Schuchmacher v. Rockpointe Homeowners Assn. CA2/3 ( 2023 )

Filed 1/19/23 Schuchmacher v. Rockpointe Homeowners Assn. CA2/3
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California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
ORLY SCHUCHMACHER, as B299589
Executor, etc.,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. PC056764)
v.
ROCKPOINTE HOMEOWNERS
ASSOCIATION et al.,
Defendants and Appellants.
APPEAL from a judgment and orders of the Superior Court
of Los Angeles County, J. Stephen Czuleger, Judge. Reversed
with directions.
Law Offices of Roger L. Stanard and Roger L. Stanard, for
Plaintiff and Appellant.
Gordon & Rees Scully Mansukhani, Craig J. Mariam and
Alison M. Pringle, for Defendants and Appellants.
‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗
This litigation arose from a fire in April 2011 that caused
damage to Gershon Schuchmacher’s condominium unit in the
Rockpointe condominium development. Schuchmacher,1 along
with his tenant, Kathleen Latham, and a contractor, Michael
Ruffino, sued, among others, the Rockpointe Homeowners
Association, Inc. (Rockpointe or HOA), four former members of
Rockpointe’s Board of Directors, and the current owner of the
unit, William Sturgeon, for a variety of causes of action, including
breach of Rockpointe’s governing documents, breach of fiduciary
duty, and civil conspiracy. At trial, the court nonsuited Latham
and Ruffino, and a jury (1) awarded Schuchmacher damages of
$76,432 for Rockpointe’s breach of its governing documents, and
(2) found the former directors and Sturgeon were not liable for
breach of fiduciary duty or civil conspiracy. Posttrial, the trial
court denied Rockpointe’s motion for judgment notwithstanding
the verdict, awarded Schuchmacher prevailing party attorney
fees, and denied Rockpointe’s and the former directors’ motions
for attorney fees. Rockpointe and the former directors appealed
from the judgment, the order denying the motion for judgment
notwithstanding the verdict, and the attorney fees order, and
Schuchmacher cross-appealed from the attorney fees order.
1 Gershon Schuchmacher died prior to trial, and Orly
Schuchmacher, the executor of his estate, was substituted as
plaintiff. We will refer to both Gershon Schuchmacher and Orly
Schuchmacher, in her capacity as plaintiff, as “Schuchmacher.”
2
On appeal, Rockpointe contends that the damages award
was not supported by substantial evidence, and Rockpointe was
entitled to recover its postoffer costs, including its attorney fees,
under Code of Civil Procedure section 998 because its pretrial
settlement offer exceeded Schuchmacher’s recovery. Separately,
the former directors contend they are entitled to attorney fees
pursuant to Civil Code section 5975, subdivision (c), which
permits an award of attorney fees to the prevailing party in an
action to enforce common interest development governing
documents. In his cross-appeal, Schuchmacher contends the trial
court abused its discretion by reducing his recoverable attorney
fees from $913,005 to $67,000.
We conclude that substantial evidence did not support the
jury’s damages award, and thus we will reduce Schuchmacher’s
damages for breach of Rockpointe’s governing documents to $1.
Having done so, we will vacate the trial court’s order regarding
Schuchmacher’s and Rockpointe’s motions for attorney fees and
to tax costs, and will direct the trial court on remand to
reconsider the parties’ requests for attorney fees and costs in
light of Schuchmacher’s reduced recovery. Finally, we conclude
that the law of the case doctrine compels the conclusion that the
former directors are not entitled to recover prevailing party
attorney fees pursuant to Civil Code section 5975, subdivision (c).
FACTUAL AND PROCEDURAL BACKGROUND
I. The April 2011 fire in Schuchmacher’s unit.
Schuchmacher bought a two-story condominium unit in the
Rockpointe condominium development in Chatsworth, California
(the unit) in 2003. In 2010, Schuchmacher experienced financial
difficulties and fell behind on his mortgage payments and
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homeowner’s association dues. The same year, Schuchmacher’s
friend, Latham, began renting the unit’s master bedroom.
On April 16, 2011, a fire broke out in Latham’s bedroom.
The fire caused significant damage to the upstairs bedrooms and
bathrooms, and the entire unit suffered water and smoke
damage. The cause of the fire was never determined.
Schuchmacher’s mortgage holder, Bank of America, had
initiated foreclosure proceedings on the unit prior to the fire. As
discussed more fully below, Bank of America foreclosed on the
unit about six months later, in October 2011.
II. Rockpointe’s governing documents and fire
insurance policy.
Rockpointe’s operations were governed by its “First
Restated Declaration of Covenants, Conditions, and Restrictions”
(CC&Rs). Among other things, the CC&Rs required Rockpointe
to “obtain and maintain a master or blanket policy of fire and
casualty insurance, for the full insurable value (replacement cost)
of all the Improvements within the Properties,” defined to include
“buildings, walls, decks, fences, swimming pools, landscaping,
landscape structures, solar heating equipment, spas, utility lines,
or any structure of any kind.” The CC&Rs also required
individual unit owners to “obtain and maintain assessment loss
coverage for fire, earthquake, and other casualties with a
minimum limit of $25,000,” and permitted individual owners to
maintain “[c]overage on portions of the structure not covered by
the Master Policy of the Association,” “[l]oss of use coverage for
living expenses,” and “[p]ersonal property coverage.” The CC&Rs
provided that Rockpointe’s master insurance policy “shall be the
primary coverage in the event of a loss covered by the
Association’s insurance.”
4
The CC&Rs provided that if there were a “total or partial
destruction of the Improvements in the Project, and the available
proceeds of the insurance [described above] are sufficient to cover
not less than 85 percent of the costs of repair and reconstruction,
the improvements shall be promptly rebuilt. The Association
shall solicit and obtain bids from at least two reputable
contractors to repair and reconstruct the improvements in
accordance with the original plans.” Thereafter, “the Board or its
authorized representatives shall, after obtaining bids from not
less than two, but no more than four, reputable contractors,
award the repair and reconstruction work to the most qualified
and responsible contractor who is licensed for the work, has
adequate liability insurance coverage and workers’ compensation
coverage.”
With regard to repair costs not covered by insurance, the
CC&Rs provided that “each Owner shall be obligated to
contribute an equal share to the cost of reconstruction or
restoration over and above the available insurance proceeds,” but
“[t]o the extent the Association’s Master Policy pays separate
interest damages, the Owner of such separate interest is
responsible to pay any deductible which is attributable to such
separate interest.” Alternatively, if damage or destruction was
caused “by the willful misconduct or negligent act or omission of”
an owner or the owner’s family, tenants, or guests, “the Board
shall cause the same to be repaired or replaced, and all costs and
expenses incurred in connection therewith shall be assessed and
charged solely to and against such Owner as a Special Individual
Assessment.”
With regard to maintenance, the CC&Rs provided that
each condominium owner was responsible for maintaining his or
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her unit, but “[n]o ‘improvement’ . . . shall be commenced,
erected, or maintained within the Property, nor shall any exterior
addition, or change or alteration be made in or to any portion of
the Common Area, any Unit, any Common Facility structure, or
to any Exclusive Use Common Area until the plans and
specifications . . . shall have been submitted to and approved in
writing by the Association’s Board of Directors.”
As required by the CC&Rs, Rockpointe maintained a
master fire and casualty insurance policy with Farmers
Insurance (Farmers). The Farmers policy included coverage for,
among other things, the interior walls of individual units, but not
the units’ contents. The policy also provided that Farmers was
the primary insurer for any covered loss, and the unit owners’
individual policies were secondary.
Separately, Schuchmacher maintained an individual
insurance policy with State Farm Insurance (State Farm) that
provided coverage for losses to his unit and personal property,
loss assessments, and temporary housing for up to 12 months if
his unit became uninhabitable due to a covered loss.
