Adams Stirling PLC

Court of Appeal, First District, Division 4, California.
(December 16, 2019) Unpublished Decision


*1 Plaintiff Miriwa Center Investments (MCI) appeals from a judgment in favor of defendants Miriwa Center Condominium Owners’ Association (Association) and its then-president Dr. Kao Lin. MCI sought declaratory and injunctive relief and damages against the Association and Dr. Lin for adopting an operating rule establishing business hours for the Miriwa Center Condominiums (Center) and allegedly overcharging it for PG&E bills. MCI further appeals the trial court’s earlier grant of summary judgment as to property manager Kinry & Associates, LLC (Kinry) and its owner Kinry Louie (Louie). If it prevails on any issues raised on appeal, MCI requests that we vacate the order granting attorney’s fees. We affirm the judgment, modified as explained below.


A. General Background

The Center is a commercial building in San Francisco with a garage, retail space on the first floor, and offices on the remaining six floors. It has periodically had problems with homeless people entering and creating health, safety, and security issues since at least 2007. As a result, the Center has contended with public urination and defecation, as well as graffiti and burglary.

The Center is run by the Association and its board. Dr. Kao Lin was the Association’s president and a board member from late 2015 until April 2017, which includes the period relevant here. The board meets monthly to address building issues such as those relating to homeless people in the Center.

MCI owns the entire first floor of the Center and owned the garage until 2015. MCI is owned by two general partnerships, Sancowa and WKI. Donald Cheng is a general partner at both Sancowa and WKI and has a 5 percent interest in each partnership. His brother, Danny Cheng, is only a limited partner with a less than 5 percent interest in Sancowa; he has no interest in WKI. Danny Cheng served on the board at the same time as Dr. Lin.

B. The Association Hires a New Property Management Company

In 2015, the Association was having problems with its former property management company, Canyon Pacific Management (Canyon).1 Canyon resigned abruptly in October 2015. Danny Cheng urged the board to find a new property management company quickly. The Association soon hired Kinry, which started managing the Center in November 2015. Kinry is owned and run by Louie, who has been managing properties for decades.

C. The Security Problem Kinry and Louie Inherited

When Kinry took over as the property manager, Louie noticed the Center’s security was nonexistent. He became aware of the Center’s lax security when, during his first visit as property manager, he asked Danny Cheng who was responsible for opening and closing the Center each day; Danny responded, whoever was first to arrive and last to leave.

Within three weeks, Louie realized homeless people were sleeping inside the Center. The painter Louie hired to paint the Center’s common areas complained to Louie that someone was urinating and defecating on the walls he had just painted, forcing him to repaint. Louie then found sleeping bags and clothing tucked underneath one of the staircases in the Center’s common areas.

*2 Within a month of taking over, Louie sent a letter to Association members concerning homeless people who had recently accessed the Center. Louie explained that there had been “incidences of urination in the halls, soiling on the hallway carpet, and public nudity by these homeless people.” He also noted that there had been “burglaries of offices.”

D. The Business Hours Operating Rule

During its January 2016 meeting, the board announced that it would be updating its “House Rules.” The minutes from that meeting stated one of the rules being considered was “establishing defined formal business hours.”

Louie emailed Kinry’s proposed list of “House Rules” to the board about three weeks before its next meeting. Within a couple of days, Danny Cheng responded that the “operating hours of the [Center] should only apply to the Office tower only. We all kn[o]w that Saturday and Sunday are the prime time for retail business on the lobby level and the garage operation.” Louie replied, “This matter is for the board to discuss. The present arrangement is very weak from a security point of view; there is no accountability.”

At the February meeting, Louie recommended the board set business hours to prevent homeless people from trespassing in the Center. Louie explained that “there [we]re too many holes in the building’s security whereupon people randomly leaving the building during the evening will open the alleyway door whereupon the homeless will walk right into the building.” The board hotly debated the issue before unanimously approving a rule establishing business hours from 7:30 a.m. to 7:30 p.m. Monday to Saturday (the Rule). Danny Cheng was one of the five board members who voted for the Rule.

