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Diamond v. Superior Court (Casa Del Valle Homeowners Association)

California Court of Appeals, Sixth District

June 18, 2013

ARLYNE M. DIAMOND, Petitioner,
v.
THE SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent. CASA DEL VALLE HOMEOWNERS ASSOCIATION, Real Party in Interest.

PUB. & MOD. ORDER FILED 7/12/13

Santa Clara County Superior Court Superior Court No.: CV099053 Hon. Mark H. Pierce

Attorney for Petitioner: Arlyne M. Diamond Law Offices of Louis Spitters Laurence Louis Spitters.

Attorneys for Real Parties in Interest: Casa Del Valle Homeowners Association Edward F. Cullen Law Offices of Charles L. Morrone Charles L. Morrone.

Amicus Curiae on behalf of Petitioner: AARP Barbara A. Jones.

BAMATTRE-MANOUKIAN, J.

I. INTRODUCTION

Petitioner Arlyne M. Diamond owns a townhouse-style unit in the Casa Del Valle common interest development, which is managed by real party in interest Case Del Valle Homeowners Association (Association). After Diamond failed to pay a $9, 750 special assessment by the due date, the Association’s collection efforts included recording an assessment lien on her townhouse property and filing the instant action for judicial foreclosure. Diamond moved for summary judgment on the ground that the Association could not foreclose because the assessment lien was not valid, since the Association had not complied with the pre-lien and pre-foreclosure notice requirements set forth in the Davis-Stirling Common Interest Development Act (Davis-Sterling Act), Civil Code sections 1367.1 and 1367.4.[1] The trial court denied the summary judgment motion, finding that the Association had substantially complied with the statutory notice requirements.

On appeal, Diamond argues that a homeowners’ association must strictly comply with the notice requirements of sections 1367.1 and 1367.4 in order to perfect an assessment lien and foreclose on a homeowner’s property in a common interest development. For the reasons stated below, we agree. Since the Association’s failure to strictly comply with all of the statutory notice requirements is undisputed, we will issue a peremptory writ of mandate directing the trial court to vacate its order denying Diamond’s motion for summary judgment and enter a new order granting the motion.

II. FACTUAL BACKGROUND

Our factual summary is drawn from Diamond’s separate statement of facts, the Association’s response, and the evidence submitted by the parties in connection with Diamond’s motion for summary judgment.

In 1978, Diamond purchased a unit in the Casa Del Valle common interest development, which is managed by the Association through its board of directors (Board). The Association’s current governing documents are the 1998 Amended and Restated Covenants, Conditions and Restrictions (CC&Rs). The CC&Rs provide that the Board may levy a special assessment to raise funds for “unexpected operating or other costs... or such other purposes as the Board in its discretion considers appropriate.” Where a levied assessment is delinquent, the CC&Rs also provide that the Association “may record a notice of delinquent Assessment and establish a lien against” the owner’s lot, and may enforce the assessment lien by any manner permitted by law, including judicial foreclosure.

In 2006, the Board decided to replace all of the roofs in the development and engage in other repair projects. Since the Association’s reserve funds were insufficient, the Board determined that a special assessment was needed to raise funds to pay for the roof replacement and the repair projects. In March 2007, a special assessment in the amount of $9, 750 per unit was approved in a special election by a majority of the voting members of the Association.

Due to her financial situation, Diamond was unable to pay the special assessment by the May 2007 due date. She then attempted to negotiate a payment plan by contacting members of the Board. According to Diamond, her communications with the Board’s president resulted in a payment plan agreement that was reached during their meeting on May 14, 2007. Diamond believed that payment plan agreement required her to execute a promissory note for $9, 750 plus interest, make a down payment of $1, 000, and make monthly payments of $100 until her financial situation improved and she could make larger monthly payments.

After Diamond made the $1, 000 down payment and a couple of monthly payments, she received a June 19, 2007 pre-lien letter from the Association’s attorney. The letter did not refer to the payment plan that Diamond believed she had negotiated with the Board president. Instead, the letter stated in part: (1) the total outstanding charges were $10, 225; (2) the Association would “record a Notice of Assessment (lien claim)” against her “condominium unit” if her account was not brought current within 30 days; (3) she was entitled to inspect the Association’s accounting books and records; (4) she could submit a written request to the Board to discuss a payment plan; (5) she had the right to dispute the assessment debt by submitting a written request for dispute resolution to the Association pursuant to the Association’s “ ‘meet and confer’ program” or, alternatively, she could request alternative dispute resolution with a a neutral third party pursuant to section 1369.510; and (6) “IMPORTANT NOTICE: IF YOUR SEPARATE INTEREST IS PLACED IN FORECLOSURE BECAUSE YOUR ARE [sic] BEHIND IN YOUR ASSESSMENTS, IT MAY BE SOLD WITHOUT COURT ACTION.”

