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Gold Strike Heights Homeowners Association v. Financial Pacific Insurance Company et al

July 13, 2012


(Super. Ct. No. CV34353)

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

Gold Strike Heights Homeowners v. Financial Pacific Ins. CA3


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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

This case arises out of the development of a new real estate subdivision for which a common area recreation facility, a clubhouse, was planned. When the clubhouse was not built, appellant Gold Strike Heights Homeowners Association (Gold Strike)*fn1 sued the developer, defendant Westwind Development, Inc. (Westwind), and defendant Financial Pacific Insurance Company (Financial Pacific), the surety company that issued a bond for the building of the clubhouse. A jury awarded $319,157 to Gold Strike, which appeared to be based on the construction estimate attached to the bond. However, the trial court granted judgment notwithstanding the verdict (JNOV) on grounds that Gold Strike failed to introduce any evidence of what it would actually cost to build the clubhouse. The trial court also ordered Gold Strike to pay attorney fees in the reduced amount of $15,000 to Westwind and $5,000 to Financial Pacific.

Gold Strike appeals, arguing that the trial court erred by granting defendants' JNOV motion. Gold Strike contends substantial evidence supports the award of damages for the clubhouse that was not built.

Westwind and Financial Pacific have filed protective cross-appeals. They argue that if we reverse the JNOV order, we must remand the case for retrial because the trial court committed evidentiary errors and advocated on behalf of Gold Strike when questioning witnesses. Defendants further argue that the trial court abused its discretion in awarding them only a fraction of their claimed attorney fees.

We affirm the JNOV order because Westwind had no obligation to build the clubhouse until it started to build phase two of the subdivision. Westwind expressly disclaimed any obligation to build phase two, and indeed phase two was not built. Because the obligation to build the clubhouse was not triggered, Financial Pacific did not have to pay on the surety bond. Our affirmance of the JNOV order obviates the need to address defendants' arguments that are contingent on a reversal of the JNOV order. Finally, we reverse the order granting attorney fees because the trial court abused its discretion when it excluded hours expended by defendants' counsel in pursuing meritorious legal theories. Accordingly, we affirm the judgment but reverse the order granting attorney fees.


The principles governing review of a trial court's granting of a motion for JNOV are well settled. As this court has previously explained, "'The trial court's discretion in granting a motion for [JNOV] is severely limited.' [Citation.] '"The trial judge's power to grant a [JNOV] is identical to his [or her] power to grant a directed verdict [citations]. The trial judge cannot reweigh the evidence [citation], or judge the credibility of witnesses. [Citation.] If the evidence is conflicting or if several reasonable inferences may be drawn, the motion for [JNOV] should be denied. [Citations.] 'A motion for [JNOV] of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict. If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied.' [Citation.]"' [Citation.] The trial court cannot consider witness credibility. [Citation.]" (Hansen v. Sunnyside Products, Inc. (1997) 55 Cal.App.4th 1497, 1510 (Hansen); accord In re Coordinated Latex Glove Litigation (2002) 99 Cal.App.4th 594, 606.)


Based on the applicable standard of review, we state the facts in the light most favorable to the jury's verdict. (Hansen, supra, 55 Cal.App.4th at p. 1510.)

Plans for the Clubhouse

Westwind designed and built the existing portion of the Gold Strike Heights subdivision project in San Andreas, California. As stated in the Declaration of Restrictions (CC&Rs) filed for the project, the subdivision was to be built in at least two phases. The CC&Rs for the subdivision were recorded with the Calaveras County clerk-recorder in March 2002. In pertinent part, the CC&Rs state: "The first phase consists of Residential Lots 1 through 42 and 48 to 50 and Common Area Lot H . . . ." The CC&Rs also state: "Declarant [Westwind] reserves the right at its discretion to establish the order of phases, the number of Common Area Lots or Residential Lots in a phase, the number of phases, or the building types in a phase." Every prospective buyer of a lot in the subdivision received a copy of the CC&Rs.

The final recorded subdivision map shows that the clubhouse was planned for lot 43, which is not listed by the CC&Rs among the lots to be developed during the first phase. The clubhouse was anticipated to consist of an 1,800-square-foot structure that contained unspecified "[e]quipment." However, no architectural plans for the clubhouse were ever drawn up by Westwind. Even so, Westwind wished to refer to the clubhouse in selling lots in the Gold Strike Heights subdivision.

