Lead Opinion
*4In Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999)
Here, homeowners cultivated a vineyard for the purpose of making wine to be sold to the public. The CC&Rs did not prohibit *569the cultivation of a vineyard for this purpose, but they did prohibit "any business or commercial activity." The operation of the vineyard may have constituted "business or commercial activity" in the literal sense of that term. But a literal interpretation in the present case would elevate form over substance and lead to absurd results. (See SDC/Pullman Partners v. Tolo Inc. (1997)
This appeal is from a judgment and a postjudgment award of attorney fees and costs in favor of Jeffrey Ketelhut and Marcella Ketelhut (the Ketelhuts) and other parties. The Ketelhuts cross-appeal from the award of attorney fees and costs. In the appeal from the judgment, the central issue is whether the Ketelhuts, homeowners in a residential common interest development, violated a restrictive covenant requiring that they not use their property for any business or commercial activity. The Ketelhuts operated a vineyard on their property. After harvesting the grapes, they sent them to a winery to be made into wine. They sold the wine over the Internet.
Other homeowners objected to the operation of what they considered to be a commercial vineyard in violation of the prohibition against any business or commercial activity. The Board of Directors (Board) of the homeowners association - Los Robles Hills Estates Homeowners Association (HOA) - decided that the vineyard was not being used for business or commercial activity.
Plaintiffs/homeowners Felipa Eith and Jeffrey Eith (the Eiths), Thomasine Mitchell and John Mitchell (the Mitchells), Stacy Wasserman, *5Philip Chang, Morrey Wasserman, and Eileen Gabler (hereafter collectively referred to as "plaintiffs") brought an action against the Ketelhuts, HOA, and Board members Michael Daily, Jeanne Yen, and Frank Niesner (hereafter collectively referred to as "defendants"). The court conducted a lengthy bifurcated trial on the eighth and ninth causes of action. The eighth cause of action concerned whether the operation of the vineyard was a prohibited business or commercial activity. The ninth cause of action sought to quiet title to a common area.
The trial court did not decide whether the operation of the vineyard was a prohibited business or commercial activity. Instead, it invoked the judicial deference rule of Lamden , supra ,
The trial court correctly applied the Lamden judicial deference rule to the Board's decision that the Ketelhuts' operation of the vineyard was not a prohibited business or commercial use. We further conclude that, as a matter of law, it is not a prohibited business or commercial use. In addition, we reject plaintiffs' claim that the judgment is void because the trial judge did not disclose contributions made by defendants' counsel to his campaign for re-election to the superior court. We affirm *570the judgment as well as the postjudgment award of attorney fees and costs.
Factual Background
In 1966, the Janss Corporation (Janss) developed a 28-lot residential subdivision (Los Robles Hills Estates) in the City of Thousand Oaks. The subdivision is a common interest development subject to the Davis-Sterling Common Interest Development Act. ( Civ. Code, § 4000 et seq. ) "Common interest developments are required to be managed by a homeowners association [citation], defined as 'a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development' [citation], which homeowners are generally mandated to join [citation]." ( Villa De Las Palmas Homeowners Assn. v. Terifaj (2004)
Janss created HOA to manage the development. It deeded to HOA an 18.56-acre parcel that the trial court and parties referred to as a "common area." The deed provides, "This conveyance is made on condition that said property shall be used solely for purposes of recreation or decoration or both, and in the event that said property is otherwise used, it shall automatically revert to grantor herein."
*6The development is subject to a recorded declaration of CC&Rs. Paragraph 1.01 of the CC&Rs provides, "No lot shall be used for any purpose (including any business or commercial activity) other than for the residence of one family and its domestic servants ...." Subparagraph 3 of paragraph 2.03 provides that "[f]or good cause shown ... deviations from the applicable deed restrictions" may be allowed "to avoid unnecessary hardships or expense, but no deviation shall be allowed to authorize a business or commercial use." Paragraph 5.07 provides, "Every person acquiring a lot ... covenants to observe, perform and be bound by this Declaration of Restrictions."
In June 2003, the Ketelhuts purchased in the development a 1.75-acre lot on Pinecrest Drive (the Property). In 2005, they planted a vineyard consisting of 600 plants. The plants extended "just under .4 acres" into the 18.56-acre common area. In their brief, defendants acknowledge, "Unbeknownst to the Ketelhuts and [HOA], some of the grape plants encroached on the [common area]." In 2011, when HOA learned of the encroachment, its counsel wrote a letter to the Ketelhuts' counsel "demanding that [the Ketelhuts] immediately remove the vines from the common area, as well as any other items that may be located upon the Association's common area."