Diamond responded to the pre-lien letter by sending the Association’s attorney a letter dated July 18, 2007, in which she stated that the Board president had agreed to a payment plan due to her hardship situation, she had complied with the payment plan, and she had offered to sign a promissory note “in lieu of a lien.” She also advised that she could not pay the special assessment without the payment plan.

On July 26, 2007, the Association recorded a notice of assessment against Diamond’s townhouse property, which stated that the amount of the assessment lien was $12, 010.23. The Association sent a copy of the recorded notice of assessment to Diamond 28 days later as an enclosure in the August 22, 2007 letter mailed to her by the Association’s attorney. The August 22, 2007 letter also informed Diamond that the Board had approved a 12-month payment plan that consisted of a monthly payment of $989.17 and maintenance of the assessment lien on her property until her account was paid in full.

Diamond met with the Association’s attorney on September 10, 2007, regarding her proposal for a payment plan. As indicated in the September 13, 2007 letter to Diamond, the Association’s attorney requested that Diamond supply documentation regarding her financial condition and corroboration of her claim that she had previously reached a payment plan agreement with the Board president. Thereafter, the Board offered Diamond a different payment plan, as stated in the October 18, 2007 letter from the Association’s attorney. Although the copy of the October 18, 2007 letter included in the record is incomplete, it appears that the Board accepted Diamond’s prior down payment of $1, 000, her prior monthly payments of $100 for five months in 2007, and agreed to accept monthly payments of $250 for the two months remaining in 2007. The balance of the proposed payment plan is not reflected in the record.

Now represented, Diamond sent an October 23, 2007 letter to the Association’s attorney requesting that the parties meet and confer and stating that if the matter could not be resolved, she requested alternative dispute resolution, specifically mediation, as provided in section 1367.1, subd. (c)(1)(B). The Association rejected Diamond’s request to meet and confer and also rejected her request for alternative dispute resolution, stating in its letter of November 21, 2007, that “the [Association] has already met and conferred with Dr. Diamond on September 10, 2007. Dr. Diamond is entitled to either meet and confer with the [Association] or engage in Alternative Dispute Resolution, but not both.” The November 21, 2007 letter also returned three $100 checks that Diamond had sent to the Association.

The Board met in executive session on November 7, 2007, to vote on whether to initiate foreclosure proceedings on Diamond’s property. Foreclosure proceedings were approved by a majority vote, as stated in the minutes of the executive session.

III. PROCEDURAL BACKGROUND

A. The Complaint

On November 15, 2007, the Association filed a complaint against Diamond seeking judicial foreclosure on her Casa Del Valle property and application of the sales proceeds to pay a judgment in the amount of $10, 064.88 plus costs, interest, and attorney’s fees. The Association personally served the summons, complaint, and notice of Board action (decision to initiate foreclosure proceedings) on Diamond on December 9, 2007.

B. The Motion for Summary Judgment

Diamond subsequently filed a motion for summary judgment, combined with a “motion to expunge lien, ” in April 2012. She generally argued that it was undisputed that the Association had failed to comply with all of the notice requirements set forth in sections 1367.1 and 1367.4 that a homeowners association must meet in order to perfect an assessment lien and foreclose on a homeowner’s property, and absent compliance with the statutory notice requirements, the Association’s foreclosure action lacked merit as a matter of law.

Specifically, Diamond asserted that the Association had (1) failed to send her a copy of the recorded notice of delinquent assessment by certified mail within 10 days of the recording (§ 1367.1, subd. (d)); (2) failed give her a pre-foreclosure notice of her right to demand alternative dispute resolution (§§ 1367.1, subd. (c)(1)(B), 1367.4, subd. (c)(1)); (3) failed to record the Board’s executive session vote to initiate foreclosure proceedings on her property in the minutes of the next meeting of the Board open to all members (§ 1367.4, subd. (c)(2)); and (4) failed to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action (§ 1367.5, subd. (c)(3)).

