Court Opinion

ID: 3204851
Source: CourtListenerOpinion
Date Created: 2016-05-19 00:02:40.996911+00
Date Added: 2024-06-11T12:16:17.903950
License: Public Domain

Filed 5/18/16 Talega Village Center Community Assoc. v. Superior Court CA4/3

                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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

                                     FOURTH APPELLATE DISTRICT

                                                DIVISION THREE

TALEGA VILLAGE CENTER
COMMUNITY ASSOCIATION,

     Petitioner,
                                                                       G051950
         v.
                                                                       (Super. Ct. No. 30-2013-00671155)
THE SUPERIOR COURT OF ORANGE
COUNTY,                                                                OPINION

     Respondent;

STANDARD PACIFIC CORPORATION
et al.,

     Real Parties in Interest.

                   Original proceedings; petition for a writ of mandate/prohibition to
challenge an order of the Superior Court of Orange County, Gail Andrea Andler, Judge.
Petition granted.
              Peters & Freedman, David M. Peters, Kennan A. Parker, Kyle E. Lakin and
Zachary R. Smith for Petitioner.
              No appearance for Respondent.
              Green & Hall, Brian C. Plante, Nicole E. Bartz and Robert L. Green for
Real Parties in Interest.
              Gemmill, Baldridge & Yguico and Carlos V. Yguico for Professional
Warranty Service Corporation as Amicus Curiae on behalf of Real Parties in Interest.

                                   *         *           *

              In this writ proceeding the petitioner challenges the enforcement of an
arbitration provision contained in the Covenants, Conditions, and Restrictions (CC&Rs)
of a residential development. The arbitration provision is contained in an exhibit to the
CC&Rs entitled “Home Builder’s Limited Warranty,” which, according to the CC&Rs,
becomes enforceable when “issued.” There is no evidence in the record that it ever
issued. Accordingly, the trial court erred by enforcing the arbitration provision.

                                          FACTS

              Talega Village Center is a residential development consisting of 302
residential units, together with association property and common areas, located in San
Clemente. Petitioner Talega Village Center Community Association (the HOA) is the
governing body for the development. Real Party in Interest Standard Pacific Corporation
(Standard Pacific) was the developer and declarant of the CC&Rs. Real Party in Interest
Talega Associates, LLC, is an entity related to Standard Pacific that was involved in the

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              1
development. Talega Village Center was built and sold in the 2003-2005 time frame.
Standard Pacific recorded the CC&Rs in 2003 at a time when it controlled the
homeowner’s association entirely.
                                                                                2
               In September 2013 the HOA filed its first amended complaint against
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defendants, alleging four causes of action: violation of SB800 construction standards,
strict liability (developer), negligence, strict liability (product). “Class
Action/Construction Defect” is stated on the face page of the complaint. The HOA
brought the action on its own behalf and on behalf of “all persons having an ownership
interest in a condominium unit at the Project.” The complaint alleges a litany of defects
in the construction of the development.
               In response, defendants filed a petition to compel arbitration, seeking to
enforce the arbitration provisions of the CC&Rs, and in particular the “Home Builder’s
Limited Warranty, which is administered by the Professional Warranty Service
Corporation . . . .”
               The arbitration provisions in the CC&Rs are set forth in various sections
and exhibits. Section 12.4.1 of the CC&Rs states, “Any Dispute, as defined in Exhibit G,
entitled ‘Alternative Dispute Resolution Provisions’ . . . , shall be governed by and
resolved in accordance with the ADR Provisions.” Exhibit G to the CC&Rs, entitled
“Alternative Dispute Resolution Provisions,” provides in part, “WITH RESPECT TO
ALL DISPUTES, DECLARANT, OWNERS, AND THE ASSOCIATION SHALL
COMPLY WITH THE DISPUTE RESOLUTION AND ARBITRATION
1
              For ease of reading, real parties in interest are hereafter referred to as
defendants, their lower court designation.
2
               The original complaint is not in the record.
3
             SB800 refers to the legislation that enacted Civil Code sections 895 through
945.5, popularly known as the Right to Repair Act. (Civil Code, § 895 et seq.: Sen. Bill
No. 800 (2001-2002 Reg. Sess.).)

