Judge: Cynthia A Freeland, Case: 37-2018-00016786-CU-NP-NC, Date: 2023-09-15 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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SOUTH BUILDING TENTATIVE RULINGS - September 07, 2023

09/08/2023  01:30:00 PM  N-27 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Cynthia A. Freeland

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Civil - Unlimited  Non-PI/PD/WD tort - Other Motion Hearing (Civil) 37-2018-00016786-CU-NP-NC VARGA VS LOMAS SERENAS PROPERTY OWNERS [IMAGED] CAUSAL DOCUMENT/DATE FILED: Motion - Other, 08/16/2023

The court, on its own motion, continues this matter and the scheduled status conference to Friday, September 15, 2023 at 1:30 p.m. in this department. In advance of that hearing, the court issues the following tentative ruling: Plaintiffs Tibor Varga and Ligia Varga (collectively, 'Plaintiffs')'s motion for an order directing Defendant Lomas Serenas Property Owners Association ('Defendant' or the 'HOA') to levy a special emergency assessment or, alternatively, for an order appointing a receiver to levy and administer a special emergency assessment is granted in part and denied in part.

On March 6, 2023, the court entered a Judgment consistent with the jury verdict and the court's Final Statement of Decision After Bench Trial. See Ortlieb Decl., Ex. 1; ROA No. 428. After entry of the Judgment, the court heard several post-trial motions including: (1) motions for judgment notwithstanding the verdict and for a new trial filed by each Defendant (see ROA Nos. 453-456, 458-459); (2) Defendants' motion to strike or tax costs (see ROA No. 452); (3) Plaintiffs' motion for an award of post-verdict/prejudgment interest (see ROA No. 461); and (4) Plaintiffs' motion for attorney's fees (see ROA No. 466). After disposing of the foregoing motions, the court endorsed the Judgment, including the awarded attorney's fees and approved costs, on June 12, 2023 in the total amount of $579,321.88 with interest accruing at the legal rate from March 6, 2023. On June 15, 2023, Defendants filed Notices of Appeal of the court's orders: (1) denying their respective motions for judgment notwithstanding the verdict and for a new trial, and (2) awarding Plaintiffs attorney's fees and costs. See ROA Nos. 551-556.

On July 20, 2023, the HOA sent its members notice of the Judgment and indicated that they may be required to pay a special assessment to cover the emotional distress damages portion of the Judgment.

See Ortlieb Decl., Ex. 2. On July 21, 2023, Plaintiffs' counsel sent Defendant's counsel an electronic correspondence demanding payment of the Judgment by way of the issuance of a special assessment to the HOA's members. Ibid., Ex. 3. The parties met and conferred between July 21 and August 14, 2023; however, they were unable to informally resolve the issue. Ibid., Exs. 4-10. In addition, the parties resolved any issues related to a proposed judgment debtor's examination by way of the HOA's production to Plaintiffs of verified copies of its financial records. See Rauch Decl., Ex. A. Plaintiffs now seek an order directing Defendant to levy a special emergency assessment under California Civil Code ('CC') § 5610(a) or, alternatively, for the court to appoint Richardson C. Griswold, Esq. as receiver to levy and administer a special emergency assessment.

CC §§ 5600 et seq. governs the establishment and imposition of regular and special assessments by a common interest development. In general, a homeowners association's board cannot 'impose a regular Calendar No.: Event ID:  TENTATIVE RULINGS

3001689 CASE NUMBER: CASE TITLE:  VARGA VS LOMAS SERENAS PROPERTY OWNERS [IMAGED]  37-2018-00016786-CU-NP-NC assessment that is more than 20 percent greater than then regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of a majority of a quorum of members . . . at a member meeting or election.' Cal. Civ. Code § 5605(b). An exception to CC § 5605's limitations exists where an assessment increase is necessary for emergency situations including, in relevant part, '[a]n extraordinary expense required by an order of a court.' Cal. Civ. Code § 5610(a).

