, many of which have ocean views. The community is managed by the Corniche Sur Mer Homeowners Association (CSM), and pursuant to the recorded conditions, covenants, and restrictions (CC&Rs), the Architectural Review Committee (ARC) has discretion to approve or disapprove any proposed exterior construction.
In this case, the ARC denied an application by homeowners Thomas and Dru Fox to expand their existing ocean view deck, quadrupling its size, because as proposed the new deck would impair the existing ocean view of the Foxes' neighbor to the north. The trial court ruled in the Foxes' favor in their action against CSM, granting them a declaratory judgment ordering CSM to approve the deck project as proposed. The trial court concluded CSM wrongly rejected the Foxes' application because the CC&Rs did not grant express rights to maintain an existing ocean view, CSM failed to act on the Foxes' application in a timely manner, and CSM failed to comply with the "letter and spirit" of Civil Code section 1378, which articulates procedural requirements to be followed when such an application is considered. We conclude denial of the application was within the ARC's discretion and the record does not support the conclusion its action was arbitrary or capricious. Accordingly, we reverse the judgment.
The Foxes own a home in the Ritz Pointe development located in Dana Point. The community, and the Foxes' property, is burdened by CC&Rs, which control among other things the architectural standards for construction and renovation of structures on the property. CSM is the homeowners association for the community.
The Foxes filed this action against CSM, seeking injunctive and declaratory relief, alleging CSM wrongly refused to approve their application to replace the existing second story deck with a new larger deck. The complaint alleged CSM failed to act on the application in a timely manner and its decision was arbitrary and capricious.
The Controlling Documents
The CC&Rs contain the following provisions relevant to architectural controls. Section 6.1 provides no homeowner may perform any exterior construction on his property without first submitting plans to the ARC, appointed by CSM's board of directors (the Board). In this case, the ARC is comprised of all members of the Board.
Section 6.2 states the ARC "shall approve" the plans if it "deems" the construction "will not be detrimental to the appearance of the [p]roperties and surrounding real property as a whole, and that the appearance of any structure or other improvement will be in harmony with the surrounding structures and improvements and are in conformance with any design guidelines adopted by the [ARC]."
Section 6.3 provides the ARC may require submission of additional plans and specifications or other information prior to approving or disapproving the plans; it may adopt rules and procedures for submissions; and "[u]ntil receipt by the [ARC] of all plans and specifications or other materials deemed necessary by the [ARC], the [ARC] may postpone review of any plans submitted for approval."
Section 6.4 states, "Decisions of the [ARC] and the reasons therefore shall be transmitted by the [ARC] to the Applicant . . . within forty-five (45) days after receipt by the [ARC] of all materials required by the [ARC]. Any application submitted pursuant to this Article VI shall be deemed approved unless the [ARC's] written disapproval or a request for additional information or materials is transmitted to the Applicant within forty-five (45) days after the date of receipt by the [ARC] of all required materials."
Article VII of the CC&Rs contain various use restrictions. Section 7.10 regarding view impairment states each owner acknowledges that construction of improvements on other property in the development "may impair the view of such [o]wner, and consents to such impairment." Section 7.18 requires trees and landscaping be maintained so as to not obstruct or affect views from other lots.
As for decks, the ARC's design guidelines regarding landscaping adopted in 1997, explained, "ANY DECK STRUCTURE WILL BE EVALUATED BY THE ARC FOR POSSIBLE VIEW AND PRIVACY INTERFERENCE, the extent and nature of potential view interference will be considered by the ARC and could be grounds for denial of the application. The ARC does not, however, warrant or guarantee the retention of any view and shall not be responsible for the impact to views of any improvement approved by the ARC. . . . [¶] THE INTENT OF THE ARC/BOARD OF DIRECTORS IS TO ALLOW REASONABLE SIZE OBSERVATION DECKS. THE DECKS ALLOWED ARE NOT TO BE EXCESSIVELY LARGE AND/OR `ACTIVITY DECKS.'" In considering an application, "The ARC will consider such factors as the following: size of deck, proportion to rear yard, side and rear yard setbacks, privacy and or view affects on adjoining properties and neighbor comments."