Surety Bond Issued by Financial Pacific

Before Westwind was allowed to mention the clubhouse in marketing phase one of the subdivision, the Department of Real Estate (Department) required the developer to secure a surety bond for the clubhouse. Chris Neri, an assistant commissioner with the Subdivision Section at the Department, testified:

"Q. [T]he bond that [sic] says phase one -- do you have an explanation as to why it may say phase one?

"A. Because the developer represented to the [D]department that they wanted to advertise the rec facility.

"Q. So the bond is stated to be for phase one to advertise. Correct?

"A. Yes."

In February 2002, Westwind secured from Financial Pacific a surety bond that was entitled "Bond (Completion of Common Facilities)." In relevant part, the bond states: "This bond is given pursuant to § 11018.5(a)(2)(A)[*fn2 ] of the California Business and Professions Code to assure lien-free completion of the improvements described in Principal's 'Planned Construction Statement', a copy of which is attached hereto and incorporated herein by reference, for the subdivision development known as Gold Strike Heights Unit 1 (Phase 1) situated in the County of Calaveras, State of California." The bond was made "in the penal sum of Three Hundred Nineteen Thousand Six Hundred Forty Seven Dollars ($319,647.00) . . . ." Attached to the bond was a "Planned Construction Statement" that indicated common area developments consisting of landscaping, "Asphalt & Concrete," and a "Recreation Area with Equipment." The recreation area with equipment referred to a clubhouse, and was listed as having a cost estimate of $200,000 with an anticipated completion date of May 2002. The planned construction statement does not mention the phase in which a clubhouse was to be constructed other than to give an estimated completion date of May 2002.

Public Report

After the bond was issued, the Department prepared a public report regarding the Gold Strike Heights subdivision to be given to prospective buyers of lots within the new development. The public report required each prospective buyer to sign a receipt that he/she had received and read the report before agreeing to purchase any lot within Gold Strike Heights. The public report for the subdivision also required that a copy of the CC&Rs be provided to each prospective buyer prior to the close of escrow.

With regard to the description of the subdivision, the public report stated:

"LOCATION AND SIZE: This subdivision is located in Calaveras County at 699 Gold Strike Road and approximately 11 miles from Angels Camp, California. [¶] This is the first phase of a two phase project which consists of approximately 13.1 acres divided into 45 lots, in addition to the common area which consists of open space, with natural grasses, streets, drives, and street lighting. [¶] Additional common amenities and/or facilities consisting of landscaping, streets and recreation area with equipment will be constructed in the second phase. [¶] Gold Strike Heights, if developed as proposed, will consist of two phases containing 88 lots. There is no assurance that the total project will be completed as proposed." (Italics added.)

The Department did not receive an application to develop phase two of the subdivision, and the clubhouse was not built.

Gold Strike Pursues the Building of the Clubhouse

In May 2008, Gold Strike claimed that Calaveras County was liable for building the clubhouse. In a letter to Gold Strike denying that Calaveras County had any liability for construction of the clubhouse, county counsel stated:

"As for the clubhouse, conditions of approval required the developer to apply for a P[lanned] [Unit] D[evelopment] permit for the clubhouse. The Planning Commission approved a P[lanned] [Unit] D[evelopment] permit for the clubhouse in 2006. Nothing in the conditions of approval for Unit 1[*fn3 ] required the clubhouse to be built prior to the recordation of the final map for Unit 1. In recognition of the concern expressed by the Unit 1 owners about the ability of the developer to construct the clubhouse, the Planning Commission conditioned recordation of the final map of Unit 2 on completion of the clubhouse. Therefore, no parcels in Unit 2 can be legally created until the clubhouse is complete. No one from the subdivision or [Gold Strike] appealed the decision of the Planning Commission on Unit 2 to the Board of Supervisors. Your allegations about staff representations to the Board of Supervisors are false as the approval of Unit 2 never went to the Board of Supervisors."

County counsel's letter concluded: "We understand your frustration with the developer in not carrying out developer promises, but most of those promises were not promises imposed by the County as part of the approval of the project. The County is committed to getting the clubhouse built and will not allow the developer, or any ...

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