Ziani Homeowners Ass'n v. Brookfield Ziani LLC

• Decision Date: 22 December 2015
• Docket Number: G050284
• Citation: 196 Cal.Rptr.3d 399,243 Cal.App.4th 274
• Court: California Court of Appeals Court of Appeals
• Parties: ZIANI HOMEOWNERS ASSOCIATION, Plaintiff and Respondent, v. BROOKFIELD ZIANI LLC et al., Defendants and Respondents; Ali Fadavi et al., Movants and Appellants.

243 Cal.App.4th 274

196 Cal.Rptr.3d 399

ZIANI HOMEOWNERS ASSOCIATION, Plaintiff and Respondent,

v. BROOKFIELD ZIANI LLC et al., Defendants and Respondents;Ali Fadavi et al., Movants and Appellants.

G050284

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

Filed December 22, 2015

Alvarado Smith, Robert J. Stein II, Claire M. Schmidt and Mayte Santacruz, for Movants and Appellants.

Fenton Grant Mayfield Kaneda & Litt, Daniel H. Clifford, Joseph Kaneda and Bruce Mayfield, for Plaintiff and Respondent.

No appearance for Defendants and Respondents.

OPINION

THOMPSON, J.

Movants and appellants Ali Fadavi, Shadi Ghazi, Pamela Bacha, Mary Roll, Jenna Pearce, Joe Pearce, Michael Ehsani, Robert Glass, and Rocheda Reid (Movants) appeal from an order denying their motion to intervene on the grounds it was not timely. Movants argue the trial court erred in determining timeliness, based upon the date the complaint was filed. We agree. Therefore, we reverse the order and remand with instructions to reconsider the timeliness of the motion, based upon the date Movants knew or should have known their interests in this litigation were not being adequately represented; and, if it is determined to be timely, then to decide the motion on the merits.

FACTS

Brookfield Ziani LLC (Brookfield) constructed a condominium development (Condominium Development) in Newport Coast in 2003 and 2004. In July 2012, Ziani Homeowners Association (HOA) sued Brookfield and others, alleging construction defects, including plumbing defects. Movants are owners of individual units within the Condominium Development and are HOA members.

The plumbing defect claims concerned leaks in the pipes, with some of those pipes being located in the individual owners' units and some in the common areas. The plumbing defect claims were the largest item (by cost of repair) in the lawsuit. The unit owners are responsible for the costs of plumbing repairs in their individual units, while the HOA is responsible for the costs of plumbing repairs in the common areas.

The HOA complaint was brought in the name of the HOA and asserted: "By the express terms of the governing documents and pursuant to Code of Civil Procedure section 382 and Civil Code sections 1364 and 1368.3, [HOA] is granted the general authority and responsibility to bring the herein stated action on behalf of all owners of condominium units within the Condominium Development."

The HOA complaint further asserted: "[HOA] ... has the sole and exclusive right and duty to manage, operate, control, repair, replace and restore the Condominium Development, ... including the right, duty, and power to contract for legal services to prosecute any action affecting the [HOA] when such action is deemed by it necessary to enforce its power, rights and obligations, including the bringing of this action.... Plaintiff seeks recovery for damages to the property which consists of but is not limited to damages to the common areas, damages to the separate interests which the [HOA] is obligated to maintain, repair, and/or damages to the separate interests within the [HOA]'s common interest, power and standing."

From the outset, the HOA board of directors and its attorney, Mr. Kaneda, represented to the individual unit owners, including Movants, that the HOA was pursuing the plumbing defect claims and would not settle unless and until it obtained full recovery to pay for the necessary repairs to the common areas and to the individual units. The HOA board and Mr. Kaneda told the individual unit owners they could file their own lawsuits, but discouraged them from doing so, because, they promised, the HOA and its counsel were bearing the expenses of the litigation and were vigorously pursuing all of the plumbing defect claims.

Thereafter, Mr. Kaneda occasionally spoke at HOA board meetings, and kept the individual unit owners informed about the status of the litigation. At a January 21, 2014 HOA board meeting, Mr. Kaneda said the case had not settled and was scheduled to go to trial in the summer of 2014. Mr. Kaneda assured the individual unit owners he would not recommend any settlement which did not pay for all past and future plumbing defect repairs.

