Filed 12/19/19 Knapp v. Katz 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

JASON J.A. KNAPP, Individually and as Trustee, etc. et al.,

Plaintiffs and Respondents,

v.

MILES KATZ et al.,

Defendants and Appellants.

D074394

(Super. Ct. No. 37-2016-00036176- CU-BC-NC)

APPEALS from a judgment of the Superior Court of San Diego County, Timothy M. Casserly, Judge. Reversed and remanded.

Kimball Tirey & St. John and Rebecca J. Fortune for Defendants and Appellants Miles Katz and Gina Katz.

Gordon & Rees Scully Mansukhani, Mark S. Posard, Christina M. Vander Werf and Christopher Queally for Defendant and Appellant San Elijo Hills #1 Homeowners Association.

La Jolla Law Group, Kent L. Sharp and Brien J. O’Meara for Plaintiffs and Respondents.

INTRODUCTION

San Elijo Hills #1 Homeowners Association (HOA) and Miles and Gina Katz (the Katzes) appeal the summary judgment entered against them in favor of Jason Knapp and Sara Appleton-Knapp (the Knapps) after the court determined a set of windows approved by the HOA and installed by the Katzes on the side of their house facing the Knapps’ neighboring property failed to comply with provisions of the San Elijo Hills policy manual. The court determined the HOA breached its governing documents because, pursuant to terms of the policy manual, it had no discretion to approve the proposed windows. The court determined the HOA is obligated to enforce the governing documents and the Katzes are required to remove the new windows and restore the windows to the original size and design of the home.

The Katzes and the HOA contend the court erred in granting the Knapps’ summary judgment based on the policy manual provisions because there is no evidence the policy manual was recorded as part of the HOA’s declaration establishing the Protective Covenants and Restrictions (PC&R’s) and the policy provisions conflict with portions of the PC&R’s giving the HOA discretion to approve exterior design changes to members’ homes. We agree and conclude the PC&R’s take precedence to the extent they conflict with the policy manual provisions. We further conclude triable issues of fact exist regarding whether the Katzes complied with the requirements for obtaining approval of their plans, whether the HOA exercised its discretion in approving the plans regarding the window design, and whether the HOA breached the governing documents in its handling of the request for approval and enforcement of the governing documents. Therefore, we reverse the judgment.

BACKGROUND

A

The Knapps and the Katzes own neighboring property located within a common interest development managed by the HOA. (Civ. Code, § 4200.) The Knapp property has a 10-foot side yard easement over the length of the Katz property, which abuts the Katz home.

1

HOA Documents

The HOA is governed by the PC&R’s, which were recorded in 1973. The PC&R’s run with the land so they are binding on all owners of the property within the common interest development.

Article XIV of the PC&R’s describes certain lots within the development with side yard easements. The lot benefiting from the easement is described as the dominant tenement while the lot burdened by the easement is described as the servient tenement. Owners of the dominant tenement may use the side yard as a recreation and garden area so long as they do not permanently install anything in the easement. The owners of the servient tenement, are entitled to: (1) enter and cross the easement, at reasonable times, to perform work related to the use of their property, (2) drain water over and across the easement resulting from normal usage, (3) enjoin attachment of any object to a wall or building belonging to the servient tenement, and (4) locate in the easement area “roof overhangs, [eaves], rain gutters, etc., which are a part of the structure located on the [s]ervient [t]enement, provided that such items do not encroach over the easement area below a height of seven … feet measured from the finished grade elevation of the easement area ….”

The PC&R’s provide homeowners may not make alterations to the exterior design or color of any structure without approval of the board. (PC&R’s, art. IV, subd. A.2.) Proposed additions to the exterior must be of consistent design and character of the original design and compatible with the atmosphere of the area “subject to approval by the Board, in its sole discretion.” (PC&R’s, art. IV, subd. C.1.)

The PC&R’s provide for an architectural and planning board to achieve and maintain aesthetic goals of the development. The board is to review, approve, and inspect plans and specifications for property improvements. The PC&R’s state, “It is not the intent of the Declarant to deprive the individual Owner from having a home of unique design, but to protect the community as a whole … from undesirable construction. In this connection, in the case of hardship, or other good reason, exceptions to any of the Restrictions contained in any portion of the Declaration may be made by the Board at any time after proper application therefor in writing.” (PC&R’s, art. V, subd. A.)

The PC&R’s provide for submission and approval of preliminary plans followed by submission of two sets of final plans for final approval. The PC&R’s state the board may require plans and specifications to comply with requirements not otherwise expressly covered by the PC&R’s. (PC&R’s, art. V, subd. F.) The board has the right to inspect the property regarding compliance with the approved plans. (Id., subd. G.) The board also has the right to enforce in equity the general and specific intent of the PC&R’s. (Id., subd. H.)

