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FILED

FEB 20 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. SC-14-1189-KuJuKi

)

WOLFGANG PATERNO, ) Bk. No. 13-06182

)

Debtor. )

______________________________)

)

MESA PINES HOMEOWNER'S )

ASSOCIATION, )

)

Appellants, )

)

v. ) MEMORANDUM*

)

WOLFGANG PATERNO, )

)

Appellee. )

______________________________)

Argued and Submitted on January 22, 2015

at Pasadena, California

Filed – February 20, 2015

Appeal from the United States Bankruptcy Court

for the Southern District of California

Honorable Christopher B. Latham, Bankruptcy Judge, Presiding

 

Appearances: Cindy A. Brand argued for appellant Mesa Pines

Homeowner's Association.**

 

Before: KURTZ, JURY and KIRSCHER, Bankruptcy Judges.

*This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.

**Appellee Wolfgang Paterno has not actively participated in

this appeal.
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INTRODUCTION

The Mesa Pine Homeowners Association filed a proof of claim

in Wolfgang Paterno’s chapter 131 bankruptcy case. The claim was

based on fines the Association imposed against Paterno for

violating certain restrictions regarding the use of his real

property. Paterno objected to the claim, and the bankruptcy

court sustained the objection, holding in relevant part that the

Association’s claim was time barred under the applicable statute

of limitations, Cal. Civ. Proc. Code (“CCP”) § 336(b).

On appeal, the Association contends that CCP § 336(b) was

not applicable to its claim because the claim was in essence an

action to recover possession of common area property that

Paterno’s home improvements encroached on. We disagree. The

claim was nothing more than an action for money (fines) for

violation of the Association’s real property restrictions, which

action squarely falls within the scope of CCP § 336(b). 

Accordingly, we AFFIRM.

FACTS

Paterno’s home is located in a planned community governed by

the Association and is subject to a recorded Amended Declaration

of Restrictions. The stated restrictions run with the land and

are binding on all homeowners within the community and their

successors. Among other restrictions, Paterno was prohibited

from making any exterior improvements without first obtaining the

1Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

all "Rule" references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037.

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written approval of the Association’s board of directors or the

board’s architectural review committee. The Amended Declaration

of Restrictions gave the Association broad authority over such

improvements:

6.2 Standard of Review. The Board shall be the final

arbiter with regard to approval of any improvement

regardless of but not limited to the nature, kind, shape,

size, height, materials and color scheme.

Amended Declaration of Restrictions (May 4, 1994) at ¶ 6.2.

In July and September of 2006, Paterno appeared at and

participated in two Association board meetings. According to the

minutes from the July board meeting, Paterno appeared at the July

meeting at the board’s request to discuss his ongoing front yard

improvements and certain alleged violations of the Association’s

restrictions. During that meeting, Paterno requested help from

the board in determining the boundary lines of his lot. The

president of the board told Paterno in response that, if Paterno

“did not know where [his] property lines were located,” he should

“have a survey completed.” Gambill Decl. (Feb. 18, 2014) at ¶ 6. 

The board president reiterated this point in a letter he caused

to be sent to Paterno shortly after the meeting. The letter

further advised Paterno that the board was not responsible for

assisting homeowners in determining their property lines.

At the September board meeting, Paterno presented his

proposed plans for improving his back yard and side yards. The

landscaping and hardscaping plans Paterno submitted contemplated

the construction of walls on Paterno’s lot up to edges of the

property. The board did not require Paterno to obtain and submit

a site survey verifying that none of his improvements would

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extend beyond his property lines and thereby encroach on the

community’s common area, which the Association had a duty to

manage and maintain. Instead, the board approved Paterno’s

proposed improvements with only two minor exceptions, one

relating to a shed and the other related to the color of his

fencing. Paterno thereafter went ahead with the construction of

his improvements.2

Roughly five years elapsed with nothing relevant occurring. 