Before planting the grape vines, the Ketelhuts submitted a landscape plan (Exhibit 244) to the Board. It was approved by the Board's Architectural Committee (the Committee). The plan divided the Property into three separate vineyards. One would grow grapes for Cabernet Sauvignon, the second for Sangiovese, and the third for Merlot. The plan did not indicate the number of grape vines that would be planted. The Ketelhuts did not inform the Board or the Committee that the grapes grown on the Property would be used to make wine that would be offered for sale to the public.
Pranas Raulinaitis, who served on the Committee in 2005, testified that the Committee members "viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood." It "never entered into [his] mind" that "the vineyard was being planted for commercial sale of wine to the public."
The first harvest was in 2008. At that time, Jeffrey Ketelhut "harvested the grapes ... with the intention of bottling *571them for sale." He "commenc[ed the] wine business in 2009." Jeffrey Ketelhut admitted that "the sale[ ] of wine is a business" and that the vineyard "operates like a business." But he characterized the vineyard "as a hobby where I do it in my spare time." "[M]y purpose in getting involved wasn't to generate a profit and this become a livelihood. This was a hobby. I enjoy gardening .... [T]hat was therapy for me." The Ketelhuts never determined whether, excluding attorney fees, the vineyard generated a profit. Including attorney fees, it has not generated a profit in any year. *7Although the Ketelhuts' tax returns were not produced, Jeffrey Ketelhut testified that he had filed Internal Revenue Service Schedule C (Form 1040) for the vineyard. Pursuant to Evidence Code sections 459 and 452, subdivision (h), we take judicial notice that Schedule C is entitled "Profit or Loss from Business (Sole Proprietor)." We also take judicial notice that, since 2009, page 1 of the instructions for Schedule C has provided, "Use [Schedule C (Form 1040) ] to report income or loss from a business you operated or a profession you practiced as a sole proprietor. An activity qualifies as a business if: your primary purpose for engaging in the activity is for income or profit, and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business ." (Italics added.)
In 2009, the Ketelhuts filed in Ventura County a fictitious business name statement showing that they were doing business at the Property as "Los Robles Hills Winery" and "Puerta del Cielo Vineyards." They applied and obtained a "Type 17 and Type 20 license [from the Department of Alcoholic Beverage Control], which [permits] retail and wholesale [sales] over the internet only." They also obtained "a Thousand Oaks business license." The licenses showed that the business was located at the Property. But in 2012, the location of the business was changed to a Camarillo address.
The Ketelhuts began selling wine in May 2010. With one exception, they have sold only wine made from grapes grown on the Property. The exception occurred in 2011, when they made wine from sauvignon blanc grapes that they had purchased. In 2015, the Ketelhuts harvested 2,000 pounds of grapes. They invited family, friends, and neighbors to participate in the harvesting. Jeffrey Ketelhut testified, "[I]t took us an hour-and-a-half to pull down all the grapes."
After the grapes are harvested, they are transported to "Camarillo Custom Crush [in Camarillo], where all the winemaking takes place." Camarillo Custom Crush puts the wine into bottles that bear the Ketelhuts' personal label. The Ketelhuts do not store wine on the Property. They have a storage facility in Malibu. They do not ship bottles of wine from the Property.
"In a typical year," the Ketelhuts are "fortunate" to produce two barrels of wine. "[A] single barrel can hold up to 30 cases." Each case contains 12 bottles. Thus, the maximum typical annual production is 720 bottles of wine. But in 2009, the Ketelhuts "produced 132 cases," which is 1,584 bottles of wine.
At the time of trial in November 2015, the wine production was "dwindling" because they had "los[t] vines [due] to drought." The original 600 *8plants had been reduced to about 400. Jeffrey Ketelhut estimated that production for 2014 and 2015 would be 50 cases per year. The wine for these years was still being stored in barrels.
The Ketelhuts retain ownership of the bottled wine. They advertise on Facebook, *572Twitter, their personal web site, "and through [their] wholesale accounts." The logo "Los Robles Hills Winery" and their website address are displayed on the exterior of their truck, which they park in the driveway of the Property. "[T]hey keep the truck covered" while it is on the Property.
The Ketelhuts "sold wine to a number of restaurants and hotels in the local area." But because of plaintiffs' lawsuit, they "let those [local sales] lapse." At the time of trial, they were "still offer[ing] retail sales and wholesale sales," but were probably giving "at least 60 percent" of their wine to "charity." For the last two years, their retail sales have been "zero." Their wines appear on the menu at "a few" restaurants.
Exhibit No. 35 contains copies of pages from the Ketelhuts' web site. The pages are dated May 22, 2014. The wines for sale range in price from $27 to $42 per bottle.