The ARC's design guidelines regarding views adopted in 1999 set forth general policies regarding views. After noting there was no legal right to an unobstructed view, the guidelines stated the CC&Rs only protected views from landscaping that exceeded the height of the adjacent residence. In all other cases where view obstruction was alleged, the ARC would attempt to "maintain a reasonable view for each residence and a reasonable degree of privacy between the homes." When approving a structural improvement, the ARC "will attempt to determine whether in the future, such improvements could constitute a potential view obstruction. . . ." The ARC would apply a reasonableness standard in analyzing possible view obstructions. It "may request `staking' of proposed structural additions. Comments must be obtained by the applying resident from all potentially impacted owners with regard to possible view obstruction."
The Foxes' Application
In early 2005, the Foxes had plans prepared for improvements to their home that included a downstairs room addition, front façade improvements, and renovation and expansion of the upstairs deck that extended into their backyard. The existing eight-foot by eight-foot deck was located in the center of the back of the house, off the upstairs master bedroom. From that deck, the Foxes had a [diagonal/southerly] view of the ocean a few miles away. The original proposed deck expansion extended the deck the entire width of their house extending out 10 feet from the exterior wall of the master bedroom. The deck would be increased in size from 67 square feet to 270 square feet. On the north end of the house, the Foxes' existing game room would open up on to the expanded deck. They proposed placing a spiral staircase on the north end of the deck to access their yard. The railings around the deck would be glass. The size and style of the Foxes' proposed deck expansion was entirely consistent with what many other homeowners in the development had done over the years and was smaller than some other deck expansions that had been approved.
Kathleen Chisholm was the Foxes' neighbor to the north. Her house was a "reverse" floor plan, with the living and dining area upstairs; bedrooms downstairs. Her living room, located on the south side of her house, had large bay windows facing the north side of the Foxes' house. From those windows she had a diagonal view across the Foxes' backyard to the ocean.
When the Foxes initially approached Chisholm for approval of the plans, she was concerned the north end spiral staircase would intrude on her privacy and she questioned the impact of the new deck on her ocean view. (She testified the current (original) deck did slightly obstruct her view.) The Foxes came back with revised plans that moved the spiral staircase to the interior of the south end of the deck and narrowed the north end of the deck by two feet. Chisholm understood the two-foot cut out would preserve her current view corridor, so in late March, she signed off on the plans (as did the Foxes' neighbor to the south).
On April 1, 2005, the Foxes submitted an application for ARC approval of their proposed improvements to CSM's property management company, PCM. On April 4, CSM's community manager wrote the Foxes, acknowledging receipt of the application, thanking them "for adhering to [CSM's] Architectural Guidelines[,]" and advising they would be notified of the ARC's decision within 45 days.
On April 27, the ARC conducted an on-site inspection and orally requested the Foxes put up "story poles" to demonstrate the height of the proposed deck. On May 3, the Foxes erected the story poles and so advised PCM.
In a letter dated May 17, but postmarked May 19, CSM's property manager wrote the Foxes that the ARC had denied approval of their plans "until further review is made prior to the May 25, 2005[,] Board Meeting." No explanation was given as to why the application was denied.
On May 31, the property manager wrote the Foxes, stating their April 1 application was disapproved because the Board needed to determine the plan's impact on their neighbors. The letter stated, "Upon meeting with you on April 27th the Board had advised you of the denial and requested that you put up a silhouette of 2X4's so the Board could see how your neighbors were affected. The Board is in the process of contacting the affected neighbors." On June 16, Chisholm wrote the Board stating she opposed the Foxes' deck plans, now that she had seen the story poles, because the deck has "repercussions to my view."
On June 17, CSM sent the Foxes a letter "serv[ing] as a final denial" of their April 1, 2005, plans because "the improvement obstructs the ocean view of [Chisholm]" and now that she has seen the story poles, she disapproves the plan. The ARC indicated it would approve the room addition and façade improvements if they were part of a separate submission. The Foxes retained legal counsel, and asked for an appeal of the ARC's decision. Some additional negotiations took place with the Board. The Foxes and their counsel appeared at the Board's July 27 meeting and made a further presentation.
On August 2, CSM advised the Foxes the deck expansion as proposed was denied "based on community aesthetic and view blockage criteria[,]" but suggested a revision to the deck that would meet with the ARC's approval. That proposal essentially was to make a 45 degree diagonal cut across the north side of the back of the deck. It would have decreased the deck size by about 32 square feet. Robert Lippert, president of the Board (and chair of the ARC), testified this was a common solution used by CSM to preserve view corridors that might be impacted by construction plans. CSM presented testimony from James Tabor, a contractor who had built several deck expansions and other construction projects in the development. He testified the Board was always quite sensitive to any proposed construction that obstructed existing views and the 45 degree cut was a common technique used in the development to preserve views.
