Route 66 CPAs, LLC v. Glendora Courtyard, LLC

Case Number: KC066584    Hearing Date: July 30, 2014    Dept: J

Re: Route 66 CPAs, LLC, etc. v. Glendora Courtyard, LLC, etc., et al. (KC066584, R/T KC063544 and BC543482)

MOTION FOR SUMMARY JUDGMENT/ADJUDICATION ON ROUTE 66 CPAs, LLC’S FIRST AMENDED COMPLAINT

Moving Parties: Defendants Glendora Courtyard, LLC and Equity Ag Financial, Inc.

Respondent: Plaintiff Route 66 CPAs, LLC

POS: Moving OK; Opposing OK; Reply OK

Plaintiff and Defendant are owners of a real property development called Glendora Courtyard. Defendant owns Parcels 1 and 2. Plaintiff owns Parcel 3. Under the CC&Rs, each owner is responsible for its proportionate share of the common area expenses. Plaintiff is seeking removal of the maintenance director at Glendora Courtyard, an accounting, reimbursement of all overpaid maintenance expenses, and an injunction against recording assessment liens. Plaintiff commenced this action on 12/27/13. The First Amended Complaint, filed on 1/27/14, asserts causes of action for:

1. Declaratory Relief
2. Preliminary and Permanent Injunction
3. Removal of Maintenance Director
4. Accounting and Restitution

On 12/31/13, the instant matter was deemed related to Case No. KC063544. Case No. KC063544 was designed the lead case.

On 1/16/14, Plaintiff’s motion for preliminary injunction was granted, enjoining Defendant from recording a Claim of Assessment Lien against Plaintiff with the Los Angeles County Recorder’s Office in the amount of $171,330.27.

On 5/8/14, the instant matter was deemed related to Case No. BC543482.

The Case Management Conference is set for 7/30/14.

MOTION FOR SUMMARY JUDGMENT/SUMMARY ADJUDICATION:

Defendants Glendora Courtyard, LLC (“Glendora”) and Equity Ag Financial, Inc. (“EAF”) (collectively “Defendants”) move for summary judgment, or in the alternative, summary adjudication on the First Amended Complaint of Plaintiff Route 66 CPAs, LLC’s (“Plaintiff” or “Route 66”). The motion is made on the grounds that:

1. Route 66’s first cause of action for declaratory relief fails to state a cause of action because it is a disguised breach of contract claim without an actionable breach; Route 66 sought relief granting broader authority than that provided under the CC&Rs; Route 66 cannot establish a likelihood of success on the merits; Glendora has not breached the CC&Rs; Route 66 cannot establish a risk of irreparable harm; these issues were adjudicated upon the merits, against Route 66, in the prior case KC063544; and Route 66 has leveled no factual allegations against EAF.

2. Route 66’s second cause of action for a preliminary and permanent injunction fails to state a cause of action because injunctive relief is dependent upon another breach; Route 66 sought relief granting broader authority than that provided under the CC&Rs; Route 66 cannot establish a likelihood of success on the merits; Glendora has not breached the CC&Rs; the notice of default and recording is absolutely privileged; Route 66 cannot establish a risk of irreparable harm; these issues were adjudicated upon the merits, against Route 66, in the prior case KC063544; and Route 66 has leveled no factual allegations against EAF.

3. Route 66’s third cause of action for removal of the maintenance director fails to state a cause of action because Route 66 is not the Majority-in-Interest; Route 66 cannot establish cause as the Maintenance Director has not breached the CC&Rs; the notice of default and recording is absolutely privileged; all other work at Glendora Courtyard has been in conformance with the CC&Rs; access to book is governed by Section 6.2.4 of the CC&Rs; the Maintenance Director possesses an easement to maintain; these issues were adjudicated upon the merits, against Route 66, in the prior case KC063544; and Route 66 has leveled no factual allegations against EAF.