In January 2011, the Ventura County Star published an article about the Ketelhuts' "winery." The article said that they "were hosting wine tastings by appointment at [their] home tasting room." In March 2011, the Department of Alcoholic Beverage Control informed the Ketelhuts that someone had complained about the wine tastings. The Ketelhuts denied hosting wine tastings on the Property.
In its statement of decision, the trial court found: "There was ... no retail traffic to the premises or tasting room on the premises at [the Property]. What was accomplished [there] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo."
Some homeowners complained about the vineyard. In August 2011 counsel for plaintiffs Felipa Eith and Stacy Wasserman wrote a letter to the Ketelhuts "indicating that the commercial vineyard was a violation of the CC&Rs and that [they] should stop that aspect of [their] business." The letter did not demand that the Ketelhuts stop growing grapes on the Property. It demanded that they "[c]ease operating a commercial vineyard." The letter also demanded that the Ketelhuts "[r]emove all encroaching plants, irrigation and any other vineyard materials ... from the ... common area."
The Board, which consisted of five homeowners, investigated the Ketelhuts' operation of the vineyard. It interviewed other homeowners. In *9June 2011, it conducted a meeting that was open to all of the homeowners. The Ketelhuts appeared and answered questions. After the meeting, three of the five board members - defendants Daily, Yen, and Niesner - concluded that the Ketelhuts were not using the Property for a nonresidential purpose in violation of paragraph 1.01 of the CC&Rs. They found that there was no prohibited business or commercial activity on the Property.
Board member Daily considered the vineyard to be "landscaping" rather than a business. He explained: "They were growing grape vines just like I grow fruit trees and Mr. Krupnick [a homeowner] grows avocado trees, and people grow grass in their yard. It was landscape." "[T]herefore I wasn't going to, as a board member, try to restrict them from growing grapes. Like I wouldn't restrict anybody else from growing fruit or whatever." "Their growing grapes was part of their landscape plan."
On the other hand, Daily understood that "the growing phase of their winery was part of the business." "You have to have grapes in order to make wine." Daily continued: "I believe that aspect to their business [growing grapes] is acceptable because it's their landscape." "The growing of grapes is certainly not something prohibited by the CC&R'S and if somebody *573takes those grapes in a very limited way without impact on the community, then I don't really care what they do with them. They can make jelly and sell it. That's fine with me." "I considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable."
Daily did not "know how to define the difference between business and commercial" activity. He said: "[W]hen I think of commercial activity, I think of something, you know, in a building, you know, off site. That's what I think of as commercial activity."
Board member Yen testified that "commercial activity" within the meaning of the CC&Rs "is something that would cause a stress in the community, whether it be traffic, whether it be individuals, that it's something that disrupts our quality in our community and impacts your neighbors. That's commercial activity." Yen did "not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community."
Procedural Background
Plaintiffs filed a complaint consisting of nine causes of action. The trial court bifurcated the eighth and ninth causes of action and tried them first. The trial began in July 2015 and ended in November 2015.
*10The eighth cause of action is against HOA and the Ketelhuts. It seeks declaratory and injunctive relief. It requests "a judicial determination and decree that the CC&Rs and Grant Deed prohibit" the Ketelhuts from (1) operating their "Business" and "commercial enterprise," including the vineyard, on the Property and the common area, and (2) encroaching on the common area. The eighth cause of action also requests the issuance of a permanent injunction prohibiting the Ketelhuts from operating their business on the Property and encroaching on the common area.
The ninth cause of action is against all defendants. It seeks to quiet title to the common area. It claims that each of the 28 lot owners has an undivided 1/28th ownership interest in the common area and is "entitled to the non-exclusive possession" of that area. The ninth cause of action sought a judicial declaration that HOA has "no estate, right, title or interest" in the common area.
The remaining seven causes of action are for nuisance; trespass; breach of the CC&Rs; breach of HOA's fiduciary duty; breach of fiduciary duty by Board members; and "willful, wanton misfeasance and gross negligence." In its statement of decision, the trial court said it had ordered that "[t]he remaining causes of action, for which a jury had been demanded, would be set for trial as may be necessary following determination of the Declaratory Relief and Quiet Title causes of actions."
Prior to trial on the eighth and ninth causes of action, all plaintiffs except Felipa Eith dismissed the entire action against HOA and Board members.