Danny Cheng quickly regretted his vote. He brought an attorney to the board’s March meeting to “disput[e] the Board’s decision ... setting the hours of the building.” The board informed the attorney that his client had voted for the Rule. Louie also explained that he had conducted an informal survey and found most retail tenants were closed by 6 p.m. and many closed earlier. The board told the attorney that they would take the “matter under advisement and w[ould] inform him accordingly.”

E. PG&E Charges

MCI also disputed the amount the board claimed it owed for PG&E charges.

1. Allocation of electricity charges

The Association’s covenants, conditions, and restrictions (CC&Rs) provide that “[a]ssessments for water, PG&E charges for electricity and gas service, cleaning and janitorial service and supplies and routine maintenance for each floor, including the Units and the Common Area on each floor, shall be assessed separately to each floor in the Condominium Building. The amount thus assessed to each floor shall then be allocated among the Units on that floor in accordance with the ratio that the square footage of each Unit bears to the total square footage of all Units on that floor, as set forth on Exhibit ‘B.’ ”

Utilities and cleaning expenses are separate from the annual assessment levied by the Association’s board to cover management, operating, and maintenance costs. Exhibit A assigns a percentage interest in the Center’s common area to each unit.

2. Failure to Assess PG&E Charges

The Association first realized Canyon had failed to properly allocate and bill Association members for PG&E charges in early 2015, when an electricity surcharge appeared on the monthly Association bill for units on the third to seventh floors. When Dr. Lin asked about the surcharge, Canyon explained that it had not properly charged owners for the electricity. Canyon collected about $185,000 in electricity surcharges.

*3 When Kinry replaced Canyon as the Center’s property manager, Dr. Lin asked Louie to advise him on the surcharge. Louie suggested hiring an accountant and recommended accountant Robert Adachi (Adachi).

On Louie’s recommendation, the board hired Adachi, who prepared a report about the Center’s PG&E bills for 2015 and provided it to the board. To complete his report, Adachi reviewed the CC&Rs and PG&E bills for each of the Center’s three accounts. He explained that he used the allocation method in Exhibit A of the CC&Rs “[s]ince the bills do not specify the costs by floor,” information that would be required for the charges to be determined in accordance with Exhibit B. He then provided the board with a chart calculating how much each unit owed in PG&E fees for 2015. The board later adopted Adachi’s formula and conclusions.

The board also voted to refund the surcharge to those who had paid it and to assess all Association members the correct amount each owed for PG&E charges Canyon had failed to bill, but the refund was never given.

After receiving his report on PG&E charges for 2015, the board asked Adachi to determine the amount each unit owed in PG&E charges from 2011 to 2016 so that the Association could assess each member the correct sum. Just over a year after this case was filed, Adachi sent the board a report with his conclusions. As the PG&E accounts from 2011 to 2016 also billed the Center for its total electricity use rather than by floor, Adachi used a method similar to the one he had used to calculate each unit’s PG&E charges for 2015. The only difference in methodology was that the amount each unit owed was reduced by any “Utilities Reimbursement”2 charges assessed by Canyon and any PG&E charges billed by Kinry after it became the property manager. Adachi concluded MCI’s units owed $15,143.02.

F. Procedural History

1. Pretrial Proceedings

Donald Cheng filed this case on April 26, 2016. The complaint sought declaratory relief, injunctive relief, and monetary damages because the Rule allegedly violated the Association’s CC&Rs and damaged MCI by making it more difficult to lease its retail spaces. It also alleged the Association had violated the CC&Rs by excessively billing MCI for electricity. The complaint was later amended to substitute MCI in place of Donald Cheng as the plaintiff.

Defendants filed a motion for summary judgment on behalf of all defendants or, in the alternative, for Kinry and Louie. The trial court granted summary judgment as to Kinry and Louie only.

2. Bench Trial

*4 The case proceeded to a bench trial, during which the court heard testimony from several witnesses regarding both the operating hours rule and the PG&E charges. Louie, Dr. Lin, Danny Cheng, and Donald Cheng (among others) testified as to the operating hours rule and the dispute over the PG&E charges. Both sides also called experts regarding the PG&E charges, as described more fully below.

a. Plaintiff Expert Jim Cantrell

James Cantrell is the president of Cantrell, Harris & Associates, a San Francisco-based real estate management and consulting firm. He has 35 years of experience as an asset and property manager, including accounting related to property management. He is not, however, an accountant.

