Eith v. Ketelhut ( 2018 )

Filed 12/17/18
CERTIFIED FOR PARTIAL PUBLICATION *
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
FELIPA RICHLAND EITH et al., 2d Civil No. B272028
(Super. Ct. No. 56-2011-00403140-
Plaintiffs and Appellants, CU-OR-VTA)
(Ventura County)
v.
JEFFREY KETELHUT et al.,
Defendants and Appellants;
LOS ROBLES HILLS ESTATES
HOMEOWNERS ASSOCIATION
et al.,
Defendants and Respondents.
In Lamden v. La Jolla Shores Clubdominium Homeowners
Assn. (1999) 21 Cal.4th 249 (Lamden), our Supreme Court
cautioned courts to give judicial deference to certain discretionary
decisions of duly constituted homeowners association boards.
The judicial deference rule does not encompass legal questions
that may involve the interpretation of the covenants, conditions,
*Pursuant to California Rules of Court, rules 8.1100 and 8.1110,
this opinion is certified for partial publication. The portions of
this opinion to be deleted from publication are identified as those
portions between double brackets, e.g., [[/]].
and restrictions (CC&Rs) of a homeowners association. Courts
decide legal questions.
Here, homeowners cultivated a vineyard for the purpose of
making wine to be sold to the public. The CC&Rs did not
prohibit the 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) 60 Cal.App.4th 37, 46 [“literal
language of a contract does not control if it leads to absurdity”].)
Because the wine was made, bottled, and sold commercially
offsite, and the activity at the vineyard did not affect the
residential character of the community, we conclude there was no
business or commercial activity within the meaning of the
CC&Rs. The homeowners association board acted within its
discretion in allowing the continued operation of the vineyard,
and its decision is entitled to judicial deference.
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.
2
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, Philip 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,
21 Cal.4th 249. Pursuant to this rule, the trial court deferred to
the Board’s decision that the vineyard was not being used for
business or commercial activity. The court entered judgment in
favor of defendants on both the eighth and ninth causes of action.
The resolution of these two causes of action rendered the
remaining causes of action moot.
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
3
commercial use. We further conclude that, as a matter of law, it
is not a prohibited business or commercial use. We affirm the
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) 33 Cal.4th 73, 81.)
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.”
The 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
4
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
5
“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
them 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.
Although 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
6
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.”
7
The original 600 plants 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, Twitter, 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
8
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 June 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.”
9
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 takes
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
10
action and tried them first. The trial began in July 2015 and
ended in November 2015.
The 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.
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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 [Lamden, supra, 21 Cal.4th 249].”
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) 70
Cal.App.3d 858 @ 865, ‘The board of directors may make incorrect
decisions, as well as correct ones, so long as it is faithful to the
corporation and uses its best judgment.’ . . . The Court finds that
this board of directors used it[s] best judgment and acted in a
reasonable manner under the circumstances presented to it. As
such, the Court does not grant the relief that plaintiffs seek, but
finds in favor of the defendants on the cause of action for
declaratory relief.” (Italics added.)
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
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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)
7 Cal.4th 725, 741.)
[[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.
After 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
13
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. 1 The next day, plaintiff
Felipa Eith filed a request for a stay of all further action by Judge
Walsh pending a hearing on a not yet filed motion to disqualify
him.
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. 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
1
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) 23 Cal.4th
529, 644, overruled on another ground in Price v. Superior Court
(2001) 25 Cal.4th 1046, 1069, fn. 13.) The Eiths have not
overcome this presumption.
14
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.”
B. 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. In Christie v.
City of El Centro (2006) 135 Cal.App.4th 767, 776, the court
“conclude[d] that because [the trial judge] was disqualified at the
time he granted the City's motion for nonsuit, that ruling was
null and void and must be vacated regardless of a showing of
prejudice.” The court rejected the City’s claim “that the grant of
nonsuit need not be overturned because [the judge] was not
disqualified until later” when a motion to disqualify him was
granted: “[D]isqualification occurs when the facts creating
disqualification arise, not when disqualification is established.
[Citations.] The acts of a judge subject to disqualification are
void or, according to some authorities, voidable. [Citations.]
Relief is available to a party who, with due diligence, discovers
the grounds for disqualification only after judgment is entered or
appeal filed. [Citations.] Although a party has an obligation to
act diligently, he or she is not required to launch a search to
discover information that a judicial officer should have disclosed.