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PROCEDURES AND PROVISIONS SPECIFIED IN THE HOME WARRANTY OR
THE ASSOCIATION PROPERTY WARRANTY, WHICHEVER IS
APPLICABLE . . . . [Citation.] The Association acknowledges and agrees that the
Home Warranty and the Association Property Warranty forms to be issued have been
made available to the Association for review, that the Association has made such review
of the Home Warranty and the Association Property Warranty and the dispute resolution
procedures specified therein as the Association deems necessary and appropriate, and that
the Association consents to participation in such procedures for resolution of Disputes.”
(Italics added.)
              Under exhibit G, the alternative dispute resolution provisions, arbitration
vis-à-vis the home warranty is the primary method of resolving disputes. It is not,
however, the only method. Exhibit G contains “SECONDARY ALTERNATIVE
DISPUTE RESOLUTION PROCEDURES,” which apply “TO THE EXTENT ANY OF
THE DISPUTE RESOLUTION OR ARBITRATION PROCEDURES AND
PROVISIONS SPECIFIED IN THE HOME WARRANTY OR THE ASSOCIATION
PROPERTY WARRANTY . . . ARE DETERMINED TO BE UNENFORCEABLE IN
WHOLE OR IN MATERIAL PART . . . , OR TO THE EXTENT A DISPUTE ARISES
WITH AN OWNER WHO DID NOT RECEIVE A HOME WARRANTY. . . .” The
secondary procedure is simply arbitration by Judicial Arbitration and Mediation Services
(JAMS), “or any other entity offering judicial reference dispute resolution procedures as
may be mutually acceptable to the parties to the Dispute, pursuant to its standard
arbitration procedures for construction matters.” There is yet a third method of
resolution, should the foregoing be deemed unenforceable, which is “a general judicial
reference pursuant to California Code of Civil Procedure Sections 638(a) and 640-
645.2 . . . .” Defendants’ petition to compel arbitration, however, specifically requested
enforcement of the arbitration provisions “pursuant to the Home Builder’s Limited
Warranty, which is administered by the Professional Warranty Service Corporation . . . .”

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             The reader must return to the CC&Rs for the definition of the home
warranty and association property warranty. Section 12.5 of the CC&Rs states, “The
form Home Builder’s Limited Warranty attached to this Declaration as Exhibit H
contains provisions which apply to both Condominiums and Association Property in the
Properties. Those provisions of the Home Builder’s Limited Warranty that pertain to
Condominiums shall be referred to as a ‘Home Warranty.’ Persons who receive from
Declarant a Home Warranty shall be bound by and shall be a beneficiary of the Home
Warranty and the ADR Provisions in the form attached to the Declaration as Exhibit G.
Nothing in the Home Warranty or any other document provided by Declarant in
conjunction with the sale of a Condominium diminishes any rights or obligations Owner
or Declarant may have under California Civil Code Sections 895 through 945.5 . . . .
THE HOME WARRANTY, WHEN ISSUED, SHALL BE THE ONLY WARRANTY,
EXPRESS OR IMPLIED, MADE BY DECLARANT WITH REGARD TO THE
RESIDENCE AND THE CONDOMINIUM, AND DECLARANT DISCLAIMS ALL
OTHER WARRANTIES AS MORE FULLY SET FORTH IN THE DISCLAIMER
ATTACHED AS EXHIBIT I TO THIS DECLARATION. This section applies to a
particular Dispute only to the extent a Home Warranty is actually issued and in effect at
the time of that particular Dispute with respect to the particular Condominiums at issue.”
(Italics added.) The Association Property Warranty is defined in the same way, except
that it includes only “[t]hose provisions of the Home Builder’s Limited Warranty that
pertain to Association Property.” In other words, both the Home Warranty and
Association Property Warranty are set forth in Exhibit H to the CC&Rs, entitled “Home
Builder’s Limited Warranty.”
             Exhibit H, the home builder’s limited warranty, is a 13-page document, and
at the top of each page appears the word “SAMPLE.” Page 1 states, “Enclosed with this
LIMITED WARRANTY is a Limited Warranty Validation Form. The Limited Warranty

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Validation Form provides the dates on which the warranty coverage period begins and
expires.” The record does not contain an executed validation form.
              The home builder’s limited warranty contains a section entitled “Binding
Arbitration Procedure.” It provides that all disputes will be resolved through binding
arbitration. “The arbitration shall be conducted by Construction Arbitration Services,
Inc., or such other reputable arbitration service that PWC shall select, at its sole
discretion, at the time the request for arbitration is submitted.” PWC refers to
Professional Warranty Services Corporation, who Standard Pacific hired to administer
the warranty (and who filed an amicus curiae brief in this writ proceeding). “The rules
and procedures of the designated arbitration organization, that are in effect at the time the
request for arbitration is submitted, will be followed. A copy of the applicable rules and
procedures will be delivered to YOU upon request.” “[I]f the arbitrator finds US
responsible for a CONSTRUCTION DEFECT, the arbitrator will determine the scope of
any repair or replacement, OUR cost of any such repair or replacement, and the
diminution in fair market value, if any, caused by such CONSTRUCTION DEFECT.
Based upon the arbitrator’s decision, WE shall choose whether WE shall (1) repair,
replace the CONSTRUCTION DEFECT, (2) pay to YOU the actual amount it would cost
US to repair or replace the CONSTRUCTION DEFECT or (3) PAY to YOU an amount
equal to the diminution in fair market value caused by the CONSTRUCTION DEFECT.
The decision to repair, replace, or make payment to YOU is at OUR or OUR authorized
representative’s sole option.”
              The HOA opposed the petition to compel arbitration, arguing, among other
things, that, “Defendants offer no evidence that the ‘SAMPLE HOME BUILDER’S
LIMITED WARRANTY’ attached to the CC&Rs . . . was ‘actually issued’ . . . .” The
HOA also argued the arbitration provisions are unconscionable. In its reply to HOA’s
opposition, defendants ignored the HOA’s argument that the warranty never issued. The
only statement in the reply that might have been in response to this point was the

