Smart Corner Owners Ass'n v. Cjuf Smart Corner LLC
| Decision Date | 20 May 2021 |
| Docket Number | D076775 |
| Citation | 279 Cal.Rptr.3d 11,64 Cal.App.5th 439 |
| Court | California Court of Appeals Court of Appeals |
| Parties | SMART CORNER OWNERS ASSOCIATION, Plaintiff and Appellant, v. CJUF SMART CORNER LLC et al., Defendants and Respondents. |
Epsten, Anne L. Rauch, San Diego, Trinette S. Sachrison, Los Angeles, Gordon A. Walters; Kasdan Lippsmith Weber Turner, Kenneth S. Kasdan, Michael D. Turner, Irvine, and Brittany L. Grunau for Plaintiff and Appellant.
Lorber, Greenfield & Polito, Bruce W. Lorber, Robert B. Titus, Poway; McCormick, Barstow, Sheppard, Wayte & Carruth and Scott M. Reddie, Fresno, for Defendants and Respondents.
Plaintiff Smart Corner Owners Association (the Association), a California nonprofit mutual benefit corporation, filed a construction defect action against the developers of a residential condominium tower. In 2019, the trial court granted the developers' motion for summary judgment on the ground that the Association failed to obtain the consent of more than 50 percent of its condominium owner members before filing the instant action as required by the governing declaration of covenants, conditions, and restrictions (CC&Rs). In concluding the Association's complaint was invalid, the court rejected the Association's argument that a subsequent vote of ratification, held after the filing of the operative complaint, could satisfy the member consent requirement. The court applied the holding of Branches Neighborhood Corp. v. CalAtlantic Group, Inc. (2018) 26 Cal.App.5th 743, 237 Cal.Rptr.3d 411 ( Branches ), which involved a similar member vote requirement, and also resulted in dismissal of an association's construction defect claims.
After the Association filed its notice of appeal, the Legislature enacted Civil Code section 5986,1 effective January 1, 2020. Section 5986 renders prelitigation member vote requirements—like those at issue here and in Branches —null and void. The newly enacted statute abrogates the defense that noncompliance with such conditions defeats a construction defect claim. ( § 5986, subd. (b).) The Legislature also expressly provided the statute would apply retroactively "to claims initiated before the effective date of this section, except if those claims have been resolved through an executed settlement, a final arbitration decision, or a final judicial decision on the merits. " ( § 5986, subd. (d), italics added.)
The Association seeks reversal of the judgment on the ground that its claims had not yet been resolved through a "final judicial decision on the merits" when section 5986 became effective, and it is therefore entitled to the benefits of the new legislation. It also contends the prelitigation vote requirement violates state public policy. We agree.
We conclude a "final judicial decision on the merits" within the meaning of section 5986, subdivision (d), does not encompass a judgment that was not final on appeal as of the statute's effective date. Section 5986 therefore applies retroactively to the Association's claims and compels reversal of the judgment entered against it. We also hold, as an independent ground for reversal, that the prelitigation vote requirement at issue in this case violates fundamental state public policy. Accordingly, we reverse the judgment and direct the trial court to enter a new order denying the developers' motion for summary judgment.
CJUF Smart Corner, LLC (CJUF), Canyon-Johnson Realty Advisors, LLC, Canyon-Johnson Urban Fund, LP, Smart Corner, LLC (collectively, the CJUF Group), and Lankford & Associates, Inc. (together with the CJUF Group, the Developers) are an associated group of real estate owners and developers.3 In 2004, CJUF contracted with Hensel Phelps Construction Company (Hensel Phelps) for the construction of the Smart Corner condominium project (Smart Corner or project) at 1080 Park Boulevard in downtown San Diego. Smart Corner is a 19-story mixed-use development with 301 residential units and common areas.
