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Canterbury Woods Homeowners Association v. Joaquin Hernandez et al

December 16, 2010

CANTERBURY WOODS HOMEOWNERS ASSOCIATION, PLAINTIFF AND APPELLANT,
v.
JOAQUIN HERNANDEZ ET AL., DEFENDANTS AND RESPONDENTS.



Appeal from a judgment of the Superior Court of Orange County, David R. Chaffee, Judge. Reversed and remanded. (Super. Ct. No. 07CC11331)

The opinion of the court was delivered by: Moore, J.

Canterbury Woods HOA v. Hernandez

CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

OPINION

Canterbury Woods Homeowners Association (Canterbury Woods or the HOA) sued former owners Joaquin Hernandez and Maria Cristina Rios (collectively defendants) for failing to pay homeowners association approximately $53,000 in assessments during their brief tenure. Following a bench trial, the trial court awarded the HOA some $15,000, without interest or late fees. The trial court found that a transaction between the association and a board member prior to defendants' ownership constituted a breach of fiduciary duty, and the HOA could not, therefore, levy assessments to fund the transaction. We find that as a matter of law, the trial court erred by finding that a past breach of fiduciary duty is a defense to an action for unpaid assessments, but acted within its discretion in denying the HOA's request for late fees and interest. We therefore reverse and remand for recalculation of the HOA's damages.

I

FACTS

Canterbury Woods was originally built in the 1960's or 1970's. It comprises 18 apartment buildings, each consisting of four units, on one large lot in Westminster. In July 1996, the owners, Donald and Grace Modglin, recorded a subdivision map for the tract, subdividing it into 18 individually owned lots consisting of one fourplex each, and three common areas lots, A, B, and C.

A declaration of covenants, codes and restrictions (CC&R's) for Canterbury Woods was filed shortly thereafter. The CC&R's delegated maintenance responsibility for the common areas to the HOA, and created the power to levy assessments.

The CC&R's defined the "Common Area" of the association as property "owned by the Association in fee or by easement for the common use and enjoyment of all the Owners." It was defined as Lots A, B, and C as specified on the tract map. Article 14.4, entitled "Common Area Easements," stated that the "Association shall own the Common Area for the use, enjoyment and convenience of the Owners."

In 1998, the Modglins sold all 18 lots to a single buyer, Future Growth, Inc. (FGI). FGI did not, however, acquire the common areas. Instead, fee ownership was retained by the Modglins, and the HOA was to pay $7500 per month for an option to obtain title in the future. The structure, according to FGI shareholder Peter Starflinger, was "very attractive," because "[t]he price of the project was much lower than what it could be, basically was a form of helping to finance the project." Starflinger was also on the HOA board, from 1998 until late 2001, then from approximately late 2004 through the time of the instant lawsuit.

FGI later transferred title of 15 of the buildings to Starflinger, who then transferred title to a new limited liability company, Future Growth, LLC (Future Growth). Future Growth then sold shares representing ownership interests in the buildings to investors. Edwina Thoma bought the three buildings that were not purchased by Starflinger. In 2001, in order to proceed with improvements to the common area,*fn1 Starflinger purchased the common area and the HOA agreed to pay him a ...


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