Filed 5/20/21

CERTIFIED FOR PUBLICATION

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

SMART CORNER OWNERS 

ASSOCIATION,

Plaintiff and Appellant,

v.

CJUF SMART CORNER LLC et al.,

Defendants and Respondents.

 D076775

 (Super. Ct. No. 37-2017-

00037690-CU-CD-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, 

Ronald L. Styn, Judge. Reversed and remanded with directions.

Epsten, Anne L. Rauch, Trinette S. Sachrison, Gordon A. Walters; 

Kasdan Lippsmith Weber Turner, Kenneth S. Kasdan, Michael D. Turner

and Brittany L. Grunau for Plaintiff and Appellant.

Lorber, Greenfield & Polito, Bruce W. Lorber, Robert B. Titus; 

McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie for 

Defendants and Respondents.
2

INTRODUCTION

Plaintiff Smart Corner Owners Association (the Association), a 

California nonprofit mutual benefit corporation, filed a construction defect 

action against the developers of a residential condominium tower. In 2019, 

the trial court granted the developers’ motion for summary judgment on the 

ground that the Association failed to obtain the consent of more than 50 

percent of its condominium owner members before filing the instant action as 

required by the governing declaration of covenants, conditions, and 

restrictions (CC&Rs). In concluding the Association’s complaint was invalid, 

the court rejected the Association’s argument that a subsequent vote of 

ratification, held after the filing of the operative complaint, could satisfy the 

member consent requirement. The court applied the holding of Branches 

Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) 26 Cal.App.5th 743 

(Branches), which involved a similar member vote requirement, and also 

resulted in dismissal of an association’s construction defect claims. 

After the Association filed its notice of appeal, the Legislature enacted 

Civil Code section 5986,1 effective January 1, 2020. Section 5986 renders 

prelitigation member vote requirements⎯like those at issue here and in 

Branches⎯null and void. The newly enacted statute abrogates the defense 

that noncompliance with such conditions defeats a construction defect claim. 

(§ 5986, subd. (b).) The Legislature also expressly provided the statute would 

apply retroactively “to claims initiated before the effective date of this 

section, except if those claims have been resolved through an executed 

settlement, a final arbitration decision, or a final judicial decision on the 

merits.” (§ 5986, subd. (d), italics added.) 

1 All undesignated statutory references are to the Civil Code unless 

otherwise specified.
3

The Association seeks reversal of the judgment on the ground that its 

claims had not yet been resolved through a “final judicial decision on the 

merits” when section 5986 became effective, and it is therefore entitled to the 

benefits of the new legislation. It also contends the prelitigation vote 

requirement violates state public policy. We agree.

We conclude a “final judicial decision on the merits” within the 

meaning of section 5986, subdivision (d), does not encompass a judgment that 

was not final on appeal as of the statute’s effective date. Section 5986 

therefore applies retroactively to the Association’s claims and compels

reversal of the judgment entered against it. We also hold, as an independent 

ground for reversal, that the prelitigation vote requirement at issue in this 

case violates fundamental state public policy. Accordingly, we reverse the 

judgment and direct the trial court to enter a new order denying the 

developers’ motion for summary judgment.

FACTUAL AND PROCEDURAL BACKGROUND2

I.

The Smart Corner Project

CJUF Smart Corner, LLC (CJUF), Canyon-Johnson Realty Advisors,

LLC, Canyon-Johnson Urban Fund, LP, Smart Corner, LLC (collectively, the 

CJUF Group), and Lankford & Associates, Inc. (together with the CJUF 

2 Consistent with the standard of review that applies to an order 

granting summary judgment, we present the facts in the light most favorable 

to the Association as the nonmoving party, “liberally construing [its]

evidentiary submission while strictly scrutinizing [Developers’] own showing, 

and resolving any evidentiary doubts or ambiguities in [the Association’s]

favor.” (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768; Light v. 

Dept. of Parks & Recreation (2017) 14 Cal.App.5th 75, 81.)
4

Group, the Developers) are an associated group of real estate owners and 

developers.3 In 2004, CJUF contracted with Hensel Phelps Construction 

Company (Hensel Phelps) for the construction of the Smart Corner 

condominium project (Smart Corner or project) at 1080 Park Boulevard in 

downtown San Diego. Smart Corner is a 19-story mixed-use development 

with 301 residential units and common areas. 

On May 24, 2007, the project architect issued its certificate of 

substantial completion for the project. On May 24, the City of San Diego (the 

City) issued a temporary certificate of occupancy for the project, although this 

temporary certificate of occupancy was not extended and lapsed after 30 

days. As of May 24, all but 25 of the project’s residential units lacked flooring 

or appliances and could not be lawfully occupied. As of May 24, the City had 

not yet completed its inspections of the project. Structural, fire alarm, fire 

sprinklers, and electrical inspections were completed after May 24. 

On July 6, 2007, the building failed its electrical system inspection. On 

July 10, the building failed structural inspection; it did not pass structural 

inspection until July 17. The City issued certificates of occupancy for 25 

residential units and the common areas on July 6, and for the project 

generally on July 17. The City continued to issue certificates of occupancy for 

the remaining residential units in the months that followed. On July 10, 

2007, CJUF recorded a notice of completion for the project. 

3 CJUF was the developer of the Smart Corner project. Canyon-Johnson 

Urban Fund, LP is a member and 85 percent owner of CJUF. Smart Corner, 

LLC is a member and 15 percent owner of CJUF. Canyon-Johnson Realty 

Advisors, LLC is the general partner of Canyon-Johnson Urban Fund, LP. 

Lankford & Associates, Inc. entered into a development agreement with 

CJUF to provide development services for the project. 
5

On August 27, 2007, CJUF, as declarant,4 caused an amended and 

restated declaration of CC&Rs to be recorded for Smart Corner. Among the 

enumerated powers of the Association was the power under section 4.3.11 of 

the CC&Rs to “initiate, defend, release, settle or intervene in mediation, 

arbitration, judicial or administrative proceedings on behalf of the 

Association in matters pertaining to . . . any and all claims, causes of action, 

damages and suits for defects relating in any way to the design or 

construction of the Association Property or Common Area or any portion 

thereof, on behalf of the Owners . . . .” 

Before the Association could initiate an action against CJUF, however, 

the Association was required to comply with a prelitigation vote provision set 

forth in section 4.4.4 of the CC&Rs (section 4.4.4), which stated:

“Members’ Approval of Certain Actions. In the event that any 

claim or other actions brought by the Association against 

Declarant, including, but not limited to, claims brought under 

California Civil Code Section 895 et seq., or any other applicable 

laws involving allegations of construction defects relating to the 

Association Property or the Common Area that are not resolved 

pursuant to the non-adversarial procedures set forth in California 

Civil Code Sections 910 through 938, the Association shall not 

4 The CC&Rs defined “declarant” to mean CJUF as well as its successors 

or assigns, “if such successors and assigns acquire any or all of Declarant’s 

interest in the Property for the purpose of purchase or sale, excluding any 

Owners, and Declarant has expressly transferred or assigned to such 

successors or assigns its rights and duties as Declarant to a portion or all of 

the Project. For any successor or assignee of ‘Declarant’ to be deemed a 

Declarant under the terms of this Declaration, Declarant shall record in the 

County a certificate so designating said successor or assignee as Declarant.” 
6

initiate a further action or procedure under Section 17.4 [5] or 

otherwise without first obtaining the consent of the Owners other 

than Declarant, constituting more than fifty percent (50%) of the 

Owners of the Association at a meeting or election of the 

Association conducted in accordance with the provisions of 

California Corporations Code Sections 7510 et seq. and 7613.” 

(Italics added.)

II.

The Construction Defect Action

A. The Association’s Notice of Construction Defect Claims

On July 6, 2017, the Association provided the CJUF Group and Hensel 

Phelps with notice of a construction defect claim and notice of commencement 

of legal proceedings under sections 895, et seq. and 910, et seq. of the Right to 

Repair Act and section 6000 of the Davis-Stirling Common Development Act

5 Section 17.4, “Alternative Dispute Resolution,” provided that “[t]he 

purpose of this Section 17.4 is to provide an expedited means of resolving any 

claims, disputes and disagreements which may arise between an Owner and 

the Association and Declarant after the close of escrow or other conveyance of 

any portion of the Property by Declarant concerning the Property, that are 

not resolved pursuant to any applicable statutory dispute resolution 

procedures (individually referenced to herein as ‘Dispute’ and collectively as 

‘Disputes.’).” It set forth provisions requiring mediation and arbitration of 

Disputes. 
7

(Davis-Stirling Act).6 The notice included a preliminary list of numerous 

alleged defects, including defects in the project’s exterior barrier coating, 

windows, door casings and doors, private decks, waterproofing, concrete, 

bathtubs and showers, roof membrane and roof flashing, roof laps and seals, 

tower floors, plumbing, venting, garage, and parking structure. 

