Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County, No. 37-2008-00101701- CU-PT-NC, David G. Brown, Judge.
HALLER, J.
Maureen Gallagher appeals an order granting the petition of the Alga Hills Homeowners Association (Association) to reduce the percentage of votes necessary for a revision of its governing CC&R's and an amendment to its bylaws. (See Civ. Code, § 1356 (hereafter § 1356).) We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
The Alga Hills common interest development contains 240 single-family homes in Carlsbad. The development is subject to a Declaration of Covenants, Conditions and Restrictions (CC&R's) and bylaws, and is governed by the Association and its board of directors (Board). Each Alga Hills homeowner is a member of the Association. The CC&R's was first recorded in August 1989, and was then amended several months later and in 1992.
More than 10 years later, the Board determined it would be in the Association's best interest to completely restate the CC&R's to bring the document up to date with current law, delete obsolete developer references, and clarify ambiguous provisions that had caused confusion. Under the CC&R's, the Association was required to obtain approval from 75 percent of the property owners (180 votes out of 240 property owners) for a valid amendment. In 2005, the Board asked the Association members to vote on a proposed restatement of the CC&R's, but a majority of homeowners did not vote in favor of the restatement.
The Board then began work on a new proposed CC&R's revision, and completed the revision in early 2008. In April 2008, the Board and its Inspector of Elections mailed to each owner a new revised CC&R's (the Restated CC&R's), ballot materials, a letter from the Association's legal counsel explaining the reason for the changes, and a three-page document entitled "Summary of Changes." The homeowners were told of the July 2 deadline to return the ballots, and that the Association was required to obtain 75 percent approval to adopt the proposed Restated CC&R's. When not enough ballots were returned by that deadline, the Association sent reminders and twice extended the deadline.
As of October 1, 2008, the Association had received 179 ballot envelopes. The Association's Inspector of Elections then opened the ballot envelopes and tabulated the results as follows: 157 owners voted in favor of the Restated CC&R's and 22 voted against the proposed document. Although more than 85 percent of the owners who voted approved the Restated CC&R's, this vote was not enough to satisfy the requirement that 75 percent of the homeowners approve the restatement (which required 180 votes).
The Association then filed a section 1356 petition in superior court, requesting that the court order the Restated CC&R's approved based on the affirmative votes actually cast, which reflected a majority of the property owners. The Association described the voting process and results, and alleged the "Restated CC&R's are reasonable in that they seek to bring the CC&R's up to date with current California law, delete developer references and clarify prior ambiguous provisions." The Association further alleged that the Restated CC&R's will not eliminate any special rights, preferences or privileges designated in the previous CC&R's. Notice of the petition was mailed to each Association member.
One Association member, Maureen Gallagher, opposed the petition, raising numerous contentions, including that the Restated CC&R's contains a new " 'View Policy' " that is unreasonable; the petition should not be granted because the Restated CC&R's was a major revision, rather than an amendment; the Association misled the homeowners about the nature of the revisions; and the section 1356 procedure cannot be used to approve an amendment that would impair a security interest of a mortgagee or beneficiary.
To support her arguments, Gallagher submitted her own declaration and the declarations of several other Alga Hills homeowners and a real estate agent. As detailed below, these declarations concerned primarily Gallagher's objections to a change in the CC&R's provision pertaining to views and tree-trimming. In reply, the Association submitted declarations of the Board president and a former Architectural Committee chair, who each explained the reason for the new tree/view provision.
After a hearing, the court granted the Association's petition and issued an order approving the Restated CC&R's. In a detailed written statement, the court found the Association met its burden of proof to show a majority of the Association members voted in favor of the Restated CC&R's and that the Restated CC&R's amendments were reasonable. In particular, the court found the amendment of the tree/view provision was reasonable because the amendment had essentially incorporated the existing tree/view rules that had been adopted several years earlier. The court noted this policy "was clearly formulated and arrived at after a careful weighing of the competing interests of the homeowners in a densely built residential development." The court further rejected Gallagher's arguments that the Association " 'misled' " the homeowners as to the true nature of the revisions and that the Restated CC&R's would "hinder the security interest of mortgagees and beneficiaries of deeds of trust."
