HUNTINGTON CONTINENTAL TOWNHOUSE ASSOCIATION, INC., Plaintiff and Respondent, v. JOSEPH A. MINER, Individually and as Trustee, etc., Defendant and Appellant.
No. G049624
Fourth Dist., Div. Three
Oct. 14, 2014
230 Cal. App. 4th 590
Sam Walker for Defendant and Appellant.
Barbara Jones for AARP as Amicus Curiae on behalf of Defendant and Appellant.
Noah Zinner for Housing and Economic Rights Advocates as Amicus Curiae on behalf of Defendant and Appellant.
Kent Qian for National Housing Law Project as Amicus Curiae on behalf of Defendant and Appellant.
Law Offices of Tom Fier and Tom Fier as Amicus Curiae on behalf of Plaintiff and Respondent.
Larry Rothman & Associates and Larry Rothman as Amicus Curiae on behalf of Plaintiff and Respondent.
SwedelsonGottlieb and Joan Lewis-Heard for ALS Lien Services as Amicus Curiae on behalf of Plaintiff and Respondent.
OPINION
FYBEL, J.-
INTRODUCTION
The Orange County Superior Court, after a decision by the appellate division (Huntington Continental Town House Assn., Inc. v. Miner (2014) 222 Cal.App.4th Supp. 13 [167 Cal.Rptr.3d 609] (Huntington Continental)), certified this case for transfer to this court pursuant to
We agree with the decision of the appellate division of the superior court in Huntington Continental, and hold that under
Joseph A. Miner, as trustee of The JM Trust, Dated January 1, 2005 (the Trust), owns a separate interest in a common interest development subject to the management of the Huntington Continental Townhouse Association, Inc. (HCTA), which is an association within the meaning of
For nearly every month from 2003 to the beginning of 2009, Miner timely paid HCTA assessments for the Trust‘s separate interest. He failed to pay the assessment due on April 1, 2009, and, thereafter, the Trust was delinquent in paying assessments. On October 13, 2010, HCTA sent a letter to the Trust, notifying it that assessments were delinquent in the amount of $3,864.96. Receiving no response to the letter, HCTA‘s board of directors adopted a resolution to record a lien against the Trust‘s separate interest for the delinquent assessments. A lien in the amount of $4,827.81 was recorded on January 7, 2011. Of that amount, $4,136 was for unpaid assessments and the rest was for late charges, interest, collection costs, and a returned check fee.
Four days after the lien was recorded, HCTA sent a notice to the Trust that the matter would be forwarded to legal counsel if the entire balance of the account was not paid within 30 days. On January 25, 2011, HCTA‘s board of directors adopted a resolution to foreclose the delinquent assessment lien. Two months later, HCTA‘s attorneys, Feldsott & Lee (Feldsott), sent a letter to the Trust, notifying it of HCTA‘s intent to initiate foreclosure proceedings. The letter stated the total amount of delinquency was $6,197.11, of which $5,434.11 was for delinquent assessments and the rest was for attorney fees, costs, release of lien fee, and “file set up” fees.
On April 13, 2011, HCTA filed a limited jurisdiction complaint against the Trust and Miner, as trustee, asserting causes of action for account stated (first cause of action), open book account (second cause of action), and foreclosure of assessment lien (third cause of action). (Later, an amendment to the complaint named Miner as a defendant in his individual capacity.) Soon after the complaint was filed, Miner requested and received from Feldsott an itemized statement of the sums due for delinquent assessments and other fees. According to the itemized statement, the total due as of May 2, 2011, was $8,012.58, of which $5,923.58 was for delinquent assessments through May 31, 2011.
On May 6, 2011, Miner sent an e-mail to HCTA, proposing a payment plan under which the Trust would make monthly payments of $1,500 to $2,000.
On October 17, 2011, Feldsott notified Miner that the Trust had failed to make the September and October payments under the payment plan agreement and failure to make those payments or reinstate the plan within 10 days would lead to its cancellation.