4. Route 66’s fourth cause of action for accounting and restitution fails to state a cause of action because these issues were adjudicated upon the merits, against Route 66, in the prior case KC063544; and Route 66 has leveled no factual allegations against EAF.

PLAINTIFF’S EVIDENTIARY OBJECTIONS:

Declaration of John W. Melvin:

1-16. Overruled. Mr. Melvin attests that he is the general counsel and custodian of records for Glendora Courtyard, LLC and Equity AG Financial, Inc. and that he has personal knowledge of the facts in his declaration.

DEFENDANTS’S EVIDENTIARY OBJECTIONS:

Declaration of Richard Soll:

1. Overruled
2. Sustained

Declaration of Mary Ann Quay:

3. Overruled
4. Sustained
5. Overruled
6. Overruled
7. Sustained
8. Overruled
9. Overruled
10. Sustained
11. Overruled
12. Overruled
13. Overruled
14. Overruled

A defendant moving for summary judgment/adjudication has met his burden of showing a cause of action has no merit if the defendant can show one or more elements of the plaintiff’s cause of action cannot be established. (CCP 437c(p)(2).)

FIRST CAUSE OF ACTION FOR DECLARATORY RELIEF AND SECOND CAUSE OF ACTION FOR PRELIMINARY AND PERMANENT INJUNCTION REGARDING THE ASSESSMENT LIEN:

An action for declaratory relief lies when there is an actual bona fide dispute between parties as to a legal obligation arising under the circumstances specified in CCP § 1060 and, in addition, the controversy must be justiciable – i.e., presents a question as to which there is more than one answer. (Western Motors Servicing Corp. v. Land Development & Inv. Co. (1957) 152 Cal.App.2d 509.) CCP § 1060 requires that (1) there is person interested under a written instrument or a contract; or (2) a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property; and, an actual controversy. (CCP §1060; Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal. App. 4th 592, 605-06.)

Injunctive relief requires a wrongful act stating a cause of action and a basis for equitable relief (e.g., ordinarily irreparable harm must be threatened, or a remedy at law is inadequate). (Brownfield v. Daniel Freeman Marina Hosp. (1989) 208 Cal. App. 3d 405, 410.)

The First Cause of Action alleges that an actual controversy has arisen and now exists between Route 66 and Glendora regarding the respective rights, liabilities and responsibilities of each under the terms of the CC&Rs; and seeks a declaration that the assessment lien for $171,330.27 is invalid. (FAC ¶¶ 35-43.) The Second Cause of Action seeks to enjoin Glendora from recording a Notice of Default. (Id. ¶¶ 46-50.)

Defendants contend that the First and Second Causes of Action fails because the Notice of Default and recording thereof, was absolutely privileged by Civil Code § 47(b). However, while publication by an association of an assessment lien against a member’s unit is absolutely privileged under Civil Code § 47(b) and cannot be the subject of a suit for disparagement of title, the litigation privilege of Civil Code § 47(b) does not bar a property owner from challenging or removing an invalid lien by way of a complaint for declaratory and injunctive relief. (See e.g., Wilton v. Mountain Wood Homeowners Assn (1993) 18 Cal.App.4th 565, 571 – The litigation privilege protects publication of assessment liens by condominium homeowners associations, but does not prevent those who are subject to homeowners assessment liens from seeking declaratory relief or filing quiet title actions to contest the validity of improper liens; Connolly Development, Inc. v. Superior Court (1976) 17 Cal.3d 803, 822-823 – Owner can seek a mandatory injunction to remove an invalid lien; Lambert v. Superior Court (1991) 228 Cal.App.3d 383, 387 – Owner can seek injunctive or declaratory relief to challenge an invalid lien.)