[Citations.]” (Id. at pp. 776-777.)
The relevant statute is Code of Civil Procedure section
170.1, subdivision (a)(9), which provides: “A judge shall be
15
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.”
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
threshhold “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 same 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
16
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) 99 Cal.App.4th 869, 874
[“ ‘ “ ‘The determination of a motion for a new trial rests so
completely within the court's discretion that its action will not be
disturbed unless a manifest and unmistakable abuse of discretion
clearly appears’ ” ’ ”]; Boyle v. CertainTeed Corp. (2006) 137
Cal.App.4th 645, 649-650 [“an appealed judgment is presumed
correct, and plaintiff bears the burden of overcoming the
presumption of correctness”].)
Plaintiffs Were Not Denied Their Right to a Jury Trial
Plaintiffs argue that the trial court’s bifurcation of the
eighth cause of action denied them their right to a jury trial on
the legal issue of whether the Ketelhuts were using the Property
17
for a business or commercial purpose in violation of the CC&Rs.
“The issue of whether [plaintiffs were] ‘constitutionally entitled to
a jury trial . . . is a pure question of law that we review de novo.’
[Citations.]” (Entin v. Superior Court (2012) 208 Cal.App.4th
770, 776.)
“As a general proposition, ‘[T]he jury trial is a matter of
right in a civil action at law, but not in equity.’ [Citations.] [¶]
. . . ‘ “If the action has to deal with ordinary common-law rights
cognizable in courts of law, it is to that extent an action at law.
In determining whether the action was one triable by a jury at
common law, the court is not bound by the form of the action but
rather by the nature of the rights involved and the facts of the
particular case -- the gist of the action. A jury trial must be
granted where the gist of the action is legal, where the action is
in reality cognizable at law.” ’ [Citation.] On the other hand, if
the action is essentially one in equity and the relief sought
‘depends upon the application of equitable doctrines,’ the parties
are not entitled to a jury trial. [Citations.]” (C & K Engineering
Contractors v. Amber Steel Co. (1978) 23 Cal.3d 1, 8-9.)
The gist of the eighth cause of action is the request for “a
permanent injunction compelling [the Ketelhuts] . . . from
encroaching on the Common Area . . . and from conducting the
Subject Business [a commercial vineyard] on the Subject Lot in
violation of the restrictions set forth in the [CC&Rs].” Such relief
is available only in equity. “A permanent injunction is an
equitable remedy for certain torts or wrongful acts of a defendant
where a damage remedy is inadequate.” (Art Movers, Inc. v. Ni
West, Inc. (1992) 3 Cal.App.4th 640, 646.)
Thus, the bifurcation of the eighth cause of action and the
trial of that action by the court did not deny plaintiffs their right
18
to a jury trial. “It is well established that, in a case involving
both legal and equitable issues, the trial court may proceed to try
the equitable issues first, without a jury . . . , and that if the
court's determination of those issues is also dispositive of the
legal issues, nothing further remains to be tried by a jury.
[Citations.]” (Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10
Cal.3d 665, 671.)
Trial Court’s Orders Relieving Original Counsel from Further
Representation and Denying Request for a Continuance
Attorney Michael T. Stoller originally represented plaintiffs
Felipa Eith, Stacy Wasserman, Philip Chang, and the Mitchells.
After the trial had begun, Stoller moved to be relieved as counsel
of record because of “a non-waivable conflict” of interest. Stoller
declared: “Based on the actual conflict, there has been an
irreparable breakdown of the working relationship between
counsel and client.” “The specific facts which give rise to this
[conflict] are . . . required to be kept confidential.” The trial court
granted the motion.
The next day, plaintiffs were not ready to proceed with the
trial. Felipa Eith had unsuccessfully tried to retain substitute
counsel. The Mitchells had retained substitute counsel, but he
was not ready to proceed. Wasserman had also retained
substitute counsel, but he was neither ready nor present in court.
Chang was unrepresented.
The trial court denied Felipa Eith’s and the Mitchells’
request for a continuance. The trial resumed with the cross-
examination of Chang by counsel for the Ketelhuts and counsel
for HOA. Felipa Eith, a licensed attorney, frequently objected to
counsels’ questions. After the cross-examination of Chang, Eith
called John Mitchell as a witness and examined him. On the
19
next day of trial - August 18, 2015 - no testimony was taken.
