Court Opinion

ID: 4192935
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:24.601548+00
Date Added: 2024-06-11T14:40:28.574570
License: Public Domain

FILED
                                                                    FEB 20 2015
 1                         NOT FOR PUBLICATION
                                                             SUSAN M. SPRAUL, CLERK
                                                                  U.S. BKCY. APP. PANEL
 2                                                                OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.      SC-14-1189-KuJuKi
                                   )
 6   WOLFGANG PATERNO,             )      Bk. No.      13-06182
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     MESA PINES HOMEOWNER'S        )
 9   ASSOCIATION,                  )
                                   )
10                  Appellants,    )
                                   )
11   v.                            )      MEMORANDUM*
                                   )
12   WOLFGANG PATERNO,             )
                                   )
13                  Appellee.      )
     ______________________________)
14
15                  Argued and Submitted on January 22, 2015
                             at Pasadena, California
16
                           Filed – February 20, 2015
17
               Appeal from the United States Bankruptcy Court
18                 for the Southern District of California
19     Honorable Christopher B. Latham, Bankruptcy Judge, Presiding
20
     Appearances:     Cindy A. Brand argued for appellant Mesa Pines
21                    Homeowner's Association.**
22
     Before: KURTZ, JURY and KIRSCHER, Bankruptcy Judges.
23
24
          *
           This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
26   have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8024-1.
27
          **
           Appellee Wolfgang Paterno has not actively participated in
28   this appeal.
 1                              INTRODUCTION
 2        The Mesa Pine Homeowners Association filed a proof of claim
 3   in Wolfgang Paterno’s chapter 131 bankruptcy case.   The claim was
 4   based on fines the Association imposed against Paterno for
 5   violating certain restrictions regarding the use of his real
 6   property.   Paterno objected to the claim, and the bankruptcy
 7   court sustained the objection, holding in relevant part that the
 8   Association’s claim was time barred under the applicable statute
 9   of limitations, Cal. Civ. Proc. Code (“CCP”) § 336(b).
10        On appeal, the Association contends that CCP § 336(b) was
11   not applicable to its claim because the claim was in essence an
12   action to recover possession of common area property that
13   Paterno’s home improvements encroached on.   We disagree.   The
14   claim was nothing more than an action for money (fines) for
15   violation of the Association’s real property restrictions, which
16   action squarely falls within the scope of CCP § 336(b).
17   Accordingly, we AFFIRM.
18                                  FACTS
19        Paterno’s home is located in a planned community governed by
20   the Association and is subject to a recorded Amended Declaration
21   of Restrictions.   The stated restrictions run with the land and
22   are binding on all homeowners within the community and their
23   successors.   Among other restrictions, Paterno was prohibited
24   from making any exterior improvements without first obtaining the
25
26        1
           Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all "Rule" references are to the Federal Rules of Bankruptcy
28   Procedure, Rules 1001-9037.

                                      2
 1   written approval of the Association’s board of directors or the
 2   board’s architectural review committee.   The Amended Declaration
 3   of Restrictions gave the Association broad authority over such
 4   improvements:
 5        6.2 Standard of Review. The Board shall be the final
          arbiter with regard to approval of any improvement
 6        regardless of but not limited to the nature, kind, shape,
          size, height, materials and color scheme.
 7
 8   Amended Declaration of Restrictions (May 4, 1994) at ¶ 6.2.
 9        In July and September of 2006, Paterno appeared at and
10   participated in two Association board meetings.    According to the
11   minutes from the July board meeting, Paterno appeared at the July
12   meeting at the board’s request to discuss his ongoing front yard
13   improvements and certain alleged violations of the Association’s
14   restrictions.   During that meeting, Paterno requested help from
15   the board in determining the boundary lines of his lot.   The
16   president of the board told Paterno in response that, if Paterno
17   “did not know where [his] property lines were located,” he should
18   “have a survey completed.”   Gambill Decl. (Feb. 18, 2014) at ¶ 6.
19   The board president reiterated this point in a letter he caused
20   to be sent to Paterno shortly after the meeting.   The letter
21   further advised Paterno that the board was not responsible for
22   assisting homeowners in determining their property lines.
23        At the September board meeting, Paterno presented his
24   proposed plans for improving his back yard and side yards.    The
25   landscaping and hardscaping plans Paterno submitted contemplated
26   the construction of walls on Paterno’s lot up to edges of the
27   property.   The board did not require Paterno to obtain and submit
28   a site survey verifying that none of his improvements would