The court finds that Plaintiffs have demonstrated good cause for an order directing the HOA to levy a special emergency assessment on its members in an amount sufficient to satisfy the Judgment. The court agrees with Plaintiffs that James F. O'Toole Co., Inc. v. Los Angeles Kingsbury Court Owners Association (2005) 126 Cal. App. 4th 549 ('O'Toole') is apposite and controlling. In O'Toole, the common areas of the Los Angeles Kingsbury Court condominium complex in Granada Hills, CA were damaged in the 1994 Northridge earthquake. The Los Angeles Kingsbury Court Owners Association (the 'KCOA') hired an insurance adjuster, James F. O'Toole Company, Inc. ('O'Toole') to deal with the KCOA's insurer. The KCOA agreed to pay O'Toole ten percent of the proceeds paid by its insurer but later refused to pay. O'Toole sued the KCOA for breach of contract and prevailed. The KCOA refused to pay the resulting judgment. O'Toole then obtained a writ of execution, recorded an abstract of judgment and, by motion, sought an order directing the KCOA to assign to it both the regular and special assessments collected by the KCOA from its members. The KCOA, in turn, filed a claim of exemption, asserting that all assessment income was needed for essential services and thus exempt from execution. The trial court agreed that all regular assessments collected by the KCOA were exempt from execution; however, O'Toole's judgment was an 'extraordinary expense' under former CC § 1366(b) and thus the KCOA was required to levy a special emergency assessment to raise the funds needed to pay O'Toole's judgment. The trial court ordered the KCOA to convene a meeting of the individual condominium owners to consider and provide for a meaningful special emergency assessment. The KCOA's members ultimately refused to impose an emergency assessment, which O'Toole responded to with a motion for an order directing the KCOA to levy a special emergency assessment. The trial court granted O'Toole's motion and appointed a receiver to levy and administer a special emergency assessment, then stayed its order to permit the KCOA to pursue an appeal.

The question before the Second District Court of Appeal was whether the KCOA could be compelled to impose an assessment to obtain the money needed to pay for the work that was performed for the benefit of the KCOA and its members. The Court of Appeal answered affirmatively. In so holding, the Court of Appeal rejected the KCOA's argument that it could not be required to levy a special emergency assessment under former CC § 1366 to satisfy a civil judgment given that such circumstance qualified as an 'emergency situation.' Toward that end, the Court of Appeal disagreed with the KCOA that the statutory exemptions applied to special emergency assessments. Moreover, the legislative history of former CC § 1366 made clear that the Legislature intended to protect regular assessments to the extent necessary to insure that homeowners were not deprived of essential services while at the same time protecting the rights of judgment creditors by allowing them to execute against an association's special emergency assessments and, where available, excess/nonexempt regular assessments. The Court of Appeal also disagreed with the KCOA that its refusal to impose a special emergency assessment was a business decision to which the trial court should have deferred to under Lamden v. La Jolla Shores Clubdominium Assn. (1999) 21 Cal. 4th 249. Furthermore, the Court of Appeal agreed with O'Toole that the trial court correctly decided to appoint a receiver to carry out its order in light of the KCOA's refusal to do so.

Here, the court has entered a money judgment in Plaintiffs' favor and against the HOA which is currently on appeal. The money judgment constitutes an 'emergency situation' for purposes of CC § 5610. Like the O'Toole plaintiff, Plaintiffs are within their right to seek an order compelling Defendant to levy a special emergency assessment against its members to pay for the Judgment and, if necessary, the appointment of a receiver to carry out that function. Defendant attempts to distinguish O'Toole on the basis that the judgment in O'Toole was final for some time before the plaintiff sought an order requiring the association to levy a special emergency assessment whereas the Judgment in this case is presently Calendar No.: Event ID:  TENTATIVE RULINGS

3001689 CASE NUMBER: CASE TITLE:  VARGA VS LOMAS SERENAS PROPERTY OWNERS [IMAGED]  37-2018-00016786-CU-NP-NC on appeal. This is a distinction without a difference and thus unavailing. More specifically, California Code of Civil Procedure ('CCP') § 917.1(a)(1) provides that '[u]nless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following: (1) Money or the payment of money . . . .' Cal. Code Civ. P. § 917.1(a)(1). The court may also stay enforcement of any judgment or order. See Cal. Code Civ. P. § 918(a). However, '[i]f the enforcement of the judgment or order would be stayed on appeal only by the giving of an undertaking, a trial court shall not have power, without the consent of the adverse party, to stay the enforcement thereof pursuant to this section for a period which extends for more than 10 days beyond the last date on which a notice of appeal could be filed.' Cal. Code Civ. P. § 918(b).