On September 5, 2017, the parties stipulated to extend until September 

29 the deadline for completing statutory prelitigation requirements for

conducting a first visual inspection, and for the Developers’ service of 

responses to the Association’s request for documents and production of 

documents to the Association. On September 27, the CJUF Group and 

Hensel Phelps notified the Association of their election to opt out of the Right 

to Repair Act and Davis-Stirling Act prelitigation procedures. 

On October 6, 2017, the Association filed a complaint against the CJUF 

Group and Hensel Phelps, alleging causes of action for negligence, strict 

liability, breach of warranties, and violation of construction standards set 

forth in sections 896, et seq. In its operative first amended complaint filed 

February 14, 2018, the Association asserted a single cause of action against 

6 The Davis-Stirling Act was enacted in 1985 and “consolidated the 

statutory law governing condominiums and other common interest 

developments.” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 

Cal.4th 73, 81 (Villa De Las Palmas).) The Davis-Stirling Act is now codified 

at sections 4000 to 6150 of the Civil Code, formerly sections 1350 to 1376. 

(See Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker (2016) 2 

Cal.App.5th 252, 258.) Section 6000 imposes requirements with which an 

association must comply before filing construction defect claims against a 

builder, developer, or general contractor of a common interest development. 

(See § 6000, subds. (a) - (r).) Service of a notice of commencement of legal 

proceedings under section 6000 tolls all applicable statutes of limitation and 

repose. (§ 6000, subd. (b).)
8

the Developers7 and Hensel Phelps for violation of construction defect 

standards under section 896, et seq. 

In their respective answers to the first amended complaint, the 

Developers asserted defenses based on the Association’s alleged noncompliance with CC&R requirements for maintaining a claim, and based on 

the running of the statute of repose in section 941, subdivision (a).8 

On May 14, 2018, the Association filed the declaration of its attorney, 

David Peters, who averred that while the Association did not agree that the 

prelitigation voting provision in section 4.4.4 was enforceable, “by February 

15, 2018, more than a majority of the members voted: (1) in favor [of] making 

a claim under Article IV, Section 4.4.4, (2) filing a lawsuit and/or (3) to ratify 

any past actions by the Board regarding the pursuant [sic] of construction 

defect claims against the Declarant and other responsible entities.” 

B. The Branches Decision

On August 24, 2018, Division Three of the Fourth District Court of 

Appeal published Branches, a case involving alleged noncompliance with a 

pre-claim vote requirement in the CC&Rs of a residential condominium 

development. (Branches, supra, 26 Cal.App.5th at p. 749.) The association 

filed a demand for arbitration of construction defect claims against a 

developer without first obtaining the vote of at least 51 percent of its 

7 Lankford & Associates, Inc. was not named as a defendant in the first 

amended complaint. It was added as a defendant on October 18, 2018, when 

the Association filed a Doe amendment substituting it as Doe 1 to the first 

amended complaint. 

8 Subdivision (a) of section 941 provides, “[e]xcept as specifically set forth 

in this title, no action may be brought to recover under this title more than 10 

years after substantial completion of the improvement but not later than the 

date of recordation of a valid notice of completion.”
9

members as required by the community’s CC&Rs. (Id. at pp. 748–749.) The 

association later held a membership meeting during which 92 of 93 members 

present voted to ratify the prosecution of the construction defect claim 

against the developer. (Id. at p. 748.)

The developer moved for summary judgment on the ground that the 

association had failed to comply with the CC&Rs by obtaining owners’ 

consent to arbitration before the claim was filed. (Branches, supra, 26 

Cal.App.5th at p. 749.) The arbitrator agreed, reasoning that because the 

CC&Rs specified the requisite consent was to be obtained “prior to” initiating 

a claim, the later ratification vote was ineffective. (Ibid.) The trial court 

entered judgment confirming the arbitration award. 

On appeal, the association argued the arbitrator had exceeded his 

powers by issuing an award that violated the association’s “ ‘unwaivable’ ”

statutory right to ratification. (Branches, supra, 26 Cal.App.5th at p. 751.) 

The appellate court found that none of the statutes cited by the association 

established a right to ratification or prevented an association’s CC&Rs from 

requiring member approval “[p]rior to” the board instituting a legal claim. 

(Id. at pp. 753–757.) 

The Branches court also rejected the association’s position that the 

arbitrator’s decision violated state public policy favoring ratification. 

(Branches, supra, 26 Cal.App.5th at pp. 757–758.) Rather, the court 

concluded public policy favored placing limits on the authority of community 

development associations. (Id. at pp. 757–758, citing §§ 4065, 4070, 4230, 

4350, 4360, 4365, 5300, 5305, 5310 & 6150.) 

The Branches court found particular relevance in section 6150, which 

requires notice to the membership and a meeting before legal action may be 

instituted against a developer. (Branches, supra, 26 Cal.App.5th at p. 758.) 
10

In the court’s view, the member voting requirement in the CC&Rs merely 

went “a step further” than section 6150 by “requiring affirmative consent of a 

quorum of the members ‘prior to’ instituting such action.” (Ibid.) It viewed 

the member voting requirement to be “consistent with the aims of the [DavisStirling] Act⎯to balance the association’s need to operate efficiently with the 

rights of its members to be informed and participate in decisions that could 

impact the association for years, if not decades, to come.” (Ibid.) The court 

further stated: “[The association] would have us believe that there is a ‘right 

to ratify’ after the fact, as if that confers some benefit on the owners. It does 

not; it ignores their explicit right to consent beforehand, before a road has 

been taken that will be difficult, expensive, and time consuming.” (Ibid.) 

Accordingly, the court affirmed confirmation of the arbitrator’s award 

dismissing the association’s construction defect claims. (Ibid.)

C. The Developers’ Motion for Summary Judgment

In December of 2018, the Developers moved for summary judgment, 

arguing there were no disputed issues of fact and the first amended 

complaint failed as a matter of law, on two independent grounds. First, they 

argued the statute of repose under section 941, subdivision (a), had started to 

run on May 24, 2007, which they argued was the date of substantial 
11

completion of the project using the prime construction contract’s definition of 

“substantial completion,”9 and the action was therefore time-barred.

Second, relying on Branches, the Developers argued the complaint was 

“invalid” because the Association had filed it without first obtaining consent 

from the majority of its members, as required by section 4.4.4. They further 

argued strict compliance with the CC&Rs was required under Branches and

therefore the February 15, 2018 member ratification vote was ineffective to 

cure the original noncompliance. The Developers also claimed that because 

the original complaint was invalid, the statute of repose had continued to run 

and had lapsed, such that the Association had no time remaining in which to 

bring a valid action based on the February 15 vote of ratification. 

The Association opposed the Developers’ motion for summary 

judgment. First, in response to the Developers’ statute of repose defense, the 

Association argued the date of “substantial completion” for purposes of 

section 941, subdivision (a), could not be contractually defined. The 

Association also submitted evidence that it argued created triable issues of 

fact as to whether the prime contract definition of “substantial completion” 

had been satisfied by May 24, 2007. This evidence included that as of May 

24, most units could not be lawfully occupied; the building had failed certain 

9 According to the Developers’ summary judgment motion, “substantial 

completion” was defined in the prime contract as occurring “when: (1) the 

Work is sufficiently complete in accordance with the Contract Documents to 

permit lawful occupancy and use thereof for its intended purpose, (2) a 

temporary certificate of occupancy has been issued, (3) all Project utilities 

have been installed and approved, (4) the Architect has issued its Certificate 

of Substantial Completion, and (5) the Contractor has certified that all 

remaining work will not interfere with the Owner’s use of the Project and is 

capable of being completed within sixty (60) calendar days.” 
12

inspections; subcontractors had not completed their work; and certificates of 

occupancy were yet to be issued for most of the residential units. 

Second, the Association argued that its complaint had not been 

invalidated by alleged noncompliance with section 4.4.4. It claimed section 

4.4.4 applied only to initiation of a mediation or arbitration, and not to the 

filing of a civil action in superior court. It further argued that section 4.4.4 

was unenforceable because it was procedurally and substantively 

unconscionable. Section 4.4.4 had “maximum procedural unconscionability,”

the Association argued, because it was drafted before the Association came 

into existence and was therefore akin to a contract of adhesion. And it was 

substantively unconscionable because it forced the Association to “jump over 

unnecessary hurdles before it can prosecute a claim against the Declarant for 

construction defects.” 