                                      3
 1   extend beyond his property lines and thereby encroach on the
 2   community’s common area, which the Association had a duty to
 3   manage and maintain.   Instead, the board approved Paterno’s
 4   proposed improvements with only two minor exceptions, one
 5   relating to a shed and the other related to the color of his
 6   fencing.   Paterno thereafter went ahead with the construction of
 7   his improvements.2
 8        Roughly five years elapsed with nothing relevant occurring.
 9   Then, in October 2011, Paterno sent a letter to the Association
10   threatening to sue unless the Association constructed a retaining
11   wall on the common area slope behind his house to reduce the risk
12   of mudslides and erosion.   In response, the Association ordered a
13
14        2
           The Association’s papers are equivocal regarding what
15   Paterno’s landscaping plans indicated regarding the boundary
     lines of his lot. On the one hand, Association president Paul
16   Gambill submitted declaration testimony stating that “[t]he plans
     show that all improvements are within the boundaries of the
17   property.” Gambill Decl. (Feb. 18, 2014) at ¶ 10. On the other
     hand, Gambill later submitted additional declaration testimony
18   referring to the exact same plans and stating that “the drawings
19   submitted by the Debtor to [the Association] did not include his
     property’s boundary lines.” Gambill Decl. (Feb. 28, 2014) at
20   ¶ 5. It is difficult to reconcile these two statements. If
     Gambill and the Association understood from the plans that all of
21   Paterno’s proposed improvements were within the “boundaries of
     the property” as Gambill first declared, how is it that Gambill
22
     and the Association obtained this understanding? In any event,
23   the bankruptcy court found that Paterno’s landscaping plans
     submitted to the Association “contemplated the construction of
24   walls that would extend to the Property’s edge.” Order
     Sustaining Claim Objection (April 3, 2014) at p. 2. On appeal,
25   the Association has not challenged this finding. In fact, the
26   Association’s opening brief contains a virtually identical
     statement in its recitation of the facts. Aplt. Opn. Brf. at
27   p. 7. We generally accept as true findings not disputed on
     appeal. See Sachan v. Huh (In re Huh), 506 B.R. 257, 272 (9th
28   Cir. BAP 2014) (en banc).

                                      4
 1   survey to determine the boundary lines of Paterno’s lot, and the
 2   survey concluded that some of Paterno’s 2006 improvements
 3   encroached on the Association’s common area by three to six feet.
 4        The Association then notified Paterno of the alleged
 5   encroachment and directed him either to order his own competing
 6   survey or to remove the encroaching improvements.   Paterno took
 7   neither of these actions.   Consequently, over the course of
 8   several months, the Association levied several thousand dollars
 9   in fines against Paterno explicitly because Paterno’s alleged
10   encroachment onto the common area violated certain restrictions
11   set forth in the Amended Declaration of Restrictions.    In
12   particular, the Association pointed to ¶ 1.8 of the restrictions,
13   which indicated that the common areas of the development were for
14   the “common use and enjoyment” of all of the owners.    In
15   addition, ¶ 2.1 of the restrictions provided:
16        Every owner of a Lot shall have a right and easement of
          ingress and egress and of enjoyment in and to the
17        Common area which shall be appurtunant to and shall
          pass with title to every such Lot . . . .
18
19   Amended Declaration of Restrictions (May 4, 1994) at ¶ 2.1.
20        When Paterno did not pay the fines, the Association filed a
21   complaint against Paterno in 2012 in the Small Claims Division of
22   the San Diego County Superior Court.   However, before the
23   completion of trial, the Association voluntarily dismissed its
24   complaint.
25        Paterno filed his chapter 13 bankruptcy petition on June 13,
26   2013, and the Association filed its proof of claim on October 2,
27   2013.   On its face, the proof of claim is based on “HOA Fine –
28   Violation of governing documents.”   Paterno then filed his claim

