Filed 8/21/14 Coalition etc. Del Mar Beach Club v. Del Mar Beach Club Owners Assn. CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

COALITION OF CONCERNED OWNERS D064506

AT DEL MAR BEACH CLUB, et al.,

Plaintiffs and Appellants, (Super. Ct. No. 37-2011-00058052- v. CU-MC-NC)

DEL MAR BEACH CLUB OWNERS

ASSOCIATION, INC., et al.,

Defendants and Respondents.

APPEAL from an order of the Superior Court of San Diego County, Timothy M.

Casserly, Judge. Affirmed.

Shewry & Van Dyke and Steven M. Shewry for Plaintiffs and Appellants.

Bremer, Whyte, Brown & O'Meara, Kere K. Tickner, Brian W. Skalsky; Epsten

Grinnell & Howell, Rian W. Jones; and Everett L. Skillman for Defendants and

Respondents.

Plaintiffs and appellants, four homeowners and their interest group, the Coalition

of Concerned Owners at Del Mar Beach Club (the Coalition), brought this action for declaratory and injunctive relief against the homeowners' association for the common

interest development where their units are located, defendant and respondent Del Mar

Beach Club Owners Association, Inc. (the Association). Their current pleading, the

second amended complaint (SAC), also seeks damages for misrepresentation on behalf of

those four individual homeowners, Ken Bien, Miguel Elias, Don Adams and Mark Dye

(together the individual plaintiffs), who own a total of six beachfront units (on the Pacific

Ocean) at the multi-building development. The dispute arises out of the Association's

decision to terminate natural gas utility service to two of the buildings at the

development.

This appeal challenges the trial court's ruling denying a class certification motion

brought by both the Coalition and the individual plaintiffs (sometimes together

Appellants), who claimed that in a representative capacity, they were entitled to

injunctive and declaratory relief against unfair and illegal conduct. (Bus. & Prof. Code,

§ 17200 et seq., the Unfair Competition Law or UCL; Code Civ. Proc., § 382.) The trial

court denied Appellants' concurrent motion for leave to file a third amended complaint

(TAC), based on similar theories that the Association had wrongfully failed and refused

"to restore natural gas service to Buildings 700 and 800." Appellants allege that the

Association's decision to shut off those gas lines was contrary to the duties it owed to

them by statute and violated the fiduciary duties imposed by its governing documents.1

1 Former Civil Code section 1364, now Civil Code section 4775, is a provision in the Davis-Stirling Common Interest Development Act (the Act), which was repealed, reenacted and renumbered. (Stats. 2012, ch. 180, § 2, p. 2845, operative Jan. 1, 2014; 2 Appellants now contend the trial court erred as a matter of law when it evaluated

the record for (1) the required community of interest among class members and (2)

superiority of class treatment, and determined Appellants had not met their burden of

showing class certification was appropriate. (Brinker Restaurant Corp. v. Superior Court

(2012) 53 Cal.4th 1004, 1021 (Brinker).) Our analysis of the operative pleading, the

SAC, as well as the proposed TAC, together with the admissible portions of the

supporting and opposing declarations, persuades us that the trial court appropriately

denied the motion. There will be significant variations in the proof of harm, if any, to

any individual homeowner that is attributable to the Association's decision to cease

providing natural gas service to the two beachfront buildings at the development. (See

Frieman v. San Rafael Rock Quarry, Inc. (2004) 116 Cal.App.4th 29, 40 (Frieman).)

Moreover, the trial court did not erroneously rely on improper criteria or incorrect

assumptions to reach its conclusions. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429,

436; Brinker, supra, 53 Cal.4th 1004, 1050.) Appellants argue the court must have

erroneously relied on evidence presented in opposition by the Association (i.e., letters

from other homeowners), even though the court simultaneously sustained Appellants'

objections to it. The showing made by Appellants in support of their motion consisted of

their proposed TAC and their attorney's declarations, which stated that the Association

had undertaken discovery that was "focused in large part on [the Coalition's] authority to

represent the owners," and thus he filed the motion for class certification to clarify the

now see Civil Code, § 4000 et seq. on residential properties.) All further statutory references are to the Civil Code unless otherwise noted. 3 issue. Appellants presented essentially no supporting evidence about any factors favoring

class certification. The pleadings outlined the legal issues presented, which the court

adequately addressed, and the references in the ruling to the excluded opposition

evidence did not undermine the court's otherwise well-supported analysis. (Brinker,

supra, 53 Cal.4th at pp. 1021-1022; Ramirez v. Balboa Thrift & Loan (2013)

215 Cal.App.4th 765, 776-777 (Ramirez) [any valid pertinent reason in the ruling is

sufficient to uphold such an order].) We affirm.

