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Wittenberg v. Beachwalk Homeowners Association

California Court of Appeals, Fourth District, Third Division

June 26, 2013

PAUL WITTENBERG et al., Plaintiffs and Appellants,
v.
BEACHWALK HOMEOWNERS ASSOCIATION, Defendant and Respondent.

Appeal from a judgment of the Superior Court of Orange County, No. 30-2011-00507078 Thierry Patrick Colaw, Judge.

Schiffer & Buus, Eric M. Schiffer and William L. Buus for Plaintiffs and Appellants.

Adams Kessler, Mary E. Gram, Aide C. Ontiveros and Adrian J. Adams for Defendant and Respondent.

OPINION

IKOLA, J.

Defendant Beachwalk Homeowners Association (association) held an election to amend its bylaws. Plaintiffs Paul Wittenburg and Raymond Dukellis filed suit to void the result of the election, claiming the association’s board of directors (the board) failed to comply with Civil Code section 1363.03, subdivisions (a)(1) and (a)(2).[1] Subdivision (a)(1) governs the use of “association media, ” such as a newsletter or Web site, during a campaign. If an association permits any “candidate or member” to advocate a point of view using association media, the association must give members with opposing viewpoints equal access to the same media. Subdivision (a)(2) requires an association to permit free access to common areas for purposes reasonably related to an election. After a bench trial, the court entered judgment for the association, finding it violated neither subdivision.

Plaintiffs contend the court erred in three ways. First, they claim the court erroneously interpreted subdivision (a)(1) as containing an exception permitting the board of directors to advocate a point of view using association media without triggering the equal-access requirement. Second, plaintiffs claim the court erroneously found certain communications, from the board, were merely informational rather than advocacy under subdivision (a)(1). Third, plaintiffs claim there is no substantial evidence supporting the court’s finding that the association did not violate subdivision (a)(2) during the campaign. We agree on all three counts and reverse the judgment.

FACTS

Plaintiffs are individual homeowners and members of the association. The association is governed by a seven-member board of directors who must be members of the association to serve and are elected by a vote of the members of the association.

The present conflict stems from paragraph nine of the association’s Covenants, Conditions and Restrictions (CC&R’s), which states, “no alterations, additions, or improvements, in connection with the common areas of the PRD [Planned Residential Development] shall be made at a cost of more than one thousand dollars ($1, 000.00) without the approval of at least two-thirds (2/3) of the voting owners....” In October of 2010 plaintiffs sued the association, claiming the association had removed one pool, and were threatening to remove two more, without obtaining the two-thirds vote required by paragraph nine of the CC&R’s. In November of 2010, the court granted a preliminary injunction preventing the removal of any more pools without obtaining the two-thirds vote required under paragraph nine. We refer to that lawsuit as the “pool litigation.”

Rather than obtain a two-thirds vote to remove the pools, the board instituted a series of elections to amend paragraph nine of the CC&R’s to increase the dollar threshold for requiring a vote, and to reduce the number of votes required to approve expenditures. In November of 2010 the board sent a ballot and cover letter to the homeowners announcing an election to be held in December 2010. The cover letter, which was drafted by board members who supported the amendment, described paragraph nine of the CC&Rs as “over broad, ambiguous, and open to interpretation on many levels.” The board warned, “As long as this subsection of the CC&R’s remains in force, there will be disputes about what constitutes an alteration or an improvement. Additionally, obtaining two-thirds voter approval of every project over $1000 will gridlock our operations and drive up our costs through constant ballots and legal expenses.” Accordingly, the board proposed the following revision to paragraph nine: “The Association shall maintain the common areas and Association-owned assets, except as otherwise provided in the CC&Rs. The spending for operational, maintenance, and repair expenses shall be limited by Section 1366.... Moreover, the Board of Directors may not make capital improvements to the common areas in any one fiscal year in excess of two and one-half percent (2.5%) of the Association’s budgeted gross expenses for that year without the approval of a majority of the membership.”[2] The letter praised this alternative as more flexible and reasonable, while still “a workable method of fiscal restraint.” The letter concluded by warning, “If we don’t take action now to resolve the situation with the CC&Rs, the Association is destined to become further mired in conflict and expensive litigation.” As one board member at trial commented, the letter “is making a strong case” in favor of the amendment and agreed it was “encouraging them to vote yes on Amendment 8.”