                                      5
 1   objection, in which he asserted, among other things, that the
 2   Association’s claim was time barred under the statute of
 3   limitations set forth in CCP § 336(b).    This assertion was not
 4   new, and it should not have been any surprise to the Association,
 5   inasmuch as Paterno had made this same argument in response to
 6   the Association’s state court complaint.    Oddly, in its papers
 7   responding to the claim objection, the Association largely
 8   ignored Paterno’s statute of limitations defense.3
 9        After holding two hearings on the claim objection and
10   directing the parties to submit additional evidence, the
11   bankruptcy court entered its order sustaining Paterno’s claim
12   objection.    The bankruptcy court explicitly found that the
13   Association should have suspected in 2006, when Paterno’s
14   improvements were made, that they might encroach on the common
15   area.    The court noted that, at the time Paterno submitted his
16   landscaping plans to the Association’s board of directors in
17   September 2006, the board had reason to suspect that there might
18   be an encroachment issue in light of Paterno’s admitted ignorance
19   of his boundary lines just two months before at the July 2006
20   board meeting.    According to the court, if the Association had
21
          3
           In its appeal brief, the Association states that the
22
     bankruptcy court “did not allow briefing” on the statute of
23   limitations issue. We are perplexed by this statement given the
     advance warning the Association had regarding this issue and the
24   absence of anything in the record indicating that the Association
     requested supplemental briefing or that the bankruptcy court
25   denied that request. It is possible that briefing was discussed
26   at one or both of the two hearings on the claim objection, but
     the Association declined to provide us with the transcripts from
27   either hearing. In addition, the statute of limitations defense
     was mentioned in the initial declaration of Paterno filed in
28   support of the claim objection.

                                       6
 1   been acting in a reasonably diligent manner, it would have
 2   required Paterno to obtain at his cost a survey establishing the
 3   boundaries of his lot as a prerequisite to the Association’s
 4   approval of the improvements.
 5        Consequently, the bankruptcy court held that the applicable
 6   five-year statute of limitations under CCP § 336 began to run in
 7   2006.    Because the Association’s proof of claim was not filed
 8   until October 2013, well after the expiration of the five-year
 9   limitations period, the court concluded that the Association’s
10   claim was time barred.
11        The Association timely filed a notice of appeal.
12                               JURISDICTION
13        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
14   §§ 1334 and 157(b)(2)(A), (B) and (O).     We have jurisdiction
15   under 28 U.S.C. § 158.
16                                   ISSUE
17        Did the bankruptcy court commit reversible error when it
18   sustained Paterno’s objection to the Association’s claim?
19                            STANDARDS OF REVIEW
20        In appeals arising from a ruling on a claim objection, we
21   review the bankruptcy court's conclusions of law de novo and its
22   findings of fact under the clearly erroneous standard.     See Allen
23   v. U.S. Bank, NA (In re Allen), 472 B.R. 559, 564 (9th Cir. BAP
24   2012).    Factual findings are not clearly erroneous unless they
25   are illogical, implausible or without support in the record.
26   Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010)
27   (citing United States v. Hinkson, 585 F.3d 1247, 1261–62 & n.21
28   (9th Cir. 2009) (en banc)).

