Alfaro v. Community Housing Improvement System & Planning Assn., Inc., H031127.

CourtCalifornia Court of Appeals
Citation171 Cal.App.4th 263
Decision Date19 February 2009
Docket NumberNo. H031127.,H031127.
PartiesPATRICIA GONZALEZ ALFARO et al., Plaintiffs and Appellants, v. COMMUNITY HOUSING IMPROVEMENT SYSTEM & PLANNING ASSOCIATION, INC., et al., Defendants and Respondents.

Appeal from the Superior Court of Monterey County, Nos. M75546 and M78858, Robert A. O'Farrell, Judge.

Law Offices of Bruce Tichinin, Inc. and Bruce Tichinin for Plaintiffs and Appellants.

Lombardo & Gilles, Esau Soren Diaz; Noland, Hamerly, Etienne & Hoss, Lloyd W. Lowrey, Jr., Daniel E. Griffee; Charles J. McKee, County Counsel, and Kathryn Reimann, Deputy County Counsel, for Defendants and Respondents.




Plaintiffs are the owners of 22 single-family residences1 in the Moro Cojo inclusionary housing development projects (sometimes "the Projects") outside of Castroville in the County of Monterey. With two exceptions, they obtained their grant deeds directly from either defendant Community Housing Improvement System & Planning Association, Inc. (CHISPA), or defendant South County Housing, Inc. (South County), both nonprofit corporations (sometimes collectively "defendants"). They acquired their properties through a special program aimed at creating affordable housing for households of very low to moderate incomes. In lieu of a cash downpayment, plaintiffs invested time and labor in helping to build their own residences and those of their neighbors. The Projects were developed subject to a deed restriction that requires the properties to remain affordable to buyers with very low to moderate incomes.

In this lawsuit, plaintiffs claim they were surprised to learn of this deed restriction after they had invested their time and labor. They seek either to invalidate it or to recover damages on a variety of theories, including inadequate recording, unreasonable restraint on alienation, fraudulent nondisclosure of the restriction, breach of an implied contract, waiver and estoppel. After the trial court sustained demurrers to three successive complaints, plaintiffs declined leave to amend their remaining cause of action for constructive fraud, and the trial court dismissed the action. For the reasons stated below, we will dismiss the appeal as to the County of Monterey and will reverse the judgment after concluding that plaintiffs' properties are subject to a valid affordable housing deed restriction, that the statutes of limitations have lapsed as to claims by 22 plaintiffs of fraudulent and negligent nondisclosure and breach of implied contract mostly against CHISPA, and that the same claims by the other 16 plaintiffs against South County remain viable.


On December 20, 1994, the Monterey County Board of Supervisors, by resolution No. 94-524, approved development permits subject to 103 conditions for certain property outside of Castroville. Among those conditions was condition No. 99: "That all the units in the Moro Cojo Inclusionary Housing Development Projects (SH 93001 and SH 93002) be affordable to very low, low and moderate income households as defined in Section 50093 of the California Health and Safety Code." This project included a subdivision including 175 single-family dwellings and a senior housing development. In so doing, the county found "that Northern Monterey County and Castroville, specifically, suffers from an acute need for affordable housing."

Monterey County's approvals of these Projects were challenged in a lawsuit in Monterey County Superior Court (Alliance to Enforce Mandates v. County of Monterey (Super. Ct. Monterey County, No. 102344)) that was settled by agreement filed November 28, 1995. Among the terms of the stipulated judgment was that condition No. 99 "shall be a permanent deed restriction on the project parcels, and shall not be subordinated to any financing, encumbrance, loan, development agreement, contract, lease or other document."

On September 30, 1997, the Monterey County Board of Supervisors, by resolution No. 97-408, accepted the final subdivision map for the Projects. They found, among other things, that condition No. 99 would be implemented by a deed restriction that would be recorded along with the final map.

On October 13, 1997, the owner of the property, CHISPA, on behalf of itself and two limited partnerships, recorded a document (#9759925) entitled "DEED RESTRICTION" with the Monterey County Recorder. The restriction referenced resolution No. 94-524 and quoted condition No. 99 as the owner's covenant with the county. The restriction provided that it "shall remain in full force and effect during the period that said permit, or any modification or amendment thereof, remains effective, and during the period that the development authorized by said permit or any modification of said development, remains in existence in or upon any part of, and thereby confers benefit upon, the subject property described herein, and to that extent, said deed restriction is hereby deemed and agreed by owner to be a covenant running with the land, and shall bind owner and all his/her assigns or successors in interest."2 The subject property was described in an exhibit as "All of Tract No. 1284 of Moro Cojo," with references to the filing date, volume, and page in the Monterey County records. According to plaintiffs, this restriction is perpetual and prevents their heirs from inheriting their properties.