Cantrell opined that MCI should be refunded any Association dues it paid that were improperly used to pay for PG&E charges and calculated the amount he believed MCI should be refunded. He began his calculation by using Exhibit A to determine MCI’s total percentage of interest in the common area based on their ownership of the garage (which MCI then owned) and first floor. Next, Cantrell used Adachi’s records to determine the amount of PG&E charges Adachi found should have been billed to the Association’s units. Cantrell then summed the amount Adachi determined was billable to the Association’s units for the years 2012 to 2015, plus Cantrell’s own estimate for the year 2011 ($594,453.52), and multiplied that by MCI’s total percentage of interest in the common area (34.77 percent), resulting in a figure of $206,691.49. That figure represented Cantrell’s calculation as to the amount of MCI’s dues that had been used to pay PG&E charges and should be refunded to MCI.

b. Defense Expert Robert Adachi

Adachi earned his bachelor’s degree in accounting from the University of California, Berkeley. After graduation, he worked at the Internal Revenue Service for three years. He then joined the Environmental Protection Agency (EPA), where he eventually became the Director of Forensic Audits for the EPA’s Office of Inspector General, Office of Audits. While at the EPA, Adachi participated in many fraud investigations.

Turning to his work for the board, Adachi explained that he was originally hired to examine whether the PG&E bills had been allocated properly for 2015, but his work soon expanded to include to 2011 through 2016. To conduct this analysis, Adachi reviewed the PG&E bills for the Center’s three PG&E accounts, the CC&Rs, and the tenant ledger maintained by Canyon and Kinry.

As in his report to the board, Adachi explained it was impossible to comply with the method specified in the CC&Rs because PG&E did not allocate charges by floor. He instead used Exhibit A to assign each unit its percentage of the PG&E bills. He multiplied that percentage by the total PG&E charges for each contested year, added up the amount each unit owed from 2011 to 2016, and subtracted any past payments for utilities recorded by the property managers. Consistent with his report to the board, Adachi testified that MCI owed approximately $15,000.

c. Post-trial Proceedings

The court issued a statement of decision denying MCI injunctive relief and damages and declaring that MCI owed the Association $18,409.11 for the PG&E charges. It reserved judgment on costs and attorney’s fees.

The court issued entry of judgment in favor of defendants on December 14, 2017. MCI filed its notice of appeal regarding the grant of summary judgment to Kinry and Louie and the statement of decision on February 9, 2018.

*5 On April 9, 2018, the parties submitted a declaration on costs and attorney’s fees in which “[t]he parties ... agreed that the Court [could] award Defendants a total of $228,239 in attorney’s fees, but also agree[d] that MCI maintains its right to appeal this and any other judgment.” The court signed an order awarding attorney’s fees as provided in the declaration on April 20, 2018. As this order was separately appealable, MCI timely filed a notice to appeal it on May 22, 2018.3 (Norman I. Krug Real Estate Investment, Inc. v. Praszker (1990) 220 Cal.App.3d 35, 46 [“a postjudgment order which awards or denies costs or attorney’s fees is separately appealable”].)


A. Judgment After Trial

MCI appeals the trial court’s determinations that the Rule was properly adopted and that MCI owed the Association $18,409.11 for past PG&E utility bills. We modify the amount of the monetary award but otherwise affirm.

1. Standard of Review

“In reviewing a judgment based upon a statement of decision following a bench trial, we review questions of law de novo. [Citation.] We apply a substantial evidence standard of review to the trial court’s findings of fact. [Citation.] Under this deferential standard of review, findings of fact are liberally construed to support the judgment and we consider the evidence in the light most favorable to the prevailing party, drawing all reasonable inferences in support of the findings.” (Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981.)

2. Business Hours

MCI contends “there was insufficient evidence to support the trial court’s conclusion that the Rule met [the requirements of Civil Code section 6632].” MCI also claims it proved damages resulting from the Rule.

a. Trial Court’s Findings

In its statement of decision, the trial court explained that the defense witnesses were “credible on all the major issues ... [because] [t]heir testimony was, in the main, consistent and persuasive.” In contrast, it found that plaintiff’s witnesses were not credible, as their testimony was often “impeached by reference to testimony under oath in their depositions.”