                                       7
 1                               DISCUSSION
 2         Under § 502(b)(1), a claim must be disallowed if the claim
 3   is unenforceable under applicable nonbankruptcy law.    Durkin v.
 4   Benedor Corp. (In re G.I. Indus., Inc.), 204 F.3d 1276, 1281 (9th
 5   Cir. 2000).   The grounds for disallowance that may be asserted in
 6   support of a § 502(b)(1) claim objection include those defenses
 7   that would be available to the debtor under state law.    Id.    In
 8   disallowing the Association’s claim, the bankruptcy court applied
 9   California’s five-year statute of limitations set forth in
10   CCP § 336(b).   That statute fixes a five year limitations period
11   for actions for violation of a restriction affecting real
12   property and further provides that the limitations period begins
13   to run “from the time the person seeking to enforce the
14   restriction discovered or, through the exercise of reasonable
15   diligence, should have discovered the violation.”    CCP § 336(b);
16   see also Harry D. Miller & Marvin B. Starr, 9 CAL. REAL ESTATE
17   § 25B:107 (3d ed. 2014).
18         On appeal, the Association in essence argues that its proof
19   of claim was an action to recover possession of the common area
20   property that Paterno encroached on, so CCP § 336(b) does not
21   apply.   In support of its position, the Association cites Kapner
22   v. Meadowlark Ranch Ass'n, 116 Cal. App. 4th 1182, 1189 (2004).
23   Kapner held that CCP § 336(b) does not apply to actions to
24   recover possession of commonly owned real property encroached on
25   by one of residents of a development, who thereby excludes from
26   the commonly owned property other residents of the development.
27   Id.
28         As a threshold matter, we note that nothing in the record

                                      8
 1   before us indicates that the Association raised this argument in
 2   the bankruptcy court, and we may decline to consider arguments
 3   raised for the first time on appeal.    See United Student Aid
 4   Funds, Inc. v. Espinosa, 559 U.S. 260, 270 (2010) (“We need not
 5   settle that question, however, because the parties did not raise
 6   it in the courts below.”); Scovis v. Henrichsen (In re Scovis),
 7   249 F.3d 975, 984 (9th Cir. 2001) (stating that court would not
 8   consider argument raised for the first time on appeal absent
 9   exceptional circumstances).
10        More importantly, however, there is a fatal flaw in the
11   Association’s argument.    Its proof of claim did not seek to
12   recover possession of the common area upon which Paterno
13   encroached.   The proof of claim merely sought to enforce the
14   fines the Association had imposed against Paterno for violation
15   of the restrictions set forth in the Amended Declaration of
16   Restrictions.   As such, the proof of claim falls squarely within
17   the scope of CCP § 336(b).    See generally Pac. Hills Homeowners
18   Assn. v. Prun, 160 Cal. App. 4th 1557, 1563-64 (2008) (holding that
19   CCP § 336(b) applies to any action to enforce a restriction on
20   real property regardless of whether the restriction is set forth
21   in a recorded document).
22        At oral argument, counsel for the Association suggested that
23   the bankruptcy court's order disallowing its claim could be
24   construed as holding that the Association is time barred from
25   pursuing an action to recover possession of the real property
26   upon which Paterno allegedly encroached.    We disagree.   The order
27   only ruled upon the proof of claim the Association filed and that
28   claim only asserted a right to payment based on fines for

                                       9
 1   violation of the restrictions set forth in the Association's
 2   Amended Declaration of Restrictions.       Thus, the Association's
 3   concern regarding the scope of the bankruptcy court’s ruling is
 4   unfounded.
 5        The applicability of CCP § 336(b) is the only argument the
 6   Association made in its appeal brief.       While the Association’s
 7   statement of issues in its brief raised questions regarding some
 8   of the bankruptcy court’s findings of fact, the argument the
 9   Association made in its brief did not challenge any findings.
10   When arguments are not specifically and distinctly made in the
11   appellant's opening brief, those arguments typically are deemed
12   forfeited.   See, e.g., Christian Legal Soc'y v. Wu, 626 F.3d 483,
13   487–88 (9th Cir. 2010); Brownfield v. City of Yakima, 612 F.3d
14   1140, 1149 n.4 (9th Cir. 2010) (citing Greenwood v. F.A.A.,
15   28 F.3d 971, 977 (9th Cir. 1994)).
16        Even if we were to review the bankruptcy court’s findings,
17   we perceive no reversible error.       The Association apparently
18   disputes the bankruptcy court’s determination that the
19   Association did not exercise reasonable diligence and that, if
20   the Association had exercised reasonable diligence, it would have
21   discovered the extent of any encroachment in 2006, when Paterno
22   made the improvements.   These determinations were findings of
23   fact.   See Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 810
24   (2005); see also Leaf v. City of San Mateo, 104 Cal. App. 3d 398,
25   409 (1980) ("Whether plaintiffs in fact exercised reasonable
26   diligence in discovering the negligence of defendant City of San
27   Mateo is a question of fact.").
28        As indicated in the standards of review section above, in

