Taormina Theosophical Community, Inc. v. Silver

• Decision Date: 17 March 1983
• Citation: 190 Cal.Rptr. 38,140 Cal.App.3d 964
• Court: California Court of Appeals Court of Appeals
• Parties: TAORMINA THEOSOPHICAL COMMUNITY, INC., Plaintiff, Cross-Defendant and Respondent, v. Robert D. SILVER and Esther W. Silver, Defendants, Cross-Complainants and Appellants. Civ. 64262.

Page 38

190 Cal.Rptr. 38

140 Cal.App.3d 964

TAORMINA THEOSOPHICAL COMMUNITY, INC., Plaintiff, Cross-Defendant and Respondent, v. Robert D. SILVER and Esther W. Silver, Defendants, Cross-Complainants and Appellants.

Civ. 64262.

Court of Appeal, Second District, Division 3, California.

March 17, 1983.

Hearing Denied June 15, 1983.

Silver & Walshin and Martin E. Pulverman, Ventura, for defendants, cross-complainants and appellants.

Hathaway, Perrett, Webster & Powers and Paul D. Powers, Ventura, for plaintiff, cross-defendant and respondent.

KLEIN, Presiding Justice.

Defendants, cross-complaints and appellants Robert D. Silver and Esther W. Silver (the Silvers) appeal from a judgment granting the injunctive relief and attorney's fees sought by plaintiff, cross-defendant and respondent Taormina Theosophical Community, Inc. (Taormina).

We reverse the judgment finding that the covenant restraining ownership of the land is unenforceable as an illegal restraint on alienation and that the covenant restraining ownership violates Civil Code section 53, subdivision (b).

PROCEDURAL BACKGROUND

Taormina filed its first amended complaint for injunctive relief, damages and a declaration of rights on May 15, 1980, seeking enforcement in equity of certain provisions in Covenants, Conditions and Restrictions (CCRs) recorded August 8, 1977, by Taormina and allegedly breached by the Silvers. ¹

On June 25, 1980, the Silvers filed an answer and a cross-complaint for declaratory relief and cancellation of the CCRs.

Following trial, injunctive relief was granted as prayed and attorney's fees were awarded. Judgment was entered December 8, 1980, and a timely appeal followed.

FACTS

Taormina is a nonprofit California corporation organized for the purpose of establishing a retirement community for Theosophists and certain other qualified persons. Theosophists are members of the Theosophical Society in America (Society). On or about March 17, 1967, Taormina acquired property for that purpose located in Ojai. The property consisted of two Tracts, 1956 and 2446. Tract 1956 was serially developed in three sections, after which Tract 2446 was developed.

On April 17, 1968, Taormina recorded CCRs covering all the purchased property, which CCRs included inter alia a right of first refusal retained by Taormina.

On January 18, 1969, Taormina conveyed property described as Lot 19 of Tract 1956-1 to K.H. Weiland which property was subject to the CCRs.

On August 8, 1977, Taormina recorded duly ratified amendments to the CCRs which contained a provision limiting ownership and occupancy in Tracts 1956-1-2-3 of Taormina to persons (1) who had been members of the Society for three years, or (2) in exceptional cases, who had been members for less than three years, but had been approved by Taormina's Board of Trustees, and (3) who were 50 years of age or over. The land in Tract 2446 was not covered by these CCRs.

On November 9, 1977, new CCRs were recorded, which had not been duly ratified. These CCRs were identical to those recorded August 8, 1977, in all but two respects. The first difference concerns an irrelevant lien provision, but the new CCRs purported to change the scope of the ownership restriction by deleting the reference to Tracts 1956-1-2-3 and making it applicable only to Tract 2446. ²

On November 22, 1977, an unratified Document of Clarification was recorded relating to Tract 1956-1. This document stated that the November 9, 1977 CCRs were intended to supercede prior restrictions.

On November 10, 1978, the trustees of the trust for K.H. Weiland transferred the property located on Lot 19 of Tract 1956-1 to the Silvers.

At the time the Silvers acquired the property together, both had actual knowledge of the CCRs recorded August 8, 1977; neither was a member of the Society, although Esther joined later, nor was either granted an exception to the ownership or occupancy requirements; Esther was 70 years old and Robert was under 50; and neither had any knowledge of the unratified documents recorded November 9 and 22, 1977.

Robert was an attorney who had represented other members of Taormina, as well as the trustee of the trust from which the Silvers acquired title.

The trial court determined that the Theosophical Society was not a religion, that the restrictions as to ownership and occupancy did not discriminate on the basis of race, color, creed or religious preference, and that the right of first refusal set forth in the CCRs was validly passed and duly enforceable against the Silvers.