Defendants also contend that the issues in the instant action have already been adjudicated in the prior action, Case No. KC063544. Defendants submit evidence the following evidence:

Route 66’s suit in KC063544 sought to block all work proposed by Glendora, asserted that all work proposed by Glendora required Route 66’s consent; sought damages for Glendora’s past and ongoing alleged “breaches” of the CC&Rs; and asserted that Glendora had breached the CC&Rs by installing flower pots and birds of paradise, removing over 20 trees, and charging Route 66 for items not allowable as Common Area Maintenance expenses. (DSS ¶¶ 31-37: NOL, Exh. H (Route 66’s Verified Complaint in KC063544) and Exh. FF (Route 66’s Separate Statement in opposition to Glendora’s Motion for Summary Adjudication).)

Route 66’s claims in KC063544 included the disputed common area expenses. (DSS ¶¶ 38-46: NOL, Exhs. J and K (Route 66’s Trial Exhibits 46 and 47), Exh. L (April 16, 2013 Letter from Glendora’s counsel to Route 66’s counsel), Exh. M (Quah Deposition), Exhs. N and O (Witness Designation), and Exhs. P and S (Trial Testimony).)

Glendora therefore contends that Route 66’s claims have already been adjudicated. (DSS ¶¶ 31-67: NOL, Exh. A (Trial Transcript and Glendora’s Motion for Judgment under CCP § 631.8); Exh. B (Final Statement of Decision); Exh. H (Route 66’s Verified Complaint in KC063544), Exhs. J and K (Route 66’s Trial Exhibits 46 and 47), Exh. L (April 16, 2013 Letter from Glendora’s counsel to Route 66’s counsel), Exh. M (Quah Deposition), Exhs. N and O (Witness Designation), and Exhs. P and S (Trial Testimonies), Exh. FF (Route 66’s Separate Statement in opposition to Glendora’s Motion for Summary Adjudication).)

Plaintiff, in opposition, contends that its first two causes of action in this case deal with an assessment lien for $171,330.27 that Glendora recorded against Route 66’s property which did not exist at the time of the first trial. Plaintiff submits evidence that the subject assessment lien was created and recorded after the judgment was entered in the first lawsuit. (Opposition, Exh. H (Notice of Default dated December 23, 2013) and Exh. K (Claim of Lien recorded on January 15, 2014).)

Plaintiff also submits evidence that the underlying Notice of Default was defective because Route 66 was not in default in the payment of its CAM expenses (PSS ¶ 325: Quay Decl. ¶ 27) and that Route 66 was not obligated to pay its proportionate share of the parking lot repairs (PSS ¶ 326: Quay Decl. ¶ 28, Exh. B.) Specifically, under the CC&Rs, 60 days before the beginning of the calendar year, the cost to repair the parking lot must be budgeted (CC&Rs § 6.2.2); once it is budgeted, Route 66 must pay during the calendar year, in equal monthly payments in advance, its proportionate share of the parking lot repair expenses based on the amount budgeted (CC&Rs § 6.2.3); and within 90 days after the end of the calendar year, Glendora must certify that the parking lot repair expenses were actually paid; if not, Route 66 is entitled to a refund of any amounts it paid for the parking lot for repairs (Ibid.). In this case, there were no repairs to the parking lot made in 2012 and 2013; Glendora did not actually pay or incur any costs or expenses to repair the parking lot in 2012 or 2013; and thus, Route 66 did not owe any money to Glendora for parking lot repairs as alleged in the Notice of Default (DSS ¶ 327: Quay Decl. ¶ 29).

The evidence demonstrates that the issues presented in the First and Second Causes of Action were not previously adjudicated. Further, the evidence demonstrates that there is an actual controversy between the parties and that there is a triable issue of fact as to whether Glendora can properly record the assessment lien for $171,330.17. Thus, the motion for summary adjudication of the First and Second Causes of Action is denied.

THIRD CAUSE OF ACTION FOR REMOVAL OF THE MAINTENANCE DIRECTOR:

The Third Cause of Action alleges that Glendora is the maintenance director for the development (FAC ¶ 52); pursuant to CC&Rs § 5.3.2, on or about January 17, 2014, Route 66 sent a letter to Glendora notifying Glendora of Route 66’s decision to terminate Glendora as the maintenance director of the project (Id. ¶ 54); and that the bases for the removal are (1) Glendora has engaged in serious misconduct which is materially injurious to the project; and (2) Glendora has engaged in acts and omissions constituting gross negligence and/or intentional misconduct in connection with the maintenance director’s performance of its obligations under the CC&Rs (Id. ¶¶ 55-56); and seeks removal of Glendora as the maintenance director (Id. ¶ 60).