III. Rockpointe makes a claim under its fire insurance
policy and assesses Schuchmacher for the
deductible; Schuchmacher fails to pay the
assessment for the deductible and loses his unit to
foreclosure in October 2011.
After the fire in Schuchmacher’s unit, Rockpointe’s general
manager, Carol Brockhouse, initiated a claim with Farmers
under Rockpointe’s master fire insurance policy. In May 2011,
Farmers provided Rockpointe with a detailed scope of work
describing the covered repairs the unit required. Farmers
estimated the replacement value of the covered losses, which
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included the costs to repair all the interior walls of
Schuchmacher’s unit that had been damaged by fire, at $86,832.
In May 2011 and April 2012, Farmers issued Rockpointe two
checks totaling $76,432––the amount of the covered losses, less a
$10,000 deductible and a prior payment for lead and asbestos
testing. Rockpointe placed these funds in a segregated account
for the benefit of the unit.
In May 2011, Rockpointe obtained estimates for the repair
work from three contractors. It thereafter notified Schuchmacher
that a meeting “for the purpose of discussing the circumstances
involving the fire in your unit . . . and payment of the $10,000
insurance deductible” would take place on June 15, 2011.
Both Schuchmacher and Latham attended the June 15,
2011 meeting, at which Rockpointe’s Board of Directors (Board)
voted to approve an individual special assessment against
Schuchmacher in the amount of the $10,000 insurance
deductible. The Board agreed to provide Schuchmacher with a
letter of responsibility that he could submit to his individual
insurer, State Farm, to make a claim under his loss assessment
coverage, and Schuchmacher agreed he would turn over the
$10,000 deductible to the Board when he received it from State
Farm. The Board also discussed that it had received bids from
three separate contractors for the repair work and “the delay in
signing a contract stems from receipt of payment of the $10,000
deductible.”
The following day, June 16, 2011, the Board provided
Schuchmacher with written notice of the $10,000 special
assessment, due July 15, 2011. Brockhouse testified that it was
the Board’s position that it would not begin repairs until the
special assessment was paid.
7
State Farm issued a check for $10,000 made out jointly to
Schuchmacher and his mortgage holder, Bank of America, on
August 17, 2011. Latham testified that she mailed the check to
Bank of America with a request that the bank endorse the check
to Rockpointe. However, according to Latham, neither she nor
Schuchmacher received an endorsed check from Bank of America,
and it is undisputed that the proceeds were never paid to
Rockpointe.2
In early September 2011, Schuchmacher requested a
meeting with the Board to discuss his disagreement with the
$10,000 special assessment for the insurance deductible. The
meeting took place on September 15, 2011, at which time Latham
showed the Board a copy of the $10,000 check from State Farm
and said Bank of America had imposed some requirements before
it would sign the check over to Schuchmacher. She agreed to
provide a copy of Bank of America’s demand letter to the Board
the following day. The Board discussed the delinquent status of
Schuchmacher’s assessment and the pending bank foreclosure,
then scheduled for September 26, 2011.
On September 19, 2011, Rockpointe filed a complaint
against Schuchmacher to foreclose on a lien of $9,388 arising out
of unpaid assessments in 2010 and 2011. The complaint did not
include the $10,000 special assessment for the insurance
deductible.
2 There was conflicting testimony at trial about what became
of the check. Latham testified that Bank of America cashed the
check and applied the proceeds to Schuchmacher’s delinquent
mortgage account. Other testimony suggested that
Schuchmacher may have cashed the check himself.
8
Brockhouse informed the Board on October 19, 2011, that
she still had not received the documents Latham had agreed to
provide on September 15, and that the foreclosure sale had been
postponed to October 26, 2011.
Schuchmacher’s mortgagee, Bank of America, foreclosed on
the unit on October 26, 2011. The trustee’s deed of sale was
recorded on November 9, 2011.
IV. Latham contracts with Ruffino to do the repair
work; subsequently, she moves back into the unit
and begins to do the repair work herself.
Meanwhile, several months prior to the October 2011
foreclosure, Latham moved back into the unit and entered into a
contract with Ruffino, a contractor recommended by a friend, to
repair the unit.3 Schuchmacher was not a party to that contract.4
Indeed, Schuchmacher testified that he did not receive an
estimate from Ruffino, did not hire Ruffino to repair the unit, and
never received a request for payment from Ruffino. Ruffino
3 We will refer interchangeably to Ruffino and Ruffino
Construction.
4 Schuchmacher’s respondent’s brief asserts that
“Schuchmacher hired Ruffino to make repairs,” but that
statement is not supported by Schuchmacher’s citation to
Ruffino’s testimony. That testimony is as follows: “Q: Now, did
you enter into any kind of an agreement with Mr. Schuchmacher
and Ms. Latham regarding the work that you were going to do at
that unit?” “A [Ruffino]: Ms. Latham, yes. We came to an
agreement that we’d work off the scope of work by Farmers
Insurance.” (Italics added.) Nor is it supported by the contract
itself, which was signed only by Latham.
9
similarly testified that he contracted with Latham, not with
Schuchmacher. Ruffino did some demolition and framing work in
the master bedroom in August 2011, but he stopped about three
weeks later because he was not getting paid.
When Ruffino stopped working on the unit, Latham, who
was not a contractor, began to do the repairs herself. She worked
primarily downstairs and in one upstairs bedroom. She borrowed
money to pay for supplies, paid friends to help her, and bartered
with other friends for their help.
When she learned about the foreclosure, Latham stopped
working on the unit, but she wanted to be paid for the work she
had already done. She testified that by that time, she had
completed about 75 percent of the work described in Farmers’
scope of work. She told Bank of America that she would move out
of the unit once she was paid for the work she had done.
V. Latham continues to live in the unit, make repairs,
and demand release of the insurance proceeds.
On about January 20, 2012, Latham faxed a letter to
Brockhouse that demanded the release of $56,492 from the funds
held in trust for the repair of the unit. The letter stated: “The
repairs outlined in the attached bill from Ruffino Construction
have been completed according to [Farmers’ scope of work] and
[in] compliance with current building codes and regulations.
Mike Ruffino is a licensed, bonded, insured general contractor
and has complied with all requirements as stated in the CC&R’s.
Therefore, I see no reason for further delay in issuing a check.”
Latham admitted at trial that although the invoice appeared to
have been issued by Ruffino for work he had done, she had
prepared the invoice and billed for work she or her friends had
done.
10
Brockhouse forwarded Latham’s letter to Rockpointe’s
attorney, Jeffrey Beaumont, on about March 2, 2012, with an
email that stated as follows: “Latham is requesting
reimbursement to a contractor. The Association had no
involvement in this contract whatsoever. There is no contract,
either written or verbal, between Rockpointe and the contractor.
Gershon Schuchmacher no longer owns the unit, it was foreclosed
upon last year. Bank of America is trying to evict Kathleen
Latham from the unit and, as you know, the Association has
judicial action against Gershon Schuchmacher. [¶] Please let me
know where Rockpointe stands on this and what action I need to
take at this point.”
In March 2012, Beaumont sent a letter to Latham that said
as follows: “The Association is prepared to and will make the
requested payments upon our receipt of the following: (1) An
agreement––executed by you, Ruffino, and Bank of America (the
owner of the property)––releasing the Association from any and
all liability with respect to the repair work to be undertaken; and
(2) Written confirmation from Ruffino that the repair work has
been completed and payment releases for [the] Association from
any claims received.” Beaumont testified that these releases
were necessary to protect Rockpointe from suit because the Board
was not clear on the legal relationships between Schuchmacher
and Latham, and because Bank of America, “who’s the owner of
the unit, really has standing to step in and dictate what takes
place with that unit.” Rockpointe never received a release
executed by Latham, Ruffino, and Bank of America.