2

Independent of the PC&R’s, the HOA has a policy manual. The manual describes the history of the development and the PC&R’s as well as how the PC&R’s were established to ensure the area “would remain a pleasant place to live and ensure that property values would be maintained evenly throughout the area to the benefit of the owners.” It states the role of the HOA board of directors is to carry out the provisions of the PC&R’s.

The manual includes some policies and procedures “that support” the PC&R’s. It encourages homeowners to read the PC&R’s as well as the manual.

Section 4 of the policy manual discusses side yard easements. The introductory paragraph to the section states, “In accordance with the Article XIV, Side Yard Easements, of the PC&R’s the Board has established a policy for windows and doors installation and replacement which encourages maintaining privacy for our homeowners. A written request on the San Elijo I Hills HOA Architectural Approval Request Form must be submitted to the Architecture Committee via the management company and a written approval received BEFORE any changes to windows or doors are made.”

Section 4.2 of the policy manual states: “Any changes or additions to windows on the servient tenements side of any home shall follow the existing size and placement of windows according to the original design and intent of the home. [¶] 4.2.1 Larger windows or windows placed at a different level on the servient tenements side will only be approved on homes without the dominant/servient (zero-lot-line) situation and with a solid fence erected between both affected properties.”

B

Katzes’ Remodel

The Katzes began to remodel their house shortly after they obtained the property through an inheritance. Story poles were erected on the property to show where they planned to expand the second story. Story poles visually outline where construction will occur to change a home or project. They do not indicate details such as windows or paint color.

Shortly after story poles were erected at the property, the Katzes received a letter dated March 16, 2015, from the HOA advising them the PC&R’s required architectural approval before work altering the exterior design could commence. Mr. Katz was not aware of the HOA or the PC&R’s before receiving the letter.

The Katzes submitted the HOA’s Request for Architectural Improvement form in April 2015 attaching limited architectural drawings of the proposed elevations of the property. The drawings depicted the proposed north side of the property with five windows. The existing window configuration was not included in the initial drawings. The story poles were not placed on the north side of the home and did not show changes to the windows. Mr. Katz stated he was not aware of the window restrictions and did not draw the HOA’s attention to the proposed windows. He believed the HOA would refuse to approve any element of the proposed plans they deemed objectionable.

F.D., a member of the board, received the request for architectural improvements along with the plans. At some point, he received a full set of blueprints and plans and testified he would have looked at them.

F.D. went to the property to look at the proposed work. According to F.D., Mr. Katz told him to look at the story poles on the property because that would show what they were doing. Mr. Katz did not specifically mention a change to the windows on the wall adjacent to the Knapp property from three to five windows.

F.D. and another board member gave preliminary approval of the plans in April 2015. F.D. and a different board member gave final approval in October 2015, although there was some question about the scope of approval.

The full plans, which were submitted before final approval, depicted both the existing and proposed elevations of the north side of the property and showed the proposed change to the windows. The proposed elevation depicted three narrow vertical windows on the second floor and two windows on the first floor consisting of one small horizontal window and one larger square window. The existing elevation showed two horizontal windows on the second floor and one horizontal window on the first floor. The horizontal window on the first floor appeared consistent in size and location in both the existing and proposed elevations.

F.D. acknowledged the full set of plans provided to the HOA contained proposed and existing elevations of the windows. He said he must have missed them. F.D. testified he would have denied approval if he knew the windows were going to be changed.

In early December 2015, Mrs. Appleton-Knapp contacted F.D. saying the Katzes put five windows on the side of the house facing the Knapps’ yard and asked if the HOA approved this change. F.D. thereafter contacted Mr. Katz to say the window configuration violated section 4.2 of the policy manual, which surprised Mr. Katz. Some discussions followed about attempting to resolve the issue, which were not successful.

The HOA board discussed the issue at a meeting on January 27, 2015. One of the board members went to the home to inspect the construction. The framing was done and they were installing sheetrock. In the board member’s opinion, the Katzes could have redesigned the windows at that point.

Construction was completed in March 2016. The HOA sent a notice of noncompliance in April 2016 followed by a notice of violation in May 2016.

C

Litigation

The Knapps sued the Katzes and the HOA for breach of contract, breach of fiduciary duty, injunctive relief, and declaratory relief. The Knapps dismissed their first cause of action for breach of contract against the Katzes. They also dismissed their second cause of action for breach of fiduciary duty against all defendants.

The Knapps moved for summary judgment or adjudication on the remaining causes of action. The Katzes and the HOA opposed the motion. The HOA filed a counter motion for summary judgment or adjudication of the Knapps’ complaint.