Defendants contend that Route 66 cannot remove the Maintenance Director because Route 66 is not he Majority-in-Interest and Route 66 cannot establish “Cause.” Defendants submit evidence that EAF is the Maintenance Director for Glendora Courtyard (DSS ¶ 133: NOL, Exh. FF (Route 66’s Opposition Separate Statement to Glendora’s Motion for Summary Adjudication in KC063544)); Route 66 cannot remove the Maintenance Director because under the CC&Rs the Maintenance Director can only be changed by removal or resignation (DSS ¶ 134, NOL, Exh. I (CC&Rs)); the Maintenance Director may only be removed by a Majority-in-Interest and only for “Cause” (DSS ¶ 135: NOL, Exh. I, (CC&Rs)); Route 66 is not the Majority-in-Interest (DSS ¶ 136: NOL, Exh. H (Complaint in KC63544 ¶ 25)); and that Route 66 cannot establish the requisite “Cause” for the removal (DSS ¶¶ 138-163: NOL, Exh. A (CC&Rs), Exh. EE (FAC), Exh. BB (Route 66’s Responses to Special Interrogatories), and Exh. D (Court’s Ruling in KC063544).) Defendants also submits evidence that CC&Rs § 1.6 authorizes the Maintenance Director to incur a wide variety of costs in order to fulfill its maintenance duties, and the charges were incurred by the Maintenance Director, in its reasonable business judgment. (DSS ¶¶ 165-184: NOL, Exh. H (Complaint in KC63544), Exh. I (CC&Rs), and Exh. B (Final Statement of Decision dated December 13, 2013 in KC063544).)

Defendants also contend that Route 66 has already failed in its 2012 effort to remove the Maintenance Director in the prior action Case No. KC063544, and that the issues have been adjudicated on the merits under CCP § 631.8(c). (DSS ¶¶ 185-221: NOL, Exh. A (Trial Transcript and Glendora’s Motion for Judgment under CCP § 631.8); Exh. B (Final Statement of Decision); Exh. H (Route 66’s Verified Complaint in KC063544), Exhs. J and K (Route 66’s Trial Exhibits 46 and 47), Exh. L (April 16, 2013 Letter from Glendora’s counsel to Route 66’s counsel), Exh. M (Quah Deposition), Exhs. N and O (Witness Designation), and Exhs. P and S (Trial Testimonies), Exh. FF (Route 66’s Separate Statement in opposition to Glendora’s Motion for Summary Adjudication).) Defendants contend that Plaintiff is prevented from relitigating the issues under the doctrine of res judicata and related legal principals.

Defendants have met their initial burden.

Plaintiff, in opposition, contends that Glendora is the Maintenance Director, not EAF. Plaintiff explains that it is true in April of 2013, Route 66 did not have any affirmative evidence to dispute that assertion, but since that time, Route 66 has uncovered evidence to establish that EAF is a sham entity under the complete direction and control of Glendora, and that Glendora is the true Maintenance Director, not EAF.

Plaintiff submits evidence that: (1) Route 66 was never formally notified that EAF was the Maintenance Director; (2) Marilena Marrelli is the president of both Glendora and EAF; (3) Ms. Marrelli testified under oath that Glendora was the Maintenance Director; (4) when Route 66 pays its monthly CAM charges, the payments are made to Glendora, not EAF; and (5) when Route 66 mailed the March 2014 Cam check to EAF, Route 66 was ordered by Glendora to reissue the check making it payable to Glendora. (PSS ¶¶ 343-345: Quay Decl. ¶¶ 45-47; Plaintiff’s Response to DSS ¶ 133: Soll Decl. ¶¶ 13-15, Exh. N, p. 154.)