In this case, while it is true that the Judgment is presently on appeal, there is no mechanism preventing enforcement of the Judgment. Defendant has not requested – and the court has not granted – a stay pending appeal. Moreover, Defendant concedes that it has been unable to obtain an undertaking staying enforcement of the Judgment – indeed, it admits that it cannot do so because it has no executable assets and cannot provide the collateral required to post a bond. See Nunez Decl., ¶ 6. The evidence further shows that Defendant, while consistently indicating that it will fulfill its legal obligations, has declined to levy a special emergency assessment upon its members. Under these circumstances, an order directing Defendant to levy a special emergency assessment to satisfy the Judgment is warranted pursuant to CC § 5610(a) and O'Toole.

However, the court is not yet persuaded that the appointment of a receiver is necessary to levy the requisite special emergency assessment. Plaintiffs are correct that the court has discretion to 'appoint a receiver to enforce the judgment where the judgment creditor shows that, considering the interests of both the judgment creditor and the judgment debtor, the appointment of a receiver is a reasonable method to obtain the fair and orderly satisfaction of the judgment.' Cal. Code Civ. P. § 708.620. At the same time, however, the appointment of a receiver is an extraordinary remedy to be exercised sparingly and with caution in instances where 'less intrusive remedies are either 'inadequate or unavailable.'' Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal. App. 5th 622, 628. In this instance, the court is not convinced that the appointment of a receiver is warranted under the circumstances. While Defendant has submitted declarations from Ms. Nunez and Mr. Adams highlighting the purportedly complex logistics and likely resistance to the levy of a special emergency assessment, such arguments are largely speculative. Moreover, to the extent Defendant contends that enforcing the Judgment will occasion a financial hardship, such concerns are allayed by the court staying this order as set forth below. That being said, it appears to the court that Defendant is not willfully refusing to levy a special emergency assessment in a bad faith effort to avoid Plaintiffs' enforcement efforts. Rather, it was Defendant's (albeit incorrect) belief that it did not need to given its mistaken understanding that O'Toole was distinguishable. The court has now answered that question in the negative. Defendant represents that it remains willing to abide by California law and this court's orders. Consequently, the court denies Plaintiffs' request for the appointment of a receiver.

In light of the foregoing, the court grants the motion in part and orders Defendant to: (1) levy a special emergency assessment on all of its members in an amount sufficient to pay the Judgment in full within 10 days of this hearing; and (2) collect the proceeds from the special emergency assessment which shall be deposited into a blocked account for Plaintiffs' benefit, and the accumulated proceeds shall be paid to Plaintiffs on a monthly basis with each payment credited against the Judgment balance until paid in full.

Plaintiffs' request for the appointment of a receiver is denied without prejudice to Plaintiffs renewing their request on an ex parte basis in the event that Defendant fails to levy the special emergency assessment as set forth herein. This order is stayed to allow Defendant an opportunity to pursue an appeal, if it so chooses.

This is the tentative ruling for the hearing at 1:30 p.m. on Friday, September 15, 2023. If no party Calendar No.: Event ID:  TENTATIVE RULINGS

3001689 CASE NUMBER: CASE TITLE:  VARGA VS LOMAS SERENAS PROPERTY OWNERS [IMAGED]  37-2018-00016786-CU-NP-NC appears at the hearing, this tentative ruling will become the order of the court as of September 15, 2023.

If the parties are satisfied with the court's tentative ruling or do not otherwise wish to argue the motion, they are encouraged to give notice to the court and each other of their intention not to appear, though this notice is not required.

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