Finally, the Association argued the February 15, 2018 vote of 

ratification by a majority of its members was effective to meet the member 

consent requirement. The Association asserted that to the extent section 

4.4.4 precluded members from validating board actions through ratification, 

it violated public policy and amounted to an unreasonable servitude within 

the meaning of section 5975, subdivision (a).10 It argued Branches was not 

dispositive of its right to comply with a member consent requirement through 

ratification, because the court in Branches considered only the narrow issue

of whether the arbitrator had exceeded his powers by violating an 

“unwaivable” right of ratification, and had not been called to consider more 

10 Civil Code section 5975, subdivision (a), provides, in part, that “[t]he 

covenants and restrictions in the declaration shall be enforceable equitable 

servitudes, unless unreasonable, and shall inure to the benefit of and bind all 

owners of separate interests in the development.”
13

generally the scope of an association’s ability to cure non-compliance with 

CC&Rs through ratification of board decisions. 

D. The Trial Court’s Ruling 

On July 22, 2019, the trial court issued a written ruling granting in 

part and denying in part the Developers’ motion for summary judgment.11 

The court denied the motion insofar as it was based on the alleged running of 

the statute of repose. The court was unpersuaded that the agreed definition 

of “substantial completion” in the construction contract governed

interpretation of section 941, subdivision (a). Even assuming the contractual 

definition applied, the court found the Developers had failed to establish an 

absence of triable issues of material fact that the project was substantially 

completed by May 24, based on the evidence submitted by the Association. 

The court noted the parties agreed that absent establishing a date of 

substantial completion, the date of recording the notice of completion 

commences the running of the statute of repose under section 941, 

subdivision (a). The court further noted there was no dispute that the 

Association’s notice of claim tolled the statute pursuant to section 927 and

the Developers argued “the 10-year statute of repose, as tolled by [the 

Association’s] Notice of Claim, ran on November 17, 2017.” The court 

11 Hensel Phelps filed a motion for summary judgment that was described 

by the trial court as “substantially similar” to the summary judgment motion 

filed by the Developers. As we discuss in footnote 13, post, in the same 

written ruling in which it resolved the Developers’ summary judgment 

motion, the court also ruled on Hensel Phelps’s summary judgment motion. 
14

concluded that under this analysis, the Association’s original complaint was 

timely filed on October 6, 2017.12 

The court found merit, however, in the Developers’ contention that the 

action was barred for noncompliance with section 4.4.4. The court found 

Branches controlling. It rejected the Association’s contention that the holding 

of Branches should be confined to cases involving confirmation of an 

arbitration award. Rather, “Branches analyzes the substantive, legal issue of 

enforcement of a CC&R member consent requirement and, as such, applies 

irrespective of the forum.” “Under Branches,” the court concluded, “Plaintiff’s 

failure to obtain the requisite consent of the membership prior to bringing 

this action against the [Developers] renders [the Association’s] original 

complaint invalid. The First Amended Complaint was also filed before [the 

Association] obtained membership approval. Thus, the First Amended 

Complaint is also invalid.” The court also rejected the Association’s public 

12 Section 927 provides: “If the applicable statute of limitations has 

otherwise run during this process, the time period for filing a complaint or 

other legal remedies for violation of any provision of this title, or for a claim 

of inadequate repair, is extended from the time of the original claim by the 

claimant to 100 days after the repair is completed, whether or not the 

particular violation is the one being repaired. If the builder fails to 

acknowledge the claim within the time specified, elects not to go through this 

statutory process, or fails to request an inspection within the time specified, 

the time period for filing a complaint or other legal remedies for violation of 

any provision of this title is extended from the time of the original claim by 

the claimant to 45 days after the time for responding to the notice of claim 

has expired. If the builder elects to attempt to enforce its own nonadversarial 

procedure in lieu of the procedure set forth in this chapter, the time period for 

filing a complaint or other legal remedies for violation of any provision of this 

part is extended from the time of the original claim by the claimant to 100 

days after either the completion of the builder’s alternative nonadversarial 

procedure, or 100 days after the builder’s alternative nonadversarial 

procedure is deemed unenforceable, whichever is later.”
15

policy and ratification arguments on the ground that identical arguments had 

been rejected in Branches. 

The court also rejected the Association’s contention that section 4.4.4 

did not apply to civil claims, reasoning that the words “ ‘or otherwise’ ” in 

section 4.4.4 were unambiguous and made clear the provision applied to civil 

actions and not only to mediation or arbitration. Finally, the court found the 

Association failed to establish that section 4.4.4 was procedurally 

unconscionable based on Pinnacle Museum Tower Assn. v. Pinnacle Market 

Development (US), LLC (2012) 55 Cal.4th 223 (Pinnacle),13 and that both 

procedural and substantive unconscionability were required to render the 

provision unenforceable. 

13 In Pinnacle, the California Supreme Court explained that even if 

CC&Rs could “perhaps be viewed as adhesive, a developer’s procedural 

compliance with the Davis-Stirling Act provides a sufficient basis for 

rejecting an association's claim of procedural unconscionability.” (Pinnacle, 

supra, 55 Cal.4th at p. 248.)
16

On August 14, 2019, the court entered judgment for the Developers. 

On August 15, the Developers filed a notice of entry of judgment. The 

Association filed its notice of appeal on September 26.14

III.

Enactment of Section 5986

A. Senate Bill No. 326 (2019–2020 Reg. Sess.) 

On August 30, 2019, after passage by the Legislature, the Governor 

signed Senate Bill No. 326 (2019–2020 Reg. Sess.) (Senate Bill 326), which 

added section 5986 to the Davis-Stirling Act, effective January 1, 2020. 

(Stats. 2019, ch. 207, § 2.) The new legislation nullifies prelitigation member 

vote provisions like those at issue here and in Branches and eliminates the 

assertion of noncompliance with such requirements as a defense to 

construction defect actions. (See § 5986, subd. (b).) 

14 In the same July 22, 2019 minute order in which the trial court granted 

in part and denied in part the Developers’ motion for summary judgment, the 

court also denied Hensel Phelps’s summary judgment motion in its entirety. 

Hensel Phelps then petitioned this court for a writ of mandate directing the 

trial court to vacate its order denying the motion and enter an order granting 

the motion. (Hensel Phelps Construction Co. v. Superior Court (2020) 44 

Cal.App.5th 595, 601 (Hensel Phelps).) Hensel Phelps “primarily argued that 

the date of substantial completion adopted by the parties to the contract

‘conclusively establishe[d]’ the date of substantial completion” under section 

941, subdivision (a). (Hensel Phelps, at p. 601.) In Hensel Phelps, another 

panel of this court denied the petition, holding the terms of the construction 

contract did not conclusively establish the date of substantial completion 

under section 941, and that “[s]ubstantial completion under the statute is a 

factual issue, to be determined by the trier of fact based on competent 

evidence concerning the actual state of construction of the improvement.” 

(Hensel Phelps, at p. 616.)
17

The analysis in support of Senate Bill 326 described the need for 

section 5986.15 Section 5986 was enacted to “ensure[ ] that developers cannot 

use the governing structure of a homeowners association to escape liability.” 

(Assem. Com. on Judiciary, Analysis of Sen. Bill 326, as amended June 24, 

2019, p. 9.) One legislative analysis report explained: 

“As part of the creation of a new HOA, the developer 

typically begins laying the groundwork for the HOA’s future selfgovernance. This includes establishing the initial governing 

documents for the HOA, including the HOA’s ‘declaration’ [of] 

covenants, conditions, and restrictions (CCRs). While the HOA 

developer is still selling off the separate properties within the 

HOA to homeowners, it is also common for the developer to serve, 

or appoint people to serve, on the HOA board of directors. In 

these ways, HOA developers exercise a great deal of control over 

how the HOA will operate going forward, even though, over time, 

the developer’s direct involvement with the HOA typically fades 

away.

15 On April 2, 2021, we granted the Association’s unopposed amended 

motion for judicial notice as to the following materials from the legislative 

history of Senate Bill 326, which were presented as separate exhibits: 

Exhibits A through G to the Association’s amended motion (consisting of 

proposed and amended versions of Sen. Bill 326); Exhibit H (Sen. Com. on 

Judiciary, Analysis of Sen. Bill 326, Mar. 27, 2019); Exhibit I (Sen. Com. on 

Housing, Analysis of Sen. Bill 326, Mar. 27, 2019); Exhibit K (Sen. Rules 

Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill 326, as 

amended May 1, 2019); Exhibit L (Assem. Com. on Housing and Community 

Development, Analysis of Sen. Bill 326, as amended June 12, 2019); Exhibit 

M (Assem. Com. on Housing and Community Development, Background 

Information Request for Sen. Bill 326); Exhibit N (Assem. Com. on Judiciary, 

Analysis of Sen. Bill 326, as amended June 24, 2019); Exhibit O (Assem. 

