Pinnacle Museum Tower Ass'n v. Pinnacle Market Development (US), LLC

Filed 8/16/

IN THE SUPREME COURT OF CALIFORNIA

PINNACLE MUSEUM TOWER )

ASSOCIATION, )

) Plaintiff and Respondent, ) ) S186149 v. ) ) Ct.App. 4/1 D055422

PINNACLE MARKET DEVELOPMENT )

(US), LLC, et al. ) San Diego County ) Super. Ct. No. Defendants and Appellants. ) 37-2008-00096678- ) CU-CD-CTL ____________________________________)

An owners association filed the instant construction defect action against a condominium developer, seeking recovery for damage to its property and damage to the separate interests of the condominium owners who compose its membership. In response, the developer filed a motion to compel arbitration, based on a clause in the recorded declaration of covenants, conditions, and restrictions providing that the association and the individual owners agree to resolve any construction dispute with the developer through binding arbitration in accordance with the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.). We granted review to…

An owners association filed the instant construction defect action against a condominium developer, seeking recovery for damage to its property and damage to the separate interests of the condominium owners who compose its membership. In response, the developer filed a motion to compel arbitration, based on a clause in the recorded declaration of covenants, conditions, and restrictions providing that the association and the individual owners agree to resolve any construction dispute with the developer through binding arbitration in accordance with the Federal Arbitration Act (FAA; 9 U.S.C. § 1 et seq.).

*232 We granted review to determine whether the arbitration clause is binding on the association, and if so, whether it must be invalidated as unconscionable. As we shall explain, even though the association did not exist as an entity independent of the developer when the declaration was drafted and recorded, it is settled under the statutory and decisional law pertaining to common interest developments that the covenants and terms in the recorded declaration reflect written promises and agreements that are subject to enforcement against the association. We conclude that…

Can the developer of a condominium project unilaterally impose arbitration on the condominium’s homeowners association by recording a mandatory arbitration clause for construction-related claims at or before the association’s inception? Because the Legislature has elected to permit developers to do so, I agree with the majority that a developer can and that the arbitration clause at issue here is enforceable. Because I think the clause’s validity rests on narrower grounds than those invoked by the majority, I write separately.

I.

Pinnacle Market Development (US), LLC (Pinnacle Development), built a condominium project. As required under the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.; Davis-Stirling Act), 1 it recorded a declaration containing easements, covenants, and restrictions on use of the property (see §§ 1352, subd. (a), 1353). Included among these covenants and restrictions, Pinnacle Development inserted a clause that compelled arbitration of one specific type of claim—constmction disputes—with the homeowners association, the Pinnacle Museum Tower Association (the Homeowners Association), and individual homeowners each bound as a condition…

I join the court’s opinion. I also find much that is persuasive in Justice Werdegar’s concurrence. In my view, the court’s opinion and Justice Werdegar’s concurrence are not that far apart.

This case requires us to answer two questions. The first is whether a provision of a declaration of restrictions for a common interest development requiring arbitration of any construction defect disputes between a homeowners association and a developer can ever be enforceable against the association. The conceptual difficulty is that this provision defies easy categorization. *257 Both the court and Justice Werdegar acknowledge that there was no privity of contract between the homeowners association, Pinnacle Museum Tower Association, and the developer, Pinnacle Market Development, and that the provision is thus not a contractual arbitration agreement in the strict sense. (Maj. opn., ante, at p. 250; cone. opn. of Werdegar, J., ante, at p. 252.) Both appear to recognize that the provision is not one of the typical property restrictions running with the land that are enforceable as equitable servitudes. (Maj. opn., ante, at p. 242; cone. opn. of Werdegar, J., ante, at p. 252.)

Further, both…

A condominium owners association sued the project’s developer over construction defects. The developer sought to have the dispute arbitrated.

The majority holds that the owners association is bound by an arbitration provision in the declaration of covenants, conditions, and restrictions (CC&R’s) drafted by the developer before the association came into existence as an independent entity. I disagree, because of the association’s lack of consent to the arbitration provision.

I

Defendant condominium developer drafted and recorded CC&R’s that, among other things, provided for the creation of a nonprofit corporation to be *259 called the “Pinnacle Museum Tower Association,” plaintiff here. The CC&R’s also stated that acceptance of any property deed would indicate agreement to have any construction dispute against the developer resolved through binding arbitration. When the developer recorded the CC&R’s, the owners association, as the majority acknowledges, had no existence independent of the developer.

After the developer completed construction and disposed of its interests in the condominium project, and after the association became an independent entity, the association sued the…