On April 23, 2012, Beaumont further advised Latham that
before any money could be released, Rockpointe needed an
agreement “signed by the owner of the unit, lender and
11
contractor, stating how the money will be distributed. This must
be provided to me prior to my client releasing any monies to
anyone.” According to Beaumont, neither he nor Rockpointe ever
received a signed agreement.
On May 8, 2012, Bank of America sold the unit to
Polymathic Properties.
On about June 14, 2012, Latham faxed Beaumont a letter
seeking issuance of a check in the amount of $76,432 made
payable to Ruffino. The letter attached a release of liability
signed by Latham for Ruffino, but did not attach a release from
the owner or a statement by Ruffino that all of the work
identified by Farmers had been completed.
On about June 25, 2012, Beaumont’s law partner, Lisa
Tashjian, responded that the amount sought exceeded what
Rockpointe had agreed to release, and Rockpointe still had not
received all the documents required by Beaumont’s March 15
letter. Tashjian said: “Unless and until a release for the amount
authorized by the Board ($56,492.02) is signed and provided to
the Association, the funds cannot and will not be released to you.
[¶] In addition, you have failed to provide our office with written
confirmation from Ruffino that the repair work has been
completed and payment of the $56,492.02 will release the
Association. Please provide this written confirmation to our
office immediately. Once the proper documentation has been
received and reviewed by our office, payment will be released.”
Sometime in July, Latham provided Beaumont with two
documents purportedly signed by Ruffino: a statement that “all
work was performed and completed as per the description on the
attached pages of Farmers Insurance ‘Scope of work,’ ” and a
release of liability stating that $56,492 “constitutes the entire
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unpaid balance due the undersigned in connection with said
project.” Latham testified that she signed both of these
documents with Ruffino’s permission. On about July 26, 2012,
Beaumont’s firm acknowledged receipt of the release signed by
Ruffino accepting $56,492 as full and final payment, but noted
that it still had not received written confirmation that the repairs
had been completed pursuant to the scope of work prepared by
Farmers. The letter further said that Rockpointe believed the
work had not been completed, and it requested access to the unit
for an inspection.
According to Latham, this letter presented a problem for
her because while she had completed much of the work described
in Farmers’ scope of work, she had done virtually no work in the
master bedroom where the fire began. She understood the letter
to mean that she would not be paid for any of her work unless she
finished all of it. Therefore, she decided to finish the work in the
master bedroom because she “couldn’t sacrifice all that money.”
Latham testified that between about August and November
2012, she completed the work described in Farmers’ scope of
work. On November 30, 2012, the Los Angeles Department of
Building and Safety finalized the building permit.
On December 9, 2012, Latham sent a letter to Beaumont
granting access to the unit for inspection and attaching a
purported release from Ruffino Construction “for the full and
completed contract for the repairs that match the estimate from
Farmers ($86,024.02).” Attached to Latham’s letter was a letter
on Ruffino Construction letterhead that stated as follows:
“Please accept this letter in confirmation that my contract (that is
consistent with scope of work estimated by Farmers Insurance)
has been completed for the property listed above. The
13
Department of Building and Safety has inspected and issued the
‘Final’ on the repair work. It is my understanding that a) your
firm, b) the Board and c) the HOA’s contractor have been given
the authority to inspect the unit any time from 12/10 to 12/21 and
according to your letter of July 26, 2012, it appears that this
inspection is the last requirement necessary for you to release a
check to me. [¶] Therefore, I would appreciate your timely
response in getting this inspection completed.” Latham admitted
that she prepared and signed this letter, but testified that she did
so with Ruffino’s authority and approval.
Rockpointe did not respond to Latham’s letters and did not
conduct an inspection. Latham sent the letters again in late
March 2013, and in April 2013, Schuchmacher, Latham, and
Ruffino were permitted to attend an executive board meeting.
Latham brought documents with her and said all the work had
been completed and she and Ruffino would like to get paid. The
Board’s president asked Latham for a copy of her lease, building
permits, and a breakdown of the work that had been done. He
said the documents would be forwarded to Beaumont to review,
“and if he said that we could cut a check, we would cut a check.”
Latham agreed to bring the documents to Rockpointe’s office the
next morning, but she did not do so.
It is undisputed that Rockpointe never made any payments
to Ruffino, Latham, or Schuchmacher for the work done in the
unit.
VI. Latham is evicted from the unit; the unit is sold to a
member of Rockpointe’s Board, and the insurance
proceeds are released to repair the unit.
Polymathic evicted Latham from the unit in May 2014 and
shortly thereafter put the unit up for sale. In August 2014, the
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unit was purchased by Sturgeon, the president of Rockpointe’s
Board.
Sturgeon testified he made a visual inspection of the unit
prior to purchasing it but did not hire a professional inspector.
He did not see any evidence of fire damage, but said there was
visible water damage to the hallway and family room ceilings and
in the garage. He also noted significant disrepair, including
windows and doors with broken windows and latches, a broken
air conditioning unit, a broken garage door, visible wood rot in
the kitchen, plumbing leaks, and a nonfunctional shower,
bathtub, and toilet. He also observed what he characterized as
“bizarre” remodeling to the unit, including the absence of closets
in the bedrooms, the replacement of an eight-foot sliding glass
door with a five-foot door, a sealed attic access, and several
bathroom sinks not connected to plumbing.
After he purchased the unit, Sturgeon reported to
Rockpointe management that there was water damage to the
unit and was told that the HOA was holding insurance proceeds
to repair the damage. In September 2014, he asked the Board to
pay for identified issues in the unit. He planned to pay for other
cosmetic repairs himself, including drywall repair, new carpet,
new paint, and a kitchen remodel.
After Sturgeon began removing drywall, he discovered
what he characterized as unremediated water damage from the
fire, including dry rot and mold in the walls, the absence of
insulation, charred wood hidden behind drywall, improperly
capped plumbing that was dripping into the walls, and a nook
filled with garbage and debris. Contractors hired and paid by
Rockpointe repaired much of this damage. In all, Rockpointe
15
paid about $53,000 to repair the unit. Sturgeon spent an
additional $30,000, for which he was not reimbursed.
VII. The present action.
A. Complaint and pretrial motions.
Schuchmacher, Latham, and Ruffino filed the present
action on December 9, 2015. The operative complaint named 21
defendants, including Rockpointe, former directors David Winn,
Andrea Canady, Tom McKenzie, and Dan Dockry (the former
directors), general manager Brockhouse, current Rockpointe
directors James McDermott, Lisa Pena, Helen Martin, and Wendi
Gladstone (the current directors), and Board president Sturgeon.
As relevant to this appeal, the complaint alleged as follows:
The first cause of action for breach of the CC&Rs, brought
by Schuchmacher against Rockpointe, alleged that Rockpointe
had a duty under the CC&Rs to repair the fire damage to
Schuchmacher’s unit, but it had refused to do so or to reimburse
Schuchmacher for the cost of making the repairs.
The second cause of action for breach of fiduciary duty,
brought by Schuchmacher against Brockhouse, the current and
former directors, and Sturgeon, alleged that defendants breached
their fiduciary duties by failing to assure that repairs were timely
made to the unit, failing to reimburse plaintiffs for the costs of
repairs, wrongfully assessing Schuchmacher $10,000, and
permitting Sturgeon to misappropriate the insurance monies.
The third cause of action for civil conspiracy, brought by
Schuchmacher, Latham, and Ruffino against Rockpointe, the
current and former directors, and Sturgeon, alleged that
defendants conspired to violate the CC&Rs, including by failing
to pay for repairs to the unit.