DISCUSSION
I. Governing Legal Principles
" '[S]ection 1356, part of the Davis-Stirling Common Interest Development Act..., provides that a homeowners association, or any member, may petition the superior court for a reduction in the percentage of affirmative votes required to amend the CC&R's.... [Citation.] The court may, but need not, grant the petition if it finds all of the following: Notice was properly given; the balloting was properly conducted [in accordance with all applicable provisions of the governing documents]; reasonable efforts were made to permit eligible members to vote; "[o]wners having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment"; and "[t]he amendment is reasonable." ' [Citation.]" (Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 569-570 (Fourth La Costa).)
" '[T]he purpose of... section 1356 is to give a property owners' association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration. [Citation.] In essence, it provides the association with a safety valve for those situations where the need for a supermajority vote would hamstring the association.' [Citation.]" (Fourth La Costa, supra, 159 Cal.App.4th at p. 570.) "Owners have a substantial interest in the long-term viability of a condominium project, and that interest is not served when a supermajority vote requirement and voter disinterest combine to preclude or hinder an association's efforts to amend outdated governing documents." (Id. at p. 585.)
A trial court has "broad discretion" in ruling on a section 1356 petition. (Fourth La Costa, supra, 159 Cal.App.4th at p. 570; Mission Shores Assn. v. Pheil (2008) 166 Cal.App.4th 789, 795.) We must affirm the court's order unless the court abused this discretion, i.e., the court " ' "exceed[ed] the bounds of reason, all of the circumstances before it being considered." ' " (Fourth La Costa, supra, 159 Cal.App.4th at p. 570.)
Gallagher urges us to conduct a de novo review, relying on Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175. Under Chinn, an independent review standard applies when an appellant raises an issue requiring statutory interpretation. (Id. at p. 186.) This standard is inapplicable here because Gallagher's contentions do not require that we resolve competing interpretations of the relevant statutes, and instead involve a review of the court's application of the statutes to the particular facts of the case. We apply a de novo review only in reviewing a trial court's legal conclusions. (In re Charlisse C. (2008) 45 Cal.4th 145, 159.)
II. Reasonableness of Provisions
In seeking relief under section 1356, a homeowners association has the burden to prove the proposed amendments are reasonable. (Fourth La Costa, supra, 159 Cal.App.4th at p. 577.) A provision in a CC&R's is "reasonable" if it is " 'rationally related to the protection, preservation and proper operation of the property and the purposes of the Association as set forth in its governing instruments, ' and [is] 'fair and nondiscriminatory.' " (Ibid.) "A CC&R is unreasonable if it is arbitrary and capricious, violates the law or a fundamental public policy or imposes an undue burden on property...." (Id. at pp. 577-578.)
On appeal, Gallagher contends two portions of the Restated CC&R's are unreasonable: (1) the new "Trees and View Policy" provision; and (2) a clause barring liability for the Association's failure to enforce a CC&R's provision. For the reasons explained below, we conclude the court did not abuse its discretion in finding the Association met its burden to show these provisions were reasonable.
A. "Trees and View Policy" Provision
1. Relevant Background
The original CC&R's contained a provision entitled "Trees" (Section 7.18), which stated that trees may not exceed the height of a residence, but the Architectural Committee may allow an exception if it determines, in its sol[e] judgment, " that a tree does "not obstruct the view from any of the other Lots in the Properties."
Section 7.18 stated: "Trees. All, trees, hedges and other plant materials shall be trimmed by the Owner of the Lot upon which they are located so that they shall not exceed the height of the house on the Lot; provided, however, that where trees do not obstruct the view from any of the other Lots in the Properties, which determination shall be within the sol[e] judgment of the Committee, they shall not be required to be so trimmed. Before planting any trees, the proposed location of such trees shall be approved in writing by the Committee. No trees, hedges or other plant materials shall be so located or allowed to reach a size or height which will interfere with the view from any other Lot."