On several occasions, Miner requested a line-item accounting from the HCTA. On November 15 and December 12, 2011, Miner tendered the regular monthly assessments of $188. On December 16, Feldsott returned the checks on the ground it was “unable to accept partial payments.” Three days later, Feldsott provided Miner a statement of delinquent assessments and fees, according to which the total due was $6,418.47.
Miner mailed a cashier‘s check for $3,500, dated December 29, 2011, to the home address of the HCTA president. On January 3, 2012, the HCTA president told Miner he would have Feldsott apply the $3,500 payment to the Trust‘s account and have the HCTA provide the Trust with an updated accounting. In a letter dated January 5, 2012, Feldsott informed Miner the $3,500 check was being returned because “[o]ur office is unable to accept partial payments without first establishing a payment plan approved by the Board of Directors.” This letter included an account statement reflecting a total of $9,226.13 in charges, $3,568 in payments (not including the returned check for $3,500), and a balance of $5,658.13. On February 15, 2012, Feldsott sent a new account statement showing a total due of $6,837.68.
After a bench trial, the trial court found the Trust owed HCTA $5,715.39 as of September 2012, and HCTA had complied with the relevant statutory requirements to foreclose its lien. The judgment awarded HCTA damages of $5,715.93 on the first and second causes of action and ordered foreclosure of its lien under the third cause of action. The Trust and Miner timely filed a notice of appeal.
The superior court appellate division, in a unanimous opinion authored by Judge Griffin, reversed the judgment as to the third cause of action and reversed and remanded as to the first and second causes of action. (Huntington Continental, supra, 222 Cal.App.4th at pp. Supp. 17, 18.) The appellate division concluded the Davis-Stirling Act compelled HCTA to accept the $3,500 check even though it constituted a partial payment of the total amount owed on the account. (Huntington Continental, supra, at pp. Supp. 15, 17.) Under the Davis-Stirling Act, an association may not seek to collect through
At trial, HCTA‘s counsel had conceded that “had that $3500 payment been applied to the account, the remaining balance would have been $760 and change.” Based on exhibits presented at trial, the appellate division of the superior court prepared an accounting of assessments only. (Huntington Continental, supra, 222 Cal.App.4th at p. Supp. 16, fn. 1.) According to that accounting, attached as an appendix to the appellate division‘s opinion, as of December 1, 2011, the total amount of unpaid assessments was $2,704 and as of September 1, 2012, the total amount of unpaid assessments was $4,441. (Id. at pp. Supp. 19, 20.) Feldsott‘s statement of account, dated December 19, 2011, showed total delinquent assessments of $7,264.57 and payment of $3,000 from funds held in trust.
DISCUSSION
I.
Standard of Review and Principles of Statutory Interpretation
General standards of appellate review apply to appeals transferred from the superior court appellate division for decision in the Court of Appeal. (People v. Disandro (2010) 186 Cal.App.4th 593, 599 [111 Cal.Rptr.3d 857].) In resolving the issue certified to this court by the superior court, we must interpret provisions of the Davis-Stirling Act. We review issues of statutory interpretation de novo. (Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911, 916 [129 Cal.Rptr.2d 811, 62 P.3d 54].)
The fundamental task of statutory interpretation is to ascertain the Legislature‘s intent to effectuate the statute‘s purpose. (Smith v. Superior Court (2006) 39 Cal.4th 77, 83 [45 Cal.Rptr.3d 394, 137 P.3d 218].) In ascertaining the Legislature‘s intent, we first consider the language of the statute itself, giving the words used their ordinary meaning. (Ibid.) The statutory language must be construed in the context of the statute as a whole and the overall statutory scheme, giving significance to every word, phrase, sentence, and part of the statute. (Ibid.)
If the statutory language is unambiguous, the plain meaning controls and consideration of extrinsic sources to determine the Legislature‘s intent is
II.