Judiciary Com., Mandatory Information Worksheet on Sen. Bill 326) Exhibit 

P (Assem. Com. on Housing and Community Development, 3d reading 

analysis of Sen. Bill 326, as amended July 3, 2019); and Exhibit Q (Sen.

Rules Com., Off. of Sen. Floor Analyses, Unfinished Business Analysis of Sen. 

Bill 326, as amended July 3, 2019).
18

“The involvement of HOA developers in the creation of the 

HOA’s initial government documents and the appointment of 

early HOA board members can sometimes create conflicts of 

interest because the HOA and the developer’s interests are not 

necessarily aligned.

“[T]his bill addresses one such circumstance. In drafting 

the governing documents for the HOAs they are creating, 

developers sometimes add provisions that make it quite difficult 

for the HOA to sue the developer in the event that construction 

defects are discovered at the HOA. [¶] While it could be argued 

that requiring a vote of the HOA members prevents the board of 

directors from spending the HOA’s money on legal disputes 

without the support of the members, the fact that these provisions 

are limited to construction defect claims against the developer 

suggests that more is afoot. Moreover, Civil Code Section 6150 

already provides some protections against an overly litigious 

board bent on suing the developer: it requires an HOA board to 

hold a meeting of the members 30 days prior to filing a lawsuit, 

stating its reasoning and laying out the options available to the 

HOA. [¶] This bill ensures that developers cannot reap the benefit 

of having taken advantage of their participation in the creation of 

the HOA in this way.” (Sen. Rules Com., Off. of Sen. Floor 

Analyses, 3d reading analysis of Sen. Bill 326, as amended May 

1, 2019, pp. 6–7, italics added.) 

Proponents of Senate Bill 326 pointed out that the bill “would be 

consistent with a recent Supreme Court of Massachusetts ruling that 

invalidated governing document provisions designed to inoculate the 

developer against construction defect claims. That court found such 

provisions to be void as against public policy, writing: [¶] ‘[i]t is overreaching 

for a developer to impose a condition precedent that, for all practical 

purposes, makes it extraordinarily difficult or even impossible for the [Board 

of Directors] to initiate any litigation against the developers regarding the 

common areas and facilities of a condominium. Such a provision has all the 

same flaws as a waiver of liability provision — which we would find void as 
19

contravening public policy — but without the transparency of such a 

provision.’ (Trustees of the Cambridge Point Condominium Trust v. 

Cambridge Point, LLC (2018) 478 Mass. 697, 709[(Cambridge Point)].)” (Sen. 

Com. on Judiciary, Analysis of Sen. Bill 326, Mar. 27, 2019, p. 10.) 

The legislative materials described developer-inserted preconditions to 

litigation as “ ‘poison pill’ ” provisions that “make it prohibitively difficult for 

HOAs to pursue claims against [developers].” (Assem. Judiciary Com., 

Mandatory Information Worksheet on Sen. Bill 326, pp. 1–2.) Branches was 

cited as an example of a developer using such a provision to its benefit. 

(Assem. Judiciary Com., Mandatory Information Worksheet on Sen. Bill 326, 

pp. 1–3.) 

B. Section 5986

Section 5986 has five subdivisions. Subdivision (a) confers the board of 

an association with authority to commence and pursue a legal proceeding 

against a declarant, developer, or builder of a common interest development, 

and vests that authority solely in those board members that are unaffiliated 

with the declarant, developer, or builder. (See § 5986, subd. (a).) 

Subdivision (b) reads as follows: “The governing documents shall not 

impose any preconditions or limitations on the board’s authority to commence 

and pursue any claim, civil action, arbitration, prelitigation process pursuant 

to Section 6000 or Title 7 (commencing with Section 895) of Part 2 of Division 

2, or other legal proceeding against a declarant, developer, or builder of a 

common interest development. Any limitation or precondition, including, but 

not limited to, requiring a membership vote as a prerequisite to, or otherwise 

providing the declarant, developer, or builder with veto authority over, the 

board’s commencement and pursuit of a claim, civil action, arbitration, 

prelitigation process, or legal proceeding against the declarant, developer, or 
20

builder, or any incidental decision of the board, including, but not limited to, 

retaining legal counsel or incurring costs or expenses, is unenforceable, null, 

and void. The failure to comply with those limitations or preconditions, if 

only, shall not be asserted as a defense to any claim or action described in this 

section.” (Italics added.) 

Subdivision (c) of section 5986 provides that provisions imposing 

limitations or preconditions on the board’s authority to initiate claims are 

valid and enforceable if “adopted solely by the nondeclarant affiliated 

members of the association . . . in accordance with the requirements 

necessary to amend the governing documents of the association.” 

Subdivision (d) states: “This section applies to all governing documents, 

whether recorded before or after the effective date of this section, and applies 

retroactively to claims initiated before the effective date of this section, except 

if those claims have been resolved through an executed settlement, a final 

arbitration decision, or a final judicial decision on the merits.” (Italics 

added.)

Subdivision (e) provides, in part, that “[n]othing in this section extends 

any applicable statute of limitation or repose to file or initiate any claim, civil 

action, arbitration, prelitigation process, or other legal proceeding.” 

DISCUSSION

The Association contends section 5986 applies retroactively to this case 

and compels reversal of the trial court’s order granting summary judgment to 

the Developers based on its failure to obtain a membership vote before filing 

its complaint under section 4.4.4 of the CC&Rs. It argues its claims had not 

been resolved by “final judicial decision on the merits” within the meaning of 

subdivision (d) when section 5986 became effective on January 1, 2020, and 
21

that they are therefore not excluded from the general rule of retroactivity in 

subdivision (d). The Association also seeks reversal on the ground that 

section 4.4.4 is unenforceable because it violates public policy to the extent it 

does not allow its members to consent to litigation by a vote of ratification. 

The Developers argue the benefits of section 5986 are unavailable to 

the Association because this action was resolved in a “final judicial decision 

on the merits” before the effective date of the statute, when the trial court 

entered judgment on August 14, 2019. The Developers also claim section 

4.4.4 is not violative of fundamental state public policy, even if it excludes the 

possibility of members consenting to construction defect litigation through a 

vote of ratification. 

I.

“Final Judicial Decision on the Merits” Means Appellate Finality

A. Standard of Review

A trial court’s grant of summary judgment is reviewed de novo. (Coral 

Construction, Inc. v. City and County of San Francisco (2010) 50 Cal.4th 315, 

326.) “On appeal from the granting of a motion for summary judgment, we 

examine the record de novo, liberally construing the evidence in support of 

the party opposing summary judgment and resolving doubts concerning the 

evidence in favor of that party.” (Miller v. Department of Corrections (2005) 

36 Cal.4th 446, 460.) “The trial court’s stated reasons for granting summary 

judgment are not binding because we review its ruling not its rationale.” 

(Canales v. Wells Fargo Bank, N.A. (2018) 23 Cal.App.5th 1262, 1268 

(Canales).) “To the extent issues on appeal from a summary judgment 

involve the interpretation of a statute, they are issues of law subject to 

independent review.” (City of Malibu v. Santa Monica Mts. Conservancy

(2002) 98 Cal.App.4th 1379, 1383; see Bruns v. E-Commerce Exchange, Inc.
22

(2011) 51 Cal.4th 717, 724 [“[s]tatutory interpretation is a question of law 

that we review de novo”]; Sacks v. City of Oakland (2010) 190 Cal.App.4th 

1070, 1082 [where the pertinent facts are undisputed and the issue is one of 

statutory interpretation, “ ‘the question is one of law and we engage in a de

novo review of the trial court’s determination’ ”].) The interpretation of the 

terms of CC&Rs is also subject to our independent review where, as here, the 

interpretation does not turn on the credibility of extrinsic evidence. (Harvey 

v. The Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 817; Starlight 

Ridge South Homeowners Assn. v. Hunter-Bloor (2009) 177 Cal.App.4th 440, 

445.)

B. Principles of Statutory Interpretation

Civil statutes are presumed to operate prospectively “in the absence of 

a clear indication of a contrary legislative intent.” (Quarry v. Doe 1 (2012) 53 

Cal.4th 945, 955 (Quarry); see § 3 [“No part of [this code] is retroactive, 

unless expressly so declared.”].) “In construing statutes, there is a 

presumption against retroactive application unless the Legislature plainly 

has directed otherwise by means of ‘ “express language of retroactivity or . . . 

other sources [that] provide a clear and unavoidable implication that the 

Legislature intended retroactive application.” ’ ” (Quarry, at p. 955.) 

The parties do not dispute that subdivision (d) of section 5986 is a clear 

expression of legislative intent for section 5986 to apply retroactively. They 

also do not dispute the retroactive reach of section 5986 extends to claims 

that were initiated and that remained pending at the time the statute 

became effective. Where they differ, however, is on the scope of pending 

claims to which the new legislation applies. 