Then, in October 2011, Paterno sent a letter to the Association

threatening to sue unless the Association constructed a retaining

wall on the common area slope behind his house to reduce the risk

of mudslides and erosion. In response, the Association ordered a

2The Association’s papers are equivocal regarding what

Paterno’s landscaping plans indicated regarding the boundary

lines of his lot. On the one hand, Association president Paul

Gambill submitted declaration testimony stating that “[t]he plans

show that all improvements are within the boundaries of the

property.” Gambill Decl. (Feb. 18, 2014) at ¶ 10. On the other

hand, Gambill later submitted additional declaration testimony

referring to the exact same plans and stating that “the drawings

submitted by the Debtor to [the Association] did not include his

property’s boundary lines.” Gambill Decl. (Feb. 28, 2014) at

¶ 5. It is difficult to reconcile these two statements. If

Gambill and the Association understood from the plans that all of

Paterno’s proposed improvements were within the “boundaries of

the property” as Gambill first declared, how is it that Gambill

and the Association obtained this understanding? In any event,

the bankruptcy court found that Paterno’s landscaping plans

submitted to the Association “contemplated the construction of

walls that would extend to the Property’s edge.” Order

Sustaining Claim Objection (April 3, 2014) at p. 2. On appeal,

the Association has not challenged this finding. In fact, the

Association’s opening brief contains a virtually identical

statement in its recitation of the facts. Aplt. Opn. Brf. at

p. 7. We generally accept as true findings not disputed on

appeal. See Sachan v. Huh (In re Huh), 506 B.R. 257, 272 (9th

Cir. BAP 2014) (en banc).

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survey to determine the boundary lines of Paterno’s lot, and the

survey concluded that some of Paterno’s 2006 improvements

encroached on the Association’s common area by three to six feet.

The Association then notified Paterno of the alleged

encroachment and directed him either to order his own competing

survey or to remove the encroaching improvements. Paterno took

neither of these actions. Consequently, over the course of

several months, the Association levied several thousand dollars

in fines against Paterno explicitly because Paterno’s alleged

encroachment onto the common area violated certain restrictions

set forth in the Amended Declaration of Restrictions. In

particular, the Association pointed to ¶ 1.8 of the restrictions,

which indicated that the common areas of the development were for

the “common use and enjoyment” of all of the owners. In

addition, ¶ 2.1 of the restrictions provided:

Every owner of a Lot shall have a right and easement of

ingress and egress and of enjoyment in and to the

Common area which shall be appurtunant to and shall

pass with title to every such Lot . . . .

Amended Declaration of Restrictions (May 4, 1994) at ¶ 2.1.

When Paterno did not pay the fines, the Association filed a

complaint against Paterno in 2012 in the Small Claims Division of

the San Diego County Superior Court. However, before the

completion of trial, the Association voluntarily dismissed its

complaint.

Paterno filed his chapter 13 bankruptcy petition on June 13,

2013, and the Association filed its proof of claim on October 2,

2013. On its face, the proof of claim is based on “HOA Fine –

Violation of governing documents.” Paterno then filed his claim

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objection, in which he asserted, among other things, that the

Association’s claim was time barred under the statute of

limitations set forth in CCP § 336(b). This assertion was not

new, and it should not have been any surprise to the Association,

inasmuch as Paterno had made this same argument in response to

the Association’s state court complaint. Oddly, in its papers

responding to the claim objection, the Association largely

ignored Paterno’s statute of limitations defense.3

After holding two hearings on the claim objection and

directing the parties to submit additional evidence, the

bankruptcy court entered its order sustaining Paterno’s claim

objection. The bankruptcy court explicitly found that the

Association should have suspected in 2006, when Paterno’s

improvements were made, that they might encroach on the common

area. The court noted that, at the time Paterno submitted his

landscaping plans to the Association’s board of directors in

September 2006, the board had reason to suspect that there might

be an encroachment issue in light of Paterno’s admitted ignorance

of his boundary lines just two months before at the July 2006

board meeting. According to the court, if the Association had

3In its appeal brief, the Association states that the

bankruptcy court “did not allow briefing” on the statute of

limitations issue. We are perplexed by this statement given the

advance warning the Association had regarding this issue and the

absence of anything in the record indicating that the Association

requested supplemental briefing or that the bankruptcy court

denied that request. It is possible that briefing was discussed

at one or both of the two hearings on the claim objection, but

the Association declined to provide us with the transcripts from

either hearing. In addition, the statute of limitations defense

was mentioned in the initial declaration of Paterno filed in

support of the claim objection.