I

BACKGROUND

The SAC describes this development as consisting of 192 total units. The 63

beachfront units are located in two of the buildings (Buildings 700 and 800). The

remaining 129 units are located east of the beachfront buildings. For about 40 years, the

natural gas lines which served the beachfront units were on one meter and ran along the

common area outside of Buildings 700 and 800, and provided fuel for barbecues on those

exterior patios and balconies. The SAC represents that the Association allowed some

owners of beachfront units, including these individual plaintiffs, to extend the exterior

natural gas lines into their residences to power their interior natural gas fueled appliances.

Those owners purchased separate gas meters from the Association for their units and

were billed for their natural gas usage.

Although the 129 nonbeachfront units at the development have continuously been

provided with both natural gas and electric utility service, the gas service for the 63

beachfront units was disrupted by leaks starting in July 2010. After investigation, the

4 Association had the gas line to Building 700 shut off, and determined the cost of

replacement was approximately $20,000. It planned to shut down both gas lines.

After a predecessor to this action was filed, Appellants obtained a temporary

restraining order to prevent shutoff of the other gas line. However, when a leak was

detected in the remaining gas line, the utility (San Diego Gas & Electric) shut it down in

late 2010.

In the SAC, Appellants cite to language in the development's declaration of

restrictions (the Declaration), stating that the Association was created to acquire, hold

title to, and manage the common areas. (Art. VI, § 6.1 of the Declaration.) Also, under

its article VI, section 6.2.6, the "Association has and shall have the following rights and

duties, . . . [t]o contract, provide and pay for (i) maintenance, utility, gardening and other

services benefitting the Common Areas." They allege that by statute, such an association

"is responsible for repairing, replacing, or maintaining the common area, other than

exclusive use common area . . . ," unless otherwise provided in the governing documents.

(Former § 1364, subd. (a) [now § 4775, subd. (a)].)

The SAC defines the potential class and the Coalition as "all owners and residents

of Buildings 700 and 800 of the [development] who own or reside in units that previously

were serviced by natural gas lines and, therefore, are real parties in interest . . . ."2 The

2 In the respondent's brief, the Association claims none of the four individual plaintiffs is alleged to be suing in a representative capacity. However, both the SAC and the TAC cite to Business and Professions Code section 17200, et seq., as well as Code of Civil Procedure section 382, and they evidently attempt to plead a representative-type UCL action. 5 SAC seeks declaratory relief and an injunction to prevent further alleged breaches of the

Association's statutory and fiduciary duties pursuant to the Declaration. The SAC pleads

that the Association is obligated to "pay for and implement the repairs and improvements

necessary to restore natural gas service to Buildings 700 and 800." An injunction is

requested to require the Association to take such action. Appellants claim entitlement to

an award of fees and costs under the terms of the Declaration and former section 1354

(now § 5975).3

The proposed TAC seeks the same basic relief, except the proposed class

definition appears to be expanded to include beachfront owners who purchased natural

gas meters or extended gas lines into their units for use with their appliances.4

B. Motion and Opposition; Ruling

Along with their motion for class certification, Appellants filed their motion to

allow filing of the TAC, which they said would be withdrawn if class certification were

denied. Neither the SAC or the TAC is verified by representatives of Appellants. (Code

Civ. Proc., § 446.)

3 Former section 1354, subdivision (a) (reenacted without change as § 5975, subd. (a)), provides in pertinent part: "The covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both." (Italics added.)

4 In the SAC, the individual plaintiffs also sought damages for the Association's alleged misrepresentations and promises without intent to perform. Had the TAC been approved, it would have dropped the Coalition as a plaintiff and omitted any damages claims by the individual plaintiffs. 6 In support of the class certification motion, Appellants' points and authorities

argued that the individual plaintiffs will be adequate class representatives, and since the

case deals with the legality of standardized documents, it is generally appropriate for

resolution on a class basis. As factual support, Appellants mainly relied on their

attorney's declaration, which explained that the motion was made in response to the

Association's discovery requests about the existence of Appellants' authority to represent

all the putative class members.

In opposition, the Association argued no community of interest was shown to

exist, because some of the proposed class members had not sustained the alleged damage.

The opposition papers included an attorney declaration attaching seven letters from the

owners of units in Buildings 700 and 800 stating they approved of the way the

Association handled the gas line issue.5

Appellants objected to the letters and any discussion of them as inadmissible

hearsay.