As we have noted, the dispute arises from the parties’ disagreement 

over the meaning of the subdivision (d) phrase “final judicial decision on the 
23

merits.” The Association contends that a judgment is not “final” under 

California law as long as it remains subject to appeal, and since its appeal 

was pending on January 1, 2020, when the statute became effective, its 

claims had not yet been resolved through a “final judicial decision” within the 

meaning of subdivision (d). The Association also argues that “on the merits” 

in subdivision (d) means resolution “on substantive law grounds” and 

excludes claims terminated for failure to comply with a developer-drafted 

prelitigation vote requirement. 

The Developers, unsurprisingly, offer a different interpretation of “final 

judicial decision on the merits.” Citing Sullivan v. Delta Air Lines, Inc.

(1997) 15 Cal.4th 288, 303–304 (Sullivan), they argue that “final” can refer to 

a trial court ruling that has become “final” because it has been reduced to 

judgment. Under their view, the Association’s claims were resolved by a 

“final judicial decision” when judgment was entered on August 14, 2019, 

before the effective date of section 5986, making section 5986 inapplicable to 

the Association’s claims. The Developers also contend that if a trial court 

“substantively” addresses whether voting requirements in CC&Rs were met, 

then its ruling is a decision “on the merits.” 

In Aldea Dos Vientos v. CalAtlantic Group, Inc. (2020) 44 Cal.App.5th 

1073 (Aldea), Division Six of the Court of Appeal, Second Appellate District 

interpreted and applied the subdivision (d) phrase “final arbitration 

decision.” However, no court of review of this state has yet interpreted the 

phrase “final judicial decision on the merits.” 

Our goal in interpreting statutes is “ ‘to ascertain the intent of the 

enacting legislative body so that we may adopt the construction that best 

effectuates the purpose of the law.’ ” (Klein v. United States of America

(2010) 50 Cal.4th 68, 77 (Klein), quoting Hassan v. Mercy American River 
24

Hospital (2003) 31 Cal.4th 709, 715.) A step-by-step process of statutory 

interpretation has been developed by the courts of this state. (See Mt. 

Hawley Ins. Co. v. Lopez (2013) 215 Cal.App.4th 1385, 1396 (Lopez); Alejo v. 

Torlakson (2013) 212 Cal.App.4th 768, 786-787 (Alejo).) The “ ‘key to 

statutory interpretation is applying the rules of statutory construction in 

their proper sequence . . . as follows: “we first look to the plain meaning of 

the statutory language, then to its legislative history and finally to the 

reasonableness of a proposed construction.” ’ ” (Lopez, at p. 1396.) 

In the initial step, we examine “the words of the statute, ‘because the 

statutory language is generally the most reliable indicator of legislative 

intent.’ ” (Klein, supra, 50 Cal.4th at p. 77.) “When the statutory text is 

ambiguous, or it otherwise fails to resolve the question of its intended 

meaning,” we proceed to the second step, and “look to the statute’s legislative 

history and the historical circumstances behind its enactment.” (Ibid.) “In 

this step, courts may ‘turn to secondary rules of interpretation, such as 

maxims of construction, “which serve as aids in the sense that they express 

familiar insights about conventional language usage.” ’ ” (Alejo, supra, 212 

Cal.App.4th at p. 787, quoting Flannery v. Prentice (2001) 26 Cal.4th 572, 579

(Flannery).) 

“ ‘If ambiguity remains after resort to secondary rules of construction 

and to the statute’s legislative history, then we must cautiously take the 

third and final step in the interpretive process. [Citation.] In this phase of 

the process, we apply “reason, practicality, and common sense to the 

language at hand.” [Citation.] Where an uncertainty exists, we must 

consider the consequences that will flow from a particular interpretation.’” 

(Alejo, supra, 212 Cal.App.4th at p. 788.)
25

C. Application to Section 5986

1. Step One—Plain Meaning

In considering the text of section 5986, we give its words “a plain and 

commonsense meaning.” (Flannery, supra, 26 Cal.4th at p. 577.) In doing so, 

we do not “consider the statutory language in isolation”; “[r]ather, we look to 

‘the entire substance of the statute . . . in order to determine the scope and 

purpose of the provision . . . .’ ” (Id. at p. 578.) “When statutory language 

includes words or terms that courts have previously construed, ‘the 

presumption is almost irresistible’ that the Legislature intended them to 

have the same ‘precise and technical’ meanings given by the courts.” (Hughes 

v. Pair (2009) 46 Cal.4th 1035, 1046 (Hughes); accord, Richardson v. Superior 

Court (2008) 43 Cal.4th 1040, 1050.) Thus, where the Legislature uses terms 

“that have a well-settled judicial construction,” we may presume it intends 

“that the terms retain the same meaning that the courts have placed upon 

them . . . .” (Hughes, at p. 1046.) 

With these concepts in mind, we consider the phrase “final judicial 

decision on the merits.” The words “on the merits” have an accepted legal 

meaning. They refer to the substantive elements of a claim or defense, as 

distinguished from technical or procedural impediments to proceeding with a 

claim. (Black’s Law Dict. (11th ed. 2019) p. 1185, col. 2 [defining “merits” as 

“[t]he elements or grounds of a claim or defense; the substantive 

considerations to be taken into account in deciding a case, as opposed to 

extraneous or technical points, esp[ecially] of procedure”].) A ruling that a 

claim is time-barred under the statute of limitations, for example, is 

considered a “ ‘technical or procedural’ ” ground for disposing of a claim, 

rather than a determination “ ‘on the merits.’ ” (Boyd v. Freeman (2017) 18 

Cal.App.5th 847, 856; Koch v. Rodlin Enterprises (1990) 223 Cal.App.3d 1591, 
26

1596 [“Termination of an action by a statute of limitations is deemed a 

technical or procedural, rather than a substantive, termination. [Citation.] 

‘Thus . . . dismissal on limitations grounds is in no way dependent on nor 

reflective of the merits—or lack thereof—in the underlying action.’ ” ].) 

Dismissal of a construction defect claim for failure to comply with the 

timing requirement of a condition precedent to suit is analogous to 

disposition on statute of limitations grounds, and is equally amenable to 

being described as a technical or procedural resolution rather than a 

resolution “on the merits.” Although the Developers characterize a court’s 

adjudication of the defense of noncompliance with a vote requirement as a 

“substantive” decision, they fail to cite any authority supporting their 

assertion, and we find it unpersuasive. 

Moreover, when considered in light of the full text of section 5986 and 

its express intent to nullify prelitigation vote requirements and eliminate 

their use as a defense, it seems highly unlikely the Legislature would exclude 

from the statute’s retroactive reach claims that are disposed of on the very 

defense it sought to abrogate. In Aldea, the court reasoned that the 

subdivision (d) phrase “on the merits” modified “final arbitration decision” as 

well as “final judicial decision,” and concluded that an arbitral award 

dismissing an association’s construction defect claim for failure to strictly 

comply with a member consent requirement “was not on the merits.” (Aldea,

supra, 44 Cal.App.5th at pp. 1079–1080.) We read the phrase similarly and 

conclude the Legislature included the phrase “on the merits” in subdivision 

(d) to indicate that claims terminated for noncompliance with prelitigation 

voting requirements were not meant to be excluded from the statute’s 

retroactive reach. 
27

Although we find the phrase “on the merits” unambiguous, we cannot 

say the same of the phrase “final judicial decision.” The term “final,” used as 

it is here to describe a “judicial decision,” has more than one possible 

meaning. The Association cites Manco Contracting Co. (W.L.L.) v. Bezdikian

(2008) 45 Cal.4th 192, 202 (Manco Contracting) for the proposition that “in 

California a judgment is not final and conclusive between the parties when it 

is on appeal, or for as long as it remains subject to appeal . . . .” 

As the Developers point out, however, “finality on appeal is not the only 

meaning of the phrase ‘final judgment.’ ” (Sullivan, supra, 15 Cal.4th at p.

303.) “In its most fundamental sense, ‘finality’ is an attribute of every 

judgment at the moment it is rendered; indeed, if a judicial determination is 

not immediately ‘final’ in this sense it is not a judgment, no matter what it is 

denominated. The Legislature has incorporated this meaning of finality into 

the very definition of a judgment: ‘A judgment is the final determination of 

the rights of the parties in an action or proceeding.’ (Code Civ. Proc., § 577, 

italics added.).” (Id. at p. 304.) “Finality in this sense not only makes a 

judicial determination a judgment, it also makes that judgment appealable.” 