Relevant Provisions of the Davis-Stirling Act
The Davis-Stirling Act is codified as part 5 of division 4 of the Civil Code. Articles 1, 2, and 3 of chapter 8 of part 5 of division 4 of the Civil Code (
The Davis-Stirling Act requires an association to levy regular and special assessments “sufficient to perform its obligations under the governing documents and this act.” (
Under
Before recording the lien, an association must provide the owner of record notice that includes the information set forth in subdivisions (a) through (f) of
If an association and an owner of a separate interest dispute the validity of a charge or sum levied by the association, the owner may pay the disputed amount, including collection costs, and, in addition to pursuing alternative dispute resolution, may commence a small claims action to recoup the disputed amount paid. (
Article 3 of chapter 8 of part 5 of division 4 of the Civil Code concerns collection of assessments and enforcement of liens. Under
In the event an association‘s board decides to pursue nonjudicial foreclosure, “[a]ny sale by the trustee shall be conducted in accordance with
Particularly significant to this case is
Section 5720(b) identifies three ways to collect or secure delinquent assessments in an amount less than $1,800. The first is “a civil action in small claims court.” (
The limitation on foreclosure of assessment liens for amounts under $1,800 does not apply to “[a]ssessments secured by a lien that are more than 12 months delinquent.” (
III.
An Association Must Accept a Partial Payment Made by an Owner of a Separate Interest After a Lien Has Been Recorded.
Two statutes within the Davis-Stirling Act, section 5655(a) and
A. Section 5655(a)
Section 5655(a) states: “Any payments made by the owner of a separate interest toward a debt described in subdivision (a) of Section 5650 shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney‘s fees, late charges, or interest.” Two issues arise in interpreting section 5655(a). First, does it permit an owner to make a partial payment, that is, a payment which does not cover the owner‘s entire debt under section 5650(a)? Second, does section 5655(a) require an association to accept a partial payment?
On the first issue, the plain language of section 5655(a) unambiguously permits partial payments. The Davis-Stirling Act permits an association
On the second issue, the plain language of section 5655(a) requires an association to accept an owner‘s partial payment. Section 5655(a) does not refer to any payment made by the owner and accepted by an association. Instead, section 5655(a) states, “[a]ny payments made by the owner” toward a debt described in section 5650(a) “shall” (italics added) be applied in the order set forth. Use of the word “shall” connotes a mandatory act. “Under ‘well-settled principle[s] of statutory construction,’ we ‘ordinarily’ construe the word ‘may’ as permissive and the word ‘shall’ as mandatory, ‘particularly’ when a single statute uses both terms.” (Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538, 542 [121 Cal.Rptr.3d 312, 247 P.3d 542].) In Diamond v. Superior Court (2013) 217 Cal.App.4th 1172, 1189-1190 [159 Cal.Rptr.3d 110] the court concluded the word “shall” in the Davis-Stirling Act,
Nothing in the Davis-Stirling Act provides that the rights and duties under section 5655(a) end when an association takes action to record a lien. Although section 5655(a) is in article 2 of chapter 8 of part 5 of division 4 of the Civil Code, entitled Assessment Payment and Delinquency, and not in article 3, entitled Assessment Collection, the headings in the Davis-Stirling Act “do not in any manner affect the scope, meaning, or intent of this act” (
HCTA argues partial payments under section 5655(a) are permitted only when made pursuant to a payment plan under
HCTA argues that permitting partial payments under section 5655(a) would be inconsistent with
B. Section 5720(b)
Section 5720(b) prohibits an association from foreclosing a lien when the amount of delinquent assessments alone is less than $1,800. In this case, if HCTA had accepted the Trust‘s check for $3,500, then the amount of delinquent assessments would have been less than $1,800 and, under section 5720(b), HCTA would not have been able to pursue foreclosure to collect the debt.