After hearing argument and taking the matter under submission, the trial court

sustained Appellants' objections to the Association's homeowner letters. The motion for

class certification was denied, as was the motion to amend. The court concluded

Appellants had not shown a community of interest as alleged, because the conditions at

the individual beachfront units presented individualized questions about any entitlement

5 The Association complains that the moving papers were not served in a timely fashion. However, the trial court received opposition and reached the merits of the issues presented, and we do likewise. 7 to the requested relief, based on variations in proof of harm. (Frieman, supra,

116 Cal.App.4th 29, 40.) Further, there was no adequate showing that a class action

method would be superior to litigation of individual lawsuits, based on the lack of a

community of interest and remaining questions about proper identification of class

members.

Appellants appealed, designating the clerk's transcript as the record on appeal. In

their briefs on appeal, they represent that at the time of the trial court hearing, their

attorney had letters from several other beachfront owners who agreed with the goal of the

action, but he decided not to submit them after his objections to the Association's similar

letters were sustained.6

II

CLASS CERTIFICATION REQUESTS

The denial of certification is an appealable order, effectively dismissing the

proposed class action. (Daar v. Yellow Cab, Inc. (1967) 67 Cal.2d 695, 699.) " 'Section

382 of the Code of Civil Procedure authorizes class suits in California when "the question

is one of a common or general interest, of many persons, or when the parties are

numerous, and it is impracticable to bring them all before the court." The burden is on

the party seeking certification to establish the existence of both an ascertainable class and

a well-defined community of interest among the class members.' " (Lockheed Martin v.

6 California Rules of Court, rule 8.120(b) requires a record of the superior court oral proceedings if the appellant raises an issue that requires consideration of them. However, this case presents primarily questions of law on a given set of facts, and our review may be conducted without any need of a reporter's transcript. 8 Superior Court (2003) 29 Cal.4th 1096, 1103-1104 (Lockheed Martin).) " 'Reviewing

courts consistently look to the allegations of the complaint and the declarations of

attorneys representing the plaintiff class to resolve this [community of interest] question.'

" (Sav-on Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 327 (Sav-on Drug

Stores).) Each theory asserted by the class must be analytically suitable for class

treatment. (Ibid.) "Individual issues do not render class certification inappropriate so

long as such issues may effectively be managed." (Id. at p. 334.)

In Brinker, supra, 53 Cal.4th at page 1022, the court summarized the rules for

appellate review of a class certification order. " 'The decision to certify a class rests

squarely within the discretion of the trial court, and we afford that decision great

deference on appeal, reversing only for a manifest abuse of discretion: "Because trial

courts are ideally situated to evaluate the efficiencies and practicalities of permitting

group action, they are afforded great discretion in granting or denying certification."

[Citation.] A certification order generally will not be disturbed unless (1) it is

unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on

erroneous legal assumptions.' " (Ibid.) Predominance is a factual question, and a trial

court finding that common issues predominate generally is reviewed for substantial

evidence. (Ibid.) "We must " '[p]resum[e] in favor of the certification order . . . the

existence of every fact the trial court could reasonably deduce from the record. . . .' "

(Ibid.)

As explained in Ramirez, supra, 215 Cal.App.4th 765, an appellate court

considering a trial court order denying class certification will evaluate only the reasons

9 given in the ruling. " 'Appeal of an order denying class certification "presents an

exception to the general rule on review that we look only to the trial court's result, not its

rationale." [Citation.] Erroneous legal assumptions or improper criteria may require

reversal "even though there may be substantial evidence to support the court's order."

[Citation.]' . . . However, ' "[a]ny valid pertinent reason stated will be sufficient to

uphold the order.' " (Id. at pp. 776-777.)

III

SHOWING ON SUITABILITY OF CLASS TREATMENT

A. Legal Context of Theories in SAC and TAC

Class actions are a procedural device intended to enforce substantive law. (City of

San Jose v. Superior Court (1974) 12 Cal.3d 447, 462.) In ruling on a certification

request, the court does not ask whether an action is legally or factually meritorious.

(Lockheed Martin, supra, 29 Cal.4th at p. 1104.)

Since no leave to amend was granted to file the TAC, we are required to treat the

operative pleading as the SAC. In either case, we focus primarily on the class theories in

support of declaratory and injunctive relief. Appellants seek to enforce language in the

governing documents and in former section 1364, subdivision (a) (now § 4775,

subd. (a)), to the effect that the Association is responsible for repairing, replacing, or

maintaining the common areas, such as where the gas lines run, and it has breached its

fiduciary duties by failing to do so.