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The fourth cause of action for conversion, brought by
Schuchmacher, Latham, and Ruffino against Sturgeon, alleged
that Sturgeon abused his position as Rockpointe’s president to
misappropriate and convert to his own use a portion of the
insurance proceeds.
Many of the defendants filed motions for summary
judgment and/or summary adjudication. In August 2019, the
trial court granted summary judgment for Brockhouse and the
current directors, granted summary adjudication for Rockpointe
on the civil conspiracy claim, and granted summary adjudication
for the former directors on the civil conspiracy claim as to
Latham and Ruffino only. Accordingly, the following claims
remained at time of trial: (1) breach of the CC&Rs, by
Schuchmacher against Rockpointe; (2) breach of fiduciary duty
and civil conspiracy, by Schuchmacher against the former
directors and Sturgeon; and (3) conversion, by Schuchmacher,
Latham, and Ruffino against Sturgeon.
B. Trial and judgment.
The case was tried to a jury over twelve days in March and
April 2019. At the conclusion of the plaintiffs’ case, the trial
court granted a nonsuit on the cause of action for conversion,
thus eliminating Latham and Ruffino as plaintiffs.
In his closing argument, Schuchmacher’s attorney told the
jury that Rockpointe breached section 11.1 of the CC&Rs, which
required it to rebuild improvements “promptly,” and section 11.5,
which required it to take all necessary steps to assure the
commencement and completion of authorized repair “ ‘at the
earliest possible date.’ ” Counsel argued: “You are the ones to
decide what promptly means. Does promptly mean two weeks?
A month? Two months? I think we can all agree promptly does
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not mean a year or two years.” With regard to damages, counsel
argued that “the amount of the damages is $87,221.67. That is
the amount given by Farmers. . . . That is the sum that we
submit is the amount of damages that should be paid and
awarded to Mr. Schuchmacher in this case.” Those damages
accrued to Schuchmacher, counsel said, because
“Mr. Schuchmacher had an obligation to Mr. Ruffino,
Ms. Latham, to reimburse them for the work that they did, and
he had the right to have that unit repaired, and it wasn’t.”
Rockpointe’s counsel argued that Rockpointe never had an
obligation to pay Ruffino because it did not receive the
documentation it asked for. Further, even if Rockpointe broke a
promise, “it’s one for which there can no remedy because Gershon
Schuchmacher was not the one promised to be paid. He’s the one
who has to suffer damages, and he’s the only one you can reward
with a verdict. You can’t find damages for Latham and Ruffino
and then transfer those somehow magically over to Gershon
Schuchmacher. That’s not how it works.” Thus, counsel argued,
damages “is another defense in this case. Damages aren’t an
optional part of a case. You don’t get to prove up your case and
then leave it in the hands of the jury to just come up with
damages. You don’t get to just put up Farmers[’] scope of repair
on the screen and point to it as your damages. That’s not
damages in this case. [¶] Gershon Schuchmacher was not out-of-
pocket for any of the money on Farmers’ scope of repair. He did
not owe anybody for the repairs. He did not owe Michael Ruffino
anything. He did not have a contract with Michael Ruffino. The
only contract with Michael Ruffino . . . was [with] Kathleen
Latham.”
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Counsel continued: “Plaintiff is suggesting . . . that, though
the contract was between Latham and Ruffino, somehow
Schuchmacher was obligated by it. . . . [¶] You heard the
[deposition] testimony of Gershon Schuchmacher yesterday. And
Gershon Schuchmacher said, ‘I had no contract with Michael
Ruffino.’ He said, ‘I was not out-of-pocket a penny in this case.
I’ve not paid them.’ If he’s not out-of-pocket a penny in this case,
he has no damages.” Further, counsel said, “Latham and Ruffino
allegedly did repairs here. You might ask yourself, well, if
somebody has a claim for repairs, then they do. But they’re not
plaintiffs in this case anymore. You can only concern yourself
with plaintiff Gershon Schuchmacher, and he has no damages.”
In rebuttal, Schuchmacher’s counsel argued: “What is this
nonsense about no damages? If you own a home and it catches on
fire, have you suffered damages? Mr. Schuchmacher suffered
damages to his unit on April 16, 2011. The measure of damages
. . . is based upon the scope of work and the estimate done by
Farmers as to what is the cost of repairing those damages. It is
that figure that we[] seek in damages in this case. The amount of
those damages, the measure of damages is proven by Farmers[’]
scope of work.” “Was Gershon Schuchmacher harmed? Yes,
obviously. They didn’t do the repairs. The repairs should have
been completed before the time he lost the unit through
foreclosure if they had acted diligently.”
The jury returned a special verdict for Schuchmacher on
the cause of action for breach of the CC&Rs and awarded
damages of $76,432. The jury returned verdicts for the former
directors and Sturgeon on the claims for breach of fiduciary duty
and civil conspiracy. The trial court entered judgment on the
special verdict on April 30, 2019.
19
VIII. Posttrial motions.
A. Rockpointe’s motion for judgment
notwithstanding the verdict.
Rockpointe moved for judgment notwithstanding the
verdict. It urged that Schuchmacher had not established he
suffered any damages as a result of the alleged breach of the
CC&Rs because there was no evidence that he paid any out-of-
pocket costs for the repairs, contracted with Latham or Ruffino to
make repairs, or suffered any diminution in value of the unit.
Accordingly, Rockpointe contended Schuchmacher was entitled
to, at most, nominal damages of $1.
Schuchmacher opposed the motion. He contended that as
the owner of the unit at the time of the fire, he was the party
entitled to recover for injury to the unit, the cost of which was
established by the scope of work and estimate prepared by
Farmers. Further, Rockpointe was estopped from contending
otherwise by having submitted a claim to Farmers and accepting
checks in the amount of $76,432, the precise amount of the jury’s
verdict.
On June 28, 2019, the trial court denied the motion for
judgment notwithstanding the verdict.
B. Motions for attorney fees and to tax costs.
The parties filed a variety of motions relating to attorney
fees and costs, including the following:
(1) Schuchmacher sought attorney fees of $913,005 plus
a multiplier pursuant to Civil Code section 5975, which permits
an award of attorney fees to the prevailing party in an action to
enforce common interest development governing documents.
Schuchmacher contended he had prevailed on his cause of action
20
against Rockpointe for breach of the CC&Rs, his attorney fees
were reasonable in view of defendant’s “egregious litigation
tactics and refusal to settle,” and his fees should not be
apportioned among the various causes of action.
(2) Rockpointe and the former directors sought attorney
fees of $759,062. Rockpointe urged that it was entitled to costs,
including attorney fees, because its pretrial settlement offer
pursuant to Code of Civil Procedure section 998 exceeded
Schuchmacher’s recovery, and the former directors urged that
they were entitled to fees pursuant to Civil Code section 5975
because they were the prevailing parties on Schuchmacher’s
claims against them to enforce common interest development
governing documents.
The trial court found that Schuchmacher was entitled to
recover attorney fees from Rockpointe because he prevailed on his
sole claim against the HOA and his recovery exceeded
Rockpointe’s pretrial settlement offer. However, the court said
the case had been severely overlitigated, and it reduced
Schuchmacher’s recoverable attorney fees to $67,500. The court
denied the past directors’ request for attorney fees, finding that
although the past directors prevailed on Schuchmacher’s claims
for breach of fiduciary duty and civil conspiracy, those claims
were not actions by an owner against other owners or against a
homeowner’s association within the meaning of Civil Code section
5975.
