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SB Liberty, LLC v. Isla Verde Association, Inc.

California Court of Appeals, Fourth District, First Division

May 22, 2013

SB LIBERTY, LLC, Plaintiff and Respondent,
ISLA VERDE ASSOCIATION, INC., Defendant and Appellant.

Order 6/18/13 (see end of opn.)

APPEAL from an order of the Superior Court of San Diego County No. 37-2011-00059253- CU-MC-NC, Frederick A. Mandabach, Judge. (Retired judge of the San Bernardino Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.)

Epsten Grinnell & Howell, William S. Budd and Thomas A. Scutti; Gates, O'Doherty, Gonter & Guy and Douglas D. Guy for Defendant and Appellant.

Lepiscopo & Associates Law Firm and Peter D. Lepiscopo for Plaintiff and Respondent.

NARES, Acting P. J.


In 2006 Gregg and Janet Short (together the Shorts, who are not parties to this appeal but are interested persons) purchased a home in the Isla Verde residential community (Isla Verde). They then transferred title to themselves as trustees of their family trust and later transferred title to plaintiff SB Liberty, LLC (SB Liberty), a California limited liability company organized in early 2011, which is owned by the Shorts as trustees of their trust and is managed by Gregg Short, SB Liberty's sole manager. The Shorts reside in the home. Defendant Isla Verde Association, Inc. (the Association) is a California nonprofit mutual benefit corporation that is an association of the Isla Verde homeowners. It is undisputed that SB Liberty is a member of the Association.

This action against the Association for injunctive relief (among other things) arose when the Association's board of directors (the Board) denied SB Liberty's retained counsel, Peter D. Lepiscopo, access to the Board's September and October 2011 meetings. SB Liberty brought a motion for preliminary injunction seeking to enjoin the Association and the Board from taking any action to prevent or interfere with SB Liberty's representatives, including Lepiscopo, attending and participating in the Board's meetings. The court denied the motion.

SB Liberty appeals the denial of its motion for preliminary injunction, contending (1) the Association─a "quasi-government entity"─has prevented SB Liberty─ whose association, speech, and member rights are fundamental in nature─from attending the open sessions of the Association's Board meetings by excluding its chosen representative─attorney Lepiscopo[1]─from those meetings, thereby causing SB Liberty to suffer great and irreparable harm; and (2) SB Liberty is entitled to send the representative of its own choosing (Lepiscopo) to the open sessions of the Board's meetings because SB Liberty is a member of the Association but not a natural person. We affirm the order denying SB Liberty's motion for preliminary injunction.


A. Factual Background

Isla Verde is a residential community consisting of 87 single-family properties located in the Lomas Santa Fe area of Solana Beach. The Association is a nonprofit mutual benefit corporation established to conduct the business of Isla Verde's member homeowners. The Association conducts its business pursuant to various governing documents, including the articles of incorporation (Articles), protective covenants and restrictions (PC&Rs) and bylaws (Bylaws).

The Association operates through its board of directors (Board), which consists of seven Association "members, " which the Bylaws define as "[e]very beneficial owner (as defined by California Code, and as distinguished from a security owner) of real property situated in... Isla Verde."

The Bylaws contain rules governing the meetings of members and the Board. Article XV, section 15.14, of the Bylaws provides that "[a]ny member in good standing may attend any [Board] meeting, except those portions of such meetings which are declared as 'Executive Session' meetings." (Italics added.)

After the Shorts transferred title of their home to themselves as trustees of their family trust in mid-2006, they submitted architectural plans to remodel the their house, which eventually led to a dispute between the Shorts and the Association regarding the scope of the construction the Shorts were permitted to perform, eventually resulting in litigation brought by the Association.

SB Liberty's articles of organization were filed in early 2011, establishing it as a limited liability company with Gregg Short designated as the sole manager.

Later that year, the Shorts' retained counsel, Lepiscopo, provided notice to the Association's legal counsel, William S. Budd, that he represented the Shorts. In that notice, Lepiscopo requested various documents and a "detailed summary of the purpose for and status of any proposed amendments to the governing documents."

Thereafter, Lepiscopo advised Budd that he might attend the September 14, 2011 Board meeting on behalf of the Shorts. Budd advised Lepiscopo that he was not planning to attend the September meeting and asked that Lepiscopo not attend, stating that "the Rules of Professional Conduct prohibit communication with a represented party without permission from that party's attorney."

Lepiscopo replied, indicating his attendance at the upcoming September 14 Board meeting would not implicate the Rules of Professional Conduct because he would be appearing as a representative of his clients, whom he again identified as Gregg and Janet Short.

On the day before the Board meeting, Budd reiterated in an e-mail to Lepiscopo that he was not allowed to attend the Board meeting over Budd's objection, as it would violate rule 2-100 of the Rules of Professional Conduct, and also instructed Lepiscopo that he could not communicate with his client without Budd's permission.

Lepiscopo responded with a letter, which he sent to Budd by e-mail and fax, disagreeing with Budd's interpretation of rule 2-100 and stating that he (Budd) and the Board "do not hold a veto over [the Shorts'] right to decide the manner in which they attend any [Association] Board meeting, " and reiterating that he (Lepiscopo) planned to attend ...

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