Huntington Continental etc. Assn. v. JM Trust ( 2014 )

FFF00623099 AFFnn Salisbury [Hearing Month][Hearing Day][Hearing Year]
[Document Type]
Filed 1/13/14
CERTIFIED FOR PUBLICATION
IN THE SUPERIOR COURT OF CALIFORNIA
COUNTY OF ORANGE
APPELLATE DIVISION
HUNTINGTON CONTINENTAL
TOWN HOUSE ASSOCIATION,
INC.
Plaintiff and Respondent, Case No. 2013-00623099
Trial Court: 2011-00466754
v.
THE JM TRUST, etc. et al., OPINION
Defendants and Appellants.
Appeal from a judgment of the Orange County Superior Court, West Justice
Center, Robert H. Gallivan, Judge. (Retired Judge of the Orange Superior Court,
assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Reversed
and remanded.
Sam Walker, Esq. for Defendants and Appellants.
Feldsott & Lee, Jacqueline Pagano and Martin L. Lee for Plaintiff and
Respondent.
1
This case presents an issue on which this court has found little published
authority: whether a homeowner’s association must accept and apply partial
payments that reduce delinquent assessments owed but not any other amounts due,
such as late fees, interest, and attorney’s fees and costs. We conclude the Davis-
Stirling Common Interest Development Act (the Act) compels a homeowner’s
association to do so.
FACTS AND PROCEEDINGS BELOW
Defendants and Appellants The JM Trust, dated January 1, 2005, Joseph A.
Miner, trustee, and Joseph A. Miner, individually (collectively, Appellants) own
residential real property in a development subject to assessments issued by their
homeowner’s association, Huntington Continental Town House Association (the
Association). From 2003 to the beginning of 2009, appellants timely paid the
homeowner’s association assessments nearly every month. But Appellants failed
to pay the assessment due on April 1, 2009, commencing a long string of
delinquencies. On October 13, 2010, the Association sent a letter to Appellants
notifying them their assessments were delinquent in the amount of $3,864.96.
Receiving no response to the letter, the Association recorded a lien for the
delinquent assessments against Appellants’ property.
Two weeks later, the Association’s Board of Directors passed a resolution
authorizing a lawsuit to foreclose on the delinquent assessment lien. The
Association’s collection attorneys, Feldsott & Lee (Feldsott) followed up with a
letter to Appellants on March 11, 2011, notifying them of the Association’s
intention to institute foreclosure proceedings. The complaint in the present matter
was filed on April 13, 2011, seeking foreclosure of the assessment lien and
damages for account stated and open book account.
2
Shortly thereafter, Appellants requested and received from Feldsott an
itemized statement of the sums due for delinquent assessments and other fees. In
May 2011, Appellants sent a proposed payment plan and a $2,000 check to the
Association, along with a request the Association refrain from foreclosing. The
Association accepted the $2,000 check, and Feldsott formalized the proposed
payment plan. Appellants, however, never signed the proposed plan. Appellants
thereafter made two payments to the Association over the summer, totaling $1,500.
On October 17, 2011, Feldsott notified Appellants they failed to make the
September and October payments scheduled in the payment plan, and that their
failure to make those payments within 10 days would lead to cancellation of the
plan. Appellants responded by requesting a line-item accounting.
On November 15, and December 12, 2011, Appellants tendered their regular
monthly assessments of $188. Feldsott returned Appellants’ checks because
Feldsott was “unable to accept partial payments.” On December 19, 2011, Feldsott
provided Appellants a breakdown of delinquent assessments and fees.
Shortly thereafter, Appellants tendered a $3,500 cashier’s check to the
Association. On January 3, 2012, the Association’s President told Appellants he
would have Feldsott apply the $3,500 payment and provide Appellants with an
updated accounting. Feldsott provided the accounting on January 5, 2012. At the
end of January, however, Feldsott returned Appellant’s $3,500 cashier’s check,
again asserting they were “unable to accept partial payments.” Feldsott followed
up with a new accounting on February 15, 2012.
After a bench trial, the court awarded the Association foreclosure and
damages of $5,715.93 against appellants, and entered judgment. Appellants timely
filed a notice of appeal.
3
DISCUSSION
Appellants contend the trial court erred in awarding judicial foreclosure and
that substantial evidence did not support the damages award. We agree.
The Association Was Not Entitled to Judicial Foreclosure of the Assessment
Lien
While the lawsuit was pending, Appellants tendered partial payments of all
the assessments due, but some of those partial payments were rejected. Had the
Association accepted Appellants’ tender of $3,500 in December 2011, Appellants’
assessment arrearages would have been brought current1 and stopped the clock on
the 12-month window for foreclosure (Civ. Code, § 1367.4, subd. (c)), although
other amounts due would have remained unpaid.
The trial court erred in ruling the Association was entitled to reject the
tendered amounts. There is nothing in the Act precluding the acceptance of partial
payments of delinquent assessments once litigation has been commenced. Civil
Code section 1367.1 provides a comprehensive framework detailing how
homeowner’s associations may secure delinquent assessments and related fees by
way of lien against the homeowner’s separate interest in the property. Subdivision
(b) allows for partial payments and delineates to what debts, and in which order,
payments are to be applied. The plain language of subdivision (b) contemplates
partial payments of amounts owed. There would be no need to explain how
payments are to be applied to the various charges if the Legislature contemplated
only full payments.
