PEAK INVESTMENTS v. S. PEAK HOMEOWNERS ASSN., INC.
(2006) 140 Cal.App.4th 1363
COUNSEL
Borton, Petrini & Conron, Matthew J. Trostler, Casandra P. Cushman, Hickey & Petchul, and Dirk Petchul for Appellant.
Garrison & McInnis, Gregory M. Garrison, Amelia A. McDermott, and Andrew R. Chivinski for Respondent. [140 Cal.App.4th 1365]
OPINION
SILLS, P. J.-
South Peak Homeowners Association (the Association) appeals from the
trial court's order granting a homeowner's petition to reduce the
percentage of homeowner votes needed to approve an amendment to the
declaration of covenants, conditions, and restrictions (CC&Rs). The
Association claims the trial court improperly reduced the percentage to
less than a simple majority of the homeowner votes. We find the
Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et
seq.) requires that a proposed amendment to the CC&Rs be approved by
at least a simple majority of the total votes in the homeowners
association before the trial court can reduce the percentage of votes
set by the CC&Rs. Accordingly, we reverse.
FACTS
Peak Investments and Norman and Rita Lesman (the Lesmans) own lot 43 in
South Peak, a planned community of custom homes in Laguna Niguel
comprising 63 lots. The Association is governed by CC&Rs recorded in
April 1984. In 1986, the Association amended the CC&Rs to change
the building heights for each lot (CC&Rs, section 6.7.1) and the
setback provisions for each lot (CC&Rs, section 6.7.2). These
changes were reflected on Exhibit 1 to the amendment, entitled "Height
and Setback Limitations," which listed on a chart each lot number, its
maximum height, its minimum setback from front lot line, its minimum
setback from side lot lines, and its minimum setback from rear lot
lines. The setback limit for lot 43's side lot lines was listed as
"20-7," meaning the limit was 20 feet total minimum setback distance for
both sides of the lot and 7 feet minimum setback distance for each side
of the lot. The second page of Exhibit 1 started with listing lot 31;
all the lots from lot 31 through 55 had sideline setbacks of 25-7 except
lot 43.
The CC&Rs were amended again in 1990 to modify the building height
limitations by removing the 35 foot cap (CC&Rs, section 6.7.1). The
amended section refers to Attachment 2, which appears to be a retyped
version of Exhibit 1 to the 1986 amendment. The only difference in the
two is the minimum sideline setback for lot 43; that number was changed
from 20-7 to 25-7.
The Lesmans purchased lot 43 in June 2001 and apparently wanted to build
a larger structure than the 20-7 setback allowed. They contacted the
lawyer who prepared the 1990 amendment, Edward Coss, who wrote to the
Association's Board of Directors in May 2002, opining that the change in
the sideline setback on lot 43 was "an inadvertent typographical
error." Coss explained, "I can find no record or other communication to
support the change in the side lot lines; in fact, the purpose of
Amendment Number Three [140 Cal.App.4th 1366] was limited to
building height alterations." Coss enclosed a proposed amendment to the
CC&Rs to correct the error for the Association's approval.
For whatever reason, the Board declined to effect the execution of the
amendment. In July 2004, the Lesmans proposed an amendment to change the
setback for their lot. In accordance with the bylaws, they caused a
special meeting of the homeowners to be called to vote on the proposed
amendment. The homeowners received a copy of the proposed amendment,
which explained the requested change from 25-7 to 20-7; they also
received a ballot allowing them to approve or disapprove the amendment
or abstain from voting. The ballot noted, "[A]t least 25 percent (25%)
of the voting power of the membership (16/63) must be present in person
or by proxy in order to achieve a quorum. The written approval of at
least 2/3rds of the Members (42 of 63) must be received for the proposed
amendment to be approved."
The meeting was held on July 29, 2004, with seventeen homeowners
physically present. Thirty-two ballots were cast: Twenty-one voted in
favor of the amendment, and eleven voted against it. Because an
amendment to the CC&Rs requires the votes of two-thirds of the lot
owners (CC&Rs, section 14.2), the proposed amendment failed.
The Lesmans petitioned the superior court to reduce the percentage
necessary to amend the CC&Rs because the CC&Rs required a
"supermajority" to amend and not enough members attended the special
meeting, and to confirm the amendment as validly approved. (Civ. Code, §
1356.) The trial court granted the petition, finding that more than 50
percent of the voters voted in favor of the amendment, as required by
the statute. ""[I]t seems to me . . . that this is what [section] 1356
was meant to apply to, the situation where you can't get enough people
interested to be there to provide for super majority. [¶] It isn't like
enough people came and voted against it. There just isn't [sic]
that many votes. . . . [T]he only question here is whether 50 percent of
the voters voted in favor of the amendment. It appears to me they did,
21 out of 32 or 33." The court also found the amendment was reasonable,
another statutory requirement. The Association appeals from the order
granting the petition.
DISCUSSION
[1] Civil Code section 1356, part of the Davis-Stirling Common Interest
Development Act (the Act), provides that a homeowners' association, or
any member, may petition the superior court for a reduction in the
percentage of affirmative votes required to amend the CC&Rs if they
require approval by "owners having more than 50 percent of the votes in
the association . . . ." [140 Cal.App.4th 1367] (Civ. Code, § 1356, subd. (a).) fn. 1
The court may, but need not, grant the petition if it finds all of the
following: Notice was properly given; the balloting was properly
conducted; reasonable efforts were made to permit eligible members to
vote; "[o]wners having more than 50 percent of the votes, in a single
class voting structure, voted in favor of the amendment"; and "the
amendment is reasonable." (Civ. Code, § 1356, subd. (c)(1)-(5).)