The Association's Architectural Committee later formed a "View Committee" to assist in evaluating the complaints of many homeowners that trees obstructed their views. During the next several years, many questions were raised as to the definitions of "obstruct" and "view" under Section 7.18, and numerous conflicts arose between those homeowners who had views and those who wanted to maintain tree height to protect their privacy. According to the Board president, the issue was highly contentious, particularly because many Alga Hills residences are located on slopes and were built very close together, permitting homeowners to look into the bathrooms and bedrooms of their neighbors.
In response to these ongoing conflicts, the Board decided to formulate a procedure to handle view/tree complaints. After consulting with legal counsel and a horticulturist, and considering the opinions of the homeowners, in December 2000 the Board adopted a written "View Policy" and a new complaint procedure to handle issues raised about trees obstructing views. The View Policy defined an "Intended View" as a view from the "first floor or patio toward an area directly away from the premises, " and excluded from this definition views from "either side of a patio, second floor bedrooms or bathrooms." The policy also provided the Board with discretion to decide whether to enforce the tree-trimming requirement "if the complaining party objects to trees in the distance, or beyond the distance of the adjoining house...." During the next several years, there was a noticeable reduction in the conflicts among neighbors regarding views and trees, and there were substantially fewer complaints about the process.
Thus, when drafting the proposed Restated CC&R's, the Board incorporated the View Policy into the restated document. The new provision, contained in Section 6.24, states in relevant part: "All Trees... shall be trimmed by the Owner of the Lot..., provided, however, that where trees do not obstruct the view from any of the other Lots in the Properties, which determination shall be within the sole judgment of the Board, they shall not be required to be so trimmed.... [¶] No trees... shall be so located or allowed to reach a size or height which will interfere with the intended view from any other Lot. [¶] (A)... The intended view shall be strictly constructed as viewed from the first floor or patio toward an area directly away from the premises. Intended views generally do not include either side of a patio, second floor bedrooms, or bathrooms...."
In the proceedings below, Gallagher argued that Section 6.24 was unreasonable, and submitted her own declaration and the declarations of three other Alga Hills homeowners. Gallagher and the other homeowners claimed they had purchased their Alga Hills homes "primarily because of the view" and had "relied on the 'Tree Provision' " in the CC&R's (Section 7.18) to believe the "second story view would be protected." The homeowners said they "paid a premium" for their homes because of the view, and that the new Section 6.24 would "devalue" their property and "impair the security interest" in their homes.
Gallagher additionally submitted the declaration of Larry Baker, a real estate agent, who opined that it was "reasonable" for Alga Hills buyers to rely on the tree trimming provision in the original CC&R's to believe their views were protected; it was not reasonable for the Board to change the provision to eliminate the protection; and the elimination of views would "impair[]" the "security interest" in those homes.
After considering the parties' arguments and the evidence, the court found Section 6.24 was reasonable. The court stated the Board previously adopted the same " 'intended view' " definition, which "came about after consultation with experts in the legal field, horticulturists, owners and those with architectural expertise...." The court also noted that after the adoption of the intended view definition, there were substantially fewer disputes among homeowners regarding privacy, views, and trees. The court thus found that Section 6.24 was not arbitrary or capricious, and did not violate the law or public policy.
2. Analysis
The court did not abuse its discretion in concluding Section 6.24 was reasonable. The record supports that the new policy was a legitimate response to concerns by the homeowners, and constituted a reasonable attempt to balance those interests. Gallagher argues there was no legitimate reason or need to favor privacy rights and burden those with view rights. However, the decision as to the proper balancing of the interests rests with the homeowners and their elected representatives, and not with the courts. Moreover, the Alga Hills homeowners were on notice of the View Policy under the prior CC&R's, and thus the view rights had already been subject to the more limited definition before the vote on the proposed Restated CC&R's.
Gallagher contends Section 6.24 "is unreasonable" as a matter of law because it "tak[es] away valuable and substantive contract/property rights that homeowners paid for and are protected under the original CC&Rs."
However, 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." '... A prospective homeowner who purchases property in a common interest development should be aware that new rules and regulations may be adopted by the homeowners association either through the board's rulemaking power or through the association's amendment powers." (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 85.)