1
Although no party provided an accounting of assessments only, this court prepared one to assist it based upon the
record of payments and billings found within Plaintiff’s Trial Exhibit 21 and Defendants’ Exhibits D, E, F, G, H,
and K. That chart is attached to this opinion as Appendix A (see chart, post).
4
Although this subsection falls within a statute primarily describing pre-lien
procedures, there is nothing that limits the provision to the pre-lien context.
Moreover, the Legislature determined that Civil Code section 1367.1 “is
subordinate to, and shall be interpreted in conformity with, Section 1367.4.” (Civ.
Code, § 1367.1, subd. (n).) Section 1367.4 discusses procedures for foreclosing on
assessment liens and sets limitations for when foreclosure is a permissible remedy.
In adding section 1367.4, the Legislature intended to protect homeowners from
being foreclosed upon for small sums of delinquent assessments. (Sen. Rules
Com., Off. of Sen. Floor Analyses, Rep. on Sen. Bill No. 137 (2005-2006 Reg.
Sess.) April 4, 2005, p. 1.) Allowing partial payments to pay down delinquent
assessments after lien recordation would be consistent with the Legislature’s desire
to limit the remedy of foreclosure to those circumstances where it appears to be the
only viable option for collecting delinquent assessments. Here, the threat of
foreclosure brought about compliance, except that the Association refused to
accept and apply Appellants’ tendered payments. Because the Association was not
entitled to judicial foreclosure of the assessment lien, we reverse as to the Third
Cause of Action.
Substantial Evidence Does Not Support the Damages Award
In its post-trial brief, the Association conceded it had failed to apply a $500
payment that Feldsott accepted. Although the Association deducted the $500
payment from the total damages sought at trial, it did not adjust its interest accrued
calculations for the unapplied payment, causing the damages awarded to be
excessive and not supported by the evidence. We reverse and remand as to the
First and Second Causes of Action for the trial court to determine damages
consistent with this decision.
5
DISPOSITION
The trial court’s judgment is reversed as to the Third Cause of Action, and
reversed and remanded as to the First and Second Causes of Action for the trial
court to determine damages consistent with this decision.
_________________________
Griffin, P.J.
We concur:
_________________________
Servino, J.
_________________________
Wilson, J.
6
APPENDIX A
(Assessments Only)2
Bill Date Monthly Subtotal Payments Total Due
Assessment (current +
prior
Due
assessments
due)
4/1/08 $188 $188 $03 $188
5/1/08 $188 $376 $188 $188
6/1/08 $188 $376 $188 $188
7/1/08 $188 $376 $188 $188
8/1/08 $188 $376 $376 $0
9/1/08 $188 $188 $188 $0
10/1/08 $188 $188 $188 $0
11/1/08 $188 $188 $188 $0
12/1/08 $188 $188 $0 $188
1/1/09 $188 $376 $188 $188
2/1/09 $188 $376 $0 $376
2
Information taken from Plaintiff’s Trial Exhibit 21, and Defendants’ Exhibits D, E, F, G, H, and K.
3
Appellants sent in a payment, but the check was returned for insufficient funds.
7
3/1/09 $188 $564 $564 $0
4/1/09 $188 $188 $0 $188
5/1/09 $188 $376 $0 $376
6/1/09 $188 $564 $0 $564
7/1/09 $188 $752 $0 $752
8/1/09 $188 $940 $0 $940
9/1/09 $188 $1128 $0 $1128
10/1/09 $188 $1316 $0 $1316
11/1/09 $188 $1504 $0 $1504
12/1/09 $188 $1692 $0 $1692
1/1/10 $188 $1880 $0 $1880
2/1/10 $188 $2068 $0 $2068
3/1/10 $188 $2256 $0 $2256
4/1/10 $188 $2444 $0 $2444
5/1/10 $188 $2632 $0 $2632
6/1/10 $188 $2820 $0 $2820
7/1/10 $188 $3008 $0 $3008
8/1/10 $188 $3196 $0 $3196
9/1/10 $188 $3384 $0 $3384
8
10/1/10 $188 $3572 $0 $3572
11/1/10 $188 $3760 $0 $3760
12/1/10 $188 $3948 $0 $3948
1/1/11 $188 $4136 $0 $4136
2/1/11 $188 $4324 $0 $4324
3/1/11 $188 $4512 $0 $4512
4/1/11 $188 $4700 $0 $47004
5/1/11 $188 $4888 $2000 $2888
6/1/11 $188 $3076 $1000 $2076
7/1/11 $188 $2264 $500 $1764
8/1/11 $188 $1952 $0 $1952
9/1/11 $188 $2140 $0 $2140
10/1/11 $188 $2328 $0 $2328
11/1/11 $188 $2516 $05 $2516
12/1/11 $188 $2704 $06 $2704
1/1/12 $193 $2897 $0 $2897
2/1/12 $193 $3090 $0 $3090
4
Lawsuit filed April 13, 2011.
5
Appellants tried to make a $188 payment this month.
6
Appellants tried to make a $188 payment this month, as well as submit a $3,500 cashier’s check, which would
have fully paid off the back-due assessments.
9
3/1/12 $193 $3283 $0 $3283
4/1/12 $193 $3476 $0 $3476
5/1/12 $193 $3669 $0 $3669
6/1/12 $193 $3862 $0 $3862
7/1/12 $193 $4055 $0 $4055
8/1/12 $193 $4248 $0 $4248
9/1/12 $193 $4441 $0 $4441
10