Requiring an association to accept a partial payment reducing the amount of delinquent assessments to less than $1,800 is consistent with this stated legislative policy of protecting owners from losing their home equity over small amounts of delinquent assessments. Permitting an association to reject a partial payment could lead to the very situation the Legislature sought to avoid: foreclosure and loss of the owner‘s equity in the home when the owner is delinquent in paying assessments in an amount under $1,800.
We disagree with the assertion made by HCTA and the amici curiae appearing on its behalf that requiring an association to accept partial payments will “seriously impede” an association‘s ability to collect assessments. We recognize assessments are both necessary to the functioning of an association and required by the Davis-Stirling Act to be in an amount sufficient to perform an association‘s obligations under the governing documents and the Davis-Stirling Act. (
An association has remedies, however, when the amount of delinquent assessments falls below $1,800. Section 5720(b) identifies three ways to collect or secure delinquent assessments in an amount less than $1,800 as well as to collect additional fees, collection costs, and interest: (1) “a civil action in small claims court“; (2) “recording a lien on the owner‘s separate interest“; and (3) “[a]ny other manner provided by law, except for judicial or nonjudicial foreclosure.” (
HCTA and the amici curiae appearing on its behalf assert that requiring an association to accept partial payments bringing the amount of delinquent assessments to less than $1,800 would permit delinquent owners to abuse the system by accepting the benefits of living in a common interest development at the expense of the other owners. It is possible for a situation to arise in which a clever and unscrupulous owner would be able to dodge foreclosure of a lien by making partial payments designed to bring the delinquent assessments under $1,800 in amount and less than 12 months in age. As we read the Davis-Stirling Act, the Legislature engaged in a balancing process and chose to accept that risk in order to protect owners from foreclosure and the loss of equity in their homes when the delinquent assessments are under $1,800 or less than 12 months delinquent. And, as we have explained, section 5720(b) grants an association various remedies to collect the debt.
C. Civil Code Section 5710
In the event the board of an association decides to pursue nonjudicial foreclosure, “[a]ny sale by the trustee shall be conducted in accordance with
HCTA argues, based on
D. Policy Arguments
The parties and, in particular, the amici curiae raise policy considerations that are not based on statutory language. HCTA and the amici curiae appearing on its behalf assert the Trust is not a struggling homeowner but owns the home as an investment, and Miner made a calculated decision not to pay assessments. Amici curiae AARP, Housing and Economic Rights Advocates, and National Housing Law Project argue that “use of foreclosure as an enforcement tool on those having difficulty paying homeowner assessments can be both unjust and extremely damaging” and “[t]he consequences of foreclosure are particularly severe for older homeowners.”
The code sections of the Davis-Stirling Act dealing with assessment payments, delinquency, and assessment collection (
IV.
Conclusion
After considering the language of section 5655(a) and its context within the Davis-Stirling Act, we conclude an association must accept a partial payment made by an owner of a separate interest in a common interest development toward a debt described in section 5650(a) and must apply that payment first to assessments owed. That requirement continues after recordation of a lien pursuant to
Accordingly, in this case, HCTA was required to accept the Trust‘s check for $3,500 when tendered in December 2011. Had HCTA accepted the
The superior court appellate division‘s opinion also addressed the sufficiency of the evidence to support the damages awarded under the first and second causes of action. (Huntington Continental, supra, 222 Cal.App.4th at p. Supp. 17.) The matter was not certified and transferred to this court to address that issue and, therefore, we decline to do so, and decline to address any other issues raised in the appellate briefs. (See
DISPOSITION
The judgment of the trial court is reversed as to the third cause of action and the matter is remanded with directions to enter judgment on that cause of action in favor of appellant. The judgment of the trial court as to the first and second causes of action is reversed and the matter is remanded in accordance with the judgment of the appellate division of the superior court. Appellant shall recover costs incurred on appeal.
Rylaarsdam, Acting P. J., and Thompson, J., concurred.