Based on the credible defense testimony, the court concluded that “[t]he evidence showed that the Association’s board of directors and Kao-Hung Lin acted in good faith, upon reasonable inquiry, and within their authority in adopting the Rule.” It noted the board had formally and informally discussed “homeless sleeping, eating, urinating, and defecating in the Center’s open areas; the inability to secure the Center; doors being left unlocked; burglaries and robbery at the Center; the Center’s unclean and unprofessional appearance; and methods to resolve the Center’s security issues.” Defendants’ familiarity with these problems was based on personal experience and discussions with other Center occupants. After “numerous compromises” regarding the Rule’s details, the board’s five members, including Danny Cheng, unanimously approved the Rule. And after the Rule passed, security improved.

The court further concluded MCI had not established damages resulting from the Rule, as MCI had not introduced evidence of its efforts to rent vacant units, the cost of leasing units, or the Rule’s negative impact on leasing units. It found MCI’s expert testimony on rentability was unpersuasive because his “opinions did not sit on a strong foundation.”4 Finally, it rejected MCI’s argument that the board passed the Rule primarily to shift security costs to MCI.

b. Civil Code Sections 6630 and 6632

*6 Under the Commercial and Industrial Common Interest Development Act (Civil Code, § 6500 et seq.), an “operating rule” is a “regulation adopted by the board that applies generally to the management and operation of the common interest development or the conduct of the business and affairs of the association.” (Civ. Code, § 6630.) There are certain statutory requirements for an operating rule to be valid and enforceable: “(a) The rule is in writing. [¶] (b) The rule is within the authority of the board conferred by law or by the declaration, articles of incorporation or association, or bylaws of the association. [¶] (c) The rule is not in conflict with governing law and the declaration, articles of incorporation or association, or bylaws of the association. [¶] (d) The rule is reasonable, and is adopted, amended, or repealed in good faith.” (Civ. Code, § 6632.)

“[W]here a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.” (Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265 (Lamden).) In affirming a trial court’s ruling in favor of the association’s decision to pursue one solution over another, our Supreme Court has adopted a rule of judicial deference analogous to the business judgment rule, instructing that courts should defer to the “relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments.” (Id. at pp. 270–271.)

c. Analysis

As MCI does not contest that the Rule was in writing, we address only whether: (a) the Rule was within the board’s Authority; (b) the Rule conflicted with the Association’s CC&Rs; and (c) the Rule was reasonable and adopted in good faith. (Civ. Code, § 6632, subd. (b)–(d).) We also determine whether MCI has proven damages.

i. The board had authority to enact the Rule

The CC&Rs provided the board with “the power and the authority to establish, promulgate, amend, repeal, and enforce Rules.” The CC&Rs define “Rules” as “operating rules (as defined in Civil Code section 1357.1005), policies, and regulations governing the administration, management, operation, use and occupancy of the [Center], including the use of Common Area and facilities, the personal conduct of Owners and Occupants, tenants, invitees, and guests within the [Center], enforcement of the Governing Documents, and any other matter which is within the jurisdiction of the Association, as adopted, published, or amended by the Board from time to time and subject to applicable law, including Civil Code section 1357.100 et seq.”

MCI alleges the Rule was not “within Association authority because it [wa]sn’t authorized in the CC&Rs, where [CC&Rs section] 5.3, states, ‘All Units located on the first floor [MCI’s floor] of the Building shall be used exclusively for retail, office or general commercial purposes, as allowed by the Planning Code of the City and County.’ ” But this CC&Rs provision does not limit the board’s authority to adopt the Rule. Nor does the Rule preclude the first floor from being used for retail, office, or general commercial purposes. We thus reject this argument.6

ii. The Rule does not conflict with the Association’s CC&Rs

*7 Relying on the CC&Rs provision providing that security costs are to be paid based on square footage, not usage, MCI claims the Rule violates the CC&Rs by impermissibly passing security costs onto it. This argument lacks merit, as the CC&Rs do not require the Association to provide a certain amount of security or prohibit the board from voting to provide additional security. Nor do the CC&Rs prohibit members from paying for additional security at their expense if desired.

iii. The board acted reasonably and in good faith

MCI also asserts the Rule was neither reasonable nor passed in good faith. Again, we disagree.

