Court Opinion

ID: 3205605
Source: CourtListenerOpinion
Date Created: 2016-05-20 22:02:21.145618+00
Date Added: 2024-06-11T14:28:55.115516
License: Public Domain

Filed 5/20/16 Irish Beach Clusterhomes Assoc. v. Bertoli CA1/5
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION FIVE

IRISH BEACH CLUSTERHOMES
ASSOCIATION,
         Plaintiff and Appellant,                                    A142326

v.                                                                   (Mendocino County
CHRISTIAN BERTOLI et al.,                                            Super. Ct. No. SCUK-CVG-13-61986)
         Defendants and Respondents.

         Plaintiff and appellant Irish Beach Clusterhomes Association (the Association)
appeals from the trial court’s order sustaining the defendants’ demurrer without leave to
amend. We reverse and remand.
                                                 BACKGROUND1
         The Association is an unincorporated association that serves as the homeowners
association for the Irish Beach Clusterhomes common interest development (the
Development). There are 16 lots in the Development. Ten of the lots are undeveloped;
these are owned by William Moores, Tona Moores, and Jessica Olsen.2 The Moores and
Olsen are also the members of the Association’s governing board (Board). The
1
  Our recitation of the underlying facts assumes the truth of the allegations of the
operative second amended complaint (complaint) and its attachments, and considers
judicially noticeable facts. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074,
1081 (Schifando); Sarale v. Pacific Gas & Elec. Co. (2010) 189 Cal. App. 4th 225, 245.)
2
    The parties agree that Olsen is the Moores’ daughter.

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defendants are twelve individuals who own the Development’s remaining six lots, all of
which have a single family residence (the individual defendants), and the Irish Beach
Clusterhomes Association, Inc., a California corporation (Irish Beach, Inc.) apparently
formed by some or all of the individual defendants.3
       Since 2003, the individual defendants have not fully paid assessments levied by
the Association. In 2005, the Association’s Board sued the individual defendants seeking
payment of outstanding assessments. After a bench trial, the trial court held the Board’s
actions were invalid because, under the Development’s covenants, conditions and
restrictions (CCRs), only lots that had been improved with a home were entitled to vote.
(Irish Beach Clusterhomes Association Board of Governors v. Farrell (Jan. 21, 2009,
A120147) [nonpub. opn.].) On appeal, the resulting judgment was declared void on the
ground that the Board was not a legal entity. (Id.) The Association paid for the legal fees
incurred in this litigation through personal loans from its Board, the Moores and Olsen.
In 2010, the Association hired a debt collection agency to collect delinquent assessments.
Further litigation ensued. (See JQD Inc. v. Irish Beach Clusterhomes Association (Mar.
6, 2015, A138145) [nonpub. opn.]; Bertoli v. Dennis (Jan. 5, 2015, A137221) [nonpub.

3
 We refer to the individual defendants and Irish Beach, Inc. collectively as defendants.
The Association asks us to take judicial notice of a computer printout from the California
Secretary of State website indicating the corporate status of defendant Irish Beach, Inc.
was suspended at the time defendants’ brief was filed. We grant this request for judicial
notice but reject the Association’s argument that we should strike the brief and grant the
appeal as to that defendant “for lack of any opposition.” Assuming we can take judicial
notice of the Secretary of State website for the fact of a corporation’s status, we sua
sponte take judicial notice that the website currently shows the corporate status of Irish
Beach, Inc., is no longer suspended. “[T]he revival of corporate powers retroactively
validates any procedural steps taken on behalf of the corporation in the prosecution or
defense of a lawsuit while the corporation was under suspension.” (Tabarrejo v.
Superior Court (2014) 232 Cal. App. 4th 849, 862.) In any event, even if the brief were
properly struck as to the corporate defendant, the “failure to file a respondent’s brief does
not mandate automatic reversal . . . . Instead, we examine the record and reverse only if
prejudicial error is found.” (Petrosyan v. Prince Corp. (2013) 223 Cal. App. 4th 587,
593.) We deny as irrelevant the Association’s October 7, 2015 request for judicial notice
of a cross-complaint filed by one of the individual defendants in a prior lawsuit.

