Schuchmacher v. Rockpointe Homeowners Ass'n

• Decision Date: 19 January 2023
• Docket Number: B299589
• Parties: ORLY SCHUCHMACHER, as Executor, etc., Plaintiff and Appellant, v. ROCKPOINTE HOMEOWNERS ASSOCIATION et al., Defendants and Appellants
• Court: California Court of Appeals Court of Appeals

ORLY SCHUCHMACHER, as Executor, etc., Plaintiff and Appellant,
v.
ROCKPOINTE HOMEOWNERS ASSOCIATION et al., Defendants and Appellants

B299589

California Court of Appeals, Second District, Third Division

January 19, 2023

NOT TO BE PUBLISHED

APPEAL from a judgment and orders of the Superior Court of Los Angeles County No. PC056764, J. Stephen Czuleger, Judge. Reversed with directions.

Law Offices of Roger L. Stanard and Roger L. Stanard, for Plaintiff and Appellant.

1

Gordon &Rees Scully Mansukhani, Craig J. Mariam and Alison M. Pringle, for Defendants and Appellants.

EDMON, P. J.

This litigation arose from a fire in April 2011 that caused damage to Gershon Schuchmacher's condominium unit in the Rockpointe condominium development. Schuchmacher,^[1] along with his tenant, Kathleen Latham, and a contractor, Michael Ruffino, sued, among others, the Rockpointe Homeowners Association, Inc. (Rockpointe or HOA), four former members of Rockpointe's Board of Directors, and the current owner of the unit, William Sturgeon, for a variety of causes of action, including breach of Rockpointe's governing documents, breach of fiduciary duty, and civil conspiracy. At trial, the court nonsuited Latham and Ruffino, and a jury (1) awarded Schuchmacher damages of $76,432 for Rockpointe's breach of its governing documents, and (2) found the former directors and Sturgeon were not liable for breach of fiduciary duty or civil conspiracy. Posttrial, the trial court denied Rockpointe's motion for judgment notwithstanding the verdict, awarded Schuchmacher prevailing party attorney fees, and denied Rockpointe's and the former directors' motions for attorney fees. Rockpointe and the former directors appealed from the judgment, the order denying the motion for judgment notwithstanding the verdict, and the attorney fees order, and Schuchmacher cross-appealed from the attorney fees order.

2

On appeal, Rockpointe contends that the damages award was not supported by substantial evidence, and Rockpointe was entitled to recover its postoffer costs, including its attorney fees, under Code of Civil Procedure section 998 because its pretrial settlement offer exceeded Schuchmacher's recovery. Separately, the former directors contend they are entitled to attorney fees pursuant to Civil Code section 5975, subdivision (c), which permits an award of attorney fees to the prevailing party in an action to enforce common interest development governing documents. In his cross-appeal, Schuchmacher contends the trial court abused its discretion by reducing his recoverable attorney fees from $913,005 to $67,000.

We conclude that substantial evidence did not support the jury's damages award, and thus we will reduce Schuchmacher's damages for breach of Rockpointe's governing documents to $1. Having done so, we will vacate the trial court's order regarding Schuchmacher's and Rockpointe's motions for attorney fees and to tax costs, and will direct the trial court on remand to reconsider the parties' requests for attorney fees and costs in light of Schuchmacher's reduced recovery. Finally, we conclude that the law of the case doctrine compels the conclusion that the former directors are not entitled to recover prevailing party attorney fees pursuant to Civil Code section 5975, subdivision (c).

FACTUAL AND PROCEDURAL BACKGROUND

I. The April 2011 fire in Schuchmacher's unit.

Schuchmacher bought a two-story condominium unit in the Rockpointe condominium development in Chatsworth, California (the unit) in 2003. In 2010, Schuchmacher experienced financial difficulties and fell behind on his mortgage payments and

3

homeowner's association dues. The same year, Schuchmacher's friend, Latham, began renting the unit's master bedroom.

On April 16, 2011, a fire broke out in Latham's bedroom. The fire caused significant damage to the upstairs bedrooms and bathrooms, and the entire unit suffered water and smoke damage. The cause of the fire was never determined.

Schuchmacher's mortgage holder, Bank of America, had initiated foreclosure proceedings on the unit prior to the fire. As discussed more fully below, Bank of America foreclosed on the unit about six months later, in October 2011.