Dru Fox testified the Board's diagonal cut proposal was not acceptable because they had already moved the spiral staircase to the interior south end at Chisholm's request, and if they cut the north end at the diagonal suggested, the deck would loose too much usable space to make it worthwhile to build. Nonetheless, the Foxes offered to use that technique if they could move the spiral staircase to the exterior of the south end of the back of the deck. Dru Fox and Tom Fox both testified they could not place the spiral staircase extending into the south end side yard because it would violate the required set back from the lot line. The minutes from the Board's August 24, 2005, meeting indicate the Board had that new submission from the Foxes, and directed the property manager to get Chisholm's number so the Board could visit her property to view the sight lines across the Foxes' backyard. The Board ultimately rejected the Foxes' suggested change moving the spiral staircase to the exterior back of the deck.
Lippert testified the Foxes' deck plan was denied because it would impair Chisholm's ocean view from her living room. The ARC had done an on-site inspection at Chisholm's house and considered the impact of the proposed deck sitting (not standing) in her living room looking out her bay windows because that's what they considered to be the most important ocean view she had. Lippert testified that after the story poles were erected, the ARC went back out to view them, sometime in May.
Lippert testified the ARC also denied the application because it could impact Chisholm's privacy (Chisholm was concerned people would congregate on the north side of the deck and be able to look into her living room), the Board thought the deck might be used as an "activity deck" not a "viewing deck" (the new deck would extend off the Foxes' existing game room, the Foxes were fond of entertaining, and there was some suggestion they might put a barbeque on the deck). Those reasons were not stated in the denial letter (Lippert testified Chisholm asked him to not register these concerns with the Foxes because she did not want them to be upset with her).
Lippert testified because Foxes' application was considered and denied at an open hearing on May 25 before the Board acting as the ARC, the Foxes had no right to appeal or reconsideration. He admitted the Foxes were not given specific notice of the hearing or that their application would be considered, but said all members are advised annually of the dates of regular board meetings.
Minutes from the May 25 meeting could not be found. Lippert testified he believed the May 25 minutes were contained within the minutes from the next (June 22) regular board meeting, and when the June 22 minutes stated, "Board has denied [the Foxes'] deck extension request" that meant the application had been denied at the prior (i.e., May 25) meeting. CSM's property management company was responsible for calculating time limits, preparing the minutes, and the Board relied on the property manager.
There was uncontradicted evidence the houses were originally situated and built so as to maximize ocean views. Chisholm's house was set much further forward on the lot than the Foxes, and the floor plan reversed with the living area upstairs, giving it an ocean view across the Foxes' backyard. Lippert testified the ARC had never approved a deck expansion that would decrease an existing view. Many other deck expansions similar to that proposed by the Foxes (sometimes even larger), including his own and that of another Board member, had been approved by the ARC. But those projects did not impact existing view corridors. (For example, Lippert explained if the original deck was already on the north end of the house, a southward expansion would not affect the northern neighbor's view, but if the deck was being expanded northward, it would cut into the existing view corridor.) He did not believe any request by the ARC for additional materials needed to be in writing and believed that by asking the Foxes to put up story poles, the 45-day limit for taking action restarted.
Donald Reddington, a real estate appraiser testifying for CSM, stated he believed Chisholm's view from her living room would be impaired by the proposed deck and would negatively affect the value of her home. He agreed the ocean view was not impacted from other locations in her house.
CSM's legal expert, Bradley Walker, testified the Board/ARC acted within the standard of care in denying the application based on its discretionary determination the deck would impact Chisholm's view and privacy. He believed the denial was timely because the ARC asked for additional materials, namely, the story poles. Walker opined that under Civil Code section 1378, the failure of CSM to state all its reasons for denial of the application did not result in automatic approval. Walker testified he believed CSM did breach the standard of care by not adequately stating all its reasons for denial of the deck expansion, and he agreed the CC&Rs did not grant an express right to maintain an existing ocean view. But he opined the impact a proposed project would have on existing views was nonetheless a proper consideration for the ARC.