The court continued the matter to October 26, 2015.
The Eiths contend that the trial court erroneously granted
Stoller’s request to be relieved as counsel. They claim that the
court “failed to undertake its duty of inquiry” and “duty to
explore the conflict.” The claim is forfeited because it is not
supported by meaningful legal analysis with citations to the
record and pertinent authority. (In re S.C. (2006) 138
Cal.App.4th 396, 408.) The only authority they cite - Aceves v.
Superior Court (1996) 51 Cal.App.4th 584, 592-593 - is a criminal
case. There, the court noted that “case law ties the duty of
inquiry to the duty of the trial court to ensure the ‘ “trial is
conducted with solicitude for the rights of the accused” ’and to
‘ “protect the right of the accused to have the assistance of
counsel.” ’ [Citation.]” (Id. at p. 593.) These rights are not
implicated in the instant civil action.
In any event, even if the trial court had erred, the Eiths
have not shown that they were prejudiced. (See Freeman v.
Sullivant (2011) 192 Cal.App.4th 523, 527 [“A judgment is
reversible only if any error or irregularity in the underlying
proceeding was prejudicial”]; In re S.C., supra, 138 Cal.App.4th
at p. 407 [“appellant cannot prevail without establishing that she
was prejudiced by the alleged error”].)
The Eiths and other plaintiffs argue that the trial court
abused its discretion in resuming Chang’s cross-examination
without granting their request for a continuance. Plaintiffs have
“not attempted to show [they were] prejudiced by the denial of
a continuance. . . . Therefore, [they have] not met [their] burden
on appeal, and any argument that the failure to grant the
requested continuance constituted reversible error is deemed
20
waived. [Citation.]” (Freeman v. Sullivant, supra, 192
Cal.App.4th at p. 528.) 2]]
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 adopted by our Supreme Court in Lamden,
supra, 21 Cal.4th 249. The plaintiff homeowner in Lamden
complained that a condominium development’s community
association had wrongly decided to treat a termite infestation
“locally (‘spot treat’).” (Id. at p. 252.) The plaintiff wanted the
association to fumigate the building. The Supreme Court stated,
“[W]e adopt today for California courts a rule of judicial deference
to community association board decisionmaking that applies . . .
when owners in common interest developments seek to litigate
ordinary maintenance decisions entrusted to the discretion of
their associations' boards of directors. [Citation.]” (Id. at p. 253.)
The rule is as follows: “Where a duly constituted community
association board, upon reasonable investigation, in good faith
and with regard for the best interests of the community
association and its members, 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, courts
2
In his reply brief, Chang argues for the first time that he
was denied his “constitutionally protected due process rights to
be represented by counsel while actually on the stand under
cross-examination.” The point is forfeited because it was not
raised in his opening brief. (Benach v. County of Los Angeles
(2007) 149 Cal.App.4th 836, 852 & fn. 10; Paulus v. Bob Lynch
Ford, Inc. (2006) 139 Cal.App.4th 659, 685.)
21
should defer to the board's authority and presumed expertise.”
(Ibid.)
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) 189
Cal.App.4th 930, 940, the court observed: “It is important to note
the narrow scope of the Lamden rule. It is a rule of deference to
the reasoned decisionmaking of homeowners association boards
concerning ordinary maintenance. . . . The Supreme Court’s
precise articulation of the rule makes clear that the rule of
deference applies only when a homeowner sues an association
over a maintenance decision that meets the enumerated criteria.
[Citations.]” (See also Ritter & Ritter, Inc. v. The Churchill
Condominium Assn. (2008) 166 Cal.App.4th 103, 122.)
22
Most courts have broadly construed the Lamden rule. In
Haley v. Casa Del Rey Homeowners Assn. (2007) 153 Cal.App.4th
863, 875 (Haley), the court concluded that Lamden “reasonably
stands for the proposition that the Association had discretion to
select among means for remedying violations of the CC&R’s
without resorting to expensive and time-consuming litigation,
and the courts should defer to that discretion.”