C. Judgment and appeal.
The court entered an amended judgment on August 26,
2019. It awarded Schuchmacher $76,432 on the first cause of
action, plus costs of $17,065, prejudgment interest of $48,728,
and attorney fees of $67,500. It entered judgment for defendants
21
on the remaining causes of action and awarded Rockpointe costs
of $2,338, and the former directors costs of $43,567 and $10,887.
Rockpointe, the former directors, and Schuchmacher
timely appealed from the judgment and postjudgment orders.
DISCUSSION
On appeal, Rockpointe contends that there is no
substantial evidence that Schuchmacher suffered actual
damages, and that it, not Schuchmacher, should have been
awarded prevailing party attorney fees. Separately, the former
directors contend they are entitled to prevailing party attorney
fees pursuant to Civil Code section 5975, subdivision (c).
Schuchmacher responds that there was ample evidence
that he suffered damages, the trial court properly found that
Schuchmacher’s recovery exceeded Rockpointe’s Code of Civil
Procedure section 998 offer, and the former directors are not
entitled to attorney fees. In his cross-appeal, Schuchmacher
urges that the trial court abused its discretion by awarding him
less than 8 percent of the attorney fees he sought.
As we discuss, Schuchmacher did not establish by
substantial evidence that he suffered more than nominal
damages, and thus we will reverse his damages award to $1.
Having done so, we will return the matter to the trial court to
redetermine attorney fees and costs in light of Schuchmacher’s
reduced recovery. Finally, we conclude that the former directors
are not entitled to attorney fees under the doctrine of law of the
case.
22
I. The jury’s damages award was not supported by
substantial evidence; Schuchmacher therefore is
entitled to an award of only nominal damages.
Rockpointe contends that the judgment must be reversed
because there was no substantial evidence that its asserted
breach of the CC&Rs caused Schuchmacher damages of $76,432.
Specifically, Rockpointe asserts it was undisputed that the
CC&Rs did not require it to turn over the insurance proceeds to
Schuchmacher, Schuchmacher did not incur any out-of-pocket
costs to repair the unit, Schuchmacher did not contract with
Ruffino to repair the unit, and there was no evidence the unit
suffered a diminution in value as a result of the unrepaired fire
damage. Thus, Rockpointe urges, Schuchmacher is entitled to
recover, at most, nominal damages of $1 for its breach of the
CC&Rs.
Schuchmacher responds that it is indisputable that his unit
was damaged by the fire and that the cost to repair the damage
was $76,432––precisely what the jury awarded him. Further, he
urges, Rockpointe is barred from claiming he did not suffer
damages because it represented it would pay to repair the
damages, and Schuchmacher relied on those promises when he
made the repairs.
A. Legal principles.
“The basic object of damages is compensation, and in the
law of contracts the theory is that the party injured by a breach
should receive as nearly as possible the equivalent of the benefits
of performance. (Civ. Code, § 3300.) The aim is to put the
injured party in as good a position as he or she would have been
had performance been rendered as promised. [Citation.]”
23
(Kashmiri v. Regents of University of California (2007)
156 Cal.App.4th 809, 848 (Kashmiri).) Thus, “[i]n an action for
breach of contract, the measure of damages is ‘the amount which
will compensate the party aggrieved for all the detriment
proximately caused thereby, or which, in the ordinary course of
things, would be likely to result therefrom’ (Civ. Code, § 3300),
provided the damages are ‘clearly ascertainable in both their
nature and origin’ (Civ. Code, § 3301).” (Erlich v. Menezes (1999)
21 Cal.4th 543, 550 (Erlich).)
Where a contract obligates a defendant to repair real
property, damages for nonperformance generally are measured
by the lesser of either the cost of repair, including lost use or
relocation expenses, or the diminution in value of the property.
(See, e.g., Erlich, supra, 21 Cal.4th at p. 561; Orndorff v.
Christiana Community Builders (1990) 217 Cal.App.3d 683, 687–
688; Coughlin v. Blair (1953) 41 Cal.2d 587, 600 (Coughlin).)
However, a property owner cannot recover “a greater amount in
damages for the breach of an obligation, than he could have
gained by the full performance thereof on both sides.” (Civ. Code,
§ 3358; see also Kashmiri, supra, 156 Cal.App.4th at p. 848;
Wickman v. Opper (1961) 188 Cal.App.2d 129, 133.)
Our review of a damages award is guided by several
standards of review. We review for substantial evidence whether
a plaintiff was, in fact, damaged by a defendant’s breach of
contract. (JMR Construction Corp. v. Environmental Assessment
& Remediation Management, Inc. (2015) 243 Cal.App.4th 571,
583; GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d
856, 873.) Whether a certain measure of damages is permissible
given the legal right the defendant has breached, is a matter of
law, subject to de novo review. (New West Charter Middle School
24
v. Los Angeles Unified School Dist. (2010) 187 Cal.App.4th 831,
843; Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 691.)
Finally, we review a factfinder’s determination of the amount of
compensatory damages for substantial evidence.
(LA Investments, LLC v. Spix (2022) 75 Cal.App.5th 1044, 1062;
Rufo v. Simpson (2001) 86 Cal.App.4th 573, 614.) Under that
standard, we “consider the whole record, view the evidence in the
light most favorable to the judgment, presume every fact the trier
of fact could reasonably deduce from the evidence, and defer to
the trier of fact’s determination of the weight and credibility of
the evidence.” (Rufo v. Simpson, at p. 614.) “ ‘The ultimate test
is whether it is reasonable for a trier of fact to make the ruling in
question in light of the whole record.’ (Roddenberry v.
Roddenberry (1996) 44 Cal.App.4th 634, 652.)” (Anderson v. Ford
Motor Co. (2022) 74 Cal.App.5th 946, 961.)
B. The evidence does not support the jury’s award
of compensatory damages.
It was undisputed at trial that the cost to repair the
damage caused by the fire was $86,431, which Schuchmacher
contended was the proper measure of his compensatory damages.
Based on the general principles articulated above, had
Schuchmacher not suffered foreclosure of the unit shortly after
the fire, we would have no difficulty concluding that the jury’s
award of $76,432––the cost of repair, less the $10,000 insurance
deductible––was based on a legally permissible measure of
damages and was supported by substantial evidence.
The foreclosure significantly altered the damages calculus,
however. Among other things, the foreclosure terminated
Schuchmacher’s membership in the HOA and ended the
contractual relationship between Schuchmacher and Rockpointe.
25
(Civ. Code, § 4625 (formerly Civ. Code, § 1358) [“Any conveyance,
judicial sale, or other voluntary or involuntary transfer of the
owner’s entire estate also includes the owner’s membership
interest in the association”].) Whatever Rockpointe did or failed
to do after Schuchmacher lost the unit to foreclosure, therefore,
could not have constituted a breach of the CC&Rs as to
Schuchmacher. (See, e.g., Martin v. Bridgeport Community
Assn., Inc. (2009) 173 Cal.App.4th 1024, 1032 [only property
owners have standing to assert redress for violations of planned
development governing documents, including CC&Rs].) The
relevant question for us in light of the foreclosure, therefore, is
whether Schuchmacher established by substantial evidence that
he suffered damages of $76,432 arising out of Rockpointe’s
actions prior to the October 2011 foreclosure.
In addition to limiting the time period during which
Rockpointe had a duty to Schuchmacher under the CC&Rs, the
foreclosure also had an effect on the nature of Schuchmacher’s
damages. Had Schuchmacher not lost the unit to foreclosure, the
cost of repairs would have been an accurate measure of his
damages because he would have fully internalized the losses
arising out of the fire. That is, but for the foreclosure,
Rockpointe’s failure to repair the unit would have left
Schuchmacher with two choices: Either pay for the repairs out of
his own pocket or suffer diminished use and enjoyment of the
unit. But because of the foreclosure, Schuchmacher would not
have enjoyed the use of the property after October 2011 even had
it been fully repaired by that time.5 Nor would the cost of any
5 We note in this regard that there was no evidence at trial
as to when the unit would have been fully repaired had
26
uncompleted repairs have fallen on Schuchmacher; instead,
postforeclosure, any additional repairs would necessarily have
been the responsibility of a subsequent owner.
