1 Filed 10/2/13 Lee v. Castelluccio CA3 NOT TO BE PUBLISHED

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT (Calaveras)

----

DON H. LEE, Plaintiff and Appellant,

v. CHRIS CASTELLUCCIO et al., Defendants and Respondents. C068987
(Super. Ct. Nos. 10CV36874, 10CV37043 & 10CV37048)

Two competing factions of a homeowners association filed three lawsuits (which were later consolidated) seeking control of the Gold Strike Heights residential subdivision. The “Weiner Parties” (individua ls and entities affiliated with Mark Weiner, who acquired majority control of the associ ation) and the “Homeowners” (individuals owning lots not owned by the Weiner Parties) participated in mediation and signed a written settlement agreement.2 Pursuant to Code of Civil Procedure se ction 664.6 [judgment by stipulation], the trial court entered an order for judgment, dism issed all three lawsuits, and included in the judgment all material term s of the agreement. Appellant Don H. Lee, one of the Weiner Parties, signed the agreement. The next day, however, he asked the trial court to stri ke three provisions in the agreement before entering judgment: provision 1d. [establis hing the term of the current board and officers], 1g. [voiding prior amendments and modifications to the bylaws and covenants, conditions and restrictions (C C&R’s)], and 1h. [requiring am endments to articles, bylaws and CC&R’s to require a supermajority vote for three years]. The trial court denied Lee’s
motion. Lee now contends (1) the challenged provi sions violate the portions of the DavisStirling Common Interest Development Act (the Act) 1 (Civ. Code, § 1350 et seq.) requiring secret elections and an inde pendent third party counting the ballots; (2) provision 1d. violates a portion of the Corporations Code go verning the terms of board members; and (3) the challenge d provisions violate public policy. 2
We conclude the trial court did not e rr in including the challenged provisions in the judgment. We will affirm the judgment.
BACKGROUND Gold Strike Heights is a residential subdivision in Calaveras County. The subdivision’s developer record ed a declaration of restrictions (CC&R’s) in 2002,

1 The Act was repealed, revised and renumb ered in 2012 (Stats. 2012, ch. 180 (Assem. Bill No. 805), eff. Jan. 1, 2014); references to the Act are to the statutes in effect at the time of judgment.