                                              6
following passing comment: “Moreover, the homeowners were given a copy of the
CC&Rs prior to closing escrow and the purchase documents also contain identical
provisions requiring construction defect disputes to be resolved through binding
arbitration with [PWC].” To support this proposition, defendants cited the declaration of
Karen Spargo, Pacific Standard’s vice-president of sales and marketing for the Orange
County division during the relevant time frame. Spargo declared, “As part of the Sales
and Marketing team, I was also required to familiarize myself with the purchase
agreements and Alternative Dispute Resolution (‘ADR’) agreements for the various SPC
communities. The ADR provisions in the purchase agreements generally mirror the ADR
provisions in the CC&Rs. For Talega Village Center, both the purchase documents and
the CC&Rs require all construction defect disputes to be resolved by binding arbitration
and to be administered by Professional Warranty Service Corporation.” Spargo also
declared that a copy of the CC&Rs is given to each homeowner before closing escrow.
The HOA objected to the latter testimony based on lack of foundation/personal
knowledge. The trial court apparently never ruled on the objection.
              The court granted the petition to compel arbitration, stating only, “The
court orders the litigation stayed and orders the parties to comply with the arbitration
provisions in Talega Village Center Community Association’s CC&Rs.” The HOA
subsequently filed a motion for “reconsideration and clarification” of the court’s order.
In denying the motion for reconsideration, the court stated, “The court declines to further
clarify its ruling beyond reiterating that the court granted the arbitration as requested by
moving party.” Thus, the arbitration provision enforced by the court was the provision
requested by defendants — namely, an arbitration under the procedures specified in the
home builder’s limited warranty.
              The court’s order was stayed for nearly one year while the parties went to
mediation. Mediation apparently failed, and shortly after the stay was lifted, the HOA

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filed the present writ petition. We issued an order to show cause and stayed the trial
court order.
                                       DISCUSSION

               The HOA contends the court erred by enforcing the home warranty. At the
same time, the HOA states, “It should be stressed that petitioner consents to a fair and
reasonable construction defect arbitration process using a neutral forum (i.e. JAMS).”
This concession is consistent with our high court’s decision in Pinnacle Museum Tower
Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal. 4th 223, where the court
held arbitration provisions in CC&Rs are generally enforceable despite that no actual
homeowners existed at the time the CC&Rs were drafted and recorded (id. at pp. 232,
240). The issue, therefore, is not whether the arbitration provisions in the CC&Rs are
generally enforceable, but only whether the primary method of arbitration is — i.e., the
home warranty. We conclude it is not.
               We interpret the CC&Rs as we would a contract. (Nahrstedt v. Lakeside
Village Condominium Assn. (1994) 8 Cal. 4th 361, 380-381 [“As noted earlier, equitable
servitudes permit courts to enforce promises restricting land use when there is no privity
of contract between the party seeking to enforce the promise and the party resisting
enforcement. Like any promise given in exchange for consideration, an agreement to
refrain from a particular use of land is subject to contract principles, under which courts
try ‘to effectuate the legitimate desires of the covenanting parties’”].) “In contract law, a
‘condition precedent’ is ‘either an act of a party that must be performed or an uncertain
event that must happen before the contractual right accrues or the contractual duty
arises.’” (Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997) 15 Cal. 4th 882, 885, fn. 1.)
“The existence of a condition precedent normally depends upon the intent of the parties
as determined from the words they have employed in the contract.” (Realmuto v.
Gagnard (2003) 110 Cal. App. 4th 193, 199.) “The rule is that provisions of a contract