These principles apply in this case. It is undisputed that the Alga Hills homeowners had a right to amend the CC&R's, and the amendment could alter rights under the original declaration. Thus, the fact that the original CC&R's contained certain tree trimming rules does not mean that an owner could reasonably rely on the provision to claim a legal right to a view at all times and under all circumstances. There is nothing in the original CC&R's stating that a property owner's view rights could not be limited by an amendment to the CC&R's. Further, the CC&R's specifically provided that the "percentage of membership votes... required to amend the [CC&R's] may be reduced under certain circumstances by Court Order obtained pursuant to... Civil Code § 1356."
The court did not abuse its discretion in concluding that the Association met its burden of proof to show Section 6.24 was reasonable.
B. "No Liability" Clause
Gallagher next contends that Section 18.4 in the Restated CC&R's is unreasonable because it bars a court from imposing liability on the Association for failing to enforce the CC&R's.
1. Challenged Provision
Section 12.1 of the prior CC&R's states: "The Association, Declarant and any Owner shall have the right to enforce, by any proceedings at law or in equity, all restrictions, conditions, covenants, and reservations.... Failure by the Association, Declarant or any Owner to enforce any covenants or restrictions contained in the Declaration shall not be deemed a waiver of the right to do so thereafter." (Italics added.)
In the Restated CC&R's, the contents of Section 12.1 are located in two provisions: Section 18.1(I) and Section 18.4. Section 18.1(I) states: "[t]he Board shall have the power and duty to enforce the [CC&R's] by all legal means available, and bring an action in law or in equity, and to utilize any lawful enforcement remedy." (Italics added.) Section 18.4 continues the same "no waiver" rule from former Section 12.1, and then adds a no-liability clause at the end: "The failure of the board or any Owner to enforce any of the provisions contained in the Governing Documents shall not constitute a waiver of the right to enforce the same thereafter, nor shall such failure result in or impose any liability on the Association or the Board. (Italics added.)
2. Contentions and Analysis
On appeal, Gallagher contends the final clause of Section 18.4 (italicized above) violates public policy and is unreasonable because it insulates the Association and its Board from liability even when these entities breach fiduciary duties owed to the homeowners. In support, Gallagher cites Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642, 654-655 (Cohen).
In Cohen, the CC&R's set forth standards for fence design, but provided the homeowners association with discretion to decide whether to approve a particular fence. (Cohen, supra, 142 Cal.App.3d at pp. 646-647.) The CC&R's also provided the Association " 'shall (not) be liable in damages... to any Owner of property affected by this [CC&R's] by reason of mistake in judgment, negligence or nonfeasance arising out of or in connection with the approval or disapproval [of]... any such plans or specifications.' " (Id. at p. 650.) One homeowner nonetheless sued the Association seeking damages and injunctive relief seeking to compel the Association to take steps to force another homeowner to comply with fence standards set forth in the CC&R's. (Id. at p. 647.) Reversing a demurrer, the reviewing court held that to the extent the exculpatory provisions in the CC&R's precluded the owners from asserting that the homeowners association acted in bad faith and in an arbitrary manner, the provisions were unenforceable as a matter of public policy. (Id. at pp. 654-655.) The court reasoned: "The law [views] with disfavor attempts to secure insulation from one's own negligence or wilful misconduct, " and "[t]his public policy applies with added force when the exculpatory provision purports to immunize persons charged with a fiduciary duty from the consequences of betraying their trusts." (Id. at p. 654.)
We agree with the Cohen court's holding under the specific facts of the case. Because a homeowners association and its board act as fiduciaries when implementing the terms of the CC&R's, an exculpatory provision is not enforceable to preclude the owners from claiming their association or its board engaged in arbitrary conduct and/or breached a fiduciary duty. Although a homeowners association has broad discretion to decide whether, and in what manner, to enforce the governing documents (see Beehan v. Lido Isle Community Assn. (1977) 70 Cal.App.3d 858, 865-866), this discretion must be exercised consistent with its fiduciary duties and the plain language of the CC&R's. (See Ekstrom v. Marquesa at Monarch Beach Homeowners Assn. (2008) 168 Cal.App.4th 1111, 1121-1125; Ritter & Ritter, Inc. Pension & Profit Plan v. The Churchill Condominium Association (2008) 166 Cal.App.4th 103, 122;Posey v. Leavitt (1991) 229 Cal.App.3d 1236, 1247; see also Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 268 [" 'Under well-accepted principles of condominium law, a homeowner can sue the association for damages and an injunction to compel the association to enforce the provisions of the declaration' "].)
