River's Side at Wash. Square Homeowners Ass'n v. The Superior Court

Decision Date06 March 2023
Docket NumberC095860
PartiesRIVER'S SIDE AT WASHINGTON SQUARE HOMEOWNERS ASSOCIATION, Petitioner, v. THE SUPERIOR COURT OF YOLO COUNTY, Respondent; RIVER'S SIDE LLC et al., Real Parties in Interest.
CourtCalifornia Court of Appeals

Order Filed Date: 3/30/23

ORIGINAL PROCEEDING in mandate (Super. Ct. No. CV2017-1712) Samuel T. McAdam, Judge. Peremptory writ issued.

Williams & Gumbiner, Scott Williams and Beth C. Tenney for Petitioner.

Chapman & Intrieri, John W. Chapman, Mark G. Intrieri, J. Spencer Edgett and John F. Baumgardner for the Executive Council of Home Owners as Amicus Curiae on behalf of Petitioner.

Christensen Hsu Sipes, Jennifer K. Stinnett and Meighan A. Cardenas for Real Parties in Interest.

No appearance for Respondent.

ORDER MODIFYING OPINION AND DENYING REHEARING

THE COURT:

It is ordered that the opinion filed herein on March 6, 2023, be modified as follows:

On page 11, the last paragraph of section II, beginning "California has not adopted the Uniform Act" is deleted and the following paragraph is inserted in its place:

California has not adopted either section 6.11 of the Restatement Third of Property, Servitudes or section 3-102(a)(4) the Uniform Act, and Plaintiff points us to no provision in California law that is analogous to section 6.11 or section 3-102(a)(4). We decline to adopt a comment to a Restatement section that California has not adopted.

There is no change in the judgment.

Petitioner's petition for rehearing is denied.

EARL J.

River's Side at Washington Square Homeowners Association (Plaintiff) is a homeowners association established to manage a development consisting of 25 residential units and common areas. It sued River's Side LLC et al. (Defendants) for construction defects in the residential units. Defendants demurred to six of the seven causes of action asserted against them, arguing a homeowners association lacks standing to sue on behalf of its members for defects in residential units that it does not own and has no obligation to repair. Plaintiff alleged it had standing to bring this action on behalf of its members pursuant to Civil Code section 945, Civil Code section 5980, and Code of Civil Procedure section 382. The trial court sustained the demurrer without leave to amend, holding that Plaintiff lacked standing under Civil Code sections 945 and 5980, and that Code of Civil Procedure section 382 was inapplicable.

Because the order sustaining the demurrer left one cause of action remaining, it is not immediately appealable, and Plaintiff thus challenges the order by petition for writ of mandate. "Extraordinary relief is generally not granted at the pleading stage. But an appellate court can do so when it concludes the trial court has deprived a party of an opportunity to plead his or her cause of action . . . and granting the petition will prevent a needless and expensive trial and reversal." (Lacher v. Superior Court (1991) 230 Cal.App.3d 1038, 1043.) We find that this is such a case.

As explained in more detail below, we conclude that Plaintiff has standing to bring claims for damages to the common areas pursuant to Civil Code sections 945 and 5980, and that it at least nominally alleged such damages. We further conclude that Plaintiff may have standing to bring claims for damages to the residential units that sound in contract or fraud if it can meet the requirements for bringing a representative action pursuant to Code of Civil Procedure section 382. Lastly, we hold Plaintiff should have been granted leave to amend to cure any standing defect. We thus grant the petition for writ of mandate and direct the trial court to reverse its order granting the demurrer.

FACTUAL AND PROCEDURAL BACKGROUND

Because we are reviewing an order sustaining a demurrer, we accept as true the factual allegations in the operative complaint. (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.)

Plaintiff is a homeowners association that was established to manage a common interest development (the development). The development consists of 25 residential units and one commercial unit, each of which is separately owned by Plaintiff's members. The development also includes common areas that are owned by Plaintiff.

