Judge Elaine W. Mandel, Case Number: 23SMCV02891, Date: 2023-10-12 Tentative Ruling

Judge: Elaine W. Mandel, Case: 23SMCV02891, Date: 2023-10-12 Tentative Ruling

Case Number: 23SMCV02891 Hearing Date: October 12, 2023 Dept: P

Tentative Ruling

Crestwood Hills Assoc. v. Broumand, et al., Case No. 23SMCV02981

Hearing Date October 12, 2023

Plaintiff Crestwood Hills’ Motion to Compel Arbitration

Plaintiff Crestwood Hills alleges the Broumand defendants are building a home that violates community CC&Rs. Crestwood moves to compel arbitration pursuant to the arbitration clause in the community’s 2022 architectural guidelines.

If an enforceable written arbitration agreement between parties is before a court, the court must grant a motion to compel arbitration if it determines the agreement applies to the parties’ controversy. Cal. Code of Civ. Proc. §1281.2. California law strongly favors the enforcement of arbitration agreements. Weiler v. Marcus & Millichamp Real Estate Investment Services, Inc. (2018) 232 Cal.Rptr 3d, 155, 162.

Crestwood Hill’s 2022 guidelines contain an arbitration clause requiring “all disputes arising from or related to these Guidelines, the architectural provisions of the CC&Rs, or any decision made by the Architectural Committee” to be settled by arbitration. Exhibit 7.

Broumand argues the arbitration clause is unenforceable, since it is not part of the CC&Rs. He notes Crestwood unilaterally adopted the 2022 guidelines without following the procedures for amending the CC&Rs. Broumand argues the arbitration clause should have been added to the CC&Rs via vote of property owners to be enforceable.

Crestwood acknowledges the arbitration clause is not part of the CC&Rs but argues it was adopted via guidelines issued by the Board. Crestwood argues the CC&Rs gives the Board power to issue guidelines. Paragraph 6 of the CC&Rs establishes an Architectural Committee to approve or disapprove new construction in the community. Crestwood argues this implies the power to promulgate binding guidelines governing resolution of construction disputes. Blackman decl. ¶6, exh. 7 §16.5.

The Davis-Stirling Act gives the board of a common interest community the ability to adopt an “operating rule” governing “procedures adopted by the association for resolution of disputes” without formally amending the CC&Rs if the rule is “within the authority of the board conferred by law” or the CC&Rs and is adopted according to specific statutory procedures. Cal. Civ. Code §§4340, 4350, 4355(a)(5) and 4360.

Broumand argues Crestwood admitted the Davis-Stirling Act does not apply, citing Crestwood’s responses to requests for admission. Braunstein decl., exh. Q. However, it is not clear which response(s) contains this admission.

The Davis-Stirling Act applies to common interest communities, which are created when the terms set forth in §4200 of the Act are fulfilled. The original CC&Rs here fulfill those requirements, so Davis-Stirling applies. Blackman decl., exh. 1. Under Davis Stirling, a community board can adopt a rule governing resolution of disputes, such as an arbitration clause, without amending the CC&Rs.

Plaintiff’s 2022 guidelines, including the arbitration clause, were validly adopted by the Board under Davis-Stirling. Contrary to Broumand’s argument, their adoption was not procedurally unconscionable, as it is permitted by statute.

Broumand argues the Association lacks standing to enforce the guidelines. The CC&Rs state their terms can be enforced by the original developer “Mutual Housing Association, Inc” (MHA). Blackman decl., exh. 1, pg. 2. Crestwood is MHA’s successor-in-interest, with MHA assigning enforcement powers to Crestwood in 1957. Blackman decl. ¶3, exhs. 4 and 5.

Broumand argues under BCE Dev., Inc. v. Smith (1989) 215 Cal.App.3d 1142, a successor-in-interest to an enforcement entity created by CC&Rs lacks enforcement power unless the CC&Rs manifest a “clear intent” regarding the power of successor entities. This misstates BCE. The court stated “[e]nforcement of mutual covenants may be achieved by successors in interest to original interests,” with no “clear intent” qualification. BCE, supra at 1146. The “clear intent” language appears elsewhere in BCE and applies to the initial creation of an enforcement agency that does not own land within the affected development. Id. at 1149. The CC&Rs include language showing a “clear intent” to create an enforcement entity. Crestwood, as that entity’s successor, can enforce guidelines created under the authority of the CC&Rs.

Broumand argues the arbitration clause is substantively unconscionable, since it deprives defendants of the right to a jury trial, only allows “such reasonable discovery as is mutually agreed or as allowed by the arbitrator,” requires costs to be split evenly and allows injunctive relief to be sought in court, outside of arbitration. Waiver of jury trial is inherent in any arbitration agreement, so cannot be unconscionable. The cost-splitting and discovery provisions are mutual and do not favor either side; they are not unconscionable. See Carbajal v. CWPSC, Inc. (2016) 245 Cal.App.4th 227, 249.

The court agrees the provision allowing injunctive relief to be sought in court rather than within the arbitration is unconscionable, as it favors the side more likely to request injunctive relief -- Crestwood. Because there is only one unconscionable term, the entire agreement is not “permeated” with unconscionability and remains enforceable. See Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482, 486. The unconscionable term will be severed.

Broumand argues Crestwood waived its right to compel arbitration by filing a complaint in Superior Court, rather than an arbitration demand. A party waives its right to arbitrate when it “substantially invokes” the litigation machinery before moving to arbitrate. Hoover v. American Income Life Ins. Co. (2012) 20 Cal.App.4th 1193, 1204.

Plaintiff did not substantially invoke the litigation machinery. It moved to compel arbitration promptly after filing the action before meaningful litigation activity occurred. Broumand argues Crestwood waived the right to arbitrate by filing the lawsuit two years after the initial dispute arose. Unreasonable delay can lead to a waiver of arbitration rights. Spear v. California State Auto Ass’n. (1992) 2 Cal.4th 1035, 1043.

The declaration from attorney Glen Kulik states substantial efforts were made to resolve the matter without litigation, causing the delay before the lawsuit was filed. Kulik decl. ¶¶2-7. This is evidence Crestwood’s delay was not unreasonable, and Crestwood did not waive its right to arbitrate. GRANTED.