In Harvey v. The Landing Homeowners Assn. (2008) 162
Cal.App.4th 809, 820 (Harvey), the CC&Rs allowed the board “to
designate storage areas in the common area.” They also gave the
board “the exclusive right to manage, operate and control the
common areas.” (Ibid.) The court held, “Under the ‘rule of
judicial deference’ adopted by the court in Lamden, we defer to
the Board’s authority and presumed expertise regarding its sole
and exclusive right to maintain, control and manage the common
areas when it granted the fourth floor homeowners the right,
under certain conditions, to use up to 120 square feet of
inaccessible attic space common area for rough storage.” (Id. at
p. 821.)
In Watts v. Oak Shores Community Association (2015) 235
Cal.App.4th 466, 473 (Watts), this court rejected the plaintiffs’
claim “that the rule applying judicial deference to association
decisions applies only to ordinary maintenance decisions.” We
reasoned: “It is true the facts in Lamden involve the association
board's decision to treat termites locally rather than fumigate.
But nothing in Lamden limits judicial deference to maintenance
decisions.” (Ibid.) “[T]here is no reason to read Lamden so
narrowly.” (Ibid.) “Common interest developments are best
operated by the board of directors, not the courts.” (Ibid.) We
applied the judicial deference rule to the board’s adoption of rules
23
and imposition of fees relating to short-term rentals of
condominium units. We noted that, in Dolan-King v. Rancho
Santa Fe Assn. (2000) 81 Cal.App.4th 965, 979 (Dolan-King), “the
court gave deference to an association board's decision denying
an owner's application for a room addition on aesthetic grounds.”
(Watts, supra, 235 Cal.App.4th at p. 473.)
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,
235 Cal.App.4th at p. 473.)
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
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.” Board member Yen did “not see
picking grapes to go to Custom Crush [a]s impairing any
24
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, 162 Cal.App.4th at p. 817.)
“ ‘ “[N]ormally the meaning of contract language . . . is a legal
question.” [Citation.] “Where, as here, no conflicting parol
evidence is introduced concerning the interpretation of the
document, ‘construction of the instrument is a question of law,
and the appellate court will independently construe the
writing.’ ” [Citation.]’ ” (Cohen v. Five Brooks Stable (2008) 159
Cal.App.4th 1476, 1483; see also Legendary Investors Group No.
1, LLC v. Niemann (2014) 224 Cal.App.4th 1407, 1413 [“contract
interpretation is a legal question for the court”].)
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.”
25
(Lamden, supra, 21 Cal.4th at p. 253.). The Board interviewed
homeowners and conducted a public hearing at which the
Ketelhuts answered questions. Yen testified that the Board’s
decision was “based on our looking at it from the scope of the
community: Is it creating any stress for the community, is it
impairing the community’s functioning, is it invasive to the
community, and have we received any complaints regarding what
is happening.” “Our decision and focus of discussion was on the
impact o[n] the community.”
“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, 21 Cal.4th at
p. 270.) The Board members lived in the community and had
discussed the Ketelhuts’ vineyard with other homeowners. They
were in a much better position than the courts to evaluate the
vineyard’s effect on the community. We “should defer to the
[B]oard's authority and presumed expertise.” (Id. at p. 265.)
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
26
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 over 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
27
irrespective of its effect on the residential character of the
community.
For 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) 250 Cal.App.2d 31, 35-36.)
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 (N.M. Ct.App. 2006) 134 P.3d 811.)
[[The Ninth Cause of Action to Quiet Title
The Eiths argue that the trial court’s judgment is not
supported by the law or the facts. It is not clear whether this
argument applies solely to the eighth cause of action for
28
declaratory and injunctive relief, or whether it also applies to the
ninth cause of action to quiet title to the common area. If the
argument applies to the ninth cause of action, it is forfeited
because it is not supported by meaningful legal analysis with
citations to the record and pertinent authority. (In re S.C., supra,
138 Cal.App.4th at p. 408.)
The Eiths contend that, on the ninth cause of action, “the
trial court did not articulate in its decision (a) what if any legal or
equitable rights each of the lot owners had in the 18 acres, nor
did the court decide (b) whether or not the 18 acres is ‘common
area’ as argued by [plaintiffs].” We disagree. In its statement of
decision the trial court declared: “The common area of 18.56
acres is Common Interest land as defined by CCR Title 10,
Chapter 6, Article 1, paragraph 2705.” “[T]itle to the 18.5 acre
common area is confirmed and quieted to the defendant
Homeowners Association.” The court rejected the complaint’s
contention that the common area is “owned collectively by the
twenty-eight (28) lot owners of the subdivision, each lot owner
owning a 1/28 undivided interest in said property.”