But the issue before us on a section 1356 petition is not the enforceability of a particular provision under all circumstances, but it is whether the amendment was reasonable. In addressing this issue, we interpret the CC&R's provisions under rules applicable to contract interpretation. (Fourth La Costa, supra, 159 Cal.App.4th at p. 575; see Franklin v. Marie Antoinette Condominium Owners Assn. (1993) 19 Cal.App.4th 824, 833-834.) It is a fundamental rule of contractual interpretation that if a provision can be interpreted in a manner that makes it legal, rather than unenforceable, the interpretation is preferred. (See Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1473; Civ. Code, § 1643.) Moreover, when parties enter into contracts, they are presumed to know and understand the applicable law, and that they have drafted the provisions accordingly. (See Swenson v. File (1970) 3 Cal.3d 389, 393.) We must read the provisions consistent with an interpretation that makes the provision lawful, valid, and capable of being carried into effect. "[I]t is one of the cardinal rules of interpreting an instrument to give it such construction as will make it effective rather than void." (Toland v. Toland (1898) 123 Cal. 140, 143.)
Applying these rules, we conclude Section 18.4 was not intended to, and does not, preclude liability based on the Association's actions arising from arbitrary or bad faith conduct, breach of fiduciary duty, or willful misconduct. (See Cohen, supra, 142 Cal.App.3d at pp. 654-655.) Under this interpretation, Section 18.4 is enforceable and does not violate public policy. It was reasonable for the homeowners to add a provision barring liability against the Association in the situation when it makes a good faith determination and acts consistent with its fiduciary duties in deciding whether to enforce a CC&R's provision. (See Beehan v. Lido Isle Community Assn., supra, 70 Cal.App.3d at pp. 865-866.)
We reject Gallagher's alternate argument that the Association had a specific duty to highlight the new "no liability" clause for the members. As discussed in Section III below, the homeowners had a copy of the Restated CC&R's, and had several months to study the document to determine whether they approved the provisions. A homeowners association has broad discretion to determine the appropriate manner in which to notify the homeowners about the nature of the proposed revision of the CC&R's. The Alga Hills property owners were made aware that there were numerous changes to the CC&R's, and there is nothing in the statutes nor the prior CC&R's that imposed a duty on the Association to specifically discuss Section 18.4 with the owners.
III. Proper Disclosure of Revision
Gallagher next contends the court erred in granting the petition because the Association failed to adequately disclose the nature of the CC&R's revisions, and/or misled the members about the changes.
A. Relevant Background
In seeking a vote on the proposed Restated CC&R's, the Association mailed the ballot to each homeowner, with a copy of the entire proposed Restated CC&R's. This Restated CC&R's document contained strikeouts and underlining to help the homeowner compare the changes between the current proposed document and the version that had been proposed three years earlier. The document also contained bracketed section numbers to assist the homeowner to compare the changes between the current proposed document and the existing CC&R's. The homeowners were told that if a Restated CC&R's section did not have a corresponding bracketed section number, then it was a brand new section that did not have a counterpart in the existing CC&R's. The Association gave the homeowners several months to review the proposed Restated CC&R's, with two additional extensions.
The Association also sent a detailed letter prepared by the Association's counsel explaining the history of, and need for, the proposed amendments. This letter included a specific explanation for the notations (deletions, strikethroughs, and brackets) on the proposed Restated CC&R's that were sent to homeowners.
The Association additionally sent a three-page document entitled "SUMMARY OF CHANGES FOR RESTATED CC&RS AND RESTATED BYLAWS." This document identified 17 specific provisions in the proposed Restated CC&R's, with the article and section reference, and briefly noted the difference between the new provision and the existing CC&R's, or stated that the current document does not have a corresponding section in the prior CC&R's. At the top of the Summary document, the following admonition appears: "NOTE: This summary outlines the changes that the Board feels are significant. This document should not be solely relied upon when making your decision on how to vote."