Prior to the Rule’s passage, the board took steps to upgrade the Center’s security, including fixing doors and replacing standard locks with digital locks in common areas to avoid trespassers using lost copies of keys to access common areas. The board also hired a lobby attendant to check the Center was secure during and just after business hours. Finally, it contracted with a security company to check the building after the lobby attendant left. Even with these additional measures, at the monthly meeting during which the board approved the Rule, one board member noted “last Friday people were shooting up [at] 5 o’clock even with your security people.... [W]e have to put in more security.” The board thus reasonably felt the need to implement further measures to ensure the Center’s security.

Louie, who had managed properties for decades and witnessed the Center’s problem, recommended the board “establish set business hours as a means to prevent homeless and other unauthorized [people] from trespassing on the property.” The board thereafter discussed at length whether setting business hours was necessary to prevent homeless people from sleeping, using drugs, or engaging in other inappropriate activities inside the Center. Only then did it approve the Rule. On this record, the board acted reasonably, in good faith, and consistent with the Center’s best interests.

Relying on Affan v. Portofino Cove Homeowners Assn. (2010) 189 Cal.App.4th 930, where the failure of a homeowners’ association to investigate a chronic sewage problem led to significant damage (Id. at pp. 934–935), MCI claims the board did not undertake a proper investigation of “both the problem (homelessness) and the solution (business hours)” before approving the Rule. But unlike the board in Affan, the board here was familiar with the problem and possible solutions and resolved the problem by repeatedly upgrading the Center’s security, including the implementation of business hours after other measures failed. Affan is therefore inapposite.

MCI next claims the Rule is unreasonable because it “disproportionately affects [its] first-floor retail units, with no countervailing benefit to them (or anyone else) since it does not help cure supposed trespassing.” But whether a rule is reasonable “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.” (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 386.) Contrary to MCI’s assertion, evidence at trial demonstrated that the Rule benefitted the entire Center by improving security and cleanliness. MCI’s claim thus fails even if it has experienced increased costs because reasonableness is measured by the benefits and burdens to the entire common interest development and the record supports the court’s finding that the entire Center has benefitted. (See ibid.)

iv. MCI failed to prove damages

*8 Contrary to the trial court’s finding that the evidence did not “preponderate to show any damages occasioned to [MCI] because of the Rule adoption,” MCI claims it proved the Rule caused it damage by making it more difficult for MCI to lease its retail spaces. This contention, too, is unavailing.

“A party who is damaged by a violation of the CC&R’s may seek money damages.” (Cutujian v. Benedect Hills Estates Assn. (1996) 41 Cal.App.4th 1379, 1385.) Even if MCI had proven the Rule violated the CC&Rs (which it has not), the judgment still must be affirmed because MCI has not established damages. MCI cites Donald Cheng’s testimony that the Rule hurt MCI’s ability to rent its units and expert Jim Cantrell’s opinion that the Rule affected rentability. But the trial court found this evidence unreliable because of the lack of foundation and contradictions between their trial testimony and depositions. We do not review credibility assessments (Lui v. City and County of San Francisco (2012) 211 Cal.App.4th 962, 969), but note that we also find this evidence unpersuasive, especially given defendants’ evidence that most of MCI’s tenants were unaffected by the Rule because they closed by 6 p.m.

Alternatively, MCI argues it suffered damages because the Rule amounted to a taking of its property by fiat in that the Rule reduced the value of MCI’s retail units. As stated by the California Supreme Court, “ ‘anyone who buys a unit in a common interest development with knowledge of its owners association’s discretionary power accepts “the risk that the power may be used in a way that benefits the commonality but harms the individual.” ’ ” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 85.) Although the Rule may have had a potentially greater impact on MCI than other Center occupants, MCI should have known the board had the power to adopt new rules to address the Center’s problems, as it did here. MCI is not entitled to relief merely because a properly approved operating rule adversely affected it.

In sum, the Association acted in the Center’s best interests and complied with applicable law when it approved the Rule. (Civ. Code, § 6632.) We thus defer to the Association’s decision.7 (Lamden, supra, 21 Cal.4th at p. 268.) Moreover, even if the board had failed to comply with state law requirements for operating rules, MCI has not proven any damages.