                                       10
 1   reviewing the bankruptcy court’s factual findings, we cannot
 2   reverse unless those findings were illogical, implausible or
 3   without support in the record.    In re Retz, 606 F.3d at 1196.
 4   The Association has not demonstrated any of these criteria for
 5   reversal.   Nor, on this record, are any of these criteria
 6   apparent.
 7        This is not a case where the bankruptcy court imposed a
 8   general duty of care on the Association requiring it in all
 9   instances to demand site surveys before permitting homeowners to
10   make landscaping improvements.    We would be reluctant to uphold
11   the imposition of such a general duty of care.      Instead, the
12   bankruptcy court’s diligence findings were based on the unique
13   facts of this case.   These facts included Paterno’s July 2006
14   admission to the Association’s board of directors that he did not
15   know where the boundary lines of his lot were located.      These
16   facts also included Paterno’s September 2006 board meeting
17   presentation of his landscaping plans, which proposed to
18   construct walls just within the purported boundaries of his lot.
19        “A plaintiff has reason to discover a cause of action when
20   he or she ‘has reason at least to suspect a factual basis for its
21   elements.’”    Fox, 35 Cal. 4th at 807 (quoting Norgart v. Upjohn
22   Co. 21 Cal. 4th 383, 398 (1999)).      The Association’s lack of
23   subjective suspicion regarding Paterno’s landscaping proposals is
24   irrelevant because the measure is an objective standard.      See
25   Wilshire Westwood Assoc. v. Atl. Richfield Co., 20 Cal. App. 4th
26   732, (1993); Mangini v. Aerojet–Gen. Corp., 230 Cal. App. 3d 1125,
27   1150 (1991).   Once the Association became aware of facts that
28   would have made a reasonably prudent person suspicious – like

                                      11
 1   Paterno’s admitted ignorance of his property lines followed soon
 2   after by his proposal to build walls just within the purported
 3   boundaries of his lot – the Association had a duty to investigate
 4   further and is charged with knowledge of those matters that would
 5   have been revealed by such investigation.   Id.
 6        The record here establishes that, when the Association
 7   ordered a survey of Paterno’s lot in 2012, the survey concluded
 8   that Paterno’s improvements had encroached on the common area.
 9   On this record, we cannot hold as clearly erroneous the
10   bankruptcy court’s findings that the Association should have
11   required Paterno in 2006, at his own expense, to order such a
12   survey of his lot as a prerequisite to approving his landscaping
13   plans and that, had such a survey been ordered, the extent (if
14   any) of Paterno’s encroachment would have been apparent to the
15   Association.
16        In sum, we perceive no reversible error in the bankruptcy
17   court’s determination that the limitations period under
18   CCP § 336(b) began to run in 2006, when Paterno constructed his
19   landscaping improvements and by which time the Association, with
20   the aid of a site survey, should have known whether Paterno’s
21   improvements encroached on the common area.
22                              CONCLUSION
23        For the reasons set forth above, we AFFIRM the bankruptcy
24   court’s order sustaining Paterno’s claim objection and
25   disallowing the Association’s claim.
26
27
28

                                    12