The development was financed and constructed by a group of entities and individuals referred to as "the developers." Due to adverse market conditions, the developers were only able to sell three of the 25 residential units to individual buyers, and they sold the remaining 22 residential units in a bulk sale. Defendants River's Side LLC, Eric Roe, Tommy Le and Michael Schimmel acquired the units, renovated them, and sold them to individual buyers from September 2012 through February 2017.

The present action is a construction defect lawsuit filed by Plaintiff against the developers, various other entities involved in the design and construction process, and Defendants. Plaintiff alleges generally that there are "defects in the structures, components, and common areas" of the development. Attached to the complaint is an exhibit (Exhibit A) that identifies defects in six of the residential units in some detail. For example, in one of the units (278 McDowell Lane), there are signs of water intrusion under the stairs, in a powder room, and around the foundation. In another unit (291 McDowell Lane), the stucco around the windows is cracked. Exhibit A does not appear to identify any defects in or damage to the common areas.

Plaintiff ultimately settled with the developers. As part of the settlement, the developers assigned to Plaintiff their rights in any claims they have against third parties who are potentially liable for the claims asserted in the lawsuit including Defendants.

Plaintiff asserted seven causes of action against Defendants, for (1) violations of statutory standards for residential construction contained in the Right to Repair Act (Civ. Code, § 895 et seq.); (2) breach of implied warranty; (3) "assigned rights" (i.e., Plaintiff is asserting the rights the developers had against third parties that were assigned to Plaintiff as part of the settlement agreement); (4) breach of contract; (5) intentional or negligent nondisclosure; (6) intentional or negligent misrepresentation; and (7) breach of fiduciary duty. As indicated above, Plaintiff alleged it had standing to bring this action on behalf of its members[1] pursuant to Civil Code sections 945 and 5980 and Code of Civil Procedure section 382.

Defendants demurred to all causes of action asserted against them except the cause of action for assigned rights, arguing, among other things, that Plaintiff lacked standing under Civil Code section 5980.[2] Civil Code section 5980 provides, among other things, that an association has standing to sue for damage to the common area or to a separate interest the association is obligated to maintain or repair. According to Defendants, the only common area in the development is a street known as Lot A, and Plaintiff is only required to maintain or repair (1) that common area, (2) the trees located in the public right-of-way along a street in the front of the development, and (3) roof drains and connections within the city's right-of-way.[3] Defendants argued that none of the defects alleged in the complaint or identified in Exhibit A involve either the common areas or any portion of the individual units that Plaintiff is required to maintain or repair, and that Plaintiff thus did not have standing under Civil Code section 5980 to bring this action.

In its opposition, Plaintiff argued it had standing under Civil Code section 5980 because the complaint at least nominally alleged defects in the common areas. It also argued it had standing under Civil Code section 945 and Code of Civil Procedure section 382, which Defendants did not cite or discuss in their demurrer. Civil Code Section 945 is part of the Right to Repair Act, which sets forth standards for residential construction and gives homeowners the right to sue for violation of those standards. It provides, "associations and others having the rights set forth in Sections 5980 . . . shall be considered to be original purchasers and shall have standing to enforce the provisions, standards, rights, and obligations set forth in this title." (Civ. Code, § 945.) Plaintiff asserted it was "beyond debate" it had standing under Civil Code section 945. Code of Civil Procedure section 382 provides, "when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all." Plaintiff argued numerous decisions interpreting this provision have held it confers representative standing on a homeowners association to enforce its members' rights.

In its reply, Defendant argued Plaintiff did not have standing under Code of Civil Procedure section 382 or Civil Code section 5980. It cited, but did not discuss, Civil Code section 945.

The trial court issued a tentative ruling sustaining the demurrer without leave to amend, finding standing under Civil Code section 945 "is predicated upon compliance with" section Civil Code 5980, and none of the bases for standing in section Civil Code 5980 applied. The trial court did not mention Code of Civil Procedure section 382.

At the hearing on the demurrer, Plaintiff was given the opportunity to expand on its argument that all three statutes confer standing on it. Indeed, the trial court continued the hearing to a second day to give Plaintiff sufficient time to make its argument, stating, "This matter's going to be continued for oral argument....I'm going to give you more time to make your case.... [¶] . ....

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