On May 24, 2007, the project architect issued its certificate of substantial completion for the project. On May 24, the City of San Diego (the City) issued a temporary certificate of occupancy for the project, although this temporary certificate of occupancy was not extended and lapsed after 30 days. As of May 24, all but 25 of the project's residential units lacked flooring or appliances and could not be lawfully occupied. As of May 24, the City had not yet completed its inspections of the project. Structural, fire alarm, fire sprinklers, and electrical inspections were completed after May 24.
On July 6, 2007, the building failed its electrical system inspection. On July 10, the building failed structural inspection; it did not pass structural inspection until July 17. The City issued certificates of occupancy for 25 residential units and the common areas on July 6, and for the project generally on July 17. The City continued to issue certificates of occupancy for the remaining residential units in the months that followed. On July 10, 2007, CJUF recorded a notice of completion for the project.
On August 27, 2007, CJUF, as declarant,4 caused an amended and restated declaration of CC&Rs to be recorded for Smart Corner. Among the enumerated powers of the Association was the power under section 4.3.11 of the CC&Rs to "initiate, defend, release, settle or intervene in mediation, arbitration, judicial or administrative proceedings on behalf of the Association in matters pertaining to ... any and all claims, causes of action, damages and suits for defects relating in any way to the design or construction of the Association Property or Common Area or any portion thereof, on behalf of the Owners ...."
Before the Association could initiate an action against CJUF, however, the Association was required to comply with a prelitigation vote provision set forth in section 4.4.4 of the CC&Rs (section 4.4.4), which stated:
(Italics added.)
On July 6, 2017, the Association provided the CJUF Group and Hensel Phelps with notice of a construction defect claim and notice of commencement of legal proceedings under sections 895, et seq. and 910, et seq. of the Right to Repair Act and section 6000 of the Davis-Stirling Common Development Act (Davis-Stirling Act).6 The notice included a preliminary list of numerous alleged defects, including defects in the project's exterior barrier coating, windows, door casings and doors, private decks, waterproofing, concrete, bathtubs and showers, roof membrane and roof flashing, roof laps and seals, tower floors, plumbing, venting, garage, and parking structure.
On September 5, 2017, the parties stipulated to extend until September 29 the deadline for completing statutory prelitigation requirements for conducting a first visual inspection, and for the Developers' service of responses to the Association's request for documents and production of documents to the Association. On September 27, the CJUF Group and Hensel Phelps notified the Association of their election to opt out of the Right to Repair Act and Davis-Stirling Act prelitigation procedures.
On October 6, 2017, the Association filed a complaint against the CJUF Group and Hensel Phelps, alleging causes of action for negligence, strict liability, breach of warranties, and violation of construction standards set forth in sections 896, et seq. In its operative first amended complaint filed February 14, 2018, the Association asserted a single cause of action against the Developers7 and Hensel Phelps for violation of construction defect standards under section 896, et seq.
In their respective answers to the first amended complaint, the Developers asserted defenses based on the Association's alleged non-compliance with CC&R requirements for maintaining a claim, and based on the running of the statute of repose in section 941, subdivision (a).8
On May 14, 2018, the Association filed the declaration of its attorney, David Peters, who averred that while the Association did not agree that the prelitigation voting provision in section 4.4.4 was enforceable, "by February 15, 2018, more than a majority of the members voted: (1) in favor [of] making a claim under Article IV, Section 4.4.4, (2) filing a lawsuit and/or (3) to ratify any past actions by the Board regarding the pursuant [sic ] of construction defect claims against the Declarant and other responsible entities."
On August 24, 2018, Division Three of the Fourth District Court of Appeal published Branches , a case involving alleged noncompliance with a pre-claim vote requirement in the CC&Rs of a residential condominium development. ( Branches, supra , 26 Cal.App.5th at p. 749, 237 Cal.Rptr.3d 411.) The association filed a demand for arbitration of construction defect claims against a developer without first obtaining the vote of at least 51 percent of its members as required by the community's CC&Rs. ( Id. at pp. 748–749, 237 Cal.Rptr.3d 411.)...
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