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opn.].) In 2013, the individual defendants notified the Association and the Board of their
intent to reconstitute the Development’s homeowners association and prohibit the Board
members from voting.
       The Association then filed this lawsuit. The complaint asserts seven causes of
action as follows: (1) declaratory relief providing that under the CCRs owners of
undeveloped lots can vote in matters pertaining to the Development; (2) declaratory relief
providing that the statute of limitations has expired on any claim the individual
defendants might make against the Board members alleging that their personal loans to
the Association constituted a breach of fiduciary duty; (3) declaratory relief providing
that the Association “exists”; (4) declaratory relief providing that Irish Beach, Inc., was
not properly created under the CCRs; (5) an injunction prohibiting the individual
defendants from operating a “second board”; (6) an injunction directing the individual
defendants to pay assessments levied by the Board; and (7) breach of equitable servitudes
seeking damages for the outstanding assessments owed by the individual defendants.
       Defendants filed a demurrer to the complaint. Defendants’ primary argument was
that the Association lacked the legal capacity to sue because “there is no lawfully elected
Board of Governors.” The trial court agreed and sustained the demurrer without leave to
amend. The Association filed a motion for reconsideration, which the trial court denied.
This appeal followed.4
                                        DISCUSSION
       “When reviewing a judgment dismissing a complaint after the granting of a
demurrer without leave to amend, courts must assume the truth of the complaint’s
properly pleaded or implied factual allegations. [Citation.] Courts must also consider
judicially noticed matters. [Citation.] In addition, we give the complaint a reasonable
interpretation, and read it in context. [Citation.] If the trial court has sustained the

4
  The appeal was taken from the order denying reconsideration and sustaining the
demurrer, a nonappealable order. (Gu v. BMW of North America, LLC (2005) 132
Cal. App. 4th 195, 202.) We construe the notice of appeal as applying to the subsequently
filed judgment of dismissal. (Id. at pp. 202-203.)

                                               3
demurrer, we determine whether the complaint states facts sufficient to state a cause of
action. If the court sustained the demurrer without leave to amend, as here, we must
decide whether there is a reasonable possibility the plaintiff could cure the defect with an
amendment. [Citation.] If we find that an amendment could cure the defect, we conclude
that the trial court abused its discretion and we reverse; if not, no abuse of discretion has
occurred. [Citation.] The plaintiff has the burden of proving that an amendment would
cure the defect.” (Schifando, supra, 31 Cal.4th at p. 1081.)
1. Capacity
         A demurrer may be sustained on the ground that “[t]he person who filed the
pleading does not have the legal capacity to sue.” (Code Civ. Proc., § 430.10, subd. (b).)
Defendants’ argument below, which the trial court agreed with, was as follows: The
CCRs provide the Board consists of five governors elected to two-year terms. Three
governors constitutes a quorum. One of the governors must be elected solely by owners
who are not subdividers. Pursuant to the allegations of the complaint, the governors now
and during the 2005 litigation were the Moores and Olsen. The Moores are subdividers
of the Development (the Association concedes this fact). Olsen is not a subdivider.
However, Olsen owns only a one-third interest in one of the vacant lots; the remaining
two-thirds are owned by the Moores.5 Under the CCRs, each lot gets one vote and,
according to defendants, the co-owners of jointly owned lots must vote “in unison” with
each other. Because Olsen could not have elected herself into office without the consent
of the Moores, she could not have been elected solely by owners who are not subdividers.
Defendants conclude “there is no three governor quorum because Olsen was never legally
elected”; “[w]ithout a quorum, the Board has no power to conduct business” and cannot
lawfully vote to file this lawsuit; and the Association therefore lacks capacity to sue.
         Assuming, without deciding, defendants’ legal analysis and interpretation of the
CCRs is correct, in reviewing a demurrer order we are confined to the facts alleged in the
complaint, documents attached to the complaint, and judicially noticeable facts.

