TENTATIVE RULING

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust’s Demurrer to Defendant The Churchill Condominium Association’s Cross-Complaint is OVERRULED.

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust, shall file an answer to Defendant/Cross-Complainant The Churchill Condominium Association’s Cross-Complaint within ten (10) days of entry of this order. (Cal. Rules of Court, rule 3.1320(j).)

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust’s Demurrer to Defendant and Cross-Complainant The Churchill Condominium Association’s Answer is OVERRULED as to the first and third through eighteenth affirmative defenses and SUSTAINED without leave to amend as to the nineteenth affirmative defense.

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust, to give notice. 

REASONING

Request for Judicial Notice

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust (“Plaintiffs”) request judicial notice of California’s Senate Floor Analysis on August 31, 2020, of Bill No. A.B. 3182 and California’s Assembly Floor Analysis on August 28, 2020, of the same bill. Plaintiffs’ request is GRANTED, pursuant to Evidence Code section 452, subdivisions (b) and (c).

Defendant/Cross-Complainant The Churchill Condominium Association (“the HOA” or Defendant) requests judicial notice of the Court’s ruling on Plaintiffs’ motion for preliminary injunction. Defendant’s request is GRANTED, pursuant to Evidence Code section 452, subdivision (d).

Background

Plaintiffs are the owners of units of real property at 10450 Wilshire Blvd., specifically units M-1, M-3, M-4, M-5, and 5J. (Compl. ¶ 1.) They are members of Defendant The Churchill Condominium Association (“the HOA”), an owners’ association established for managing the common interest development known as “The Churchill,” and Plaintiffs’ units are subject to the HOA’s Second Amended and Restated Declaration of Covenants, Conditions, and Restrictions (“CC&Rs”), which define the M-1, M-3, M-4, M-5 (“the M-units”) as maid’s rooms or guest rooms. (Compl. ¶¶ 2, 7-8.) Plaintiffs pay monthly association dues on each unit they own, including the M-units. (Compl. ¶ 10.)

Plaintiffs allege that the HOA restricts Plaintiffs’ M-unit tenants from using all common area amenities not specifically afforded to “residences” or “dwelling units” as defined in the CC&Rs. (Compl. ¶ 15.) Plaintiffs allege that the HOA’s property management team informed Plaintiffs and their tenants in October 2019 that occupants of the M-units cannot use the common area amenities and cannot receive packages, and the HOA contends that Plaintiffs are restricted from renting the M-units. (Compl. ¶¶ 16-18.) Plaintiffs also state that the CC&Rs prohibit children under the age of 13 from permanently residing in the building, but Plaintiffs intend to rent the units, and the tenants may have children under 13. (Compl. ¶¶ 19-20.)

Plaintiffs contend that the only restriction on M-units in the CC&Rs is the prohibition that the units cannot be purchased or transferred without the concurrent ownership or transfer of one or more residential units. (Compl. ¶ 25.) Plaintiffs allege that the CC&Rs and HOA’s Operating Rules do not restrict the M-unit residents from using common area amenities, nor do the CC&Rs restrict owners from leasing M-units. (Compl. ¶¶ 26-32.) Plaintiffs also contend that the CC&R provision which prohibits permanent residency of children under the age of 13 is invalid because it violates the Unruh Act, and they believe that the HOA intends to enforce the prohibitions if Plaintiffs rent out the M-units to a family that has children under 13 years of age. (Compl. ¶ 33.)

In its Cross-Complaint, the HOA brings a single cause of action for declaratory relief seeking a judicial declaration that (1) the governing documents prohibit owners in the community from utilizing M-units are residential units, including to disallow them to be rented to third parties and to disallow M-unit users the full benefit and use of the building’s common area amenities other than as guests of the corresponding owners of the M-unit, and (2) use of the M-units as residential units would violate the governing documents by exceeding the maximum number of allowable units in the building. (Cross-Compl. ¶ 24.)

Legal Standard

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967), but the Court does not “assume the truth of contentions, deductions, or conclusions of fact or law” (Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125).