Statement of Decision
On the eighth cause of action for declaratory and injunctive relief, in its statement of decision, the trial court said that it was "faced with ... whether or not to exercise its independent analysis of whether or not what the Ketelhuts were doing is a business or commercial activity, or to determine if the HOA had the discretionary authority to allow the Ketelhuts to do what they did under what is commonly known as the business judgment rule." The court applied the "deferential business judgment standard adopted by [
*574Lamden , supra ,
The trial court ruled: "The Court finds here that the defendant HOA and its individual directors acted in good faith in addressing the activities of the defendants Ketelhut, and that this decision should not be re-examined within the context of this litigation. ... As noted in Beehan v. Lido Isle (1977)
On the ninth cause of action to quiet title to the common area, the trial court found that the area was deeded to HOA in 1966. "[N]o fractional interest in the property was deeded to any homeowners. Since that time, there have been no other documents, recorded or otherwise, that purport[ ] to grant to the homeowners the 1/28 fractional interest that they are seeking in this action." Therefore, "title to the 18.5 acre common area is confirmed and quieted to [HOA]."
Judgment
On the eighth and ninth causes of action, the trial court entered judgment in favor of defendants. The judgment does not mention the remaining seven causes of action. In its statement of decision, the trial court said, "The rulings here made moot plaintiffs['] remaining causes of action. The case is therefore not set for further trial on those issues."
Thus, the judgment disposed of all nine causes of action and is appealable under the one final judgment rule of Code of Civil Procedure section 904.1, subdivision (a). "Judgments that leave nothing to be decided between one or more parties and their adversaries ... have the finality required by section 904.1, subdivision (a). A judgment that disposes of fewer than all of the causes of action framed by the pleadings, however, is necessarily 'interlocutory' ( Code Civ. Proc., § 904.1, subd. (a) ), and not yet final, as to any parties between whom another cause of action remains pending." ( Morehart v. County of Santa Barbara (1994)
PLAINTIFFS' APPEAL
The Judgment Is Not Void Because of the Trial Judge's Alleged Disqualification
A. Factual and Procedural Background
The complaint was filed on August 31, 2011. The case was assigned to Judge Henry J. Walsh.
*12After a contested judicial election, Judge Walsh was reelected in 2012. On February 10, 2016, the Commission on Judicial Performance admonished Judge Walsh for failing to disclose contributions made to his 2012 campaign by attorneys who had appeared before him after the election. The Commission noted, "In 2010, effective January 1, 2011, subdivision (a)(9)(C) was added to Code of Civil Procedure section 170.1 to require judges to disclose campaign contributions of $100 or more."
On the same day that Judge Walsh was admonished, he signed the judgment in the instant case.
On March 2, 2016, Felipa Eith filed a motion to disqualify Judge Walsh for cause pursuant to Code of Civil Procedure section 170.1. The ground for the motion was that he had received campaign contributions from defendants' counsel and had not disclosed them to plaintiffs. Eith alleged, "Recent inspection of recorded and filed election documents (Form 460) establishes that during the pendency of the instant action Judge Walsh solicited, accepted and kept secret from Plaintiffs and plaintiffs' counsel, monetary contributions to his campaign from defense counsel [firm, partners, or staff attorneys] in the amount of $2,600.00 ...." (Brackets in original.) A minute order entered nine days later on March 11, 2016, states: "Without conceding the merit of allegations of prejudice made by Ms. Eith, the court recuses itself from the case, and refers it to the supervising civil judge for re-assignment."
Plaintiffs filed a motion for a new trial. They argued that Judge Walsh's failure to disclose the campaign contributions denied them their right to a fair trial. Plaintiffs claimed that, if Judge Walsh had made a timely disclosure, they "would certainly have sought his disqualification in 2012 to preclude the possibility that he would preside at trial."
Judge John Nho Trong Nguyen denied the motion for a new trial. He ruled, "When the facts are viewed as a whole they show that no person aware of them might reasonably entertain a doubt that Judge Walsh would be able to be impartial."
*13B. Analysis
Plaintiffs argue that the judgment is void because Judge Walsh was disqualified years before the trial when he failed to disclose contributions made by defendants' counsel. If Judge Walsh were so disqualified, the judgment would be void. In Christie v. City of El Centro (2006)
The relevant statute is Code of Civil Procedure section 170.1, subdivision (a)(9), *576which provides: "A judge shall be disqualified" if: "(A) The judge has received a contribution in excess of one thousand five hundred dollars ($1500) from a party or lawyer in the proceeding , and either of the following applies: [¶] (i) The contribution was received in support of the judge's last election, if the last election was within the last six years. [¶] (ii) The contribution was received in anticipation of an upcoming election. [¶] (B) Notwithstanding subparagraph (A), the judge shall be disqualified based on a contribution of a lesser amount if subparagraph (A) of paragraph (6) applies." (Italics added.) Subparagraph (A) of paragraph (6) provides that a judge shall be disqualified if "[f]or any reason: [¶] (i) The judge believes his or her recusal would further the interests of justice. [¶] (ii) The judge believes there is a substantial doubt as to his or her capacity to be impartial. [¶] (iii) A person aware of the facts might reasonably entertain a doubt that the judge would be able to be impartial." (Italics added.)