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been acting in a reasonably diligent manner, it would have

required Paterno to obtain at his cost a survey establishing the

boundaries of his lot as a prerequisite to the Association’s

approval of the improvements.

Consequently, the bankruptcy court held that the applicable

five-year statute of limitations under CCP § 336 began to run in

2006. Because the Association’s proof of claim was not filed

until October 2013, well after the expiration of the five-year

limitations period, the court concluded that the Association’s

claim was time barred.

The Association timely filed a notice of appeal. 

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(A), (B) and (O). We have jurisdiction

under 28 U.S.C. § 158.

ISSUE

Did the bankruptcy court commit reversible error when it

sustained Paterno’s objection to the Association’s claim?

STANDARDS OF REVIEW

In appeals arising from a ruling on a claim objection, we

review the bankruptcy court's conclusions of law de novo and its

findings of fact under the clearly erroneous standard. See Allen

v. U.S. Bank, NA (In re Allen), 472 B.R. 559, 564 (9th Cir. BAP

2012). Factual findings are not clearly erroneous unless they

are illogical, implausible or without support in the record. 

Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010)

(citing United States v. Hinkson, 585 F.3d 1247, 1261–62 & n.21

(9th Cir. 2009) (en banc)).

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DISCUSSION

Under § 502(b)(1), a claim must be disallowed if the claim

is unenforceable under applicable nonbankruptcy law. Durkin v.

Benedor Corp. (In re G.I. Indus., Inc.), 204 F.3d 1276, 1281 (9th

Cir. 2000). The grounds for disallowance that may be asserted in

support of a § 502(b)(1) claim objection include those defenses

that would be available to the debtor under state law. Id. In

disallowing the Association’s claim, the bankruptcy court applied

California’s five-year statute of limitations set forth in

CCP § 336(b). That statute fixes a five year limitations period

for actions for violation of a restriction affecting real

property and further provides that the limitations period begins

to run “from the time the person seeking to enforce the

restriction discovered or, through the exercise of reasonable

diligence, should have discovered the violation.” CCP § 336(b);

see also Harry D. Miller & Marvin B. Starr, 9 CAL. REAL ESTATE

§ 25B:107 (3d ed. 2014).

On appeal, the Association in essence argues that its proof

of claim was an action to recover possession of the common area

property that Paterno encroached on, so CCP § 336(b) does not

apply. In support of its position, the Association cites Kapner

v. Meadowlark Ranch Ass'n, 116 Cal.App.4th 1182, 1189 (2004). 

Kapner held that CCP § 336(b) does not apply to actions to

recover possession of commonly owned real property encroached on

by one of residents of a development, who thereby excludes from

the commonly owned property other residents of the development. 

Id. 

As a threshold matter, we note that nothing in the record

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before us indicates that the Association raised this argument in

the bankruptcy court, and we may decline to consider arguments

raised for the first time on appeal. See United Student Aid

Funds, Inc. v. Espinosa, 559 U.S. 260, 270 (2010) (“We need not

settle that question, however, because the parties did not raise

it in the courts below.”); Scovis v. Henrichsen (In re Scovis),

249 F.3d 975, 984 (9th Cir. 2001) (stating that court would not

consider argument raised for the first time on appeal absent

exceptional circumstances). 

More importantly, however, there is a fatal flaw in the

Association’s argument. Its proof of claim did not seek to

recover possession of the common area upon which Paterno

encroached. The proof of claim merely sought to enforce the

fines the Association had imposed against Paterno for violation

of the restrictions set forth in the Amended Declaration of

Restrictions. As such, the proof of claim falls squarely within

the scope of CCP § 336(b). See generally Pac. Hills Homeowners

Assn. v. Prun, 160 Cal.App.4th 1557, 1563-64 (2008) (holding that

CCP § 336(b) applies to any action to enforce a restriction on

real property regardless of whether the restriction is set forth

in a recorded document).

At oral argument, counsel for the Association suggested that

the bankruptcy court's order disallowing its claim could be

construed as holding that the Association is time barred from

pursuing an action to recover possession of the real property

upon which Paterno allegedly encroached. We disagree. The order

only ruled upon the proof of claim the Association filed and that

claim only asserted a right to payment based on fines for

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violation of the restrictions set forth in the Association's

Amended Declaration of Restrictions. Thus, the Association's

concern regarding the scope of the bankruptcy court’s ruling is

unfounded.