(Ibid.) The Developers thus argue the Association’s claims were resolved by 

“final judicial decision” when the trial court’s minute order granting their 

dispositive motion was reduced to judgment. Given the discussion in 

Sullivan of the different meanings of finality, we cannot disagree that “final” 

can reasonably mean finality after appeal, as advocated by the Association, or 

a trial court decision reduced to final judgment, as urged by the Developers. 

The Legislature’s use of the words “judicial decision” suggests the 

Association’s interpretation is probably the one the Legislature intended. 

“Judicial” is a general term that refers equally to a trial court, appellate 

court, or a high court of review. (See Cal. Const., art. VI, § 1 [“The judicial 
28

power of this State is vested in the Supreme Court, courts of appeal, and 

superior courts, all of which are courts of record.”].) Had the Legislature

meant to exclude from the retroactive reach of section 5986 claims that had 

already been resolved in the trial court, it could easily have done this by 

inserting the words “trial court” in place of “judicial.” (See, e.g., Manco 

Contracting, supra, 45 Cal.4th at p. 203 [interpreting California’s Uniform 

Foreign-Country Money Judgments Recognition Act; reasoning that “[i]f the 

Legislature had intended to restrict the meaning of ‘final’ ” to refer “only to 

finality in the trial court, i.e., a judgment that is not interlocutory,” “it could 

have easily added the phrase ‘in the trial court’ after ‘final’ ”].) 

Similarly, the Legislature’s use of the word “decision” rather than 

“judgment” suggests it had a broader scope of tribunals in mind, since 

judgments are issued only by trial courts (see, e.g., Code Civ. Proc., § 577 [“A 

judgment is the final determination of the rights of the parties in an action or 

proceeding.”]; Aixtron v. Veeco Instruments Inc. (2020) 52 Cal.App.5th 360, 

384 [under the “ ‘ “one final judgment rule,” ’ ” “ ‘ “ ‘an appeal may be taken 

only from the final judgment in an entire action’ ” ’ ”]), whereas courts of all 

levels issue decisions (Vazquez v. Jan-Pro Franchising Internat. (2021) 10 

Cal.5th 944, 952–953 [referring to Dynamex Operations W. v. Superior Court

(2018) 4 Cal.5th 903 as a “judicial decision”]; Martinez v. Combs (2010) 49 

Cal.4th 35, 66 [describing United States v. Silk (1947) 331 U.S. 704, 713 as a 

“judicial decision”]; In re Thomas (2018) 30 Cal.App.5th 744, 761–762 

[referring to “ ‘decisions’ ” of the California Courts of Appeal]). 

However, although we find it likely the Legislature intended “final 

judicial decision on the merits” to have the meaning advanced by the 

Association, we cannot confidently reject the Developers’ interpretation based 

solely on an examination of the statutory text. Accordingly, we proceed to the 
29

next step and consider the legislative history of section 5986. (Jones v. Lodge 

at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162–1163 [“statutory 

language is not plain” where “[i]ts language does lend itself to plaintiff’s 

interpretation, but . . . that is not the only reasonable interpretation . . . .”].) 

2. Step Two—Legislative History and Maxims of Construction

(i) Legislative History

“If [a statute] is susceptible of multiple interpretations . . . we will 

divine the statute’s meaning by turning to a variety of extrinsic sources, 

including the legislative history [citation], the nature of the overall statutory 

scheme [citation], and consideration of the sorts of problems the Legislature 

was attempting to solve when it enacted the statute [citation].” (Clayworth v. 

Pfizer, Inc. (2010) 49 Cal.4th 758, 770.) “In addition, an ‘examination of the 

original text of the statute and the evolution of the language’ of a statute that 

has been amended is ‘useful in ascertaining its current meaning.’ ” (Lopez, 

supra, 215 Cal.App.4th at p. 1400, quoting Ailanto Properties, Inc. v. City of 

Half Moon Bay (2006) 142 Cal.App.4th 572, 586 (Ailanto Properties).) 

As detailed above, legislative analyses of Senate Bill 326 explained that 

section 5986 was enacted to end a trend of developers taking advantage of 

their ability, early in the formation of condominium associations, to insert 

provisions into CC&Rs which make it more difficult for the association to sue 

them for construction defects. (Assem. Com. on Judiciary, Analysis of Sen. 

Bill 326, as amended June 24, 2019, p. 9; Sen. Rules Com., Off. of Sen. Floor 

Analyses, 3d reading analysis of Sen. Bill 326, as amended May 1, 2019, pp. 

6–7.) The bill was meant to “ensure[ ] that developers cannot reap the 

benefit of having taken advantage of their participation in the creation of the 

HOA in this way.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading 

analysis of Sen. Bill 326, as amended May 1, 2019, p. 7.) Cambridge Point, 
30

the Massachusetts Supreme Court case, was cited favorably for its holding 

that developer-drafted conditions precedent to a suit that increased the 

difficulty of initiating litigation against developers contravened public policy. 

(Sen. Com. on Judiciary, Analysis of Sen. Bill 326, Mar. 27, 2019, p. 10.) 

Branches was offered as an example of a developer’s successful employment 

of the disfavored defense. (Assem. Judiciary Com., Mandatory Information 

Worksheet on Sen. Bill 326, pp. 1–3.) 

Subdivision (d) was proposed to make the statutory nullification of such 

provisions, and the defenses based on them, retroactive. (Sen. Com. on 

Judiciary, Analysis of Sen. Bill 326, Mar. 27, 2019, p. 10.) As originally 

drafted, the text of subdivision (d) of section 5986 stated: “This section 

applies to all governing documents, whether recorded before or after the 

effective date of this section, and applies retroactively to any claims initiated 

before the effective date of this section.” (Sen. Amend. to Sen. Bill 326, Mar. 

27, 2019, p. 6, original italics omitted; our italics added.) 

The bill’s author later proposed an amendment to subdivision (d) 

“strik[ing] out ‘section’ and insert[ing]: [‘]section, except if those claims have 

been resolved through an executed settlement, a final arbitration decision, or 

a final judicial decision on the merits.[’] ” (Sen. Com. on Judiciary, Analysis 

of Sen. Bill 326, Mar. 27, 2019, p. 13, amend. 21.) 

An analysis report prepared for the Senate Committee on Judiciary 

explained the impetus for the proposed amendment: 

“As it appears in print, the bill would apply retroactively, 

not just to any governing documents sitting around out there, but 

also to pending construction defect claims. Even if it makes 

policy sense for the bill to nullify these self-serving provisions 

within existing HOA governing documents generally, this general 

rule becomes more problematic when applied to pending claims. 

Historically, this Committee has sought to avoid interfering with 

or altering the outcome of pending litigation. Nonetheless, as the 
31

Massachusetts Supreme Court’s decision [in Cambridge Point] 

suggests, these provisions raise such concern that the courts 

might well find them void as against public policy regardless of 

whether this bill passes. The Committee might find retroactive 

application to pending claims appropriate under that narrow 

circumstance.

“At the same time, the language in the bill is written so 

broadly that it could be interpreted to allow for the revival of 

lapsed claims or claims that have already been resolved on their 

merits. That this is not the bill’s intent and the author proposes 

to offer an amendment in Committee that would limit the bill’s 

retroactivity to claims that are not time-barred and that have not 

been resolved on their merits.” (Sen. Com. on Judiciary, Analysis 

of Sen. Bill 326, Mar. 27, 2019, pp. 10–11, italics added.) 

To address the issues set forth in the foregoing comments, amendments 

were proposed to “clarify that the bill’s provisions regarding nullification of 

specified provisions within an HOA’s governing documents do not apply to 

claims that are time-barred or that have reached final resolution on their 

merits.” (Sen. Com. on Judiciary, Analysis of Sen. Bill 326, Mar. 27, 2019, p. 

11, italics added.) 

The proposed amendment to subdivision (d) was approved in committee 

and voted into the bill on May 1, 2019. The amendment remained in Senate 

Bill 326 through passage by the Legislature without further change. (See § 

5986, subd. (d).) 

Two aspects of this history draw our attention. First, developerdrafted, prelitigation member vote requirements were viewed as clearly 

violative of public policy. Retroactive abrogation of defenses based on failure 

to comply with these requirements, even in the context of “pending litigation” 

or “pending claims,” was considered appropriate under the circumstances. 

Second, subdivision (d) was amended to ensure the statute’s retroactivity 

provision was appropriately circumscribed so it did not result in “reviv[ing]” 
32

claims that had “reached final resolution on their merits.” (Sen. Com. on 

Judiciary, Analysis of Sen. Bill 326, Mar. 27, 2019, p. 11.) 

We believe the separation of powers doctrine lends clarity to the line 

the Legislature was attempting to draw in amending subdivision (d) to 

restrict the scope of its retroactive application. The separation of powers 

doctrine holds that one branch of the government cannot exercise essential 

powers that our state Constitution has delegated to another branch. (Perez v. 

