Case Number: KC063544 Hearing Date: May 01, 2014 Dept: J

Re: Route 66 CPAs, LLC, etc. v . Glendora Courtyard, LLC, etc., et al. (KC063544, R/T KC066584)

(1) MOTION TO RELEASE ASSESSMENT LIEN AND TO APPOINT A RECEIVER; (2) MOTION FOR ORDER TO SHOW CAUSE RE CONTEMPT; (3) MOTION FOR MONETARY SANCTIONS

Moving Parties: (1) Plaintiff Route 66 CPAs, LLC; (2) and (3) Defendant Glendora Courtyard, LLC

Respondents: (1) Defendant Glendora Courtyard, LLC; (2) and (3) Plaintiff Route 66 CPAs, LLC

POS: (1) Moving OK; Opposing OK; Reply OK; (2) Moving OK; Opposing and Reply served by regular mail contrary to CCP § 1005(c); (3) Moving OK; Opposing served by regular mail contrary to CCP § 1005(c)

In this dispute regarding a common interest development, Plaintiff and Defendant are owners of real property development called Glendora Courtyard. Defendant owns Parcels 1 and 2. Plaintiff owns Parcel 3. Under CC&Rs, each owner is responsible for its proportionate share of the common area expenses. Plaintiff alleges that beginning in October 2011, Defendant has been threatening to make substantial capital improvements to the common area, i.e., landscaping, new security fence, resurfacing the parking lot, and exterior painting, without Plaintiff’s consent, and to pass those charges on to Plaintiff. Plaintiff opposes the improvements on grounds they are unnecessary and excessive, and claims that they will cause a substantial increase Plaintiff’s proportionate share of the monthly common area fees. The Complaint, filed on 4/9/12, asserts causes of action for :

Preliminary and Permanent Injunction
Breach of the CC&Rs
Breach of Implied Covenant of Good Faith and Fair Dealing
Breach of Fiduciary Duty
Declaratory Relief

(1) MOTION TO RELEASE ASSESSMENT LIEN AND TO APPOINT A RECEIVER:

Plaintiff Route 66 CPAs, LLC (“Plaintiff” or “Route 66”) moves the court for an order compelling Defendant Glendora Courtyard, LLC (“Defendant” or “Glendora Courtyard”) to release the claim of assessment lien in the amount of $57,360.67 that it recorded against Route 66.

Route 66 presents evidence that on January 22, 2014 counsel for Glendora Courtyard served a Notice of Default alleging that Route 66 failed to pay incurred common area expenses in the amount of $57,360.67 through the end of 2013 and threatened to record a lien unless that amount was paid within 10 days. (Plaintiff’s Exhibit A.) Thereafter, on January 28, 2014, counsel for Route 66 sent a check for the full amount to counsel for Glendora Courtyard, but noted that it was “being paid under protest.” (id, Exhibits B and C.)

Thereafter, on or about February 14, 2014, Glendora Courtyard recorded an “Amended Claim of Lien” which in essence released a prior lien in the amount of $171,330.27 pursuant to this court’s order, but replaced it with a lien for the $57,360.67. Route 66 contends that sections 10.4 and 10.5 of the CC&Rs allows for an assessment lien only in cases where there is a default in the payment of CAM expenses, and here the lien was recorded after the CAM expenses had been paid in full albeit under protest. An owner of property that contests the amount due on a lien recorded against the owner’s property can seek equitable relief when no amount is owing. (Passanisi v. Merit-McBride Realtors, Inc. 190 Cal.App.3d 1496, 1504 (1987).)Where a lien is invalid, it can be removed by way of a motion. (See e.g. Howard S. Wright Construction co. v. Sup.Ct. 106 Cal.App.4th 314, 318 (2003).)

In opposition, Glendora Courtyard asserts that since the CAM assessment was paid under protest, the payment by Route 66 was “invalid.” Further, Glendora Courtyard contends that it need not release the lien since section 10.5.2 of the CC&Rs states that a lien includes “all costs and expenses incurred in creating and foreclosing such lien (including attorneys’ fees).” However, in its opposition and in its accompanying Motion for Order to Show Cause re Contempt re Route 66 CPAs Contempt, Glendora Courtyard provides no authority for its proposition that the payment ‘under protest” is tantamount to an invalid payment of the assessment. Further, the fact that the payment of the full $57,360.67 was made within the 10-day period demanded in the January 22, 2014 letter from counsel for Glendora Courtyard demonstrates that the lien should never have been created or recorded. Therefore, Glendora Courtyard cannot seek to recover the costs for doing so from Route 66.

Based upon the foregoing, the motion to release the assessment lien of $57,360.67 is granted.

Route 66 also moves to appoint Nancy L. Martin as a receiver to take over as the Maintenance Director for the project. Route 66 claims the current Maintenance Director has taken actions which are an abuse of her powers under the CC&Rs (Sections 10.4 and 10.5). The motion is made on grounds that Glendora Courtyard and its sister company Equity Ag Financial, Inc. have commingled money and committed numerous other violations of the CC&Rs warranting the appointment of a receiver.