Plaintiff contends that pursuant to CC&Rs § 5.3.2, Owners representing at least a Majority-in-Interest, excluding the Maintenance Director if the Maintenance Director is an owner, must notify the Maintenance Director of such decision in writing; and that since Glendora is the Maintenance Director, it is not allowed a vote on the issue of removal of the Maintenance Director.

Plaintiff also submits evidence that for the past several years, the Maintenance Director has been abusing its power and engaged in acts and omissions constituting gross negligence and intentional misconduct in connection with its duties. (Opposition, Quay Decl. ¶¶ 35-44.)

Finally, Plaintiff contends that the issue of removing the Maintenance Director was never mentioned, nor alleged, nor litigated, nor decided in the first lawsuit.

The evidence submitted by Plaintiff raises a triable issue of fact as to whether EAF is a sham entity, and whether the Maintenance Director can be removed. Further, one of the grounds for the removal of the Maintenance Director in the instant case, i.e., an allegation that the Maintenance Director falsely and fraudulently served a notice of default in the amount of $171,330.27 for parking lot repairs that were never paid or incurred (FAC ¶ 56(l)), occurred after the judgment was entered in the previous case. Thus, it appears that Plaintiff is not prevented from seeking such relief in this action. Accordingly, the motion for summary adjudication of the third cause of action is denied.

Defendants, in their reply, contend that Route 66 violated the rule against claim splitting, i.e., the issues involving violations of the CC&Rs were previously litigated and resolved in the first lawsuit. However, as discussed above, Plaintiff’s claim also encompasses acts that occurred after the trial in the first lawsuit was entered, and therefore, Plaintiff’s entire cause of action cannot be adjudicated.

FOURTH CAUSE OF ACTION FOR ACCOUNTING AND RESTITUTION:

A cause of action for accounting needs to allege the existence of a relationship requiring an accounting, such as a fiduciary, and that some unliquidated and unascertained balance is owed. (St. James Church of Christ Holiness v. Superior Court (1955) 135 Cal.App.2d 352.) “[T]he purpose of the accounting is, in part, to discover what, if any, sums are owed to the plaintiff, and an accounting may be used as a discovery device.” (Teselle v. McLoughlin (2009)173 Cal.App.4th 156, 180.) A person who has been unjustly enriched at the expense of another is required to make restitution. (California Federal Bank v. Matreyek (1992) 8 Cal.App.4th 125, 131, citing to Rest., Restitution, § 1.)

Defendant contends that the issues presented in the Fourth Cause of Action were litigated and adjudicated in the prior case (Case No. KC063544). (DSS ¶¶ 244-280: NOL, Exh. A (Trial Transcript and Glendora’s Motion for Judgment under CCP § 631.8); Exh. B (Final Statement of Decision); Exh. H (Route 66’s Verified Complaint in KC063544), Exhs. J and K (Route 66’s Trial Exhibits 46 and 47), Exh. L (April 16, 2013 Letter from Glendora’s counsel to Route 66’s counsel), Exh. M (Quah Deposition), Exhs. N and O (Witness Designation), and Exhs. P and S (Trial Testimonies), Exh. FF (Route 66’s Separate Statement in opposition to Glendora’s Motion for Summary Adjudication).)

However, the allegations of the FAC demonstrate that Plaintiff is seeking an accounting based on a letter sent by Glendora on or about January 22, 2014, after the judgment in the prior case KC063544 was entered. (FAC ¶ 62.) Moreover, Plaintiff, in opposition, contends that the gravamen of the fourth cause of action is that the Maintenance Director charged Route 66 for certain expenses (such as day porter janitorial services and cleaning of interior restrooms) that are not allowed under the CC&Rs.

Thus, the motion for summary adjudication of the Fourth Cause of Action is denied.

MOTION FOR SUMMARY JUDGMENT:

Based on the foregoing, the motion for summary judgment is also denied.

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