3. Allocation of Utility Costs

As noted, the court ordered MCI to pay the Association $18,409.11 on MCI’s claims for declaratory relief, injunctive relief, and damages based on the Association’s alleged failure to bill its members for PG&E charges in the manner required by the CC&Rs.8 MCI contends this was error, arguing the evidence showed the Association owed MCI $206,691.49. As modified below, we affirm.

a. Trial Court Findings

*9 The trial court concluded that “the board properly, before litigation, and under new management sought professional assistance to determine proper utility charges by hiring forensic auditor Robert Adachi, an accountant with over 40 years’ experience.” It found Adachi properly undertook an audit of the expenses showing that MCI owed the Association $18,409.11. It declined to credit Cantrell’s testimony, as he was not an accountant and gave inconsistent trial and deposition testimony. The trial court granted declaratory relief in that MCI was “adjudged to owe $18,409.11.”

b. Legal Principles Relating to Declaratory Relief

A party interested under a written instrument may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an action for declaratory relief. (Code Civ. Proc., § 1060.) The declaration sought may include a declaration of rights or duties. (Ibid.) “ ‘The fundamental basis of declaratory relief is the existence of an actual, present controversy over a proper subject.’ ” (City of Cotati v. Cashman (2002) 29 Cal.4th 69, 79.) “It is not essential, to entitle a plaintiff to seek declaratory relief, that he should establish his right to a favorable declaration.” (Columbia Pictures Corp. v. DeToth (1945) 26 Cal.2d 753, 760; see also Photochart v. Del Riccio (1949) 94 Cal.App.2d 315, 318 [“The fact that a declaratory judgment would or might be adverse to the plaintiff’s contentions is not a ground for denying declaratory relief”].)

“A court, in granting declaratory relief, has the power to award additional relief.” (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 901, citing Record Etc. Co. v. Pageman Hold. Corp. (1954) 42 Cal.2d 227, 234 (Pageman) and Bertero v. National General Corp. (1967) 254 Cal.App.2d 126, 147.) For example, in Pageman the plaintiff and defendant entered into a contract for real property, personal property, and patents. (Pageman, at p. 229.) Plaintiff initially performed under the contract but sought declaratory relief when defendant failed to provide title to the patents. (Ibid.) The trial court’s judgment declared “plaintiff to be the owner of all defendant’s interest in the property and [ordered] defendant [to] transfer good title thereto. If it cannot or does not do so, [defendant] must bring an action for the payments due under the contract as there provided, presumably taking into consideration the amount thereof and the effect of its inability or failure to give good title to all the property.” (Id. at p. 230.)

Our Supreme Court reversed, as the trial court “failed to find the value of the patent to which defendant could not give good title, or, stated in another way, the damage plaintiff would suffer by defendant’s inability to perform the contract in that respect.” (Pageman, supra, 42 Cal.2d at p. 233.) It therefore directed the trial court “to render the same judgment heretofore given, but in addition, [to] ascertain and declare the rights of the parties with respect to the payment of the unpaid balance of the purchase price, if any, under the contract, and the effect thereon of defendant’s inability to give good title to the patent it does not own.” (Id. at p. 234.)

c. Analysis

We agree with the trial court that the Association may retroactively assess its members for PG&E fees and that the trial court had the ability to determine the amount MCI owed to fully resolve the controversy for which MCI sought declaratory relief. CC&Rs section 7.7.2 requires the Association to assess its members for PG&E fees by determining the electricity used by each floor and allocating that amount among the units on that floor. The CC&Rs do not prohibit the board from retroactively assessing units for PG&E charges if they failed to collect those assessments for past years. Moreover, as it is not possible to assess PG&E charges as set forth in the CC&Rs, the most equitable way of determining the amount owed by each unit is to use another distribution method from the CC&Rs, as both experts did. Although this method does not strictly comply with the CC&Rs, it is consistent with the parties’ intent in that it permits the Association to recover PG&E charges proportionately from its members as required by the CC&Rs.