What, then, was the proper measure of Schuchmacher’s
damages? Under well-established authority, Schuchmacher
would have been entitled to any diminution in value he suffered
at the foreclosure sale as a result of the unrepaired fire damage
(see, e.g., Erlich, supra, 21 Cal.4th at p. 561; Coughlin, supra,
41 Cal.2d at pp. 600–601), but he did not introduce any evidence
at trial concerning the value of the property, the sale price, or the
amount of his indebtedness. He also would have been entitled to
recover for his lost use of the unit (Erlich, at p. 561)––but, again,
there was no evidence about when Schuchmacher would have
been able reoccupy the unit had it been promptly repaired, or of
the reasonable value of Schuchmacher’s use and enjoyment of the
unit during the months that he should have been able to, but
could not, occupy it. Neither diminution in value nor lost use,
therefore, supports the jury’s damages award.
Alternatively, had Schuchmacher paid to repair the unit or
obligated himself contractually to do so prior to losing the unit to
foreclosure, his out-of-pocket costs would have been a proper
measure of his damages––but the evidence was undisputed that
Schuchmacher did not pay to repair the unit and did not enter
Rockpointe “promptly” initiated repairs. As we have said, the fire
occurred in April 2011, and Bank of America foreclosed on the
unit approximately six months later, in October 2011. In the
absence of evidence that the unit would have been fully repaired
prior to October 2011 but for Rockpointe’s breach of the CC&Rs,
we do not believe that the evidence supported a damages award
in any amount for lost use of the unit.
27
into a contract to do so. To the contrary, Schuchmacher testified
that he did not “put money [up] front” for the repair of the unit,
did not sign a contract with Ruffino to repair the unit, did not
discuss payment arrangements with Ruffino, and did not receive
a request for payment from Ruffino. Ruffino similarly testified
that he “never entered into a contract with Gershon
Schuchmacher” and, in fact, met Schuchmacher only once. And,
although Schuchmacher testified that he orally agreed to allow
Latham to repair the unit, neither he nor Latham testified that
Schuchmacher promised to pay Latham for her work.6
Finally, the insurance proceeds would have been a proper
measure of Schuchmacher’s damages if the CC&Rs had obligated
Rockpointe to turn over the insurance proceeds to him, but there
was no evidence they did so. No one testified that Schuchmacher
had a right to the insurance proceeds paid by Farmers, and no
provision of the CC&Rs so provided. And, indeed,
Schuchmacher’s theory at trial was not that he had a direct right
to the insurance proceeds, but rather that he had the right under
the CC&Rs to have his unit promptly repaired.
6 Schuchmacher’s counsel suggested at oral argument that
Latham testified at trial that Schuchmacher had agreed to pay
Ruffino. Not so. Latham’s testimony was that she told
Schuchmacher that he would be responsible to pay Ruffino––not
that Schuchmacher ever agreed to do so. Latham also did not
testify that Schuchmacher had authorized her to bind him to a
contract with Ruffino. While Latham said she had
Schuchmacher’s authority to deal with the HOA and to repair the
unit, neither she nor anyone else testified that Schuchmacher
had authorized her to enter into a contract on Schuchmacher’s
behalf.
28
Although not directly on point, we find instructive several
cases addressing claims against insurers for damages to property
that occurred shortly before foreclosure. Track Mortgage Group,
Inc. v. Crusader Ins. Co. (2002) 98 Cal.App.4th 857 (Track) is one
such case. There, a property owner reported severe damage to an
apartment building to its insurer, which did not pay the claim.
About two months later, the lender holding the first deed of trust
foreclosed on the building. The indebtedness under the first deed
of trust at the time of foreclosure was approximately $528,000,
and the lender purchased the property at the foreclosure sale
with a partial credit bid of about $472,000. (Id. at pp. 862–863.)
The lender spent about $1.2 million repairing the building and
then sued the insurer for breach of contract and breach of the
covenant of good faith and fair dealing. (Id. at p. 863.) The trial
court found the insurer breached the insurance contract and that
the lender had spent about $877,000 to repair damages covered
by the policy. The court ruled, however, that the amount the
lender could recover was limited to the difference between the
$528,000 obligation secured by the trust deed at the time of
foreclosure and the lender’s $472,000 credit bid. (Id. at p. 864.)
The lender appealed, contending that it should have been
awarded the costs of repair notwithstanding the partial credit
bid. (Track, supra, 98 Cal.App.4th at p. 864.) The Court of
Appeal disagreed and affirmed. It explained that when a lender
makes a full credit bid at the foreclosure of its mortgage, it is not
entitled to insurance proceeds payable for prepurchase damage to
the property because the lender’s only interest in the property is
the repayment of the debt. (Ibid.) Thus, the trial court properly
calculated the lender’s damages as the difference between its
29
indebtedness and the amount of its partial credit bid. (Id. at
p. 866.)
Track is distinguishable from the present case, most
significantly in that the Track plaintiff had a direct claim to the
insurance proceeds by virtue of the property insurance contract,
while here Schuchmacher has no such claim. Track nonetheless
stands for the proposition that where property damage occurs
shortly before foreclosure, both the original owner and the
foreclosing lender may have claims to the insurance proceeds
payable as a result of the property damage, and the division of
those proceeds depends on a variety of factors, including the
amount of the original owner’s indebtedness and the price paid
for the property at the foreclosure sale.7 Because that evidence
was not presented to the jury, we cannot conclude that the jury’s
award of the entirety of the insurance proceeds to Schuchmacher
was supported by substantial evidence.
The thrust of Schuchmacher’s argument on appeal is
that the amount of his damages was established by evidence of
the damage to the unit, but his respondent’s brief does not cite a
single case or statutory provision for this contention. Below, in
opposition to Rockpointe’s motion for judgment notwithstanding
the verdict, he relied exclusively on Vaughn v. Dame
7 See also Najah v. Scottdale Ins. Co. (2014) 230 Cal.App.4th
125 [where lender acquired property through a full credit bid at
foreclosure sale, it was not entitled to insurance proceeds due on
claim arising out of preforeclosure damages to the property];
Countrywide Home Loans, Inc. v. Tutungi (1998) 66 Cal.App.4th
727 [where HOA received insurance proceeds after earthquake,
lender who foreclosed on the property, not the owner at the time
of the earthquake, was entitled to the unit’s share].
30
Construction Co. (1990) 223 Cal.App.3d 144 to assert that
because he owned the unit at the time of the fire, he is entitled to
recover damages resulting from the fire. Vaughn concerned a
different issue, however––namely, whether a plaintiff had
standing to sue for property damage notwithstanding her
subsequent sale of the property. Vaughn expressly did not decide
the proper measure of the plaintiff’s damages; instead, because
the appeal was from a grant of summary judgment for the
defendant, the court merely found that it was undisputed that
plaintiff had suffered some harm. (Id. at p. 146, fn. 2.) Thus,
while Vaughn suggests that Schuchmacher has standing to sue
for the damages he suffered as a result of Rockpointe’s breach of
contract––an issue that is not before us––it does not suggest that
Schuchmacher’s damages were equal to the damages to the unit.