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 [court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”]; Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 [“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”]; Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768 [“When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.”].) The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust’s Demurrer to Defendant The Churchill Condominium Association’s Cross-Complaint

First Cause of Action: Declaratory Relief

“To qualify for declaratory relief, a party would have to demonstrate its action presented two essential elements: (1) a proper subject of declaratory relief, and (2) an actual controversy involving justiciable questions relating to the party’s rights or obligations.” (Jolley v. Chase Home Finance, LLC (2013) 213 Cal.App.4th 872, 909, quotation marks and brackets omitted.)

Plaintiffs demur to this cause of action on the ground that Civil Code section 4741 prohibits rental bans, and the governing documents do not prohibit the rental of M-units as the HOA contends.

Relying on section 25.1 of the CC&Rs, which states that “each owner is free to sell or lease his condominium,” Plaintiffs argue that the governing documents expressly permit leasing M-units. (Cross-Compl. ¶ 4, Ex. A, at § 25.1.) Plaintiffs contend the provision does not restrict the right to sell or lease on the class of unit, and the only prohibition as to sale or lease of an M-unit is that M-units cannot be purchased or transferred without the concurrent ownership or transfer of one or more residential units. (Cross-Compl. ¶ 4, Ex. A, at § 1.3.)

Notably, the CC&Rs allows unit owners to freely sell or lease their condominiums. Section 1.3 of the CC&Rs defines “Maid’s Rooms and/or Guest Room,” which Plaintiffs contend is the class of the M-units (Compl. ¶ 9), to be “any of those elements of a condominium.” (Cross-Compl. ¶ 4, Ex. A, at § 1.3, italics added.) This provision does not support Plaintiffs’ contention that an M-unit is a condominium under section 25.1 of the CC&Rs, and the requirement that M-units not be sold without attachment to a residential unit also tends to indicate that M-units were not contemplated to be within the definition of “condominium” under section 25.1.

Plaintiffs contend that the CC&Rs define “unit” to mean “elements of a condominium which are not owned in common with the owners of other condominiums in the project” (Cross-Compl. ¶ 4, Ex. A, at § 1.2), and all units are numbered from 1 to 129, but Plaintiffs do not provide a logical link with this argument. Whether an M-unit is defined as a unit is inapposite where the CC&Rs allow only for sale and lease of a condominium. There is no conflict in the CC&Rs in this respect, making Plaintiffs’ reliance on MaJor v. Miraverde Homeowners Association (1992) 7 Cal.App.4th 618, misplaced, as the HOA is not exceeding “the authority granted to it by the CC&Rs.” (Id. at p. 628.)

Plaintiffs also argue that Civil Code section 4741, subdivision (a), prohibits a common interest development from enforcing any restriction that prohibits or restricts the rental or leasing of any separate interest, accessory dwelling unit, or junior accessory dwelling unit. This relies on Plaintiffs’ contention that the M-units are “separate interests,” and the CC&Rs do not support such a conclusion. Under the CC&Rs, the M-units cannot be leased or sold without attachment to a residential unit. It follows that the M-units are not separate interests, making Civil Code section 4741, subdivision (a), inapplicable to the M-units.

Plaintiffs also argue that the HOA cannot prohibit M-unit occupants from accessing the common area amenities. Given that M-units are not permitted to be leased or sold, there is no basis to conclude that an occupant of an M-unit is a “resident” under the CC&Rs. As to Plaintiffs’ argument that the HOA cannot restrict children under the age of 13 from permanently residing in any unit located at The Churchill, the HOA has not sought such a declaration in the Cross-Complaint, making this argument irrelevant for the purposes of this demurrer.

For these reasons, the Court finds that the HOA has stated a proper claim for declaratory relief. Accordingly, Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust’s Demurrer to Defendant The Churchill Condominium Association’s Cross-Complaint is OVERRULED. Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust, shall file an answer to Defendant/Cross-Complainant The Churchill Condominium Association’s Cross-Complaint within ten (10) days of entry of this order. (Cal. Rules of Court, rule 3.1320(j).)