The California Supreme Court Committee on Judicial Ethics Opinions (CJEO) issued an opinion on mandatory disqualification based on a contribution of more than $1,500: CJEO Formal Opinion 2013-003 (http://www.judicialethicsopinions.ca.gov/wp-content/uploads/cjeo_formal_opinion_2013-003.pdf). CJEO concluded, and we agree, that the $1,500 disqualification threshold "applies to the individual lawyer appearing in the matter." (Id . at p. 11.) "[T]he Legislature did not intend the $1,500 threshold for disqualification to apply to aggregated contributions from multiple individuals from the *14same law firm, nor to all individuals practicing law in a contributing law firm. A judge receiving such contributions however, is also required to make a determination as to whether disqualification is called for under section 170.1, subdivision (a)(6) [A](iii) and [ (a) ](9)(B)." (Ibid .) "[M]andatory disqualification for individual attorney contributions over the $1,500 threshold, together with discretionary disqualification for aggregated and law firm contributions, sufficiently ensures the public trust in an impartial and honorable judiciary." (Ibid .)
In their opening briefs, plaintiffs list the contributions of all of the lawyers who allegedly represented defendants during the five years of litigation. No lawyer contributed more than $1,500 to Judge Walsh's campaign. Thus, the mandatory disqualification provision is inapplicable. ( Code Civ. Proc., § 170.1, subd. (a)(9)(A).)
Plaintiffs have failed to show that Judge Walsh was disqualified because "[a] person aware of the facts might reasonably entertain a doubt that [he] would be able to be impartial." ( Code Civ. Proc., § 170.1, subd. (a)(6)(A)(iii).) Thus, we reject plaintiffs' claim that Judge Nguyen abused his discretion in denying their motion for a new trial. (See Garcia v. Rehrig International, Inc. (2002)
[ [/] ]
The Trial Court Properly Applied the Judicial Deference Rule Adopted by Our Supreme Court in Lamden
In its statement of decision, the trial court applied the rule of judicial deference *577adopted by our Supreme Court in Lamden , supra ,
The Supreme Court explained: "The formulation we have articulated affords homeowners, community associations, courts and advocates a clear standard for judicial review of discretionary economic decisions by community association boards, mandating a degree of deference to the latter's business judgments sufficient to discourage meritless litigation .... [¶] Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations' discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments." ( Lamden , supra , 21 Cal.4th at pp. 270-271,
Some courts have narrowly construed the Lamden rule. In Affan v. Portofino Cove Homeowners Assn. (2010)
Most courts have broadly construed the Lamden rule. In Haley v. Casa Del Rey Homeowners Assn. (2007)
*16In Harvey v. The Landing Homeowners Assn. (2008)
In Watts v. Oak Shores Community Association (2015)
Based on Lamden , Haley , Harvey , Watts , and Dolan-King , the judicial deference rule applies to an association board's discretionary decisions concerning the operation of the common interest development, e.g., the board's maintenance and repair decisions ( Lamden ), its selection of the appropriate means to remedy a violation of the CC&Rs ( Haley ), its designation of storage space in a common area ( Harvey ), its adoption of rules relating to short-term rentals ( Watts ), or its approval or rejection of a homeowner's improvement plan ( Dolan-King ). As we observed in Watts , "Common interest developments are best operated by the board of directors, not the courts." ( Watts , supra ,
Here, the Board made a decision concerning the operation of the common interest development. The Board decided whether the Ketelhuts violated the CC&Rs' prohibition against the use of the Property for business or commercial activity. The Board reasoned that the CC&Rs' prohibition did not encompass the operation of the vineyard because it did not affect the residential character of the community. Board member Daily testified, "I
*17considered that [the Ketelhuts] were going to do something that was not going to have a negative impact on the community and therefore it was allowable." Board member Yen did "not see picking grapes to go to Custom Crush [a]s impairing any activities in the community or in any way creating blockage to the community or a problem for the community."
We do not defer to the Board's interpretation of the CC&Rs. The interpretation of CC&R's is a legal question to be decided by the courts, not the Board. "CC&R's are interpreted according to the usual rules for the interpretation of contracts generally, with a view toward enforcing the reasonable intent of the parties. [Citations.]" ( Harvey , supra ,
In our review of the CC&Rs, we conclude that the Board correctly interpreted the prohibition of business or commercial activity. The prohibition does not encompass activity that has no effect on the community's residential character. The purpose of the prohibition is to preserve the community's residential character.