Where, as here, an aggrieved party seeks a mandatory injunction to remedy an

alleged violation of the restrictions in such a declaration of restrictions, "the court will

10 balance the equities, weighing the relative hardship on the defendant against the benefits

to the plaintiff if such an order is granted." (8 Miller & Starr, Cal. Real Estate (3d ed.

2011) § 24:26, p. 24-98; fn. omitted.)

"The duties and powers of a homeowners association are controlled both by statute

and by the association's governing documents." (Ostayan v. Nordhoff Townhomes

Homeowners Association, Inc. (2003) 110 Cal.App.4th 120, 127.) In view of the type of

relief requested by the SAC, Appellants' theories about the duties and obligations of the

Association will be measured by provisions of the Act and the Declaration. The parties

do not go into detail about the substantive law that governs common interest

developments, except for citing to portions of the Act (e.g., former § 1351 et seq. [current

§ 4775].

In considering the appropriateness of class treatment for such requested remedies,

Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, provides

guidance for evaluating issues arising under the Act. Under former section 1354 (now

§ 5975), the reasonableness of recorded common interest development restrictions, such

as these, "is to be determined not by reference to facts that are specific to the objecting

homeowner, but by reference to the common interest development as a whole. . . . [T]he

restriction is presumed to be reasonable and will be enforced uniformly against all

residents of the common interest development unless the restriction is arbitrary, imposes

burdens on the use of lands it affects that substantially outweigh the restriction's benefits

to the development's residents, or violates a fundamental public policy." (Nahrstedt,

supra, at p. 386.)

11 Under this interpretive approach, an association's duty to enforce a provision in a

restrictive declaration cannot be decided in the abstract, but requires a factual showing

about the overall effects of the provision upon the development as a whole. Likewise,

class certification requests require factual and legal support to enable the trial court to

exercise its discretion appropriately in ruling upon them. (See Brinker, supra, 53 Cal.4th

at p. 1022.)

B. Community of Interest

As outlined in Lockheed Martin, supra, 29 Cal.4th at page 1104: " 'The

community of interest requirement [for class certification] embodies three factors: (1)

predominant common questions of law or fact; (2) class representatives with claims or

defenses typical of the class; and (3) class representatives who can adequately represent

the class.' " Predominance of common questions is a factual question, and the trial court's

findings on whether common issues predominate in a given case will be reviewed for

substantial evidence. (Sav-On Drug Stores, supra, 34 Cal.4th at pp. 328-329; Brinker,

supra, 53 Cal.4th at p. 1021.)

In Frieman, supra, 116 Cal.App.4th 29, the court analyzed whether class treatment

was proper for an action by neighboring property owners who sought nuisance damages

from noise generated by the defendant's quarry operations. There was evidence from

expert witnesses establishing that there were many differences among potential class

members on the issues of liability for nuisance, "as well as in the nature of the damages

suffered." (Id. at p. 41.) The request for class certification was denied, for lack of

uniformity in the type and degree of impact that was likely among the neighboring class

12 members. (Id. at pp. 41-42.) On appeal, no abuse of discretion was found in the denial

of certification, since individualized issues almost certainly predominated over any

common issues, and there was a potentially wide disparity in the amount of damages

provable by each class member. (Ibid.)

Appellants mainly argue this ruling was improperly based upon excluded evidence

from letters submitted by the Association (to the effect that some beachfront owners in

the Association were opposed to this lawsuit). Appellants fail to recognize that, as the

proponents of class certification, they had the obligation to supply substantial evidence of

a common, systematic Association policy on providing utilities, and to show that a

common method of proof about its effects would be available to establish the

Association's liability. (See Brinker, supra, 53 Cal.4th 1004, 1051.)

Appellants further claim it is unfair and unlawful that natural gas service continues

to be available to the owners of the 129 nonbeachfront units, while the Association has

treated the beachfront owners differently in that regard. From the pleadings and motion

papers, it can readily be recognized that determining whether the Association failed to act

"reasonably" in making its decisions will require fact-intensive, individualized inquiries

regarding the effects of the restrictions and obligations in the Declaration upon different

areas of the development, in terms of the feasibility of the gas line repair and replacement

project. (§ 5975, subd. (a) ["The covenants and restrictions in the declaration shall be

enforceable equitable servitudes, unless unreasonable . . . ."].) In this factual and legal

context, the trial court had the discretion to decide that resolving this type of dispute on a

classwide basis would be unduly difficult. The obligations that were imposed on the

13 Association (whether "by virtue of its fiduciary duties, Civil Code section 1364, the

Declaration, and the Public Utilities Code") cannot readily be interpreted or enforced on a

generic basis.