5
    In support of this fact, defendants requested judicial notice of a 2004 grant deed.

                                                4
(Schifando, supra, 31 Cal.4th at p. 1081.) Defendants’ argument hinges on the fact that
only the Moores and Olsen cast votes when Olsen was elected to the Board (as opposed
to other non-subdivider owners)—a fact that does not appear in the complaint, its
attachments, or any judicially noticeable documents. The record does contain the
minutes from a 2004 election at which Olsen was apparently first elected to the Board,
which had been filed in a prior lawsuit. Although counsel for the Association agreed, at
the hearing on reconsideration, that the trial court could take judicial notice of the
minutes, counsel also noted judicial notice of such a record was generally taken only of
the fact that the document had been filed.
       We need not decide whether the trial court properly considered the contents of the
2004 minutes because the document is irrelevant to the question of who voted for Olsen
when she was elected to her current term as governor—as noted above, Board members
are elected to two-year terms under the CCRs. Whether Olsen was properly on the Board
from 2004 to 2006 has no bearing on the question of the Association’s present capacity to
maintain this lawsuit. At oral argument in this court, defendants’ counsel argued that
counsel for the Association conceded below that the only people voting for Olsen in
elections from 2008 onward were the Moores and Olsen. In fact, counsel for the
Association argued below at the hearing on the motion for reconsideration that the trial
court’s demurrer ruling “rests on the assumption that there never was a proper vote. That
in 2006, ’08, ’10, and ’12, the only people that voted for Olsen were [the] Moores and
Olsen.” Counsel continued, “any [of the] defendants could have voted at any election. In
2006, ’08, ’10, and ’12. There’s nothing to indicate that they didn’t except [defendant’s
counsel] saying they didn’t. There’s no evidence presented showing that they didn’t
vote.” Later, counsel did say, “I’m not confident that we would be able to amend the
complaint to say that after 2004, maybe in 2006 -- I don’t know off the top of my head
and I apologize. But from 2008 probably on, it very likely was just Moores, Moores, and
Olsen.” We decline to construe this equivocal statement regarding the ability to amend
the complaint as a binding evidentiary admission, particularly in light of counsel’s prior
argument that there was no such evidence. Because there was no evidence of the

                                              5
Association’s present capacity to maintain the lawsuit, the trial court erred in sustaining
defendants’ demurrer on the ground that the Association lacks the capacity to sue.
2. Alternate Grounds
       Defendants contend we can affirm the demurrer order in part on alternative
grounds raised below. We disagree.
       Defendants argue the second cause of action—seeking declaratory relief as to the
statute of limitations for a breach of fiduciary duty claim—is frivolous because the statute
of limitations for such a claim can “readily be found in statutes and case law.” However,
the Association contends the parties’ dispute is over when the statute of limitations began
to run, and defendants do not contend there is no dispute over this issue.6
       Defendants contend the Association lacks the capacity to bring the seventh cause
of action—seeking damages for unpaid assessments—because, since the assessments
were levied to repay loans from Board members, the entire Board had a conflict of
interest barring them from authorizing the lawsuit. Assuming that such a conflict
deprives the Association of the capacity to sue, we reject this argument. First, contracts
or transactions approved by votes involving an interested director are not void if it is
shown the contract or transaction “was just and reasonable as to the corporation at the
time it was authorized, approved or ratified.” (Corp. Code, § 7233, subd. (a)(3); Harvey
v. Landing Homeowners Assn. (2008) 162 Cal. App. 4th 809, 823–824; see also Civ. Code,
§§ 4080, 5350, subd. (a) [Corp. Code § 7233 applies to “any contract or other transaction
authorized, approved, or ratified by the board” of an unincorporated common interest
development association].) This is a question of fact not resolved by the pleadings.
Second, the complaint alleges the individual defendants stopped consistently paying
assessments in 2003, before the 2005 litigation for which Board members loaned the

6
  Although the Association failed to raise this issue in its opening brief, we decline to
exercise our discretion to treat the issue as waived. Defendants discussed the claim in
their response brief and the parties’ arguments were fully discussed in their briefs below.
Accordingly, defendants “cannot reasonably claim prejudice from our consideration” of
the issue. (Nelsen v. Legacy Partners Residential, Inc. (2012) 207 Cal. App. 4th 1115,
1122 [declining to treat as waived argument not raised in opening brief].)

                                              6
Association money. Therefore, it is not established that all of the unpaid assessments
sought by the Association are to repay money loaned by Board members.
                                     DISPOSITION
      The order sustaining defendants’ demurrer is reversed and the matter is remanded
for further proceedings. The Association is awarded its costs on appeal.

                                            7
                    SIMONS, J.

We concur.

JONES, P.J.

BRUINIERS, J.

(A142326)

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