The Trial Court's Ruling
The parties waived a written statement of decision and the court gave an oral statement of its ruling. The court ruled in the Foxes' favor granting them a declaratory judgment ordering that CSM "approve, absent any unreasonable conditions or restrictions, [the Foxes'] application for renovation of their deck . . . consistent with their plans submitted on March 31, 2005."
The court found CSM failed to follow its own procedures because it failed to deny the application in a timely manner, the application was submitted on April 1 and not denied until May 19, past the 45-day limit, and thus the application was deemed approved by the terms of the CC&Rs. The court also found CSM failed to comply with "the letter and the spirit of Civil Code section 1378" because it failed to state all its reasons for denial of the application or explain the procedures for having the denial reconsidered. The evidence was inadequate to show the Foxes' application was denied at an open meeting (CSM was unable to produce approved minutes from the May 2005 meeting at which it claimed it considered the application). The court stated there was no evidence the ARC ever went back to inspect after it requested the Foxes to erect the story poles, leading the court to conclude the Board had "predetermined" its position on the Foxes' application.
The court also concluded the CC&Rs did not give Chisholm the right to a completely unobstructed ocean view. The trial court noted it had conducted an on-site inspection. Although the Foxes' proposed deck expansion would obstruct some of Chisholm's existing ocean view, it would not affect her golf course or hillside views. There was no evidence to support the assertion the deck was to be used as an "entertainment deck." And there was no substantial evidence the new deck had any greater impact on Chisholm's privacy than the current deck.
1. Standard of Review
The Foxes' complaint was for declaratory relief, and generally, the trial court's decision to grant or deny such relief will not be disturbed on appeal unless it is clearly shown its discretion was abused. (Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974 (Dolan-King).) Where, however, the essential facts are undisputed, "[I]n reviewing the propriety of the trial court's decision, we are confronted with questions of law. [Citations.] Moreover, to the extent our review of the court's declaratory judgment involves an interpretation of the [CC&Rs] provisions, that too is a question of law we address de novo. [Citation.]" (Ibid.)
2. The ARC's Discretion to Deny the Foxes' Application
We begin by considering the discretion granted the ARC under the CC&Rs and conclude it had discretion to reject the Foxes' deck expansion application as proposed because it impaired Chisholm's ocean view. California law permits delegation of broad discretion to make decisions restricting the use of property in a common interest development. Courts review such grants of authority under a deferential standard: they are "presumptively reasonable [citation], and are enforceable `unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit' [citation]." (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 88; Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 380, 382 (Nahrstedt).)
Here, the grant of discretion to the ARC in sections 6.1 and 6.2 of the CC&Rs, is not "wholly arbitrary." (Nahrstedt, supra, 8 Cal.4th at p. 382.) That is, it bears a "rational relationship to the protection, preservation, operation[, and] purpose of the affected land." (Id. at p. 381.) Taken together sections 6.1 and 6.2, provide for ARC approval of any exterior construction if it finds the construction "will not be detrimental to the appearance of the [p]roperties and surrounding real property as a whole, and that the appearance of any structure or other improvement will be in harmony with the surrounding structures and improvements and are in conformance with any design guidelines adopted by the [ARC]." "Maintaining a consistent and harmonious neighborhood character, one that is architecturally and artistically pleasing, confers a benefit on the homeowners by maintaining the value of their properties." (Dolan-King, supra, 81 Cal.App.4th at p. 976.)
The Foxes make much of the absence of express language in the CC&Rs giving a homeowner any right to maintain an existing ocean view. They assert the ARC's stated reason for denying an application must "necessarily be a right otherwise afforded by the Controlling Documents." And because the CC&Rs do not grant express ocean view rights, an application cannot be denied on the ground it impairs an existing ocean view. It appears the trial court agreed somewhat with that position. In ruling, the court commented that while the CC&Rs might allow for protection of some sort of view for Chisholm, they did not protect any particular view and did not expressly provide for preservation of an existing ocean view.
We conclude it was well within the discretion of the ARC to consider the impact of the improvement on existing ocean views. California law specifically authorizes common interest developments to grant an architectural review committee broad, subjective discretion to reject proposed improvements on aesthetic, artistic, or similar grounds. (Dolan-King, supra, 81 Cal.App.4th at pp. 976-977; Clark v. Rancho Santa Fe Assn. (1989) 216 Cal.App.3d 606, 618-620 (Clark).)