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will not be construed as conditions precedent in the absence of language plainly requiring
such construction.” (Rubin v. Fuchs (1969) 1 Cal. 3d 50, 53.)
              We conclude the home warranty is not enforceable because a condition
precedent — issuance — has not occurred. The CC&Rs are quite clear on their face that
the home warranty does not apply unless it has issued: “This section applies to a
particular Dispute only to the extent a home warranty is actually issued and in effect at
the time of that particular Dispute with respect to the particular Condominiums at issue.”
In the same section, the CC&Rs provide that the home warranty is the only applicable
warranty “WHEN ISSUED.” Likewise, exhibit G, the alternative dispute resolution
provisions, states that the home warranty is “to be issued.”
              The HOA argued both in the trial court and again in this writ proceeding
that the home warranty never issued, and in both cases, defendants completely ignored
the argument. Defendants’ decision to not address the issue leaves us in the difficult
position of having no guidance as to what it even means for the home warranty to issue.
The CC&Rs provide no definition for the term. Does the home warranty issue generally,
or does it issue to each homeowner specifically? Does it issue by simply handing a
homeowner a copy? Or, does issuance require the sort of validation form mentioned in
the home warranty? Does issuance require an additional recordation? Defendants
provided no evidence of what the parties intended, much less evidence that whatever was
intended actually occurred.
              We perceive only two pieces of evidence that might bear on the issue. The
first is that in exhibit G, the alternative dispute resolution provisions, the HOA agreed to
the terms of the home warranty: “The Association acknowledges and agrees that the
Home Warranty and the Association Property Warranty forms to be issued have been
made available to the Association for review, that the Association has made such review
of the Home Warranty and the Association Property Warranty and the dispute resolution
procedures specified therein as the Association deems necessary and appropriate, and that

                                              9
the Association consents to participation in such procedures for resolution of Disputes.”
(Italics added.) The problem, of course, is that this provision specifically contemplates
that the home warranty is “to be issued,” and read in conjunction with the CC&Rs, the
home warranty is not binding until it is issued. Without evidence of issuance, this
provision is of no help to defendants.
              The second piece of evidence is a declaration by Karen Spargo to the effect
that each homeowner is given a copy of the CC&Rs prior to purchasing the home, and
that the home purchase documents contain alternative dispute resolution provisions that
“generally mirror” the provisions in the CC&Rs. Setting aside the problem that it is not
clear that merely handing a copy of the CC&Rs to a homeowner qualifies as issuance, for
any given homeowner, Spargo cannot testify to what was or was not given to them prior
to the purchase. The HOA’s objection based on lack of personal knowledge is well
taken. Moreover, to the extent the purchase documents, which are not in the record,
“generally mirror” the CC&Rs, presumably they also require a home warranty to be
issued. Finally, defendants’ petition was to compel arbitration pursuant to the CC&Rs,
not pursuant to any purchase documents.
              Because we conclude there is no evidence in the record that the home
warranty issued, we need not address the HOA’s argument that the arbitration provisions
in the home warranty are unconscionable. Nor need we address the HOA’s arguments
concerning whether DeMars & Associates, Ltd., the originally chosen but subsequently
withdrawn arbitration provider, is biased. And since the HOA has consented to
arbitration through the secondary method of using JAMS, we need not address its
contention that defendants failed to comply with the Right to Repair Act (Civil Code,
                                                             4
§ 895 et seq.) prior to petitioning to compel arbitration.

4
               Our conclusion that the home warranty did not issue applies only to the
present petition to compel arbitration. In addition to the arbitration provisions, the home
warranty contains limitations on liability that defendants may wish to enforce in a future

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                                      DISPOSITION

              The petition for a writ of mandate is granted. Let a peremptory writ of
mandate issue directing the trial court to vacate its March 5, 2014 order granting
defendants’ petition to compel arbitration. Having served its purpose, the order to show
cause is discharged. The stay imposed by this court is dissolved upon the finality of this
opinion. The HOA shall recover costs incurred in this writ proceeding.
              The HOA’s motion for judicial notice is denied, as it contains material not
presented to the trial court and unnecessary to resolve the writ petition.
              The defendants’ motion to strike the declarations of David M. Peters and
Kyle E. Larkin is granted, as the objectionable material was not presented to the trial
court and is unnecessary to resolve the writ petition.
              Amicus Curiae PWC’s requests for judicial notice are denied, as they
contain material not presented to the trial court and unnecessary to resolve the writ
petition.

                                                  IKOLA, J.

WE CONCUR:

O’LEARY, P. J.

ARONSON, J.

arbitration in this case. For purposes of enforcing those limitations on liability, nothing
about our opinion would preclude defendants from presenting evidence that the home
warranty, in fact, did issue. In other words, our conclusion is only that there is no
evidence in the record before us that the home warranty issued. That said, we offer no
opinion on whether those limitations on liability are ultimately enforceable.

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