Plaintiffs/Cross-Defendants Seth Wilen and Emily Stewart, individuals and as Trustees of the Wilen Family Trust’s Demurrer to Defendant and Cross-Complainant The Churchill Condominium Association’s Answer

Plaintiffs also demur to the HOA’s answer to Plaintiff’s complaint. Plaintiffs specifically demur to the HOA’s first and third through nineteenth affirmative defenses and argue that the HOA must plead facts, not theories, equitable defenses have heightened pleading standards, some affirmative defenses are mere denials, the HOA cannot reserve the right to add additional affirmative defenses, and the HOA fails to state which cause of action is subject to each affirmative defense.

“A party against whom an answer has been filed may object, by demurrer as provided in [Code of Civil Procedure] [s]ection 430.40, to the answer upon any one or more of the following grounds: [¶] (a) The answer does not state facts sufficient to constitute a defense. [¶] (b) The answer is uncertain. As used in this subdivision, ‘uncertain’ includes ambiguous and unintelligible. [¶] (c) Where the answer pleads a contract, it cannot be ascertained from the answer whether the contract is written or oral.” (Code Civ. Proc., § 430.20.) A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 [in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents].) For purposes of ruling on a demurrer, all facts pleaded are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)

Code of Civil Procedure section 430.40, subdivision (b), provides that “[a] party who has filed a complaint or cross-complaint may, within 10 days after service of the answer to his pleading, demur to the answer.” Plaintiffs argue they were entitled to an extension because of the inability to meet and confer. Whether the parties successfully met and conferred is of no consequence here, as the court has discretion to consider an untimely demurrer (Jackson v. Doe (2011) 192 Cal.App.4th 742, 749), and the Court prefers to resolve challenges to pleadings on their merits. 

The Court assumes that the affirmative defenses are intended to apply to all causes of action in Plaintiffs’ complaint. As to the first and seventeenth affirmative defenses, it is clear that the HOA contends that Plaintiffs have failed to state a claim upon which relief may be granted, and it is for the trier of fact to determine if this is the case. As to the third affirmative defense, the HOA clearly alleges that Plaintiffs have delayed the commencement of this action to the HOA’s prejudice, and this may be proven through future facts learned through discovery. Thus, the demurrer to these affirmative defenses is OVERRULED.

As to the fourth, fifth, sixth, eighth, ninth, tenth, eleventh, twelfth, thirteenth affirmative defenses, these have been adequately pled as legal defenses based on Plaintiffs’ allegations in their complaint; specifically, Plaintiffs allege that the HOA claimed that M-units could not be rented in January 2020, and Plaintiffs admit they took ownership of the M-units with knowledge of the CC&R provisions. (Compl. ¶¶ 7, 8, 18.) it is reasonable to assert a defense which may be proven through future facts learned through discovery, and the Court does not require a party to assert the entirety of their defense in an answer. Accordingly, the demurrer to these affirmative defenses is OVERRULED.

As to the seventh, fourteenth, fifteenth, and sixteenth affirmative defenses, “[t]he business judgment rule is a judicial policy of deference to the business judgment of corporate directors in the exercise of their broad discretion in making corporate decisions.” (Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 429.) Each of these affirmative defenses pleads a version of justification based on the HOA’s judgment in enforcing the CC&Rs. Thus, the demurrer to these affirmative defenses is OVERRULED.

As to the eighteenth affirmative defense, the HOA sufficiently cites a provision of the CC&Rs as providing a basis to assert that Plaintiffs are barred from recovery. Accordingly, the demurrer to this affirmative defense is OVERRULED.

As to the nineteenth affirmative defense, the Court agrees with Plaintiffs that the HOA cannot simply substitute an affirmative defense in place of what is currently alleged as the “Additional Affirmative Defenses” defense. The HOA must move for leave to amend its answer if it wishes to allege a new affirmative defense. Thus, Plaintiffs’ demurrer to the nineteenth affirmative defense is SUSTAINED without leave to amend.