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Promenade At Playa Vista Homeowners Association v. Western Pacific Housing

November 8, 2011

PROMENADE AT PLAYA VISTA HOMEOWNERS ASSOCIATION, PLAINTIFF AND RESPONDENT,
v.
WESTERN PACIFIC HOUSING, INC., ET AL., DEFENDANTS AND APPELLANTS.



APPEAL from an order of the Superior Court of Los Angeles County, Emilie H. Elias, Judge. (Los Angeles County Super. Ct. No. BC424950)

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

CERTIFIED FOR PUBLICATION

Affirmed.

This appeal presents the question of whether, in response to a construction defect action brought by a condominium homeowners association, the developer can compel binding arbitration of the litigation pursuant to an arbitration provision in the declaration of covenants, conditions, and restrictions (CC&R's). The answer is no.*fn1

We reach this conclusion because the developer does not rely on a contract with the homeowners association to compel arbitration but instead on the arbitration provision in the CC&R's. Yet, under California law, the provisions in the CC&R's are equitable servitudes and can be enforced only by the homeowners association, the owner of a condominium, or both. Developers are not among those permitted to enforce CC&R's.

I BACKGROUND

The facts and allegations in this appeal are taken from the pleadings, the exhibits submitted in connection with the motion to compel arbitration, and the standard procedure for creating a common interest development.

Defendants Western Pacific Housing, Inc., and Playa Capital Company, LLC (Developers), constructed, marketed, and sold a 90-unit condominium complex located on West Pacific Promenade in Playa Vista, California. Before the homeowners association (Association) came into existence or a single unit was sold, the Developers drafted and recorded the CC&R's. Only the Developers signed that document.

The CC&R's contained a mandatory arbitration provision, requiring that any disputes between the Developers, on the one hand, and the Association or a condominium owner, on the other hand, be submitted to binding arbitration. According to its terms, the provision could not be amended without the consent of the Developers. The CC&R's made the Federal Arbitration Act (FAA) (9 U.S.C. §§ 1-16) applicable in interpreting and enforcing the arbitration provision.

Sales of the units began in 2004. In addition to the CC&R's, each "Purchase Agreement and Escrow Instructions" contained a mandatory arbitration provision, requiring that postclosing disputes between the Developers and the buyer be submitted to binding arbitration. The purchase agreements, unlike the CC&R's, were signed by both the Developers and the buyer.

Initially, the members of the Association's board of directors were appointed by the Developers. Ultimately, the Developers sold all the units and no longer had any ownership interest in the complex. The owners replaced the initial board members with individuals of their own choosing.

On October 29, 2009, the Association filed this action against the Developers, alleging construction defects in the roofs, stucco, windows, and doors, and the structural, electrical, plumbing, and mechanical components and systems. The Developers responded with a motion to compel arbitration, relying on the arbitration provision in the CC&R's and the individual purchase agreements.

The Association filed opposition, contending the CC&R's were not subject to arbitration because they were equitable servitudes, not a contract, and, alternatively, if they were a contract, enforcement was barred because the contract was unconscionable. The Association also pointed out that 30 of the original buyers had sold their units, and the arbitration provision in their purchase agreements with the Developers did not apply to the subsequent purchasers.

The motion was heard on April 12, 2010. By order of the same date, the trial court denied the motion to compel. The Developers appealed.

II DISCUSSION

We review the trial court's decision independently because it involves interpreting the CC&R's and applicable statutes. (See P&D Consultants, Inc. v. City of Carlsbad (2010) 190 Cal.App.4th 1332, 1340; Redding ...


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