Accompanying the letter was a one-page attachment containing a section entitled “Case for amending the CC&Rs, ” and another section entitled “Case against amending the CC&Rs.” The document was written by board members who supported the amendment. The board did not ask any opposing members for written input for the “Case against, ” but did listen to their arguments at homeowner forums and attempted to incorporate those arguments. The board specifically decided not to include any opposition material.

The board’s proposal generated significant interest in the community. Fliers circulated throughout the community on almost a weekly basis.

Shortly after the board sent out the election materials, a homeowner requested use of the “rental side” of the clubhouse to put on a “town hall meeting” to support other candidates for the board of directors who had a different view than the view expressed by the current board regarding the amendment. The association’s clubhouse is divided between one side available for free and another available for rental. The rentals are handled through the community manager and generally rental requests do not come before the board. The homeowner tendered a check to the community manager for $200 representing the cleaning deposit, believing he did not have to pay the usual $90 rental fee under subdivision (a)(2). Two days later, however, the community manager called the homeowner and stated the board had rejected the request to use the clubhouse for free. Accordingly, the homeowner paid the additional $90 fee. At trial one of the board members in support of the amendment testified the homeowner request never came before the board because it went through the community manager, but also acknowledged the board should have given the homeowner a refund.

In order to pass outright under the CC&R’s, the amendment required a yes vote from 75 percent of the members of the association. The board’s aim, however, was more modest: a yes vote from 50 percent of the members, which would allow the board to file a petition to have the CC&R’s amended under section 1356, subdivision (c)(4). To achieve 50 percent, the board needed 227 yes votes. The December 2010 election fell short of that, garnering 188 yes votes, which amounted to 64 percent of the votes that were cast, but not 50 percent of the total number of association members.

The board scheduled another election for April of 2011. In February of 2011 the board sent ballots and voting materials to all of the members. Included with those materials was a two-page letter regarding the amendment that was nearly identical to the letter sent in connection with the prior election, as well as the same summary of the cases for and against the amendment. The proposed amendment underwent one change: for expenses that would require a vote under the amendment, instead of requiring a 50 percent vote as before, the revised amendment would require a 55 percent vote in favor of the expenditure.

The association had a newsletter that went to all members on a monthly basis. The board exclusively drafted all of the content of the newsletter. In the February 2011 issue of the newsletter, the board included a section entitled “Update on the Proposed 8th Amendment to the Beachwalk CCRs, ” which listed a number of arguments in support of the amendment. For example, it asked, “Why is this so important and why does the proposed amendment benefit the community?” It answered by claiming paragraph nine was ambiguous, the proposed alternative was more modern and adaptable, and the amendment would help resolve the pool litigation. It also asked, “What will happen if the 8th amendment does not receive 227 yes votes?” It then listed several consequences, including the lawsuit regarding the pools would “drag on, generating huge legal bills, ” any homeowner “with the will and financial resources to sue the” association would do so on the basis of paragraph nine, the association’s insurance rates would go up, otherwise willing homeowners would stop volunteering their time to the association, and operating costs would increase. As a result, the board promised to continue holding elections until the measure passed: “Therefore, we will be asking homeowners to vote on this issue again on the March ballot. And if we cannot get 227 yes votes in March, there will be another ballot on the same issue shortly thereafter.” The article concluded with an exhortation to the members to vote yes on the amendment: “Vote YES on the proposed 8th amendment to our CCRs so we can put our money to use on physically improving Beachwalk.” One of the board members who was in favor of the amendment testified this article was encouraging the homeowners to vote yes. Nonboard members were not invited to provide opposing viewpoints in the newsletter.

Shortly thereafter, a homeowner opposed to the amendment asked to write a response to the board’s newsletter article to be published in the March 2011 issue of the newsletter. The board refused the request because only board members were permitted to publish articles in the newsletter.

At around the same time another homeowner opposed to the amendment requested use of a common area called the “greenbelt” for purposes of a political rally. The request was denied. The community manager explained by e-mail he was unable to obtain unanimous consent from the board, which was required for an action without meeting (which was necessary because no board meeting was scheduled between when the application was filed and the requested date for the rally). The homeowner replied with an angry e-mail decrying a violation of his rights under section 1363.03. The manager’s only response was to say he would pass the homeowner’s concerns on to the board, and he invited the homeowner to resubmit his request at the next regularly scheduled board meeting where a simple majority could approve his request, which was eight days after the date of the proposed political rally. The board members were concerned the homeowner had requested the greenbelt for the entire day, had requested the use of clubhouse tables and chairs, and had not ...


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