Between the January 21 and March 25 HOA board meetings, the HOA agreed to settle the lawsuit with Brookfield. At the March 25 HOA board meeting, the individual unit owners were informed of the existence of the settlement, but not its terms. The HOA and its counsel refused to answer questions about the settlement, including questions about the plumbing defect claims. One HOA board member resigned in protest over the settlement.

On March 31, Mr. Kaneda sent a letter to all of the individual unit owners, which provided some information about the settlement. The letter told the individual unit owners the settlement "cover[ed] all the necessary and needed repairs," and "with the settlement monies the [HOA] shall be able to completely re-plumb the entire project." However, it also stated that completing those repairs would require use of the HOA's reserve funds.

In a subsequent letter dated April 14, Mr. Kaneda said the settlement would only cover the cost of repairs made with "PEX [plastic] piping," and the decision to use PEX or copper piping (as used in the original construction) would be ultimately made by the HOA board. Mr. Kaneda also stated the settlement would not reimburse the individual unit owners who already paid to repair their plumbing defects.

At the April 22, HOA board meeting, Mr. Kaneda disclosed more terms of the settlement, which allegedly showed the settlement would leave the individual unit owners with some combination of out-of-pocket expenses for the plumbing repairs, a special HOA assessment, and depleted HOA reserves.

In May 2014, Movants filed a motion to intervene (Motion). The Motion sought both permissive intervention (Code Civ. Proc., § 387, subd. (a), all further undesignated statutory references are to this code), and mandatory intervention (§ 387, subd. (b) ). The Motion was supported by declarations from Movants Fadavi and Ghazi, together with a class action complaint, and a request for judicial notice.

Movants argued mandatory intervention was proper because: (1) Movants were individual unit owners and members of the HOA, and they had a direct and immediate financial interest in the litigation; (2) the proposed settlement would impair or impede Movants' ability to protect their interests; (3) the HOA board and its counsel were no longer adequately representing Movants' interests; and (4) the Motion was timely because Movants filed it promptly after learning the HOA board and its counsel were no longer adequately representing Movants' interests.

Movants contended permissive intervention was proper because: (1) Movants had a direct and immediate financial interest in the litigation; (2) the Motion was timely; (3) intervention would not enlarge the issues in the case because Movants adopted the same substantive claims based on the same alleged plumbing defects; and (4) the benefit of allowing intervention outweighed the HOA's interests in controlling the litigation because the claims were the same, and denial would prejudice the individual unit owners whose claims might be barred by the statutes of limitation.

The HOA filed opposition to the Motion, supported by a declaration from Denise Hartman, the HOA board president. (Brookfield and other defendants also opposed the Motion.) With respect to mandatory intervention, the HOA conceded Movants had an interest in the property at issue in the litigation. The HOA argued, however, the proposed settlement would not impair or impede Movants' ability to protect their interests because the HOA board would ultimately decide how the settlement funds would be used and Movants had recourse under the covenants, condition, and restrictions (CC & R's) for the Condominium Development.

The HOA also asserted Movants failed to demonstrate the HOA did not adequately represent their interests. In fact, even at that late date, the HOA argued it was still adequately representing the interests of the individual unit owners. In essence, the HOA argued the Motion was too early—not too late.

As to permissive intervention, the HOA argued Movants did not have a direct and immediate interest because resolution of the litigation would not affect the relationship between the HOA and Movants vis-à -vis the CC & R's. The HOA also asserted intervention would enlarge the issues in the litigation because Movants filed a class action, which would require litigation over class certification issues. The HOA added Movants did not offer a compelling reason for intervention, and the likelihood of delay to litigate the class certification issues would prejudice the HOA.

Movants filed a reply, supported by a declaration from their attorney, another request for judicial notice, and evidentiary objections to Hartman's declaration. Their reply pointed out the HOA did not contend the Motion was untimely.

As to mandatory intervention, Movants noted the HOA conceded the Movants had an interest in the litigation. Movants stated they had learned the proposed settlement contained a release of their individual unit plumbing defect claims, and the proposed settlement would impair or impede their ability to protect their interests.

Movants again asserted the HOA and its counsel were no longer adequately representing Movants' interests because the HOA could not pursue their individual plumbing defect claims, the proposed settlement created a conflict between the HOA and its members, the HOA misled its members, and the HOA violated its members' rights.

With respect to permissive intervention, Movants argued they had an interest in litigation, and they noted the HOA conceded Movants had such an interest in the mandatory intervention section of its opposition, but disputed they had such an interest in the permissive intervention section of its opposition. Movants contended intervention...