Dolan-King, supra, 81 Cal.App.4th 965, is instructive. In that case, the CC&R's in a residential development required "that property improvements and structures be approved by the [homeowner's association] with the written advice of . . . (the Art Jury) `so as to insure a uniform and reasonably high standard of artistic result and attractiveness in exterior and physical appearance of said property and improvements.'" (Id. at p. 970, fn. omitted.) The development was divided into "`Architecture Districts'" and the CC&R's "set forth general requirements to which buildings or structures `shall' conform, `subject to the discretion of the Art Jury.'" (Id. at p. 971.) Plaintiff sought the Art Jury's approval of improvements to her property that included replacing the "the original three-rail corral-type fence on her property . . . [with] a fence composed of stucco columns (pilasters) joined by horizontal wood beams." (Id. at pp. 971-972.) The Art Jury rejected her application finding the proposed fence inconsistent with its design guidelines. After an unsuccessful appeal to the association's board of directors, plaintiff filed suit. The trial court entered declaratory judgment for plaintiff. It concluded the Art Jury and the association's board of directors abused their discretion in denying the proposed plan. As to the fence, the court found the plans should have been approved because the proposed fence was consistent with the type of architecture required by the CC&Rs, the Art Jury relied on its "[architectural g]uidelines that were without `controlling effect,' and . . . the fence could be masked by appropriate landscaping." (Id. at p. 973.)
The appellate court reversed. It found the CC&Rs reasonably granted the Art Jury broad authority and discretion to approve or disapprove construction based on inherently subjective aesthetic criteria. (Dolan-King, supra, 81 Cal.App.4th at p. 976.) The architectural guidelines developed by the Art Jury were a reasonable attempt at giving owners guidelines and examples as to the criteria the Art Jury would employ. (Id. at p. 978.) The trial court "failed to apply the proper deferential standard to test the Board's exercise of discretion." (Id. at p. 979.) "[W]here the record indicates the Art Jury and [association board] acted within the authority granted to it by the [CC&Rs], pursuant to a reasonable investigation, in the best interests of the community and not in an arbitrary manner, we will respect and uphold their decisions. Having sought a declaration that the Art Jury and [association board] imposed restrictions unreasonably and arbitrarily, it was [plaintiff's] burden at trial to make that showing before the trial court. [Citation.]" (Ibid.)
As to the fence proposal, the court concluded plaintiff failed to prove she had been "subjected to the [association board's] selective and arbitrary exercise of discretion. . . ." (Dolan-King, supra, 81 Cal.App.4th at p. 983.) The trial court had wrongly relied on the lack of a specific provision in the CC&Rs restricting homeowners to using the board's preferred split rail type fence. The CC&Rs gave the board and Art Jury broad discretion to ensure proposed improvements were in "`harmony'" with the property and surrounding neighborhood. (Id. at p. 981.) There was no evidence supporting a conclusion the Art Jury acted arbitrarily in exercising that discretion. The board's president testified that "nearly all of the fencing in [plaintiff's] neighborhood was pasture-rail-type fencing." (Id. at p. 982.)
As in Dolan-King, here it was within the ARC's broad discretion to consider the impact of the Foxes' proposed deck expansion on surrounding properties' existing ocean views. The duly adopted design guidelines specify that in reviewing projects, the ARC would attempt to maintain reasonable views and view obstruction was a ground for denying a project. As noted in Zabrucky v. McAdams (2005) 129 Cal.App.4th 618, 623-624, "much of the value of any property within [a coastline development with an ocean view] depends on the quality of the view. To significantly obstruct any homeowner's view of the Pacific Ocean is to depreciate the economic worth of their property—often by several hundred thousand dollars—as well as dramatically reduce their enjoyment of the home they bought and live in."
There is no requirement that specific aesthetic or design criteria be promulgated by the Board or the ARC. Rather, the law requires simply that "when an association determines that a unit owner has violated a use restriction, the association must do so in good faith, not in an arbitrary or capricious manner, and its enforcement procedures must be fair and applied uniformly. [Citations.]" (Nahrstedt, supra, 8 Cal.4th at p. 383.)