The Board also mailed a ballot, which explained the voting instructions, and told the homeowner to place the ballot in an enclosed unmarked envelope and then to place that envelope into another envelope identifying the homeowner. The Board asked the homeowner to mail a copy of the ballot to the Association's Inspector of Election.
The Association also provided the opportunity for members to attend monthly Board meetings to discuss the proposed Restated CC&R's, and the Board specifically invited homeowners to attend a monthly Board meeting to ask questions about the proposed Restated CC&R's. However, only a few owners attended, and these owners did not raise any specific concerns about the proposed CC&R's.
B. Contentions and Analysis
Gallagher raises numerous contentions challenging the materials that were provided to the homeowners. The trial court rejected each of these contentions. We determine the court acted within its discretion in reaching these conclusions.
Gallagher first contends the Association "misled" the homeowners by not including certain changes in the Summary of Changes document. However, the trial court had a reasonable basis to find the summary was appropriate and not misleading. The Summary of Changes identified 17 specific changes to the CC&R's which the Association believed were particularly noteworthy. Although Gallagher suggests that the Summary should have identified additional changes, the Association had the broad discretion to decide which changes it believed were important to include in the summary. It is not a court's role to second guess this decision. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn., supra, 21 Cal.4th at p. 253 [adopting a rule of judicial deference to community association board decisionmaking].) Moreover, the Association and the Association's counsel each told the homeowners they should not rely solely on the Summary of Changes in making their decision, and that this summary was provided merely to assist homeowners in understanding the changes to the current documents and to inform the homeowners of changes that the "Board feels" are significant.
Gallagher next contends the Summary of Changes document was "false and misleading" because it stated that the "View/tree policy" in the existing CC&R's (Section 7.18) is "not as clear" as the provision in the proposed Restated CC&R's. Gallagher relies on Ekstrom v. Marquesa at Monarch Beach Homeowners Association, supra, 168 Cal.App.4th 1111, in which the court found a CC&R's provision (that was identical to Section 7.18) unambiguously applied to palm trees and that the homeowners association's limited interpretation of the term "view" was contrary to the plain language of the CC&R's provision. (Id. at pp. 1123-1124.) These holdings-under the particular facts of the Ekstrom case-do not establish that, in this case, the Board's statement was false that the prior CC&R's Tree/View provision was "not as clear" as the new proposed provision.
Gallagher also contends the court erred in failing to rely on the declarations of two homeowners, who asserted they were "misled" by counsel's letter and the Summary of Changes document, because the "major" revisions were not reflected or adequately explained in these documents. The court's written statement shows it considered these declarations, but found they were unconvincing to show the homeowners were given inaccurate or incomplete information. The court stated, for example, that these homeowners claimed they were unaware of the change to the View/Tree policy because of deficiencies in the Summary of Changes, but that the Summary of Changes document expressly identified the nature of this revision. The record supports the court's conclusion that the declarations did not provide credible evidence to establish Gallagher's claims that the Association misled the homeowners.
Gallagher next suggests the Association was under a legal duty to specifically discuss each new provision or revision with the homeowners. In support, Gallagher cites Ostayan v. Nordhoff Townhomes Homeowners Assn. (2003) 110 Cal.App.4th 120, which recognized that a homeowners association owes a fiduciary duty towards its members with respect to certain matters. (Id. at p. 130.) However, in this case, the court did not err in finding the Association satisfied its fiduciary duty by providing the homeowners with the proposed Restated CC&R's and the additional informational documents. The record supports that the Association provided sufficient materials to allow each homeowner to meaningfully review the Restated CC&R's document and reach an informed decision whether to approve the restated document.
