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Villa Milano Homeowners Association v. Il Davorge11/6/2000
As modified November 26, 2000. There is no change in the judgment. The petition for rehearing is denied.
VILLA MILANO HOMEOWNERS ASSOCIATION,
PLAINTIFF AND RESPONDENT,
v.
IL DAVORGE,
DEFENDANT AND APPELLANT.
(Super. Ct. No. 754749)
Cooksey, Howard, Martin & Toolen, Thomas F. Zimmerman and Wilson E. Yurek for Defendant and Appellant. Duke Gerstel Shearer and Dawn R. Brennan for Plaintiff and Respondent.
The opinion of the court was delivered by: Sills, P.J.
CERTIFIED FOR PUBLICATION
OPINION
Appeal from an order of the Superior Court of Orange County, Tully H. Seymour, Judge.
Affirmed.
In this case of first impression, we decide whether a developer can use a declaration of covenants, conditions and restrictions (CC&R;s) containing a binding arbitration clause as a device to preclude homeowners, and the homeowners association of which they are members, from pursuing an action for construction or design defect damages in a court of law. When homeowners purchase property subject to CC&R;s, they agree to be bound by those CC&R;s, including any arbitration clause contained therein. But that agreement, like any other, will not be enforced if it is unconscionable. Code of Civil Procedure section 1298.7 provides home buyers the right to bring a judicial action for construction or design defect damages even when the purchase agreement contains a binding arbitration clause. Public policy will not permit a developer, who is unable to use a purchase agreement to block a home buyer's access to a judicial forum, to cut off that access by circuitous means -- the CC&R;s.
I. FACTS
Il Davorge, a California limited partnership, was the developer of the Villa Milano condominium complex located in Huntington Beach. In order to create a "condominium project" governed by the Davis-Stirling Common Interest Development Act (Civ. Code, § 1350 et seq.), it recorded CC&R;s governing the use and maintenance of the property within the complex (Civ. Code, §§ 1351-1353). As the sole owner of the property at the time of recordation, Il Davorge was the only party to sign the CC&R;s. More than two years after the CC&R;s were recorded, and before any units were sold, Il Davorge lost the project through foreclosure by its construction lender. The units were sold thereafter.
The CC&R;s provided for the creation of the Villa Milano Homeowners Association (Association), a nonprofit corporation. Every owner of a condominium unit is a member of the Association, as required by the CC&R;s. The Association is governed by applicable statutes, its articles of incorporation, its bylaws, and most notably, the CC&R;s. (2 Hanna & Van Atta, Cal. Common Interest Developments: Law and Practice (1999) § 18:40, p. 46 (hereafter Hanna & Van Atta).) The CC&R;s, by their terms, are imposed as equitable servitudes against the property and bind all owners of interests in the property, both the individual unit owners and the Association as the holder of an easement interest in the common area.
Eventually, the homeowners and the Association discovered that both the individual units and the common area suffered from what they believed to be various construction and design defects. Hence, the Association filed a complaint against Il Davorge seeking damages to the project. While the Association filed the suit in its own name, pursuant to Code of Civil Procedure section 383, it sought recovery for damages suffered by the indiv
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