II. Rockpointe's governing documents and fire insurance policy.

Rockpointe's operations were governed by its "First Restated Declaration of Covenants, Conditions, and Restrictions" (CC&Rs). Among other things, the CC&Rs required Rockpointe to "obtain and maintain a master or blanket policy of fire and casualty insurance, for the full insurable value (replacement cost) of all the Improvements within the Properties," defined to include "buildings, walls, decks, fences, swimming pools, landscaping, landscape structures, solar heating equipment, spas, utility lines, or any structure of any kind." The CC&Rs also required individual unit owners to "obtain and maintain assessment loss coverage for fire, earthquake, and other casualties with a minimum limit of $25,000," and permitted individual owners to maintain "[c]overage on portions of the structure not covered by the Master Policy of the Association," "[l]oss of use coverage for living expenses," and "[p]ersonal property coverage." The CC&Rs provided that Rockpointe's master insurance policy "shall be the primary coverage in the event of a loss covered by the Association's insurance."

4

The CC&Rs provided that if there were a "total or partial destruction of the Improvements in the Project, and the available proceeds of the insurance [described above] are sufficient to cover not less than 85 percent of the costs of repair and reconstruction, the improvements shall be promptly rebuilt. The Association shall solicit and obtain bids from at least two reputable contractors to repair and reconstruct the improvements in accordance with the original plans." Thereafter, "the Board or its authorized representatives shall, after obtaining bids from not less than two, but no more than four, reputable contractors, award the repair and reconstruction work to the most qualified and responsible contractor who is licensed for the work, has adequate liability insurance coverage and workers' compensation coverage."

With regard to repair costs not covered by insurance, the CC&Rs provided that "each Owner shall be obligated to contribute an equal share to the cost of reconstruction or restoration over and above the available insurance proceeds," but "[t]o the extent the Association's Master Policy pays separate interest damages, the Owner of such separate interest is responsible to pay any deductible which is attributable to such separate interest." Alternatively, if damage or destruction was caused "by the willful misconduct or negligent act or omission of" an owner or the owner's family, tenants, or guests, "the Board shall cause the same to be repaired or replaced, and all costs and expenses incurred in connection therewith shall be assessed and charged solely to and against such Owner as a Special Individual Assessment."

With regard to maintenance, the CC&Rs provided that each condominium owner was responsible for maintaining his or

5

her unit, but "[n]o 'improvement' . . . shall be commenced, erected, or maintained within the Property, nor shall any exterior addition, or change or alteration be made in or to any portion of the Common Area, any Unit, any Common Facility structure, or to any Exclusive Use Common Area until the plans and specifications . . . shall have been submitted to and approved in writing by the Association's Board of Directors."

As required by the CC&Rs, Rockpointe maintained a master fire and casualty insurance policy with Farmers Insurance (Farmers). The Farmers policy included coverage for, among other things, the interior walls of individual units, but not the units' contents. The policy also provided that Farmers was the primary insurer for any covered loss, and the unit owners' individual policies were secondary.

Separately, Schuchmacher maintained an individual insurance policy with State Farm Insurance (State Farm) that provided coverage for losses to his unit and personal property, loss assessments, and temporary housing for up to 12 months if his unit became uninhabitable due to a covered loss.

III. Rockpointe makes a claim under its fire insurance policy and assesses Schuchmacher for the deductible; Schuchmacher fails to pay the assessment for the deductible and loses his unit to foreclosure in October 2011.

After the fire in Schuchmacher's unit, Rockpointe's general manager, Carol Brockhouse, initiated a claim with Farmers under Rockpointe's master fire insurance policy. In May 2011, Farmers provided Rockpointe with a detailed scope of work describing the covered repairs the unit required. Farmers estimated the replacement value of the covered losses, which

6

included the costs to repair all the interior walls of Schuchmacher's unit that had been damaged by fire, at $86,832. In May 2011 and April 2012, Farmers issued Rockpointe two checks totaling $76,432-the amount of the covered losses, less a $10,000 deductible and a prior payment for lead and asbestos testing. Rockpointe placed these funds in a segregated account for the benefit of the unit.

In May 2011, Rockpointe obtained estimates for the repair work from three contractors. It thereafter notified Schuchmacher that a meeting "for the purpose of discussing the circumstances involving the fire in your unit . . . and payment of the $10,000 insurance deductible" would take place on June 15, 2011.

Both Schuchmacher and Latham attended the June 15, 2011 meeting, at which Rockpointe's Board of Directors (Board) voted to approve an individual special assessment against Schuchmacher in the amount of the $10,000 insurance deductible. The Board agreed to provide Schuchmacher with a letter of responsibility that he could submit to his individual insurer, State Farm, to make a claim under his...