*10 MCI claims the “trial court improperly awarded affirmative monetary compensation to the Association for past PG&E charges,” arguing that “[t]he trial court could not maneuver such a claim into MCI’s declaratory relief cause.” But as indicated above, the trial court had authority to resolve the entirety of the dispute—even if the award was adverse to MCI—as the controversy as to which MCI sought declaratory relief logically includes any outstanding PG&E charges owed. (See Pageman, supra, 42 Cal.2d at pp. 233–234.) The trial court therefore could properly find that MCI owed the Association for past PG&E fees.

MCI nevertheless insists that “[t]he Association must ... repay MCI for misapplication of its funds in violation of the CC&Rs, at least to the extent that MCI was assessed more than its own floor’s actual PG&E charges.” MCI claims the “[v]iolation of the CC&Rs arose from years of [upper floor] units underpaying their share of PG&E charges because their units didn’t pay PG&E charges in the percentage their unit’s square footage bore to the total square footage of their floor, but rather in the lower percentage their unit’s total square footage bore to the total square footage of the Center.” (Italics removed.) But MCI essentially concedes that the only way to allocate the PG&E charges is through total square footage, as both experts used Exhibit A in light of the fact that using Exhibit B was not possible.

MCI further argues that it entitled to a refund because CC&Rs section 7.6 only provides the board with the “power and duty to levy Annual and Special Assessments sufficient to meet the Association’s obligations under the Governing Documents and applicable law,” and the Association’s payment of PG&E bills means that MCI’s dues must have improperly gone toward those charges. MCI’s reliance on section 7.6 ignores the Association’s obligation to maintain a reserve fund for the repair and replacement of major components for which it is responsible under CC&Rs section 7.7.1. As Adachi explained, the Association’s reserve account was likely underfunded because the PG&E bills had been paid out of Association funds. Under section 7.6, the board therefore could properly deposit MCI’s dues to the Association’s reserve account.

Finally, MCI argues that, even if the court had authority to determine that MCI owed the Association for PG&E charges, the court awarded the incorrect amount. On this point, we agree. Adachi’s testimony and report indicated that MCI owed $15,143.02, not $18,409.11. We therefore modify the trial court’s judgment to $15,143.02 to reflect the testimony credited by the trial court.

In short, the trial court could properly determine what sum, if any, MCI owed the Association for PG&E charges based on MCI’s request for declaratory and other relief. However, we modify the trial court’s judgment to require MCI to pay $15,143.02, not $18,409.11, consistent with the trial record. We otherwise affirm.

B. Summary Judgment as to Kinry and Louie

MCI contends the trial court should not have granted summary judgment to Kinry and Louie on “both procedural and substantive grounds.” We disagree.

1. Trial Court Order

The court granted summary judgment in favor of Kinry and Louie, explaining that Kinry and Louie were “entitled to summary judgment in their favor because all three claims alleged against them fail [as] they are not parties to the CC&Rs and do not own any units or other property in the building. Because [they] are not parties to the CC&Rs and do not own units in the building, there is no basis to seek declaratory, injunctive, or damages relief against them based on the CC&Rs.”

2. Standard of Review

*11 We review a grant of summary judgment de novo, considering all evidence in the light most favorable to the nonmoving party. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843, 860.) On review, “we apply the same three-step analysis used by the superior court. We identify the issues framed by the pleadings, determine whether the moving party has negated the opponent’s claims, and determine whether the opposition has demonstrated the existence of a triable, material factual issue.” (Silva v. Lucky Stores, Inc. (1998) 65 Cal.App.4th 256, 261.)

A “motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. In determining if the papers show that there is no triable issue as to any material fact, the court shall consider all of the evidence set forth in the papers, except the evidence to which objections have been made and sustained by the court, and all inferences reasonably deducible from the evidence, except summary judgment shall not be granted by the court based on inferences reasonably deducible from the evidence if contradicted by other inferences or evidence that raise a triable issue as to any material fact.” (Code Civ. Proc., § 437c, subd. (c).)

3. Analysis

Common interest development declarations and corresponding CC&Rs are considered contracts. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 512 (Frances T.).) Limiting enforcement of CC&Rs to owners and associations that act on behalf of owners is entirely consistent with the cases that have used contract principles to interpret and enforce CC&Rs. (See, e.g., id. at pp. 512–513 [CC&Rs as contract between homeowner and homeowners association with respect to installation of common area lighting]; Barrett v. Dawson (1998) 61 Cal.App.4th 1048, 1054 (Barrett) [restrictive covenant constitutes a contractual right between neighboring property owners to prohibit use of residential property for business activities]; and Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 828, 833–834 (Franklin).)