The trial court properly deferred to the Board's discretionary decision that the Ketelhuts' operation of the vineyard did not violate the prohibition against business or commercial activity because it did not affect the community's residential character. The Board made its decision "upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members." ( Lamden , supra ,
"Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments ...." ( Lamden , supra ,
The Board Correctly Decided that the Operation of the Vineyard Is Not Prohibited Business or Commercial Activity
As an alternative holding, we conclude that as a matter of law, the Ketelhuts' operation of the vineyard is not prohibited business or commercial activity because it does not affect the community's residential character.
No signs advertising wine sales are posted on the Property. Although the Ketelhuts' logo "Los Robles Hills Winery" and their website address are displayed on the exterior of their truck, "they keep the truck covered" while it is on the Property. The wine is made and bottled in Camarillo. The bottled wine is stored in Malibu. It is not shipped from the Property. The trial court found that there is "no retail traffic" to the Property, which does not have a wine-tasting room. The court said, "What was accomplished [on the Property] was cultivation of the grapes, picking of the grapes, and transportation of the grapes to Camarillo."
Had the Ketelhuts retained the wine for their personal use or given it away to friends or charity, there would have been no basis for finding business or commercial activity. All activities relating to the vineyard would have been permissible. That the Ketelhuts offered the wine for sale *580over the Internet did not transform their use of the Property into prohibited business or commercial activity. At all times the operation of the vineyard was fully consistent with residential use. No homeowner familiar with the vineyard's operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public. The business or commercial activity of making and selling the wine did not occur on the Property. Board member Daily testified, "They were growing grape vines just like I grow fruit trees and Mr. Krupnick grows avocado trees, and people grow grass in their yard." Moreover, instead of being a blight on the community, the vineyard was an aesthetic enhancement. Pranas Raulinaitis, who served on the Committee that approved the Ketelhut's landscape plan in 2005, testified that the Committee members "viewed the [vineyard] as an amazing [aesthetic] enhancement to the neighborhood."
We recognize that the growing of grapes on the Property is an integral part of the Ketelhuts' winemaking business. As Daily testified, "You have to have grapes in order to make wine." But absurd consequences would flow from construing the CC&Rs as prohibiting any business or commercial activity whatsoever irrespective of its effect on the residential character of the community.
*19For example, some appellate attorneys work at home, reading records, doing research, and writing briefs, but meet with clients elsewhere. Although these attorneys are engaged in the business of practicing appellate law at their home offices, their business activities do not affect the residential character of their communities.
It would be absurd to construe the CC&Rs as prohibiting such harmless conduct, just as it would be absurd to construe them as prohibiting the Ketelhuts from operating their vineyard. " 'In construing a contract the court ... should adopt that construction which will make the contract reasonable, fair and just [citation]; ... [and] should avoid an interpretation which will make the contract ... harsh, unjust or inequitable [citations], or which would result in an absurdity [citations] ....' " ( Wright v. Coberly-West Co. (1967)
There will be instances, of course, where a homeowner's activity constitutes prohibited business activity even though the business is primarily conducted off the residential premises. For example, if a homeowner conducted a trucking business off the premises except that the trucks were stored on the premises when not in use, the homeowner might be in violation of the business prohibition. The presence of the commercial trucks would detract from the community's residential character. (See Smart v. Carpenter (Ct.App. 2006)
[ [/] ]
Disposition
The judgment and postjudgment award of attorney fees and costs are affirmed. The parties shall bear their own costs on appeal.
I concur:
PERREN, J.
PERREN, J.
I concur.
In a vain effort to "define what may be indefinable," Justice Potter Stewart *581opined, "I know it when I see it."
Both the majority and the dissent appeal to "Common sense." (Maj. opn. ante , at p. 577; dis. opn. post , at pp. 582-83.) In doing so they quote from Lamden : I join with them and set forth the full closing of that opinion:
"Common sense suggests that judicial deference in such cases as this is appropriate, in view of the relative competence, over that of courts, possessed by owners and directors of common interest developments to make the detailed and peculiar economic decisions necessary in the maintenance of those developments. A deferential standard will, by minimizing the likelihood of unproductive litigation over their governing associations' discretionary economic decisions, foster stability, certainty and predictability in the governance and management of common interest developments. Beneficial corollaries include enhancement of the incentives for essential voluntary owner participation in common interest development governance and conservation of scarce judicial resources." ( Lamden v. La Jolla Shores Clubdominium Homeowners Assn ., supra , 21 Cal.4th at pp. 270-271,
This dispute and the resulting expense and acrimony are strong testament to the wisdom of such deference.