Route 66 contends that Glendora Courtyard and Equity Ag Financial, Inc. have committed the following acts:

(1) Demanded payment of an additional $57,360.67 for allegedly unpaid common area maintenance expenses from 2013. (Ex. A) Route 66 vigorously disputed this, but to avoid another lien it paid the money under protest (Exs. B and C). Nevertheless, on 3/13/14, Glendora Courtyard notified Route 66 that the $57,360.67 lien had been recorded, in violation of the CC&Rs. Further, it has caused Route 66 extreme financial hardship as it constitutes a cloud and a slander of Route 66’s title; and a default under the terms of Route 66’s loan with Union Bank (Exs. F and G).
(2) Violation of the CC&Rs by diverting and commingling trust money that belongs to the Maintenance Director, in violation of Section 6.2.3 (Ex. X).
(3) On 2/19/14, they used their power as Maintenance Director to raise Route 66’s monthly CAM fees from $4,688 per month to $35,441 per month starting 5/01/14.
(4) Charging grossly excessive and unreasonable fees to resurface walkways, planters and deck, and to replace landscaping. Spending hundreds of thousands of dollars of CAM fees to “upgrade the complex” in the words of the Maintenance Director, that is beyond “maintenance.” (Ex. AA, Final Statement of Decision, 11:15-19).
(5) On 2/26/14, they threatened to use their power as Maintenance Director to raise Route 66’s CAM fees from $35,441 per month to $53,089 per month, claiming this included costs for “outside compliance counsel” which is not authorized anywhere in the CC&Rs. (Ex. Q).
(6) Glendora Courtyard intends to to post signage in violation of Section 3.7.1 of the CC&Rs.
(7) On 3/27/14, Glendora Courtyard charged Route 66 attorneys’ fees to review correspondence, without a provision in the CC&Rs to support such a charge. (Ex. V, p. 2).

Glendora Courtyard opposes the appointment of a receiver on the grounds that section 5.3.2 of the CC&Rs provides that the Maintenance Director can only be removed by the Majority-in-Interest, which is Glendora Courtyard. The CC&Rs also dictate only an owner or occupant can be Maintenance Director, precluding a receiver such as Nancy L. Martin from holding. They also contend that since the current Maintenance Director, Equity Ag Financial, Inc., has not resigned, so the appointment of a new MD requires its hostile removal. If that occurs, then Glendora Courtyard has the sole discretion to name the replacement.

Glendora Courtyard also argues that Route 66 has failed to meet the receivership standards. The receivership law, CCP 564(b)(1) and (b)(9), applies “(1)…between partners or others jointly owning or interested in any property or fund,…and where it is shown that the property or fund is in danger of being lost, removed, or materially injured. . . . [or] (9) In all other cases where necessary to preserve the property or rights of any party.”

Glendora Courtyard asserts that there is no common ownership or trust CCP 564(b)(1), and there is no showing of sufficient harm. The parties are not partners, and the common areas are not owned in common by the owners as tenants-in-common, jointly or otherwise. Each party owns their own parcel, and there is no separate association or board of directors. Route 66 admitted this in their Verified Complaint (para. 10). Under the CC&Rs, the only rights the parties have over other parcels are easements. But “[a]n easement…is not an ownership interest, and certainly does not amount to a fee simple estate.” Silacci v. Abramson (1996) 45 Cal.App.4th 558, 564. The parties are not part of a “trust” or “fund.” Section 11.8 of the CC&Rs states that the parties are not “principal and agent,” a “partnership,” a “joint venture,” or an “association.” The relationship is one of creditor and debtor. In addition, there is no showing of sufficient harm.

In reply, Route 66 argues that appointment of a receiver is authorized by the CC&Rs as well as by California law. Section 10.1 of the CC&Rs states that if an owner breaches any provision of the CC&Rs, the other owner may institute a lawsuit for specific performance, injunction, declaratory relief, damages, or “any other remedy provided in law or in equity.” A receivership is an equitable remedy that is clearly embraced within the language of the CC&Rs. Even in the absence of the CC&Rs, appointment of a receiver is allowed in any action between parties “jointly owning or interested in any property or fund,” or when it is “necessary to preserve the property or rights of any party.” CCP Sections 564(b)(1) and (9).

There is no merit to the argument that the receiver is ineligible to take on the role of the Maintenance Director of the development. A receiver is an officer of the court who can be appointed to take control over the management of property that is the subject of the litigation before the court. A receiver is an agent of the court and not of any party.

There is no merit to the argument that there is no common interest in any property or fund between Glendora Courtyard and Route 66. The common interest is predicated on the fact that Glendora Courtyard owns Parcels 1 and 2, and Route 66 owns Parcel 3. Parcels 1, 2, and 3, and the surrounding asphalt parking lot, landscaping, driveways, sidewalks, and hardscape are all part of a planned commercial development known as Glendora Courtyard.

Judge Hoffstadt’s decision stated that the Maintenance Director “testified that her goal with the new landscaping was to upgrade the complex from a ‘C’ level facility to a ‘first class’ facility. (Testimony of Marrelli) Upgrading the overall commercial attractiveness of the complex goes beyond ‘maintenance.’” (Ex. AA, Final Statement of Decision, 11:15-19).