CONTENTIONS

The Silvers set forth a number of reasons why each of several conclusions of the trial court was incorrect. We shall discuss only those arguments that actually dispose of each issue.

The Silvers' first point is that the trial court erred in refusing to give effect to the November 9th CCRs and the November 22nd Document of Clarification. They contend that the recording statutes and Corporations Code section 313 made the documents legally binding and in any case, that waiver and estoppel prevent the enforcement of the ownership requirement.

They also argue that the ownership provision, if applicable to their property, constitutes an illegal restraint on alienation.

The Silvers also aver that Civil Code section 53, which prohibits restrictive covenants based on religion, renders both the ownership and the occupancy requirements void.

The Silvers go on to attack the trial court's conclusion that the right of first refusal is enforceable, arguing that it violates the Rule Against Perpetuities.

Finally, the Silvers contend that a provision regarding subleasing and the residency of children is invalid.

DISCUSSION

1. The August CCRs control over those recorded November 9, 1977.

The threshold issue is whether the trial court erred in finding that the November 9 CCRs had no legal effect because they were not ratified by the membership. The Silvers claim that the document must be considered binding since it was executed by corporate officers and duly recorded. If the November 9 CCRs were indeed binding on the parties, a reversal would be dictated because the ownership restriction, by its own terms, would not apply to the Silvers' property. However, they are not binding and therefore the August CCRs control.

Generally, restrictive covenants may be modified by less than all affected landowners where the original scheme of restrictions contains a provision so authorizing. (See Sharp v. Quinn (1931) 214 Cal. 194, 197, 4 P.2d 942; Rest. Property, § 554 com. e.) The procedure established in the provision must be followed for the modification to be binding. While an individual can give up his or her own rights under a covenant, such individual cannot unilaterally affect the rights of others. (See Robertson v. Nichols (1949) 92 Cal.App.2d 201, 206, 206 P.2d 898.)

The August 8 CCRs provide for amendment by the vote of 75 percent of lot owners. The trial court found that 75 percent of the owners had not approved the changes embodied in the November 9 CCRs. The changes therefore are not enforceable and to the extent that they purport to make such changes, the November 9 CCRs are void.

2. Corporations Code section 313 inapplicable.

The Silvers contend however that Corporations Code section 313 prevents us from considering lack of ratification. Corporations Code section 313 provides that a written instrument signed by corporate officers "is not invalidated as to the corporation by any lack of authority of the signing officers in the absence of actual knowledge [by the other party to the instrument]."

Its purpose, as set forth in the legislative committee comment is "to allow third parties to rely upon the assertive authority of various senior executive officers of the corporation concerning the execution of any instrument on behalf of the corporation." (Leg. Committee Comm., West's Ann.Corp.Code, § 313 (1977 ed.) p. 254; emphasis added.) Such extra protection for third parties who deal with corporations is warranted since corporations necessarily act through agents.

Here, the Taormina officers were not acting just on behalf of the corporation when they filed the November 9 CCRs; they were acting on behalf of the individual landowners in the community as well. Therefore, the policy of protecting those dealing with corporations is not applicable, and Corporations Code section 313 is not controlling.

3. The mere act of recordation did not make the November CCRs enforceable.

Despite the Silvers' further contention, the act of recording the November 9 CCRs did not make them enforceable. The purpose of recording is to protect innocent purchasers and encumbrancers of property by giving notice of potential limitations on title. (U.S. Hertz, Inc. v. Niobrara Farms (1974) 41 Cal.App.3d 68, 85, 116 Cal.Rptr. 44.) Recording itself grants no interest in the property, (ibid.) and a void document "derives no validity from the mere fact that it is recorded." (City of Los Angeles v. Morgan (1951) 105 Cal.App.2d 726, 733, 234 P.2d 319.) Therefore, the otherwise void November 9 document was not made binding on the parties simply because it was recorded.

A different case would be presented if the Silvers actually had been misled by the recorded documents as to the limitations on their land. In such a case, equity might require enforcement of the provisions despite their invalidity. However, the Silvers knew the property was restricted and were not aware of the limiting provisions of the November 9 document. Any doubts about the enforceability of the covenants stemmed from their content, and not from the state of the record title. Therefore, considerations of equity do not require that the November 9 CCRs be given effect.

4. Enforceability of the CCRs.

Having decided that the August 8 CCRs control, the next issue is whether the restrictions contained therein are enforceable against the Silvers' property. Since the Silvers were not parties to the...