On appeal, the Association contends the trial court erred in making an
affirmative finding that more than 50 percent of the owners voted in
favor of the amendment. It argues the statute requires an affirmative
vote by more than 50 percent of all owners, whether or not they
attended the meeting (i.e., 32 out of 63), while the trial court
mistakenly construed the requirement to be merely more than 50 percent
of the owners who attended the meeting (i.e., 17 out of 32).
[2] In construing a statute, we must ascertain the intent of the
Legislature. The first step in the process is to look at the plain
meaning of the words used. (Villa de las Palmas Homeowners Assoc. (2004) 33 Cal.4th 73,
82.) "If there is no ambiguity in the language of the statute, 'then
the Legislature is presumed to have meant what it said.'" (Smith v. Rae-Venter Law Group (2002) 29 Cal.4th 345, 358.)
The phrase in question here is "owners having more than 50 percent of
the votes," appearing in section 1356, subdivision (c)(4). The phrase is
unqualified by language indicating "the votes" are those cast at a
meeting; in the absence of such qualification, it must mean total votes
in the Association.
Our interpretation is buttressed by language in other sections of the
Act that carefully define votes cast at a meeting. For example, section
1355.5 allows the board of directors of an association to adopt an
amendment to the governing documents deleting "any provision which is
unequivocally designed and intended, or which by its nature can only
have been designed or intended, to facilitate the developer in
completing the construction or marketing of the development." (§ 1355.5,
subd. (a).) However, the board may not adopt such an amendment "without
the approval of the owners, casting a majority of the votes at a
meeting or election of the association constituting a quorum . . . . For
the purposes of this section, "quorum" means more than 50 percent of
the owners who own no more than two separate interests in the
development." (§ 1355.5, subd. (d).) Likewise, a rule change by the
board of directors of an association may be reversed "by the affirmative
vote of a majority of the votes represented and voting at a duly held
meeting at which [140 Cal.App.4th 1368] a quorum is present
(which affirmative votes also constitute a majority of the required
quorum) . . . ." (§ 1357.140, subd. (c).) And absent statutory notice (§
1365), the board of directors of an association cannot levy assessment
increases without the "approval of owners, constituting a quorum,
casting a majority of the votes at a meeting or election of the
association . . . ." (§ 1366, subds. (a) & (b).)
If a declaration fails to include provisions permitting its amendment, the Act provides that it may be amended after, inter alia,
"the approval of owners representing more than 50 percent . . . of the
separate interests in the common interest development has been given . .
. ." (§ 1355, subd. (b).) Thus, it appears the Legislature made a
conscious decision to provide that a bare majority of all the members
would be the minimum required to amend the declaration. The comments to
the Restatement of Property explain, "The declaration for a
common-interest community functions like a constitution for the
community. Like a constitution, the declaration should not be subject to
change upon temporary impulse. Unlike rules, which can be adopted with a
simple majority of votes cast, amendments require at least a majority
of all votes that could be cast, and many types of amendment require
substantially more." (Rest.3d, Property, Servitudes (2000) § 6.10, com.
a.)
The Restatement includes a section entitled "Judicial Power to Excuse
Compliance with Requirements of the Governing Documents." The section
provides that "[a] court may excuse compliance with any of the following
provisions in a governing document if it finds that the provision
unreasonably interferes with the community's ability to manage the
common property, administer the servitude regime, or carry out any other
function set forth in the declaration, and that compliance is not
necessary to protect the legitimate interests of the members or lenders
holding security interests: [¶] (4) a provision requiring approval of
more than two-thirds of the voting power to adopt an amendment . . . ."
(Rest.3d, Property, Servitudes, supra, § 6.12.) The section's
notes state, "The rule that quorum and supermajority requirements may be
waived if necessary to permit adoption of amendments necessary to
continued existence and proper functioning of the association is based
on California Civil Code §§ 1356 and 1357, although it differs in some
particulars." (Id., reporter's notes.) Notably, the Restatement
section does not require the court to make threshold findings before it
can exercise its discretion, as does section 1356.
There is no case law directly on point. The closest is Blue Lagoon Community Assoc. v. Mitchell (1997) 55 Cal.App.4th 472,
in which this court held that a proceeding pursuant to section 1356 was
not "adversarial" so as to entitle the party successfully opposing the
petition to attorney fees as the prevailing party in an action to
enforce the governing [140 Cal.App.4th 1369] documents of a
common interest development. (§ 1354, subd. (c).) In so holding, this
court commented: "[T]he purpose of Civil Code section 1356 is to give a
property owners' association the ability to amend its governing
documents when, because of voter apathy or other reasons, important
amendments cannot be approved by the normal procedures authorized by the
declaration. [Citation.] In essence, it provides the association with a
safety valve for those situations where the need for a supermajority
vote would hamstring the association." (Id. at p. 477.)
[3] It appears the legislative intent is to require at least a simple
majority of all members of an association to amend the CC&Rs.
Accordingly, the trial court erred in finding that the affirmative votes
of 21 out of 63 owners met the statutory prerequisite that owners
having more than 50 percent of the vote voted in favor of the amendment.
Because we reach this conclusion, we need not discuss the Association's
contention that the amendment was not reasonable. We observe, however,
that it appears the Lesmans may be merely attempting to correct a
scrivener's error. Nothing in this opinion shall be construed to hamper
their ongoing efforts in that regard.
DISPOSITION
The order granting the petition is reversed. In the interest of justice, each party shall bear its own costs.
Rylaarsdam, J., and Fybel, J., concurred.
FN 1. All statutory references are to the Civil Code.