The court granted summary judgment in favor of the Knapps against the Katzes because the court determined, the “windows approved by [the HOA] and installed by [the Katzes] … are non-compliant and violate Section[s] 4.2 and 4.2.1” of the policy manual. The court granted the Knapps’ request for declaratory and injunctive relief requiring the Katzes to remove the newly installed windows and restore the windows to the original size and design. The court denied the Katzes’ motion to set aside the judgment.

The court similarly granted summary judgment in favor of the Knapps against the HOA on the basis that the HOA violated the PC&R’s and the policy manual and “must enforce these same governing documents against [the Katzes]” whereby the “windows must be restored to their original design.” In reaching its decision, the court concluded the windows violated the policy manual and, even if the HOA approved the proposal, the policy manual gave “no discretion on the part of the HOA to grant a proposal such as the Katzes’ proposal.”

DISCUSSION

I

“On an appeal from a grant of summary judgment, we independently examine the record to determine whether triable issues of material fact exist.” (Woodridge Escondido Property Owners Assn. v. Nielsen (2005) 130 Cal.App.4th 559, 567.) ” ‘[W]e examine the facts presented to the trial court and determine their effect as a matter of law.’ [Citation.] We review the entire record, ‘considering all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained.’ [Citation.] Evidence presented in opposition to summary judgment is liberally construed, with any doubts about the evidence resolved in favor of the party opposing the motion. [Citation.] [¶] Summary judgment is appropriate only ‘where no triable issue of material fact exists and the moving party is entitled to judgment as a matter of law.’ ” (Regents of University of California v. Superior Court (2018) 4 Cal.5th 607, 618.) We also independently interpret written instruments where the interpretation does not turn on the credibility of extrinsic evidence. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.)

II

The trial court concluded the policy manual gave the board no discretion to approve the Katzes’ proposed modification to the windows. Therefore, the court determined the Knapps were entitled to judgment because the windows were in violation of sections 4.2 and 4.2.1 even if the Katzes obtained board approval for the proposed changes. We disagree.

A

PC&R’s for a common interest development are enforceable equitable servitudes that “inure to the benefit of and bind all owners of separate interests in the development” and may be enforced by “any owner of a separate interest or by the association, or by both.” (Civ. Code, § 5975, subd. (a).) “A governing document other than the declaration may be enforced by the association against an owner of a separate interest or by an owner of a separate interest against the association.” (Id., subd. (b).)

The PC&R’s in this case express throughout its provisions the goal that the exterior design of any additions be consistent with the design and character of that established by the original declarant and compatible with the rural atmosphere of the area. As such, homeowners are not permitted to alter the exterior design or color of structures, including additions, without prior board approval. (PC&R’s, art IV, subd. A.2.) However, the PC&R’s give the board “sole discretion” to approve exterior design changes. (Id., subd. C.1.) Further, article V, subdivision A provides that the board may make “exceptions to any of the Restrictions contained in any portion of the Declaration” in the case of hardship or other good reason “at any time after proper application therefor in writing.”

Section 4.0 of the policy manual discussing side yard easements states the board established a policy for installation and replacement of windows and doors to encourage privacy for homeowners. The provision requires a homeowner to submit an HOA Architectural Approval Request form before any changes to windows or doors are made. Section 4.1 describes and summarizes side yard restrictions under article XIV of the PC&R’s.

Section 4.2 of the policy manual provides, “Any changes or additions to windows on the servient tenements side of any home shall follow the existing size and placement of windows according to the original design and intent of the home. [¶] 4.2.1 Larger windows or windows placed at a different level on the servient tenements side will only be approved on homes without the dominant/servient (zero-lot-line) situation and with a solid fence erected between both affected properties.”

The trial court interpreted section 4.2 to prohibit the board from exercising any discretion to approve a proposed change to larger windows or windows placed at a different level from the original design on the servient tenement side of a home when the home has a “dominant/servient (zero-lot-line) situation.”

Such an interpretation of the policy provision, however, conflicts with provisions of the PC&R’s giving the board sole discretion to approve exterior design changes and to make exceptions to any restrictions. To the extent there is a conflict, the PC&R’s prevail. (Civ. Code, § 4205, subd. (d) [“To the extent of any conflict between the operating rules and the bylaws, articles of incorporation, or declaration, the bylaws, articles of incorporation, or declaration shall prevail.”].)

“An operating rule is valid and enforceable only if all of the following requirements are satisfied: [¶] (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 adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article. [¶] (e) The rule is reasonable.” (Civ. Code, § 4350, italics added.)