Since the Association had failed to comply with these statutory notice requirements, Diamond argued that the lien was “invalid to the extent it includes any sum other than the principal amount of the lien, less all sums paid to date by [Diamond]” and therefore the lien should be expunged and summary judgment granted.

C. Opposition to the Motion for Summary Judgment

In opposition to the motion for summary judgment, the Association argued that the evidence showed that it had sufficiently complied with the statutory notice requirements and therefore the motion should be denied.

First, although the Association admitted that it had not sent Diamond a copy of the recorded notice of delinquent assessment by certified mail within 10 days of the recording, as required by section 1367.1, subdivision (d), the Association argued that this was a “technical violation” because Diamond had received actual notice and the Civil Code did not provide any consequences for the violation.

Second, the Association argued that it had given Diamond adequate pre-foreclosure notice of her right to demand alternative dispute resolution, as required by sections 1367.1, subdivision (c)(1)(B) and 1367.4, subdivision (c)(1), in its pre-lien letter of June 19, 2007. According to the Association, the Civil Code does not require separate notices of the right to pre-lien or pre-foreclosure alternative dispute resolution.

Third, the Association also admitted that it had failed to record the Board’s executive session vote to initiate foreclosure proceedings on Diamond’s property in the minutes of the next meeting of the Board open to all members, as required by section 1367.4, subdivision (c)(2). However, the Association contended that under the circumstances of this matter, including its efforts to negotiate a payment plan with Diamond, “this technical violation should be excused by the court.”

Finally, the Association disputed Diamond’s claim that it had failed to personally serve her with the notice of the Board’s vote to foreclose prior to commencement of the foreclosure action, as required by section 1367.4, subdivision (c)(3). The Association explained that it had complied with this requirement by personally serving her with the notice of the Board’s vote to foreclose along with the summons and complaint on December 9, 2007. The Association further explained that section 1367.4, subdivision (c)(3) does not specify the timing for serving the notice of the Board’s vote to foreclose.

D. The Trial Court’s Order

The record on appeal does not contain a signed and filed court order ruling on Diamond’s motion for summary judgment. The only record we have of the trial court’s ruling is a copy of the undated tentative ruling and the reporter’s transcript of the August 16, 2012 hearing on the motion. However, the parties have not raised any issues with respect to the omission of a signed and filed order denying the motion for summary judgment.

In its tentative ruling, the trial court denied the motion for summary judgment and the motion to expunge the lien, stating in part: “[Diamond] fails to meet her initial burden to produce evidence that [the Association’s] action is barred by the provisions of Civil Code sections 1367.1 and 1367.4. [The Association] substantially complied with the requirements of section 1367.1, subdivision (d) because [Diamond] received actual notice of the fact that a lien was recorded on her property in sufficient time to allow her to work with [the Association] to resolve this dispute before [the Association’s] lawsuit was filed. [Citations.] Prior to initiating this action, [the Association] also complied with the requirement of sections 1367.1, subdivision (c)(1)(B) and 1367.4, subdivision (c)(1) to provide notice of [Diamond’s] right to meet and confer or participate in ADR. [Citation.] Additionally, [the Association] complied fully with section 1367.4, subdivision (c)(3)’s requirement that [Diamond] receive notice of the board’s decision to initiate the action. [Citation.] Finally, insofar as [the Association] failed to comply strictly with the requirements of section 1367.4, subdivision (c)(2), the statutory purpose to protect [Diamond’s] right to privacy was not frustrated by the failure of the board to note its decision to foreclose in the minutes of a regular board meeting. Insofar as subdivision (c)(2) also functions to effectuate the requirements of Civil Code section 1363.05, subdivision (c), [Diamond] was not aggrieved by the board’s omission any differently than any other member of the association, and her remedy as a member of the association was to pursue a timely action under Civil Code section 1363.09.”

The trial court adopted its tentative ruling at the conclusion of the August 16, 2012 hearing on the motion for summary judgment.

IV. DISCUSSION

After the trial court denied her motion for summary judgment, Diamond filed a petition for a writ of mandate directing the trial court to vacate its order and enter a new order granting her motion for summary judgment. The Association filed preliminary opposition to the petition, to which the Diamond replied. We issued an order to show cause why a peremptory writ should not issue as requested in the petition for a writ of mandate and a temporary stay of all trial court proceedings while the writ petition was pending. Having received further briefing from the parties and granted the application of the American Association of Retired Persons (AARP) for leave to file an amicus ...


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