Kinry and Louie never owned property at the Center and never served on the board. They were also not Association members because the CC&Rs limit Association membership to owners. As Kinry’s and Louie’s lack of Association membership or ownership in the Center was undisputed, no triable issues of material fact remained. (Code Civ. Proc., § 437c, subd. (c).) Given that MCI could not enforce the CC&Rs against Kinry and Louie, the trial court appropriately granted summary judgment. (See, e.g., Frances T., supra, 42 Cal.3d at pp. 512–513.)

MCI also claims, “persons who can be enjoined are not limited to those with legal power over or direct connection with another, but rather those who might under any circumstance propose to harm another.” But MCI cites no case law in which courts have enforced CC&Rs against property managers. In addition, even if the trial court improperly granted summary judgment as to Kinry and Louie, MCI was not prejudiced because, as already addressed, its claims fail on the merits. Accordingly, we affirm the grant of summary judgment as to Kinry and Louie.

C. Attorney’s Fees

MCI finally requests that, if we reverse all or part of the judgments below, we “order reversal or reconsideration of the Order Re Costs and Attorney’s Fees and direct that the case be remanded to a different trial court.” “An order awarding costs falls with a reversal of the judgment on which it is based.” (Merced County Taxpayers’ Assn. v. Cardella (1990) 218 Cal.App.3d 396, 402.) The order awarding fees and costs stands as we are merely modifying—not reversing—the trial court’s judgment.


*12 We modify the judgment to reduce the amount MCI owes from $18,409.11 to $15,143.02. As modified, we affirm. Respondents shall recover their costs on appeal.



1. Specifically, the Association was dissatisfied with the Center’s interior cleanliness and a surcharge for PG&E utilities Canyon imposed.

2. Canyon assessed only a single charge for trash, water, and PG&E charges without specifying the amount owed for each. Adachi therefore credited each unit for its entire utility reimbursement payment because “a determination of the amount allocable to PG[&]E cannot be made.”

3. This court never received MCI’s second notice of appeal. However, as the issue concerns a transmission error from the Superior Court, we will proceed as if this court had properly received the notice of appeal.

4. Cantrell opined that the Rule affected MCI’s ability to rent its empty retail units in the Center. Defendants called Nicholas Berg, president of Citiscape Property Management Group, as their expert. He opined that the retail businesses at the Center closed between 5:00 and 6:00 p.m. and saw no evidence that MCI had sustained damage from the Rule’s 7:30 p.m. closing time.

5. Former Civil Code section 1357.100 was repealed (Stats. 2012, ch. 180, § 1) and is now Civil Code section 6630 (Stats. 2013, ch. 605, § 21). “With respect to a commercial or industrial common interest development, Section 6630 continues Section 1357.100(a) without change.” (Cal. Law Revision Com. com., Deering’s Ann. Code Civ. Proc., § 6630 (2019 supp.) p. 305.)

6. Although MCI stipulated below that it was not contesting the legitimacy of board elections, on appeal MCI questions the board’s legitimacy and, by extension, its authority to approve the Rule by arguing, “[t]roublingly, just prior to invoking procedural perfectionism over vote rescinding, the board knew its election and authority [were] doubtful.” Absent extenuating circumstances, we do not consider arguments that could have been, but were not, presented to the trial court. (In re Marriage of Hinman (1997) 55 Cal.App.4th 988, 1002.) As this argument was not presented to the court because of MCI’s stipulation, we will not address it here.

7. For the same reasons, we reject MCI’s claims against Dr. Lin.

8. Specifically, MCI requested “a declaration that the purported refunds were allocated in violation of the CC&Rs” and “a preliminary and permanent injunction enjoining Defendants and their agents from allocating utility bills among the owners of the separate interests in a manner inconsistent with the CC&Rs [¶] ... [and] from refunding assessments in a manner that is inconsistent with the CC&Rs.” MCI also prayed for damages in “the dollar amount by which Defendants’ past allocation of utility bills and ‘refunds’ resulted in overcharging [MCI] for utility bills.”