Roe 1 (2006) 146 Cal.App.4th 171, 176–177 (Perez).) “A core function of the 

Legislature is to make statutory law . . . . A core function of the judiciary is 

to resolve specific controversies between parties.” (Id. at p. 177.) Thus, 

“[w]hen cases become final for separation of powers purposes, the Legislature 

may not . . . bind the courts with an after-the-fact declaration of legislative 

intent.” (Ibid.) As the United States Supreme Court has explained in the 

context of the parallel federal separation of powers doctrine, “[w]hen 

retroactive legislation requires its own application in a case already finally 

adjudicated, it does no more and no less than ‘reverse a determination once 

made, in a particular case.’ ” (Plaut v. Spendthrift Farm, Inc. (1995) 514 U.S. 

211, 225 (Plaut); see People v. Bunn (2002) 27 Cal.4th 1, 5 (Bunn) [following 

Plaut, and finding Plaut “both consistent with California law and persuasive 

for state separation of powers purposes”].) 

However, “[s]eparation of powers principles do not preclude the 

Legislature from amending a statute and applying the change to both 

pending and future cases, though any such law cannot ‘readjudicat[e]’ or 

otherwise ‘disregard’ judgments that are already ‘final.’ ” (Bunn, supra, 27 

Cal.4th at p. 17.) “Because the judicial branch consists of a hierarchy of 

courts—from district courts and appellate courts to the Supreme Court 

itself—a judgment has no conclusive effect for separation of powers purposes 
33

until the time for appeal has passed, or an appeal has been pursued and the 

review process is completed. Therefore, separation of powers principles are 

not implicated, and a lower court decision has not been unconstitutionally 

altered, when a reviewing court applies a new retroactive statute to cases 

still pending on appeal.” (Perez, supra, 146 Cal.App.4th at p. 179, citing 

Plaut, supra, 514 U.S. at pp. 226–227.) “[O]nly those decisions that represent 

‘the final word of the [judicial] department as a whole,’ as expressed by ‘the 

last court in the hierarchy that rules on the case’ ” are constitutionally 

protected from the effects of retroactive legislation. (Bunn, at p. 21.) 

The Legislature is presumed to have been aware of the relevant law (In 

re W.B. (2012) 55 Cal.4th 30, 57) and of the limits of its powers (Young v. 

Department of Fish & Game (1981) 124 Cal.App.3d 257, 277). We infer from 

these presumptions and from the legislative history discussed above, that in 

amending subdivision (d), the Legislature was attempting to avoid 

overstepping the limits of its constitutional legislative authority while still 

allowing for the broadest possible scope of pending claims to be affected by 

section 5986. The Legislature’s concern about the overbreadth of subdivision 

(d) as originally drafted, together with the statements that affecting “pending 

litigation” was acceptable under the “circumstances” while “reviv[ing]” claims 

that had been finally resolved was not, support this view. Likewise, that 

Senate Bill 326 was designed to “ensure[ ] that developers cannot reap the 

benefit of having taken advantage of their participation in the creation of the 

HOA . . . ,” the citation to Branches in the legislative materials as an example 

of a developer benefitting from such a misuse of authority, and the expressed 

view that developer-inserted “ ‘poison pill’ ” provisions violated public policy 

by making it more difficult for associations to hold developers accountable for 

construction defects, are all indications of legislative intent for section 5986 
34

to affect pending construction defect litigation to the extent of its authority to 

do so. (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of 

Sen. Bill 326, as amended May 1, 2019, p. 7; Assem. Judiciary Com., 

Mandatory Information Worksheet on Sen. Bill 326, pp. 1–2.)

We thus conclude from our analysis of the legislative history of section 

5986 in general, and the amendment to subdivision (d) of section 5986 in 

particular, that the Legislature intended “final judicial decision” to refer to a 

judgment for which the time to appeal had passed, or, if an appeal was taken, 

had reached finality after completion of the process of appellate review.

(ii) Maxims of Construction

This interpretation is further supported by the structure of subdivision 

(d), which establishes retroactivity as the general rule, and makes claims 

resolved through “final judicial decision on the merits” the exception. At the 

second stage of statutory interpretation, we may consider maxims of 

construction. (See Lopez, supra, 215 Cal.App.4th at p. 1411.) One such 

principle holds that statutory exceptions are to be narrowly or strictly 

construed. (See Carter v. Cohen (2010) 188 Cal.App.4th 1038, 1051 

[“Exceptions to the general rule of a statute are to be strictly construed and, 

in interpreting exceptions to the general statute, courts include only those 

circumstances which are within the words and reason of the exception.”]; 

Maracich v. Spears (2013) 570 U.S. 48, 60 [“An exception to a ‘general 

statement of policy’ is ‘usually read . . . narrowly in order to preserve the 

primary operation of the provision.’ ”]; C.I.R. v. Clark (1989) 489 U.S. 726, 

739 [“In construing provisions . . . in which a general statement of policy is 

qualified by an exception, we usually read the exception narrowly in order to 

preserve the primary operation of the provision.”].) 
35

Applying this principle and construing “final judicial decision” narrowly 

supports the view that “final judicial decision” encompasses only those claims 

resolved to appellate finality. This interpretation results in fewer cases being 

excluded from the statute’s retroactive reach, and thus serves subdivision 

(d)’s primary purpose of retroactivity. The Developers’ interpretation, by 

contrast, excludes a greater range of cases from the statute’s retroactive 

effects, frustrating the overall purpose of the statute and contravening the 

rule favoring a narrow interpretation of exclusionary clauses.

3. Step Three—Reason, Practicality, and Common Sense

After considering the statute’s legislative history and the structure of 

subdivision (d), we are persuaded that “final judicial decision” means a 

decision that has been reduced to judgment and has reached finality after 

completion of the appellate process, or that has become final because the time 

to appeal has passed. 

Although it is unnecessary to do so, we note that this interpretation is 

consistent with reason and common sense. (See, e.g., Lopez, supra, 215 

Cal.App.4th at p. 1417 [“Although it is not necessary to do so, we confirm our 

interpretation of [the statute], by applying ‘reason, practicality, and common 

sense to the language’ of the statute.”], citing Ailanto Properties, supra, 142 

Cal.App.4th at p. 591 [“Although our review of the legislative history suffices 

to support our conclusion, applying ‘reason, practicality, and common sense to 

the language at hand’ confirms that conclusion.”].) 

Interpreting “final judicial decision” to encompass claims resolved to 

finality in the trial court, but to exclude claims pending on appeal, makes 

little sense. Doing so would create the possibility of judicial enforcement of a 

provision that our Legislature has already declared in the strongest possible 

terms⎯through explicit statutory directive⎯should be treated as null and 
36

void. It would also raise the potential for affirming a ruling that disposed of 

a case for noncompliance with such a provision, despite the legislative 

declaration that such defenses can no longer be asserted. In practical terms, 

this would mean that associations chronologically advantaged because their 

claims, for whatever reason, were not reduced to final judgment by January 

1, 2020, would be entitled to the full benefits of section 5986 and would see 

previously-dismissed claims restored, whereas associations whose claims 

were resolved before that point and were pending on appeal on January 1, 

2020, would not. We see little to be gained, as a matter of policy or 

pragmatics, from drawing such a distinction. Accordingly, we decline to do 

so.

4. Conclusion—Interpretation of “Final Judicial Decision on the 

Merits”

Our examination of the text, legislative history, and structure of section 

5986, subdivision (d), as confirmed by considerations of reason and common 

sense, leads us to conclude that a “final judicial decision” under subdivision 

(d) means a judgment for which the time to appeal had passed, or, if an 

appeal was taken, had reached finality after completion of the process of 

appellate review. We have already found that “on the merits” does not 

encompass a claim disposed of for noncompliance with a condition precedent 

to litigation like the one contained in section 4.4.4. 

Thus, the Association’s claims had not been resolved by a “final judicial 

decision on the merits” when section 5986 became effective, and they are not 

excluded from the statute’s retroactive reach. Accordingly, subdivision (b) of 

section 5986 applies. Under subdivision (b), “[a]ny limitation or precondition 

[in the governing documents of an association], including, but not limited to, 

requiring a membership vote as a prerequisite to . . . the board’s 

commencement and pursuit of a claim . . . is unenforceable, null, and void. 
37

The failure to comply with those limitations or preconditions, if only, shall 

not be asserted as a defense to any claim or action described in this section.” 

The trial court granted summary judgment based on the Developers’ 

defense that the Association failed to comply with section 4.4.4 by filing its 

complaint and first amended complaint without first obtaining the consent of 

a majority of owners. Subdivision (b) abrogates this defense and renders the 

member vote precondition on which it was based null and void. As the 

judgment is now without a legal basis, we will reverse it.