2 The Homeowners claim Lee lacks standing because he is not currently a member, officer or director of the Association. But the issue presented is whether the trial court erred in entering judgment and dismissing thr ee cases in which Lee was a named party. Accordingly, we will address the merits.3 designating the subdivision as a senior citiz en housing developmen t. The developer contemporaneously established the Gold St rike Heights Association (Association), a California nonprofit mutual be nefit corporation. The CC&R’ s declared each owner of a
lot within the subd ivision a member of the Association. The Association is governed by an elected board of directors, which has th e power to levy assessmen ts, adopt and enforce community rules, and impose disciplinary ac tion against Associatio n members. These
features make the Association a common interest development under Civil Code
section 1352 of the Act. The developer abandoned Go ld Strike Heights after bu ilding homes on fewer than half of the lots and before completing prom ised common area improv ements. Thirty-one bare lots in the subdivision were acquired in 2005 and 2006 by Ma rk Weiner and entities he controlled. Ownership of these lots gave Weiner a 63 percent majority vote in the Association; he used that ma jority in 2007 to nominate and elect a board of directors which thereafter made substantial changes to the Association’s governance. Lee, an employee of one of Weiner’s companies, serv ed as an Association director and officer
between 2007 and 2010.
The three consolidated cases arose from a contentious dispute over control and management of the subdivision be tween Weiner and his affiliate s on one side and most of the Gold Strike Heights homeowners on the other side. In February 2011, the two factions and their respective attorneys particip ated in a lengthy but successful mediation. Following many weeks of negotiation, the par ties signed a written settlement agreement. After signing the agreement, Lee moved the trial court to strike three provisions and enter judgment on the remainder, or in the alternative, to declar e the entire agreement illegal and unenforceable. The cha llenged provisions were as follows: “1d. The parties agree that the Boar d of Directors of the [Association], as presently constituted . . . [,] w ill remain as the Board of Directors and its officers for a period of three (3) years . . . ;”4 “1g. The parties agree that all amendm ents or modifications of the Bylaws and CC&Rs . . . since July 1, 2010, are withdraw n, void and of no further force and effect;”
and “1h. The parties agree that . . . ame ndments to the Articles, Bylaws and/or CC&Rs of the [Association] w ill require a super-majority vote of 75% of the membership for a period of three (3) years . . . .” Each of the challenged prov isions involved election of the board of directors and changes to bylaws and CC&R’s, and each had been expressly labeled a “material” term in the agreement. The trial court denied Lee’s motion, gr anting instead an oppos ing motion to enter judgment enforcing the entire agreement.
DISCUSSION
I Lee contends the challenged provisions violate the portions of the Act requiring secret elections and an independent third party counting the ballots.
The Act was enacted in 1985 to consolidate in one pl ace an array of statutes governing common interest developments an d, among other things, “resolve problems faced by homeowners and associations in the operation of common interest developments, particularly the collection of assessments and amendment of governing documents.” (1 Sp roul & Rose nberry, Advising Cal. Comm on Interest Communities (Cont.Ed.Bar 2010) § 1.4, p. 6.) The Act in cludes very specific and complex rules about
how and when board elections ar e to take place. (Civ. C ode, § 1363.03 [requiring secret ballots with double envelopes to be opene d and tabulated during a noticed and open meeting by a specially appointe d inspector of elections].) Although Lee argues that provisions 1d. [establishing the term of the current board and officers], 1g. [voiding prior amen dments and modifications to the bylaws and CC&R’s], and 1h. [requiring amendments to articles, bylaws and CC&R’s to require a5 supermajority vote for three years] violate the Ac t, he does not cite to portions of the Act governing the term of the current board and officers, or the manner in which articles, bylaws and CC&R’s are modified, and he do es not show exactly how the challenged provisions are in conflict with the Act. In stead, he simply cites to provisions requiring secret ballots counted by third parties. Lee has failed in his burden on appeal to show that provisions 1d., 1g. a nd 1h. violate the Act.
II Lee next contends provision 1d. [establis hing the term of the current board and officers] violates Corporations Code secti on 7220, subdivision (a), which prohibits board members of California nonprofit corporations from extending their own terms of office. Lee draws our attention to the following pr ovision: “No amendment of the articles or bylaws may extend the term of a director bey ond that for which the director was elected, nor may any bylaw provision increasing the terms of directors be adopted without approval of the members . . . .” (Corp. Co de, § 7220, subd. (a).) Lee’s reliance on this provision is misplaced. Under the parties’ agreem ent, the Association’s board members “will remain [in office] until the regular general election in Ju ne of 2014.” Lee does not point to evidence