Schuchmacher further urges that Rockpointe is equitably
estopped from denying that he suffered damages because it
repeatedly offered in writing to reimburse him for the costs of
repairs. Not so. While it is undisputed that Rockpointe’s
attorneys made the offers on which Schuchmacher relies, those
were offers to pay Ruffino, a licensed contractor, for work he
assertedly had done pursuant to a contract with Schuchmacher––
not offers to pay Schuchmacher for work done primarily by
Latham, for which Schuchmacher was not contractually
obligated. Moreover, at the time of those offers, Latham had
represented to the Board that Schuchmacher had entered into a
contract with Ruffino to repair the unit, a representation it
subsequently learned not to be true. Accordingly, we cannot
conclude that the Board’s offers to pay Ruffino for his work
equitably estop Rockpointe from asserting on appeal that
31
Schuchmacher did not suffer damages as a result of Rockpointe’s
breach of the CC&Rs.
C. Schuchmacher is entitled to an award of
nominal damages.
Nominal damages pursuant to Civil Code section 3360 “are
properly awarded in two circumstances: (1) Where there is no
loss or injury to be compensated but where the law still
recognizes a technical invasion of a plaintiff’s rights or a breach
of a defendant’s duty; and (2) although there have been real,
actual injury and damages suffered by a plaintiff, the extent of
plaintiff’s injury and damages cannot be determined from the
evidence presented. (Civ. Code, § 3360; Sterling Drug, Inc. v.
Benatar (1950) 99 Cal.App.2d 393, 400; Gray v. Craig (1932)
127 Cal.App. 374, 378; Black’s Law Dictionary (4th ed. 1951) at
p. 469.) [¶] Whichever classification the nominal damages fall
into, they remain [n]ominal; the court can award no more than
nominal damages when the proof of actual or punitive damages
fails.” (Avina v. Spurlock (1972) 28 Cal.App.3d 1086, 1088
(Avina).)
California courts have applied Civil Code section 3360 to
conclude that “ ‘[a] plaintiff is entitled to recover nominal
damages for the breach of a contract, despite inability to show
that actual damage was inflicted upon him.’ (Sweet v. Johnson
(1959) 169 Cal.App.2d 630, 632.) Nominal damages may be
properly awarded for the violation of a contractual right because
‘failure to perform a contractual duty is, in itself, a legal wrong
that is fully distinct from the actual damages.’ ” (Elation
Systems, Inc. v. Fenn Bridge LLC (2021) 71 Cal.App.5th 958,
965–966 (Elation Systems).)
32
In the present case, the jury found that Rockpointe
breached a duty it owed to Schuchmacher under the CC&Rs, and
Rockpointe has not challenged that finding on appeal.
Accordingly, we direct the trial court on remand to strike the
award of compensatory damages and replace it with an award of
$1 as nominal damages. (See Elation Systems, supra,
71 Cal.App.5th at pp. 967–968 [where substantial evidence did
not support jury’s award of $10,000 in damages for breach of
nondisclosure agreement, trial court should have stricken
$10,000 award and replaced it with award of nominal damages in
light of jury’s unchallenged finding of breach]; Avina, supra,
28 Cal.App.3d at p. 1090 [modifying judgment by striking award
of $501 and substituting $1 as nominal damages].) Given our
conclusion, the award of prejudgment interest on the damages
award must also be stricken.8
II. In light of our reduction of Schuchmacher’s damages
award, the matter must be returned to the trial court
to reconsider Rockpointe’s and Schuchmacher’s
competing motions for attorney fees and costs.
Rockpointe contends in its appeal that it was entitled to an
award of its attorney fees and costs because its Code of Civil
Procedure section 998 offer exceeded Schuchmacher’s recovery,
and Schuchmacher contends in his cross-appeal that the trial
court abused its discretion by awarding him attorney fees of only
$67,500. In light of our conclusion that Schuchmacher is entitled
to only nominal damages, we vacate the award of attorney fees
8 Because we reverse the judgment, the order denying the
motion for judgment notwithstanding the verdict is moot.
33
for Schuchmacher and direct the trial court on remand to
reconsider the parties’ requests for attorney fees and costs in
light of the reduced damages award.
III. The trial court properly denied the former directors’
motion for attorney fees.
Finally, the former directors contend that they are entitled
to recover their attorney fees pursuant to Civil Code section 5975,
subdivision (c), because “the gist” of Schuchmacher’s claims
against them, although “labeled as” breach of fiduciary duty and
conspiracy, was for enforcement of the CC&Rs. We rejected a
nearly identical claim in an earlier appeal brought by Brockhouse
and the current directors, and we do so again here.
A. Notice of appeal.
We begin by considering whether the former directors
properly appealed from the order denying their motion for
attorney fees. Rockpointe filed two notices of appeal, on July 29
and September 10, 2019, neither of which designated the former
directors as appellants. We therefore asked the parties to submit
letter briefs addressing whether Rockpointe’s notices of appeal
should be construed to include the former directors. In their
supplemental letter brief, the former directors urged that notices
of appeal may be construed to include omitted parties, and it is
appropriate to do so here because Schuchmacher had not been
misled or prejudiced; to the contrary, both parties understood the
appeal to embrace the former directors’ claim. In his
supplemental brief, Schuchmacher said he “has no objection to
the Court construing Rockpointe’s Notice of Appeal to include its
four former directors and would prefer to have the directors’
appeal heard on its merits.”
34
“[T]he timely filing of an appropriate notice of appeal or its
legal equivalent is an absolute prerequisite to the exercise of
appellate jurisdiction.” (Hollister Convalescent Hosp., Inc. v. Rico
(1975) 15 Cal.3d 660, 670.) However, “[t]he notice of appeal must
be liberally construed. The notice is sufficient if it identifies the
particular judgment or order being appealed.” (Cal. Rules of
Court, rule 8.100(a)(2).) This rule of liberal construction “is
intended to ‘implement the strong public policy favoring the
hearing of appeals on the merits.’ (Norco Delivery Service, Inc. v.
Owens-Corning Fiberglas, Inc. (1998) 64 Cal.App.4th 955, 960;
see Glassco v. El Sereno Country Club, Inc. (1932) 217 Cal. 90, 92
[‘notices of appeal are to be liberally construed with a view to
hearing causes on their merits’]; Kellett v. Marvel (1936) 6 Cal.2d
464, 471 [‘notices of appeal are liberally construed to preserve the
right of review unless it appears that the respondent has been
misled’].)” (K.J. v. Los Angeles Unified School Dist. (2020)
8 Cal.5th 875, 882.)
In K.J. v. Los Angeles Unified School Dist., supra, 8 Cal.5th
at page 865, our Supreme Court noted that while the rule of
liberal construction of notices of appeal is most commonly
employed to remedy defects in a notice’s designation of the order
or judgment that is being appealed from, the rule also applies to
defects in the notice’s designation of the parties to the appeal.
The court therefore held that a court “is not categorically
precluded” from construing a notice of appeal to include a party
who is not referenced in the notice, so long as it is “reasonably
clear that the [omitted party] intended to join in the appeal, and
the respondent was not misled or prejudiced by the omission.”
(Id. at p. 885.)
35
Applying this standard here, we conclude that Rockpointe’s
notices of appeal should be construed to include the omitted
former directors. The September 17, 2019 notice of appeal stated
that appeal was taken from an August 9, 2019 postjudgment
order that, among other things, denied the former directors’
motion for attorney fees. Further, Rockpointe’s case information
statement filed September 26, 2019, identified the former
directors as appellants, as did the parties’ stipulation for
consolidation of appeals and proposed briefing schedule. Finally,
Schuchmacher’s response to our request for briefing makes clear
that he was neither misled nor prejudiced by the omission.
Accordingly, we will construe Rockpointe’s notices of appeal to
include the former directors.