II.

Section 4.4.4 Violates Fundamental State Public Policy

As an independent ground for reversal of the judgment, the Association 

argues that section 4.4.4, as interpreted by the trial court to require the 

Association to obtain member approval before filing suit and to disallow 

member approval by a later vote of ratification, violates fundamental state 

public policies. The Association notes that the trial court was compelled to 

follow Branches, which was controlling law at the time it ruled on the 

Developers’ summary judgment motion. It urges that we should now reject 

the holding of Branches and follow Aldea instead. 

We agree. As an independent basis for reversing the judgment, we 

conclude, like the court in Aldea, that section 4.4.4 “contravenes explicit 

legislative expressions of public policy.” (Aldea, supra, 44 Cal.App.5th at p. 

1077.) We also join Aldea in registering our disagreement with Branches to 

the extent it held otherwise. 

Civil Code section 5975, subdivision (a), provides, in relevant part, that 

“[t]he covenants and restrictions in the declaration shall be enforceable 

equitable servitudes, unless unreasonable, and shall inure to the benefit of 

and bind all owners of separate interests in the development.” “[C]ovenants 
38

and restrictions in recorded declarations of common interest developments 

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, supra, 33 Cal.4th at p. 88.) “Equity will not enforce any 

restrictive covenant that violates public policy. [Citations.] Nor will courts 

enforce as equitable servitudes those restrictions that are arbitrary, that is, 

bearing no rational relationship to the protection, preservation, operation or 

purpose of the affected land.” (Nahrstedt v. Lakeside Village Condominium 

Assn. (1994) 8 Cal.4th 361, 381 (Nahrstedt); Pinnacle, supra, 55 Cal.4th at p. 

239 [“Although Nahrstedt spoke specifically in terms of land use restrictions, 

its analysis logically extends to all covenants in a declaration, which by 

statute are also enforceable as equitable servitudes unless unreasonable.”].) 

In Aldea, the court examined a voting requirement, much like the one 

at issue here, that required a condominium association to obtain the consent 

of a majority of owners before filing a claim. (Aldea, supra, 44 Cal.App.5th at 

p. 1076.) The association failed to obtain owner consent prior to filing its 

demand for arbitration, but later obtained the approval of 99 percent of its 

members to continue with the arbitration. (Ibid.) The arbitrator granted the 

developer’s motion to dismiss based on the association’s failure to comply 

with the vote requirement prior to beginning arbitration, and the trial court 

confirmed the award. (Ibid.) 

On appeal, Division Six of the Second Appellate District found the vote 

requirement, and the arbitral award enforcing it, violative of explicit 

legislative expressions of state public policy. (Aldea, supra, 44 Cal.App.5th at 

pp. 1077–1079.) The policies it identified included those supporting quality 

residential construction. (Id. at p. 1077, citing Health & Saf. Code, § 50001 
39

[“ ‘housing is of vital statewide importance to the health, safety, and welfare 

of the residents of this state . . . .’ ”]; §§ 896 [listing construction defects for 

which the developer is liable], 897 [developer liable for defects not expressly 

listed], 941, subd. (a) [10-year statutory period in which to bring a 

construction defect action].) 

The Aldea court also found the vote requirement unreasonable and 

unconscionable and thus violative of the prohibition in section 5975, 

subdivision (a), against enforcement of unreasonable provisions in CC&Rs, 

particularly as interpreted by the arbitrator to prohibit consent through 

ratification after the claim was filed. (Aldea, supra, 44 Cal.App.5th at p. 

1077.) The provision gave the developer “veto power over the Association’s 

claims in spite of the members’ vote to proceed with the arbitration.” (Ibid.) 

The court disagreed with Branches that such a requirement benefits 

members and “ ‘balance[s] the association’s need to operate efficiently with 

the rights of its members to be informed and participate in decisions that 

could impact the association for years, if not decades, to come.’ ” (Id. at p. 

1078, quoting Branches, supra, 26 Cal.App.5th at p. 758.) The Aldea court 

had a pithy response: “But the members voted to ratify the Association’s 

decision to arbitrate. It is an odd benefit that deprives the members of the 

right to proceed with an arbitration they voted to undertake.” (Aldea, supra, 

44 Cal.App.5th at p. 1078.) The Aldea court further noted that the vote 

provision did not “inform the Association or its members of the devastating 

effect the failure to comply will have on its rights, or that the initial failure to 

comply, no matter how inadvertent, will be irremediable.” (Id. at pp. 1078–

1079.) 

We agree with the Aldea court’s discussion and adopt its reasoning. We 

find its assessment of state public policy particularly persuasive since it is 
40

consonant with the legislative history of Senate Bill 326 and the concerns 

that motivated the Legislature to enact section 5986. The commentary in the 

relevant legislative analysis noted that at the time of the bill’s authorship, 

common interest developments accounted for “approximately a quarter of the 

state’s overall housing stock . . . .” (Sen. Com. on Judiciary, Analysis of Sen. 

Bill 326, Mar. 27, 2019, p. 5.) “[T]he laws overseeing such developments have 

a large impact on the population.” (Ibid.) In this case alone, the Association 

stands for the interests of the inhabitants of 301 residential units. Within 

this context, the identified trend in developer-created impediments to 

construction defect suits by condominium associations becomes a matter of 

public welfare. The same legislative analyses looked askance at the notion

that developers insert such provisions for the rational purpose of fostering 

informed decision-making. “[T]he fact that these provisions are limited to 

construction defect claims against the developer suggests that more is afoot.” 

(Id. at p. 9.) 

We conclude, like Aldea, that the requirement in section 4.4.4 that 

prohibited the Association from instituting litigation against the Developers 

without first obtaining the consent of a majority of the owners violates 

fundamental state policy by making it more difficult for the Association to 

hold Developers accountable for construction defects. We also find section 

4.4.4 unreasonable, unconscionable and violative of the fundamental state 

policy against unreasonable servitudes insofar as it requires strict 

compliance as a precondition to suit and prohibits members from providing 

their consent later through a vote ratifying a board decision to file suit. 

Thus, even if we were to conclude that section 5986 did not apply 

retroactively to the Association’s claims, we would reverse the judgment on 

the basis that section 4.4.4 violates fundamental public policy.
41

III.

Developers’ Remaining Arguments

The Developers oppose reversal on certain grounds we have not yet 

addressed. 

First, the Developers contend the Association, in its opening brief on 

appeal, failed to challenge the trial court’s ruling that the complaint and first 

amended complaint were invalid as a matter of law for failure to comply with 

section 4.4.4, and the Association has therefore forfeited this challenge to the 

judgment. Because we find the Developers’ contention to be an obvious 

mischaracterization of the Association’s appellate brief, we need not and do 

not address it further.

Next, the Developers advance a complicated argument that we 

summarize as follows: the Association’s original complaint was unauthorized 

for failure to comply with section 4.4.4; the 10-year statute of repose under 

section 941, subdivision (a), started to run no later than July 10, 2007 (the 

date of recordation of the notice of completion), and because the original 

complaint was invalid, it continued to run to expiration before the February 

15, 2018 ratification vote; the ratification vote was therefore ineffective to 

cure the original complaint’s invalidity; because subdivision (e) of section 

5986 does not extend statutes of repose, it is now too late for the Association 

to file a new complaint based on the February 15, 2018 ratification vote; 

therefore, the Association’s complaint remains unauthorized and invalid, and 

we should affirm the judgment. 

The chief, but not the only, problem with this logic emerges at step one. 

Since we have concluded section 5986 applies retroactively to the 

Association’s claims, its original complaint can no longer be characterized as 

unauthorized for noncompliance with section 4.4.4. Since the remainder of 
42

the Developers’ argument depends on the validity of this first step, we reject 

the argument in its entirety. 

Finally, the Developers contend that in the event we reverse the trial 

court’s grant of summary judgment, we should remand for further 

proceedings so they can conduct discovery to determine whether the 

Association amended its CC&Rs to add a new provision with a valid member 

consent precondition to suit. We decline to do so. The Developers cite no 

authority that would support allowing them this opportunity. Essentially, 

the Developers seek to conduct additional discovery under Code of Civil 

Procedure section 437c, subdivision (h), but this provision only applies to the 

party opposing summary judgment; the Developers were the moving party. 

The Developers also fail to indicate how evidence of a new voting provision in 

the CC&Rs would be relevant to the summary judgment motion they already 

filed, which was based on section 4.4.4.
43

DISPOSITION

The judgment is reversed and the matter is remanded with directions 

that the trial court vacate its order granting the Developers’ motion for 

summary judgment and issue a new order denying that motion. The 

Association is entitled to its costs on appeal. 

DO, J.

WE CONCUR:

HUFFMAN, Acting P. J.

GUERRERO, J.