In this regard, Gallagher's reliance on footnote 5 in Fourth La Costa is misplaced. (Fourth La Costa, supra, 159 Cal.App.4th at p. 582, fn. 5.) In the footnote, this court stated the appellant homeowner waived her right to challenge the reasonableness of certain CC&R's provisions on appeal because she did not raise those arguments in the proceedings below. (Ibid.) In so ruling, we noted that the proposed CC&R's "contain dozens of new provisions and amended provisions, and the trial court could not be expected to comb through them and independently research each one to determine its reasonableness." (Ibid.) Gallagher relies on this statement to suggest that the Association had an obligation to discuss each revised CC&R's provision in the materials provided to the homeowners. However, a trial court's analysis of the factual and legal reasonableness of a CC&R's provision on a section 1356 petition is not the same as a homeowner's review of a proposed CC&R's. Each Alga Hills homeowner had several months to review the proposed CC&R's, was provided with informational materials, and had the opportunity to speak with the Board members about any questions or problems they had with the proposed document. The appellate waiver doctrine is unrelated to the scope of a homeowner association's duties in the CC&R's amendment process.
We also reject Gallagher's argument that the Association acted in a "deceptive and misleading" manner when it marked differences between the 2005 version (that was not approved) and the proposed Restated CC&R's. In Gallagher's opinion, the Association should have provided a copy of the existing CC&R's to the homeowners, and focused only on the comparison between the existing CC&R's and the proposed Restated CC&R's.
However, the Association could have reasonably assumed that the homeowners had a copy of the existing CC&R's because that was the effective document governing the development at the time. Further, the Association could reasonably conclude that it would be more helpful to show the differences between the current proposed CC&R's and the CC&R's that had been proposed three years earlier. As noted by the Association, providing a redlined version comparing the existing CC&R's and the Restated CC&R's would have been confusing because of the substantial differences in formatting and organization between these versions.
In any event, the Association did identify the differences between the existing and the proposed Restated CC&R's in two ways: (1) on the copy of the proposed Restated CC&R's the Association used brackets to note the corresponding section number of the existing CC&R's and informed the homeowner that where there was no brackets, the section was new rather than a revised section; and (2) on the Summary of Changes document, there was a comparison between the proposed provision and the existing one (if applicable).
Mission Shores Association v. Pheil, supra, 166 Cal.App.4th 789, relied upon by Gallagher, is not helpful on this point. In Mission Shores, the court noted that "presenting the owners with a redlined version of the proposed amendment constituted the reasonably detailed form the CC&R's require." (Id. at p. 797.) In this case, there is no showing the CC&R's imposed any requirements regarding the information required to be provided. Moreover, Mission Shores merely analyzed the documents before it, and did not state or suggest a redlined version was required in every case.
IV. Court Did Not Err in Finding Amendment Did Not Impair Security Interest
Gallagher next contends the court erred in ordering relief under section 1356 because the Association failed to obtain approval of 75 percent of the mortgagees.
Section 1356, subdivision (e)(3) provides that a court has no authority to approve an amendment if the amendment: "Would impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries."
The existing CC&R's require the prior written consent of 75 percent of mortgagees for certain "material" amendments.
In the proceedings below, the Association contended there was no requirement to obtain mortgagee approval under this statutory provision because the changes in the Restated CC&R's would not impair the security interest of the mortgagees. To counter this claim, Gallagher relied on real estate agent Baker's declaration, which stated that: "If the CC&R's are changed or revised to eliminate protection of panoramic views from either the first or second story in the Alga Hills Development, the value of those homes with second story views will be negatively impacted and the security interest in those homes impaired." (Italics added.) The Association objected to the declaration as "lacking foundation, and irrelevant."
The court had a reasonable basis to reject this evidence as insufficient to show that the change in the view/tree CC&R's provision would "impair" the security interest of mortgagees. (§ 1356, subd. (e)(3).) There was no foundation to show Baker had any factual basis to opine as to whether the change in policy would impair the security interest of one or more of the homes. Moreover, as noted, there was no material change in the view policy because several years earlier, the Association had adopted a policy that was identical to the provision being adopted in the Restated CC&R's. Additionally, the evidence showed that the developer had provided notice to at least some buyers that the developer may construct additional improvements that could obstruct views, and that the developer had made no express or implied representations as to "the nature or extent of the view from any portion of your lot or residence."
In exercising its discretion, the court could reasonably conclude that the evidence did not show the adoption of Section 6.24 would impair the security of the residences, and therefore to conclude that the approval requirement was not triggered.
DISPOSITION
Order affirmed. The parties to bear their own costs on appeal.
WE CONCUR: NARES, Acting P. J., McINTYRE, J.