Notes
The Eiths "posit that the 2/10/16 handwritten date appearing adjacent [to] the signature line [on the judgment] is suspect" and "therefore unreliable." The Eiths contend that the handwritten date "was likely backdated." (Capitalization and bold omitted.) We reject the contention because it is based on speculation. There is a "presumption that judicial duty is properly performed." (People v. Coddington (2000)
See footnote *, ante .
See footnote *, ante .
Jacobellis v. Ohio , (1964)
Dissenting Opinion
I know unfairness when I see it. The judgment should be reversed because plaintiffs are entitled to a ruling from the trial court that the Ketelhuts were conducting a business in violation of the Covenants, Conditions, and Restrictions running with the land. (CC&Rs.) It does not matter whether the Ketelhuts could win an award for having the most beautiful vineyard in the world. It does not matter whether the wine from the grapes rivals the finest wines of the Napa Viticulture. As I shall explain, the facts unerringly point to the conclusion that the Ketelhuts were conducting a vineyard business on their property (the Property).
There will, of course, be situations in which the conducting of a business at a residence in violation of the CC&Rs will be so trivial to the neighborhood that it will be deemed not to be in violation of the CC&Rs. There is no reason to list them and one is only limited by imagination. As Colonel Stonehill said, "I do not entertain hypotheticals. The world, as it is, is vexing enough." (True Grit (2010 film).) So here, we need only decide whether the maintenance of the vineyard as a business is in violation of the CC&Rs.
*21Judicial Deference Rule
The judicial deference rule applies where an association board "exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development's common areas." ( *582Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999)
The inapplicability of the judicial deference rule is supported by Dover Village Assn. v. Jennison (2010)
The court considered Lamden to be "a nice illustration of matters genuinely within a board's discretion." ( *22Dover Village , supra ,
If the judicial deference rule applied here, there would be few board decisions to which it did not apply. The judicial deference rule "does not create a blanket immunity for all the decisions and actions of a homeowners association." ( Affan v. Portofino Cove Homeowners Assn. (2010)
*583The Vineyard Is Business or Commercial Activity within the Meaning of the CC&Rs
The majority opinion concludes that, as a matter of law, the Ketelhuts' operation of the vineyard is not a prohibited business or commercial activity because it does not affect the residential character of the community. But paragraph 1.01 of the CC&Rs does not say, "No lot shall be used for any purpose (including any business or commercial activity [that does not affect the residential character of the community ] ) other than for the residence of one family and its domestic servants." (Italicized language added.) " ' "In construing a contract which purports on its face to be a complete expression of the entire agreement, courts will not add thereto another term, about which the agreement is silent. [Citation.]" ' [Citation.]" (The Ratcliff Architects v. Vanir Construction Management , Inc. (2001)
There may be cases where business or commercial activity is so de minimis or concealed that it does not violate the CC&Rs, such as the example given in the majority opinion of an appellate attorney with a home office who sees no clients on the premises. But the Ketelhuts' operation of their commercial vineyard was neither de minimis nor concealed. They filed a fictitious business name statement and were issued both a business license *23and an alcoholic beverage sales license. The licenses originally indicated that the business was located at the Property. Board member Yen testified: "[A] notice of intent to sell [alcoholic beverages] ... was posted on their front where their mailbox was, and it needed to be posted elsewhere because you're not supposed to be advertising a business in the community. So they were advised not to post it there." The Ketelhuts advertised on Facebook, Twitter, their personal web site, "and through [their] wholesale accounts." They filed an Internal Revenue Service Schedule C (Form 1040) to report their business income or loss. The logo "Los Robles Hills Winery" and their website address were displayed on the exterior of their truck. Although the Ketelhuts covered the truck while it was parked on the Property, the logo and website address were openly displayed when they drove the truck to and from the Property.
The Ketelhuts sought and obtained publicity for their winery by giving an interview to the local newspaper, the Ventura County Star. In January 2011 the newspaper published an article about the winery. Until he read the article, plaintiff John Mitchell was not aware that the Ketelhuts were growing grapes for a commercial purpose. Mitchell "knew that they weren't supposed to be doing an activity like that because of the CC&Rs," which "exclude any business activity."