The applicability of CCP § 336(b) is the only argument the

Association made in its appeal brief. While the Association’s

statement of issues in its brief raised questions regarding some

of the bankruptcy court’s findings of fact, the argument the

Association made in its brief did not challenge any findings. 

When arguments are not specifically and distinctly made in the

appellant's opening brief, those arguments typically are deemed

forfeited. See, e.g., Christian Legal Soc'y v. Wu, 626 F.3d 483,

487–88 (9th Cir. 2010); Brownfield v. City of Yakima, 612 F.3d

1140, 1149 n.4 (9th Cir. 2010) (citing Greenwood v. F.A.A.,

28 F.3d 971, 977 (9th Cir. 1994)).

Even if we were to review the bankruptcy court’s findings,

we perceive no reversible error. The Association apparently

disputes the bankruptcy court’s determination that the

Association did not exercise reasonable diligence and that, if

the Association had exercised reasonable diligence, it would have

discovered the extent of any encroachment in 2006, when Paterno

made the improvements. These determinations were findings of

fact. See Fox v. Ethicon Endo-Surgery, Inc., 35 Cal.4th 797, 810

(2005); see also Leaf v. City of San Mateo, 104 Cal.App.3d 398,

409 (1980) ("Whether plaintiffs in fact exercised reasonable

diligence in discovering the negligence of defendant City of San

Mateo is a question of fact.").

As indicated in the standards of review section above, in

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reviewing the bankruptcy court’s factual findings, we cannot

reverse unless those findings were illogical, implausible or

without support in the record. In re Retz, 606 F.3d at 1196. 

The Association has not demonstrated any of these criteria for

reversal. Nor, on this record, are any of these criteria

apparent.

This is not a case where the bankruptcy court imposed a

general duty of care on the Association requiring it in all

instances to demand site surveys before permitting homeowners to

make landscaping improvements. We would be reluctant to uphold

the imposition of such a general duty of care. Instead, the

bankruptcy court’s diligence findings were based on the unique

facts of this case. These facts included Paterno’s July 2006

admission to the Association’s board of directors that he did not

know where the boundary lines of his lot were located. These

facts also included Paterno’s September 2006 board meeting

presentation of his landscaping plans, which proposed to

construct walls just within the purported boundaries of his lot.

“A plaintiff has reason to discover a cause of action when

he or she ‘has reason at least to suspect a factual basis for its

elements.’” Fox, 35 Cal.4th at 807 (quoting Norgart v. Upjohn

Co. 21 Cal.4th 383, 398 (1999)). The Association’s lack of

subjective suspicion regarding Paterno’s landscaping proposals is

irrelevant because the measure is an objective standard. See

Wilshire Westwood Assoc. v. Atl. Richfield Co., 20 Cal.App.4th

732, (1993); Mangini v. Aerojet–Gen. Corp., 230 Cal.App.3d 1125,

1150 (1991). Once the Association became aware of facts that

would have made a reasonably prudent person suspicious – like

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Paterno’s admitted ignorance of his property lines followed soon

after by his proposal to build walls just within the purported

boundaries of his lot – the Association had a duty to investigate

further and is charged with knowledge of those matters that would

have been revealed by such investigation. Id.

The record here establishes that, when the Association

ordered a survey of Paterno’s lot in 2012, the survey concluded

that Paterno’s improvements had encroached on the common area. 

On this record, we cannot hold as clearly erroneous the

bankruptcy court’s findings that the Association should have

required Paterno in 2006, at his own expense, to order such a

survey of his lot as a prerequisite to approving his landscaping

plans and that, had such a survey been ordered, the extent (if

any) of Paterno’s encroachment would have been apparent to the

Association.

In sum, we perceive no reversible error in the bankruptcy

court’s determination that the limitations period under

CCP § 336(b) began to run in 2006, when Paterno constructed his

landscaping improvements and by which time the Association, with

the aid of a site survey, should have known whether Paterno’s

improvements encroached on the common area.

CONCLUSION

For the reasons set forth above, we AFFIRM the bankruptcy

court’s order sustaining Paterno’s claim objection and

disallowing the Association’s claim.

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