Here, the evidence demonstrated that in reviewing proposed deck expansions, the ARC always took into consideration the project's impact on existing views and the ARC had never approved projects that obstructed existing views. The ARC found the Foxes' deck expansion, as proposed, would negatively impact their neighbor's existing ocean view from her living room. The Foxes presented evidence that many similar or larger deck projects had been approved, but presented no evidence those projects obstructed existing ocean views.1
3. The ARC's Action Not Arbitrary or Capricious
Having concluded it was within the ARC's discretion to withhold approval of the Foxes' deck expansion plans for the reason stated—obstruction of an existing ocean view from surrounding property—we turn to whether it nonetheless acted in an arbitrary or capricious manner. As the party seeking declaratory relief, the Foxes bore the burden of proof. (Dolan-King, supra, 81 Cal.App.4th pp. 970, 979.) Although generally "[w]hether conduct was arbitrary and capricious is a question of fact within the sound discretion of the trial court [citation]" (Zuehlsdorf v. Simi Valley Unified School Dist. (2007) 148 Cal.App.4th 249, 255-256), as noted above where the facts are uncontroverted we apply a de novo standard of review. (Dolan-King, supra, 81 Cal.App.4th at p. 974.)
a. The Denial was Timely
The trial court concluded the ARC's denial of the Foxes' application was untimely and thus it was deemed approved. Section 6.4 of the CC&Rs provides "Decisions of the [ARC] and the reasons therefore shall be transmitted by the [ARC] to the Applicant . . . within forty-five (45) days after receipt by the [ARC] of all materials required by the [ARC]. Any application submitted pursuant to this Article VI shall be deemed approved, unless the [ARC's] written disapproval or a request for additional information or materials is transmitted to the Applicant within forty-five (45) days after the date of receipt by the [ARC] of all requested materials."
The uncontroverted evidence here is the Foxes submitted their application on April 1. On April 27, the ARC conducted an on-site inspection and asked the Foxes to erect story poles. (The design guidelines specifically contemplate that in analyzing possible view obstructions, the ARC "may request `staking' of proposed structural additions.") The Foxes erected the story poles on May 3. On May 19, CSM sent a letter to the Foxes denying their application with no statement of reasons. On June 17, exactly 45 days after the story poles were erected, CSM denied the Foxes' application for the stated reason that it would obstruct Chisholm's ocean view. CSM's request for story poles constituted a request for additional materials or information as contemplated by section 6.4 of the CC&R's. The Foxes assert that because the ARC's request for story poles was oral, it did not constitute a request for additional materials within the meaning of section 6.4. There is no requirement the request be in writing. The Foxes were certainly aware of the request and complied with it. The 45-day period in which the ARC had to act on the application did not commence until the story poles were erected. Accordingly, the denial was timely.
b. Civil Code section 1378
The trial court also found the ARC did not comply with the "letter and spirit" of Civil Code section 1378. Section 1378 contains no specific enforcement mechanism. But given its mandate that "a decision on a proposed change shall be made in good faith and may not be unreasonable, arbitrary, or capricious" (Civ. Code, § 1378, subd. (a)(2)), certainly an association's failure to follow its directives would be a consideration is determining whether the association's decision was unreasonable, arbitrary, and capricious. We conclude any technical failures of the ARC to comply with the statute's directives do not support a finding its decision was arbitrary and capricious.
Civil Code section 1378 provides that if a homeowners association's governing documents require association approval before a homeowner may make a physical change to his or her property, the association must satisfy several requirements in conducting its review.
Civil Code section 1378, subdivision (a)(1), provides, "The association shall provide a fair, reasonable, and expeditious procedure for making its decision. The procedure shall be included in the association's governing documents. The procedure shall provide for prompt deadlines. The procedure shall state the maximum time for response to an application or a request for reconsideration by the board of directors." Civil Code section 1378, subdivision (a)(2), provides, "A decision on a proposed change shall be made in good faith and may not be unreasonable, arbitrary, or capricious."
CSM's controlling documents provided an appropriate and prompt procedure for responding to the kind of construction applications at issue here. To the extent the trial court concluded CSM failed to comply with the deadlines set forth in the CC&Rs, we have already concluded it did not.
