By Glen C. Hansen
In Quail Lakes Owners Assn. v. Kozina (2012) 204 Cal.App.4th 1132, the Court of Appeal for the Third Appellate District affirmed a trial court’s decision to grant a verified petition by a homeowners’ association for an order under Civil Code section 1356 to modify the association’s governing laws to reduce a supermajority voting restriction.
The organic charters for many older homeowners associations required supermajority votes for amendments. However, voter apathy and other reasons often make achieving such a supermajority impractical. Civil Code section 1356 of the Davis-Stirling Common Interest Development Act creates a court procedure for lowering the supermajority requirement. Section 1356 provides that a homeowners association, or any member, may petition the superior court for a reduction in the percentage of affirmative votes required to amend the governing documents if they require approval by “owners having more than 50 percent of the votes in the association.” The court may, but need not, grant the petition if it finds all of the following: (1) notice was properly given; (2) the balloting was properly conducted; (3) reasonable efforts were made to permit eligible members to vote; (4) owners having more than 50 percent of the votes voted in favor of the amendment; (5) the amendment is reasonable; and (6) granting the petition is not improper for any reason stated in subdivision (e), of section 1356.
In this case, the Quail Lakes Owners Association (“Association”) filed a petition under section 1356 that alleged an inability to make changes to its “Covenants, Conditions and Restrictions” (“CCR’s”), despite majority support among the homeowners, due to a supermajority requirement. The petition alleged that in a 2009 election, of 1,958 “membership votes,” 1,409 votes were cast, of which 1,209 voted in favor of the new CCR’s.
Petitioner Vladimir Kozina initially filed an objection on the grounds that the evidence attached to the unverified petition was not properly authenticated, and that the manner of notice was insufficient to satisfy due process. The trial court denied that initial petition without prejudice for lack of verified evidence. In response, the Association filed a verified amended petition. Kozina then filed an opposition to the amended petition that did not address any procedural and substantive deficiencies in the amended petition, but instead “reserve[ed] expressly the right to submit” additional briefing. At the hearing on the amended petition, Kozina conceded the Association’s president had verified the amended petition, but argued that she had not stated her competence or authenticated the documents attached to the amended petition. The trial court declined the Association’s offer to present live testimony. The trial court granted the amended petition. Kozina appealed. The Court of Appeal affirmed.
On appeal, Kozina argued that the trial court’s hearing on the petition violated due process because the time to oppose the petition was too short. However, the Court of Appeal noted that Kozina never contended that he was unable to articulate all of the arguments he wanted to make, or unable to muster the evidence he wanted the trial court to consider, due to time constraints, and therefore he failed to show how he was prejudiced by the response time set by the trial court. The Court of Appeal rejected Kozina’s argument that other homeowners might have been prejudiced by the briefing order, because Kozina lacked standing to assert the due process rights of other homeowners. The court explained that the Association is the de facto representative of the homeowners, and Kozina did not purport to represent a subgroup within the Association. Contrary to Kozina’s argument, the rules for derivative shareholder suits are not analogous in this context because his appeal did not challenge any action or omission by the Association — it challenged the court’s order amending the CCR’s — and because a derivative action does not advance the rights of individual shareholders, as Kozina’s analogously sought to do here.
The Court of Appeal further held that the trial court’s findings were sufficient regarding each of the six requirements provided in section 1356. The record on appeal demonstrated that the trial court was aware of the requirements of exercising its discretion under section 1356. In addition, the trial court was not required to recite the evidence pertaining to its findings under each of the six requirements. Therefore the trial court did not abuse its discretion in granting the amended petition.
Glen C. Hansen is Senior Counsel at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.