of when the board members were elected or for how long, although he does imply that the challenged provision would extend their elected terms. The statutory provision he cites, however, only prohibits the extension of a sitting director’s term of office when the extension is accomplished by an amendment to the Association’s articles or bylaws. (Corp. Code, § 7220, subd. (a).)
Lee relies on Burke v. Ipsen (2010) 189 Cal.App.4th 8 01, but that case does not support his contention. Burke involved bylaw amendments proposed by the board of
directors of a labor union wh ich, among other things, extende d the directors’ terms of office and substantially incr eased membership dues. ( Id . at p. 805.) Unlike Burke , this6 case does not involve amendments to article s or bylaws effectuated by the board of directors. Provision 1d. merely mainta ins the status quo for a period of time.
III In addition, Lee argues that the challe nged provisions violate public policy. Settlement agreements are contracts subj ect to the same principles as other contracts, meaning that courts should try to interpret them as lawful and operative without violating the intent of the parties. ( Kaufman v. Goldman (2011) 195 Cal.App.4th 734, 745.) As the court in Kaufman observed, “ ‘Freedom of contract is an important principle, and courts should not blithely apply public policy reas ons to void contract provisions.’ ” ( Ibid. , quoting VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th 708, 713.) Further, the California Supreme C ourt, calling public policy an “unruly horse, astride of which you are carried into unknown and uncertain paths” stated long ago that “unless it is entirely plain that a contract is violative of sound public policy, a court will never so declare.” ( Stephens v. Southern Pacific Co. (1895) 109 Cal. 86, 89 ( Stephens ).) The quoted statement from Stephens was cited in Bovard v. American Horse Enterprises, Inc. (1988) 201 Cal.App.3d 832, one of the rare cas es in which a California
court concluded that a settleme nt agreement was illegal and void. The voi ded contract was for the manufacture and purchase of drug paraphernalia which the trial court held was contrary to the public policy set out in statutes barring possessi on of marijuana. ( Id. at pp. 839-840.) But the appellate court’s anal ysis of illegality went beyond mere citation of the marijuana statute; it carefully applied the factors set forth in the Restatement Second of Contracts, section 178 [when a term is unenforce able on grounds of public policy]. “A promise or other term of an agreem ent is unenforceable on grounds of public policy if legislation provides that it is unenforc eable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.” (Rest.2d Contracts, § 178, su bd. (1).) Factors weighing in favor of a7 contract’s enforcement include “(a) the partie s’ justified expectations, (b) any forfeiture
that would result if enforcement were denied , and (c) any special pub lic interest in the enforcement of the term.” (Rest.2d Contracts, § 178, subd. (2).) Factors weighing against enforcement include “(a) the strength of that policy as manifested by legislation or judicial decisions, (b) the likelihood that a re fusal to enforce the te rm will further that policy” and two factors involving misconduct. (Rest.2d Contracts, § 178, subd. (3).) Here, in considering the parties’ jus tified expectations, paragraph (F) of the agreement says the purpose of the agreem ent was “to obtain complete peace” with respect to the claims raised in the litigation. Lee ack nowledges that, from 2007 through 2010, the Association’s board of directors wa s “dominated by” Indian Village Estates, LLC, an entity controlled by Weiner. Fo llowing a contested election in July 2010, the board was dominated by the Homeowners. Sixtee n of the Homeowners were plaintiffs in the 2010 complaint accusing Weiner, Lee a nd Weiner’s son of fra ud and other serious
misconduct. Among other things, the challenged provi sions were intended by the parties to establish stability, eliminate litigation, and give Weiner meaningful input but not
unfettered control. A spokesman for the Homeowne rs stated in a declaration before the trial court that “severance of any one of these [challenged] provisions would disrupt the entirety of our agreement from the standpoint of what we fairly barg ained for in the negotiating process at the mediation.” There were 13 provisi ons designated as “mater ial condition[s]” on the face of the agreement; all three of the challenged provisions were designated material.
The record indicates that stri king the challenged provisions at the behest of Lee would deprive the other parties of their justified expectations. Regarding the other factors in favor of enforcement, there is no evidence of a “forfeiture” or “special public interest.”8 Turning to the factors that would weig h against enforcement, the Act seeks to assure fairness in decisions affecting the separate property interests of Association members. But given the history of the Associ ation, Lee has not established that the Act’s policy goals would be furthere d by striking the challenged provisions. Moreover, the remedy for violation of the election provisions of the Act is an action by a member to have election results declared void. (Civ. Co de, § 1363.09 [stating that a court could also impose a civil penalty up to $500].) Lee does not cite to any provision in the Act that
would invalidate the settleme nt agreement provisions. In sum, Lee has not established that striking the challenged provisions would further public policy; instead, the record indicates that his unilateral request would thwart the policy favoring settleme nt agreements. (See Abbott Ford, Inc. v. Superior Court (1987) 43 Cal.3d 858, 871–873.)
DISPOSITION The judgment is affirmed.

MAURO , J.

We concur:

HULL , Acting P. J.

BUTZ , J.