Civil Code section 1378, subdivision (a)(4), requires "A decision on a proposed change shall be in writing. If a proposed change is disapproved, the written decision shall include both an explanation of why the proposed change is disapproved and a description of the procedure for reconsideration of the decision by the board of directors." Civil Code section 1378, subdivision (a)(5), provides, "If a proposed change is disapproved, the applicant is entitled to reconsideration by the board of directors of the association that made the decision, at an open meeting of the board." However, if the board of directors and the body making a decision on a proposed change are one and the same (as they are in this case where the Board is the ARC), and the decision to disapprove the proposed change is made at an open meeting, then reconsideration of the decision is not required.
The Foxes contend CSM failed to comply with Civil Code section 1378 because its June 17 letter did not state all the reasons for denying the Foxes' application. The letter cited only the project's potential for obstruction of existing ocean views, but at trial, Lippert testified the ARC also had concerns about the impact on Chisholm's privacy and the potential use of the deck as an activity deck. But there is nothing in either the statute or section 6.4 of the CC&Rs requiring a statement of every factor or reason for denying the project. And while it would be problematic if the board gave constantly shifting reasons, there is no evidence that is the case here. The ARC has always been consistent about the primary reason for denying the proposed deck—it would obstruct an existing ocean view. As already noted, as the party seeking a declaration the association acted arbitrarily and capriciously, the Foxes bore the burden of proof. The Foxes did not meet their burden. Stating some but not all of the reasons for denial does not render the denial ineffective. As we have discussed, denial of the application because of the new deck's impact on existing ocean views was within the ARC's discretion. That it had other reasons cannot be used to negate its decision.
Additionally, as the court noted in its ruling, the June 17 letter did not explain any reconsideration procedures. CSM's contention that because the application was denied at an open meeting on May 25, and thus, no reconsideration was necessary, ignores the trial court's factual finding the Foxes' application was not denied at an open meeting on May 25, because there was no substantial evidence that it was in fact considered at the meeting. (CSM could not produce the minutes from that meeting.)
Nonetheless, there was no requirement in the CC&Rs that an application be considered at an open meeting. The requirement contained in Civil Code section 1378 is that if the application is denied, it be subject to either an appeal to the Board of Directors, or, if the body denying the application and the Board of Directors are the same, then reconsideration by the Board at an open meeting. Here, despite the lack of notification about appeal or reconsideration rights, after the application was disapproved, the record discloses the Foxes were nonetheless afforded those rights. The Foxes specifically asked for an appeal. They appeared at the Board's regularly scheduled open meeting on July 27, and made a presentation to the Board, after which they were advised the deck expansion was denied for "view and aesthetic" reasons. As acknowledged in a letter from the Foxes' attorney dated August 15, 2005, the Foxes appeared at and made a further presentation to the Board at its meeting on July 27.
The judgment is reversed and the matter remanded for the superior court to enter a judgment for CSM. In the interests of justice, the parties shall bear their own costs on this appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
1. While this appeal was pending, CSM completed an amendment to its CC&Rs that prohibits a property owner from performing construction or installation of items on his or her property that would negatively affect views (including ocean views) from another property in the development. The amendment to the CC&Rs adds a new section 7.20 concerning use restrictions. It provides: "`No Member may . . . perform construction, install anything or perform an act on the Properties that would negatively affect [o]cean views, golf course views, or hillside views (`Views') from another Lot within the Properties. No Member may perform construction that would, including, but not limited to, reduce, minimize, disturb, lessen or change a View in a negative manner. The purpose and intent of this provision is to preserve the Views from the homes that existed at the time of original construction of the Properties, and to clarify any ambiguity as it relates to the importance of Views to the value of the homes within the Properties. View or Views are defined as the ability to see the Pacific Ocean, the Monarch Links Golf Course or hillside along Crown Valley Parkway from any location within a home where that View existed at the time of original construction. . . ." The new section 7.20 also prohibits placement of semi-permanent or permanent item such as gazebos, canopies, tents, statues, and fountains that would negatively affect views, for other than a short temporary period to accommodate a special event.
CSM has filed a motion to dismiss its appeal and to direct entry of judgment in is favor arguing the amendment to the CC&R's renders the appeal (and lawsuit) moot. We disagree. Although the amendment might obviate one of the Foxes' arguments, and one of the reasons the trial court ruled in their favor—i.e., that the absence of a specific provision in the CC&Rs protecting ocean views precluded the ARC from denying an application due to an improvement's affect on ocean views—it does not answer the question of whether CSM otherwise proceeded in an arbitrary or capricious manner. Accordingly, the motion to dismiss is denied.