A copy of the newspaper article was marked as Exhibit 54, but it was neither offered nor received into evidence. I quote from the article because it was before the trial court, witnesses testified as to its content, Felipa Eith quoted from the article during her examination of Jeffrey Ketelhut, and the article arguably is judicially noticeable not to prove the truth of the facts reported, but to prove the extent to *584which the commercial nature of the vineyard was publicized. ( Evid. Code, §§ 452, subd. (h), 459.)
The article takes up the entire front page of the newspaper's Sunday "Business" section ("Section E"). It is entitled, "GRAPE expectations[:] T.O. [Thousand Oaks] couple's home vineyard about to pay off." The article includes photographs of the vineyard, the Ketelhuts, and bottles of wine produced from grapes grown at the vineyard. The bottles are labeled, "Los Robles Hills." One of the photographs of the Ketelhuts is captioned, "Jeff and Marcella Ketelhut, owners of the commercial vineyard in the Conejo Valley, enjoy discussing the challenges of wine production." (Italics added.) The article includes the website address of the Ketelhuts' winery.
The article states in part: "For Jeff and Marcella Ketelhut, the dream of owning a winery has come to fruition on the slopes near their Thousand Oaks home." "The Ketelhuts are not yet making a profit but said they are selling their wine, at $35 a bottle, through their website, by word of mouth and by *24hosting wine tastings by appointment at their home tasting room. [¶] ... The couple also has planted a selection of olive trees on the property and hopes to begin producing cured olives and olive oil for sale in the near future. [¶] They said they are exploring ways to expand their commercial enterprise, given the potential they believe exists in the Conejo Valley. [¶] 'We wanted to try it for a few years, and initially it was more of a fun thing, but now we're barely doing any marketing and the stuff is flying off the shelves,' said Marcella." The article observes that "the Ketelhuts' Los Robles Hills Winery [is] on the list of 15 [wineries] that make up the Ventura County Wine Trail." Jeffrey Ketelhut testified that in 2010 the Ketelhuts had become "members of the Ventura County Wine Trail."
Through the newspaper article, the Ketelhuts proclaimed to Ventura County residents that they were operating a commercial vineyard on the Property. It is understandable that homeowners, such as John Mitchell, would be alarmed by this development, which appeared to be a blatant violation of the CC&Rs' prohibition against "any business or commercial activity." Homeowners could view the article as a public flaunting by the Ketelhuts of their violation.
The majority opinion states, "No homeowner familiar with the vineyard's operation would have had reason to suspect that the vineyard was being used to produce wine for sale to the public." (Maj. opn., ante at p. 580.) But the newspaper article put the entire community on notice that the Ketelhuts were operating a commercial vineyard.
Moreover, the vineyard was in plain view of the homeowners. Richard Monson testified that, "[w]hen [he] drove past the Ketelhuts' home," he "noticed the grapevines on the hillside." Because the grapevines were visible to everyone, they would be a continual source of aggravation to homeowners who objected to a commercial agricultural operation in their community. The majority opinion says that the vineyard was an "aesthetic enhancement." (Maj. opn., ante at pp. 579-80.) But to the homeowners who objected to its presence, it was an eyesore.
The Ketelhuts' commercial vineyard was not permissible because, as Board member Daily testified, "Their growing grapes was part of their landscape plan." The landscape plan, which was approved in 2005 by the Board's Architectural Committee (the Committee), did not indicate that the vineyard would be used to grow grapes to make wine that would be offered for sale to the public. In 2005 the Ketelhuts did not inform the Committee of this future commercial *585use. Had it been so informed, the Committee probably would not have approved the landscape plan.
Difficulties may arise in applying the majority opinion's standard of whether business or commercial activity affects the residential character of *25the community. With such a vague standard, where does one draw the line between activity that affects and activity that does not affect residential character? This is a purely subjective determination.
A New Meaning for CC&Rs
Traditionally, CC&Rs are restrictions and limitations on land use. Now at the whim of the Board, CC&Rs mean "choices, creativity, and recommendations." A homeowner has a choice and may be creative in the use of property. The traditional CC&Rs have been transformed into recommendations that the Board may elect not to enforce. Rather than having the force of law, the CC&Rs have the backbone of a chocolate éclair. And, of course, the Board's composition may change and there will be inconsistency in just how much business or commercial activity will be allowed.
CC&Rs play a vital role in protecting the reasonable expectations of parties when they purchase land. This concept is lost in the majority opinion. Future buyers in the development should be expressly advised that business or commercial activity is allowed at the discretion of the Board. This may actually devalue the land.
Finally, to monetarily punish plaintiffs with attorneys' fees is not only unfair, it is unconscionable. The Ketelhuts were the "first movers." They created the entire problem by operating a commercial vineyard and publicizing it in the local newspaper. They are at fault and they should pay for it.