According to a brochure distributed by CHISPA, applicants with low or very low incomes, under Monterey County guidelines, could become home-owners by pooling their efforts and spending 40 hours a week per family for eight to 10 months building their own homes under CHISPA supervision. Specialty work such as plumbing and electrical would be done by professionals. Applicants had to qualify for federal Rural Development loans available under the Rural Housing Service Mutual Self-Help Housing Program.

South County distributed a document dated May 3, 2001, explaining the financing in English and Spanish as follows. The home prices were set at fair market value. However, the owners could pay on the following terms. The homeowner made a promissory note to the County of Monterey on which no monthly payments were due so long as the owner was not in default under the terms of the note. The homeowner was to make a one-time payment equal to the amount of a first-time homebuyer program mortgage subsidy within 30 days of the completion of the home. The amount of the note and accrued interest was due on sale or transfer of the home. The county had a first option to purchase the property at fair market value if the owner wished to sell. If the county declined, the homeowner could sell the home to any person. The owner was guaranteed a return on a "sweat equity" downpayment valued at $16,000 plus specified interest, effected, if necessary, by a forgiveness of principal and interest.

At various unspecified dates, plaintiffs all participated in this program to obtain their properties and fully performed their obligations under their contracts. By working with plaintiffs through these programs, defendants created confidential, fiduciary relationships and were the managing partners in a joint venture. Defendants did not disclose the existence of the deed restriction to plaintiffs before they invested their time and labor. Plaintiffs were not informed before purchasing their properties that they are required to sell them to "persons meeting unspecified income limits" for prices "well under their current fair market values...."

The preliminary title reports given to all plaintiffs "at the time they purchased their property referred to Covenants, Conditions, and Restrictions, and Deed Restrictions of record, but the references did not describe any limits on the sale value of their properties, or the ability of Plaintiffs to encumber their properties for financing."

CHISPA issued 11 grant deeds to 16 plaintiffs on the following dates: January 31, 2000, Jose and Maria Marin; May 11, 2000, Jennifer Cruz; May 12, 2000, Salvador Sanchez;3 June 5, 2000, Efrain and Amparo Ochoa;4 July 12, 2000, Celestino Salazar;5 July 13, 2000, Juan and Silvia Palacios; July 14, 2000, Lorena Maravilla; July 17, 2000, Estee Hurley; December 6, 2000, Howard Carter; February 12, 2001, Raul and Yolanda Perez; June 19, 2001, Panfilo and Isaura Barbaso.

How South County obtained title to property in the Projects is not explained in the record. South County issued 10 grant deeds to 16 plaintiffs on the following dates: February 9, 2000, Jose and Carmen Cervantes, Fermin and Rosario Chavarin, Juventino and Socorro Chavez; February 14, 2000, Jose and Rebecca Pineda; February 15, 2000, Roberto Alfaro, Manuel Castro, Tomas Alfaro;6 February 22, 2000, Octavio Martinez and Erendira Sanchez; February 28, 2001, Ramiro and Rosario Castillo; May 22, 2001, Claudio Serrato.7

Each grant deed from CHISPA stated, "See Attached Exhibit for CC & R Incorporation." The incorporation page referenced the three deed restrictions and the covenants, conditions, and restrictions recorded on October 13, 1997.8 The grant deeds from South County did not contain this provision, except for the deeds to the Castillos and Claudio Serrato.9

This deed restriction breached "an unwritten contract the existence and terms of which were implied from the conduct and the" written brochures distributed by defendants containing the terms that, if plaintiffs contributed their time and labor to construct the homes and assumed the indebtedness necessary to purchase the homes, defendants "would convey to said Plaintiffs title to the homes free of any restriction prohibiting said Plaintiffs from selling their homes at fair market value."

Following receipt of their grant deeds, on February 15, 2000, plaintiffs Pinedas executed a note promising to pay South County $38,190. On July 24, 2000, plaintiff Hurley executed a note...

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    ......Pacific Greyhound Page 9 Lines, Inc. (1933) 130 Cal.App. 510, 512.) In this case, ... to challenge or justify the ruling.' " ( Alfaro v. Community Housing Improvement System & g Assn., Inc. (2009) 171 Cal.App.4th 263, 302; Cantu ......
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    • United States
    • California Court of Appeals
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    .... 171 Cal.App.4th 1355f. PATRICIA GONZALEZ ALFARO et al., Plaintiffs and Appellants,. v. COMMUNITY HOUSING IMPROVEMENT SYSTEM & PLANNING ASSOCIATION, INC., et al., Defendants and Respondents. No. H031127. Court of Appeal of California, Sixth District. March 18, 2009. [Modification of opinion (171 Cal.App.4th 263; ___ Cal.Rptr.3d ___), upon denial of rehearing.]. .         THE COURT. — IT IS ORDERED that the opinion filed herein on February 19, 2009, be modified as follows, and the ......

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