The court finds that although the appointment of a receiver is an available provisional remedy under the present circumstances, Route 66 has not made a sufficient showing of harm to justify such an appointment at this time. The release of the assessment lien being ordered should eliminate any cloud upon Route 66’s title and, as Judge Hoffstadt previously noted in ruling on Route 66’s request for a preliminary injunction, there is no indication that Union Bank will find Route 66 in default on its loan as a result of the assessment.

The request for appointment of a receiver is denied without prejudice.

(2) MOTION FOR ORDER TO SHOW CAUSE RE CONTEMPT:

Defendant Glendora Courtyard seeks and order to show cause re contempt against Plaintiff Route 66, alleging violations of three prior court orders:

(1) In KC063544, the court’s 10/10/13 ruling granting Glendora’s CCP § 631.8 motion for judgment (Ex. A);
(2) KC063544, the court’s 12/13/13 Final Statement of Decision (Ex. B).
(3) In KC066584, the Court’s 1/17/14 ruling denying Route 66’s Motion for Preliminary Injunction (Ex. C).

Glendora Courtyard makes the following arguments:

As to (1) above, in KC063544, Glendora’s CCP § 631.8 motion was granted at the time of trial when Route 66 announced that it was not proceeding on three causes of action and no evidence was presented thereon. As a result, judgment was entered in favor of Glendora Courtyard on the second cause of action for breach of contract, third cause of action for breach of the implied covenant of good faith and fair dealing, and fourth cause of action for breach of fiduciary duty. As a result, Glendora Courtyard contends that Route 66 is required to pay its percentage of the CAM expenses.

As to (2) above, in KC063544, the court’s 12/13/13 Final Statement of Decision held that Route 66 was responsible for paying CAM expenses for all disputed items such as janitorial services, tree removal, and repaving the parking lot, etc., but not for security fencing, repainting the buildings, or re-landscaping, which is not a CAM expense. (Ex. B at 14:4-5).

As to (3) above, in KC066584, the Court’s 1/17/14 ruling denying Route 66’s Motion for Preliminary Injunction (Ex. C) stated, “Route 66 is required to pay 42.95% of the complex’s ‘common area expenses’ and Glendora Courtyard is to pay the remainder…¶ Route 66 has not established its likelihood of success vis-à-vis the 2012 common area expenses or any 2013 common area expenses not involving the re-paving of the parking lot.” (Ex. C, pages 1 and 3).

Route 66 was present at the hearings on each of these matters and had knowledge of the rulings. Route 66 admitted its ability to comply.

Glendora Courtyard contends that Route 66 willfully disobeyed the rulings when it sent a check with a reservation of rights (“under protest”). Therefore, Glendora Courtyard contends that Route 66 has not paid the 2012 and 2013 balances. Instead it filed a First Amended Complaint (“FAC”) on 1/27/14 in KC066584 adding a cause of action for “Removal of Maintenance Director” and a cause of action for “Accounting and Restitution” challenging the CAM expenses for 2012 or 2013. The FAC states “[t]he payment of the $57,360.67 is not owed, and the payment therefore constitutes unjust enrichment to Glendora.” (FAC, para. 65). Glendora Courtyard contends that Route 66 has already lost the accounting claims.

The court finds that Judge Hoffstadt’s Final Statement of Decision and resulting judgment made it clear that Route 66 may not be assessed for replacing the landscaping, installing a security fence, and repainting the exterior of the buildings without its prior consent, it does not necessarily follow that Route 66 must therefore blindly pay whatever remaining CAM charges are assessed without reserving its right to question the validity of the charges, which it is apparently attempting to do in case number KC066584. Route 66 has in fact paid the assessment, but is seeking a judicial determination that the nature of the charges assessed are proper under the CC&Rs. The request for an order to show cause re contempt is denied.

(3) MOTION FOR MONETARY SANCTIONS:

Glendora Courtyard contends that Route 66 knowingly filed a “contempt” motion wholly devoid of merit on 2/05/14. In it, Route 66 falsely alleged that Glendora Courtyard committed contempt by recording and refusing to release a $171,330.27 lien on Route 66’s property. In reality, the court authorized Glendora Courtyard to file the lien when it denied Route 66’s request for a temporary restraining order. Only after Glendora Courtyard recorded the lien did the court direct it to only prosecute a lien for a lesser amount. Within 24 hours of receiving this court’s ruling, Glendora complied, superseding the $171,330.27 lien on 1/22/14. Glendora remained, at all times, fully compliant with this Court’s rulings.

The motion is denied. Although the lien was recorded prior to Judge Hoffstadt’s January 17, 2014 ruling enjoining the lien, Glendora Courtyard did not merely withdraw the lien but superseded it with one in a different amount, which is addressed and ordered released above.

NOTE TO COUNSEL: Given the history of this past and pending litigation, the evident animosity between the parties and apparently between counsel, and the nature and extent of the motions presented to the court thus far in the two related actions, counsel should be prepared to address the appointment of a reference pursuant to CCP §§ 638 and/or 639 at the hearing of any future motions.