B. Our prior decision in Schuchmacher I.
Schuchmacher v. McDermott (Mar. 28, 2019, B288130)
[nonpub. opn.] [2019 WL 1396737] (Schuchmacher I) was an
appeal by Brockhouse and the current directors from
postjudgment orders denying their motions for attorney fees after
they obtained summary judgment of Schuchmacher’s causes of
action against them for breach of fiduciary duty and civil
conspiracy. Brockhouse and the current directors contended that
attorney fees were proper pursuant to Civil Code section 5975,
subdivision (c) because the causes of action were grounded in
enforcement of the CC&Rs. (Schuchmacher I, at p. *2.) The trial
court denied the motion for fees, finding that the moving parties
were not entitled to recover fees under Civil Code section 5975.
(Schuchmacher I, at p. *3.)
We affirmed. We explained that Civil Code section 5975,
which is part of the Davis-Stirling Common Interest
Development Act (Civ. Code, § 4000 et seq.), states in full:
36
“(a) The covenants and restrictions in the declaration[9] shall be
enforceable equitable servitudes, unless unreasonable, and shall
inure to the benefit of and bind all owners of separate interests in
the development. Unless the declaration states otherwise, these
servitudes may be enforced by any owner of a separate interest or
by the association, or by both. [¶] (b) A governing document
other than the declaration may be enforced by the association
against an owner of a separate interest or by an owner of a
separate interest against the association. [¶] (c) In an action to
enforce the governing documents,[10] the prevailing party shall be
awarded reasonable attorney’s fees and costs.” (Italics added.)
Thus, we said, “unless ‘the Declaration provides otherwise,
each owner of a lot or unit in a tract subject to restrictions has
the right as an individual to enforce the restrictions against any
and all of the other owners’ separate interests in the
development, or against the association to compel the association
to take appropriate enforcement action.’ (Miller & Starr,
Cal. Real Estate (4th ed.) § 28109, fn. omitted, italics omitted.)
9 Civil Code section 4135 states: “ ‘Declaration’ means the
document, however denominated, that contains the information
required by Sections 4250 and 4255.” The contents of the
declaration shall include, inter alia, “the restrictions on the use
or enjoyment of any portion of the common interest development
that are intended to be enforceable equitable servitudes.”
(Civ. Code, § 4250, subd. (a).)
10 “Governing documents” means the “declaration and any
other documents, such as bylaws, operating rules, articles of
incorporation, or articles of association, which govern the
operation of the common interest development or association.”
(Civ. Code, § 4150.)
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Under ‘ “well-accepted principles of condominium law, a
homeowner can sue the association for damages and an
injunction to compel the association to enforce the provisions of
the declaration.” ’ (Lambden v. La Jolla Shores Clubdominium
Homeowners Assn. (1999) 21 Cal.4th 249, 268.)” (Schuchmacher
I, supra, 2019 WL 1396737, at p. *5.)
We concluded that the causes of action against Brockhouse
and the current directors were not suits to enforce the CC&Rs,
and thus the moving parties were not entitled to attorney fees
pursuant to Civil Code section 5975. We explained: “In the
second cause of action, Schuchmacher sued Brockhouse, the
former general manager of the HOA, alleging breach of fiduciary
duty and seeking tort damages. In the third cause of action,
Schuchmacher, together with Latham, his tenant, and Ruffino, a
contractor, sued the Current Directors and others for civil
conspiracy, and likewise sought tort damages. Neither of these
causes of action was an action by an owner against other owners,
or against the HOA, to enforce the governing documents, making
Civil Code section 5975(c) inapplicable.
“The cases cited by appellants for the proposition that
Civil Code section 5975(c) was implicated are inapposite. Each of
those decisions involves litigation between an owner, former
owner, or alleged assignee of an owner, on the one hand, and a
homeowners association on the other, to enforce the relevant
governing documents. . . .
“In the instant case, the relevant causes of action are tort
claims by an owner and two non-owners, who sued a former
manager of the HOA and its Current Directors for damages. As
the trial court found, this was not an action to enforce the
governing documents. Therefore, Brockhouse and the Current
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Directors are not entitled to attorney fees pursuant to Civil Code
section 5975(c).” (Schuchmacher I, supra, 2019 WL 1396737,
at p. *6.)
C. Our conclusion in Schuchmacher I is law of the
case, and thus we will not reconsider it on the
merits.
The doctrine of “law of the case” generally precludes
repeated appellate review of the same issue in a single case.
“ ‘ “ ‘Where a decision upon appeal has been rendered . . . and a
second appeal comes to this court . . . , for reasons of policy and
convenience, this court generally will not inquire into the merits
of said first decision, but will regard it as the law of the case.’
[Citations.]” ’ (In re Rosenkrantz (2002) 29 Cal.4th 616, 668.)”
(People v. Gray (2005) 37 Cal.4th 168, 196–197.)
“ ‘The principal reason for the doctrine is judicial economy.
“Finality is attributed to an initial appellate ruling so as to avoid
the further reversal and proceedings on remand that would result
if the initial ruling were not adhered to in a later appellate
proceeding.” ’ [Citations.] . . . [¶] We will apply the law of the
case doctrine where the point of law involved was necessary to
the prior decision and was ‘ “actually presented and determined
by the court.” ’ [Citation.] The doctrine will not be applied,
however, when such application leads to an unjust result.
Because the law of the case doctrine ‘is merely one of procedure
and does not go to the jurisdiction of the court [citations], the
doctrine will not be adhered to where its application will result in
an unjust decision, e.g., where there has been a “manifest
misapplication of existing principles resulting in substantial
injustice” [citation], or the controlling rules of law have been
altered or clarified by a decision intervening between the first
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and second appellate determinations. [Citation.] The unjust
decision exception does not apply when there is a mere
disagreement with the prior appellate determination.’ ” (People
v. Gray, supra, 37 Cal.4th at pp. 196–197.)
The former directors do not dispute that the applicability of
Civil Code section 5975, subdivision (c) to Schuchmacher’s breach
of fiduciary duty and civil conspiracy claims was presented to,
and decided by, this court in Schuchmacher I, or that resolution
of the issue was necessary to our decision. They urge, however,
that the principle of law we articulated in Schuchmacher I does
not apply here because while current directors “were not on the
Association’s Board of Directors at the time of Schuchmacher’s
ownership of the unit,” the former directors “had a purported
duty to enforce the CC&Rs at the time of the fire.”
We do not agree that Schuchmacher I does not apply here.
Although Schuchmacher’s claims against the current directors
were manifestly on weaker legal ground than were the claims
against the former directors––and were, thus, subject to
summary judgment––both sets of claims were based on the same
legal theory: That the directors “owed a fiduciary duty to each
owner of a condominium unit within the Rockpointe development
to see that the affairs of [the HOA] were conducted in accordance
with the Association’s governing documents.” Accordingly, we
conclude the law of the case doctrine applies and compels the
conclusion that the former directors are not entitled to recover
prevailing party attorney fees pursuant to Civil Code section
5975, subdivision (c).
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DISPOSITION
The judgment and order granting attorney fees are
reversed and the matter remanded to the trial court. On remand,
as to the first cause of action, the trial court shall enter judgment
for Schuchmacher, reduce the award of compensatory damages
from $76,432.64 to $1, and eliminate the award of prejudgment
interest. As to the second and third causes of action, the court
shall enter judgment in favor of defendants. The trial court shall
conduct further proceedings consistent with this opinion,
including (1) reconsidering Schuchmacher’s and Rockpointe’s
requests for attorney fees and costs, and (2) entering an amended
judgment.
The parties shall bear their own costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(5).)
NOT TO BE PUBLISHED IN THE OFFICIAL
REPORTS
EDMON, P. J.
We concur:
LAVIN, J.
EGERTON, J.
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