We acknowledge that the trial court's ruling inexplicably makes a reference to the

opposing attorney's declaration, even though Appellants' objections to its attachments and

content were sustained. However, the court's substantive ruling that the evidence failed

to show a true community of interest is otherwise supported by the record. Essentially,

this denial order found that no sufficient evidence had been produced to support

Appellants' position about the existence of predominant common issues of fact and law.

The court applied the correct legal principle in ruling on the motion, that a class action is

not feasible where obvious variations in proof will require individualized evidence about

the claimed harm and liability outlined in the pleadings. (Frieman, supra, 116

Cal.App.4th 29, 40.) Thus, the court based its denial of class certification on at least one

legally valid, supported ground, and its ruling was not erroneous or an abuse of

discretion. (Ramirez, supra, 215 Cal.App.4th 765, 776-777, relying on In re Tobacco II

Cases (2009) 46 Cal.4th 298, 311.)

Moreover, Appellants are not really in a position to complain about any erroneous

factual references to opposing evidence in the ruling, because it was their burden to

establish a community of interest, but they did not do so. " '[T]he proponent of

certification must show, inter alia, that questions of law or fact common to the class

predominate over the questions affecting the individual members.' " (Lockheed Martin,

supra, 29 Cal.4th at p. 1104.) Appellants supplied only attorney declarations that were

14 deficient in any factual showing about common facts and law. No substantial evidence

supported their requested predominance finding. (Brinker, supra, 53 Cal.4th 1004, 1021-

1022.)

C. Superiority of Class Treatment

A class action must be the "superior" means of resolving the litigation, for both the

parties and the court. (Newell v. State Farm Gen. Ins. Co. (2004) 118 Cal.App.4th 1094,

1101.) Group action has the potential to create injustice, and therefore trial courts are

required to " ' "carefully weigh respective benefits and burdens and to allow maintenance

of the class action only where substantial benefits accrue both to litigants and the

courts." ' " (Ibid.)

The burden is on the party seeking certification to establish the existence of an

ascertainable class, as well as a community of interest. (Lockheed Martin, supra,

29 Cal.4th 1096, 1103-1104.) A properly identified class must be "ascertainable,"

meaning that the class must comprise a "group that was [actually] harmed by the

defendant[s]." (See Akkerman v. Mecta Corp., Inc. (2007) 152 Cal.App.4th 1094, 1100.)

Again we note that under section 5975, subdivision (a) (formerly § 1354,

subd. (a)), the covenants and restrictions in the Declaration "inure to the benefit of and

bind all the owners of separate interests," and the Association must enforce them, "unless

unreasonable." (Ibid.; italics added.) The record supports an inference that the interests

of some of the beachfront unit owners may well have been harmed, as alleged, by the

Association's discontinuation of natural gas service to the two buildings. Based on the

SAC's pleading of the projected expenses for restoring the common area natural gas lines,

15 not only the interests of these beachfront property owners are affected, but also, the

individualized interests of the owners of the 129 other properties in this common interest

development. Determining the enforceability of the Declaration's provisions about

maintenance of utilities and common areas in this context will require not only legal

analysis but also fact-intensive showings about the physical and regulatory conditions at

various units.

In determining whether injunctive or declaratory relief is proper, the court must

balance the equities, including the relative hardships or benefits for not only Appellants

and the Association, but also other stakeholders. (See 8 Miller & Starr, supra, § 24:26,

p. 24-98.) We cannot conclude that the trial court abused its discretion in concluding that

the resolution of these complicated issues, as presented, would not be feasible in a class

setting. Even though interpretation of the Declaration in light of statutory provisions will

be required, the availability of the requested relief does not depend only upon facts

common to all members of the proposed class. (Brinker, supra, 53 Cal.4th 1004, 1021-

1022.)

In conclusion, Appellants did not demonstrate to the trial court that a class action

was the fairest and most efficient way to decide the claims of all 63 beachfront owners.

(Code Civ. Proc., § 382.) We affirm the order, and in this procedural context, express no

opinion on the merits of the substantive issues.

16

DISPOSITION

The order is affirmed. Costs are awarded to Respondent Association.

HUFFMAN, Acting P. J.

WE CONCUR:

HALLER, J.

McINTYRE, J.

17