The court’s conclusion that section 4.2 removes the general discretion granted to the board under the PC&R’s is also not consistent with section 1.3 of the policy manual, which states the policies and procedures are for “day-to-day management of the association” to “support the PC&R’s.”

B

The Knapps contend the first four sentences of section 1.3 suggest the policy manual was voted upon and recorded as an amendment to the PC&R’s. Therefore, section 4.2 of the policy manual may be enforceable as a binding equitable servitude. We are not persuaded.

Section 1.3 of the policy manual states, “The Board has over the years undertaken an evaluation of all the provisions in both the PC&R’s and the By-Laws. The evaluation included the solicitation of comments and recommendations from all the homeowners. The proposed changes were submitted to each homeowner for their vote. The resulting amendments were officially recorded with the County Recorder’s office and became [an] official part of the PC&R’s and By-Laws. A copy is enclosed in this package. For day-to-day management of the association, some policies and procedures that support the PC&R’s and the By-Laws have been printed in this manual. We encourage you to read the PC&R’s and the By-Laws as well as this manual.”

Section 1.3, read together with the whole policy manual, does not support the Knapps’ interpretation. The policy manual begins by saying it is a “short introduction to acquaint you with our Homeowners’ Association to reinforce some of the information you have already received as part of the house purchase process.” Section 1.1 gives a history of the community and discusses how the binding PC&R’s were established so the area would remain a pleasant place to live and to ensure property values are maintained. Section 1.2 entitled “Who Are We?” describes the HOA, the board, and board meetings.

Section 1.3 is entitled “Why Are We?” and discusses the purpose of the board as well as the purpose and the history of the PC&R’s. Section 1.3 plainly differentiates the PC&R’s from the policies printed in the manual, which are to “support” the PC&R’s. It encourages homeowners to read both the PC&R’s and the policy manual.

No party offered independent evidence to establish the policy manual was recorded with the San Diego County Recorder’s office or constituted an amendment to the PC&R’s pursuant to Civil Code section 4270. The copy of the policy manual submitted by the Knapps in support of their summary judgment motion does not bear a stamp from the San Diego County Recorder’s office and the authenticating declaration does not indicate it was recorded. Therefore, we conclude the PC&R’s are separate from and prevail over provisions in the policy manual.

Since the purpose of the policy manual is to support the PC&R’s, we conclude section 4 of the policy manual sets forth a policy expectation for changes to windows placed on the servient tenement side of a home with a zero-lot-line. It does not, however, override or prohibit the exercise of discretion given to the board by PC&R’s to approve exterior design changes for such a property, including making an exception to any restrictions of the PC&R’s based on hardship or other good reason.

Our interpretation is supported by undisputed evidence in the record that one of the HOA board members has windows that do not comply with the policy manual for which the board made an exception.

III

Summary judgment is not appropriate as to any party. A determination of whether there was a breach of contract is generally a question of fact. (Ash v. North American Title Co. (2014) 223 Cal.App.4th 1258, 1268.) Because the policy is an operating rule and not an equitable servitude, a violation of the policy is not dispositive on the issue of breach of contract. Disputed issues of material fact remain on the breach of contract claim regarding whether the Katzes complied with the PC&R’s requirements for obtaining approval of their plans and whether the HOA board exercised its discretion under the PC&R’s to approve the window design plans. The Katzes contend they requested and received both preliminary and final approval for the windows by submitting the plans to the HOA and the board’s decision is final. However, there was evidence the Katzes did not clearly call out the window change as part of the proposal and if they had done so, F.D. said he would not have approved the proposal. There are also disputed material facts regarding whether a full set of plans were submitted to the HOA and the scope of the approval given in October 2015.

Additionally, disputed issues of material fact exist regarding (1) whether the HOA breached the governing documents in its handling of either the request for approval or the enforcement of the HOA governing documents, (2) whether the HOA’s actions were justified, and (3) whether the Knapps suffered damage as a result of any alleged breach of the governing documents.

For the same reasons, the Knapps are not entitled to declaratory or injunctive relief at this juncture. (Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1402 [summary judgment not appropriate if sought-after declaration is not legally correct or is not supported by undisputed facts]; see Christensen v. Tucker (1952) 114 Cal.App.2d 554, 562–563 [trier of fact has discretion in determining whether to grant injunction and may weigh the relative hardships].) Likewise, the HOA is also not entitled to judgment on the Knapps’ complaint.

DISPOSITION

The judgment is reversed and the matter is remanded for further proceedings consistent with this opinion. The appellants are entitled to recover their costs on appeal.

McCONNELL, P. J.

WE CONCUR:

O’ROURKE, J.

GUERRERO, J.