Street Maintenance
The Eiths assert that “the trial court [err]ed in refusing to
decide street maintenance obligations in the [common interest
development].” In its statement of decision the trial court said it
had “ruled before the presentation of evidence that the issue of
the streets was not tendered by the pleadings or discovery and
therefore would not be a subject for resolution at trial.” The
Eiths have forfeited the issue because they have not presented
meaningful legal analysis with supporting citations to the record
and pertinent authority. (In re S.C., supra, 138 Cal.App.4th at
p. 408.)
29
The Kettlehuts’ Encroachment on the Common Area
The Eiths claim that the trial court erred in “refusing to
decide if the Ketelhut vineyard encroached on . . . common area.”
The court decided this issue. In its statement of decision the
court found, “[S]tarting in January of 2005, [Jeffrey Ketelhut]
planted 600 grape vines on his property and extending into the
18.5 acre common area at the rear of []his property by just under
.4 acres.” In any event, it is undisputed that the Ketelhuts
encroached on the common area. In their brief defendants
acknowledge, “Unbeknownst to the Ketelhuts and [HOA], some of
the [Ketelhuts’] grape plants encroached on the 18-acre parcel
owned by the Association.”
Denial of Plaintiffs’ Motion to Disqualify HOA’s Counsel
The Eiths maintain that the trial court erroneously denied
plaintiffs’ motion to disqualify HOA’s counsel. The issue is
forfeited because the Eiths have failed to present meaningful
legal analysis with supporting citations to the record and
authority. (In re S.C., supra, 138 Cal.App.4th at p. 408.)
Plaintiffs’ Appeal from Award of Attorney Fees
“In an action to enforce the governing documents [of a
common interest development], the prevailing party shall be
awarded reasonable attorney’s fees and costs.” (Civ. Code,
§ 5975, subd. (c).) Except for the Eiths, plaintiffs’ appeal from the
award of attorney fees is based on their claim that the judgment
in favor of defendants on the eighth cause of action must be
reversed. Therefore, they assert that the award of attorney fees
is “premature.” Because we are affirming the judgment, the
award is not premature.
The Eiths present numerous grounds for reversing the
award of attorney fees. They contend that defendants are not
30
“true prevailing parties.” (Capitalization omitted.) The
contention lacks merit because judgment was rendered in favor of
defendants and against plaintiffs on both the eighth and ninth
causes of action.
The Eiths argue that, because of Jeffrey Eith’s “bankruptcy
filing” and the automatic stay triggered by that filing, it was
“improper” to order him to pay attorney fees. “The automatic
stay is self-executing, effective upon the filing of the bankruptcy
petition. [Citations.] The automatic stay sweeps broadly,
enjoining the commencement or continuation of any judicial . . .
proceedings against the debtor . . . .” (In re Gruntz (9th Cir. 2000)
202 F.3d 1074, 1081.) The automatic stay argument is forfeited
because it was not raised in the trial court. (In re Marriage of
Moschetta (1994) 25 Cal.App.4th 1218, 1227 [“parties are not
normally allowed to raise new issues on appeal [because] it is
unfair to their opponents who did not have the opportunity to
attack that theory factually or legally in the trial court”].) 3
The Eiths remaining grounds for contesting the award of
attorney fees are rejected for lack of meaningful legal analysis
with supporting citations to the record and pertinent authority.
(In re S.C., supra, 138 Cal.App.4th at p. 408.)
THE KETELHUTS’ CROSS-APPEAL FROM
ORDER AWARDING ATTORNEY FEES
The Ketelhuts claim that they were entitled to attorney
fees of $351,432.55. In their cross-appeal, the Ketelhuts argue
that the trial court abused its discretion in reducing the fees to
$250,506.50, a shortfall of $100,926.05.
3
Defendants raised the forfeiture issue in their respondent’s
brief. The Eiths did not file a reply brief.
31
Disallowance of Fees Paid to Prior Attorney
The $100,926.05 shortfall includes attorney fees of
$75,930.05 paid by the Ketelhuts to their prior attorney, Myers,
Widders, Gibson, Jones & Schneider, LLP (Myers, Widders). The
fees are supported by Jeffrey Ketelhut’s declaration under
penalty of perjury and Myers, Widders’ detailed billing
statements (Exhibit B to the declaration). Each statement
includes a description of the service performed, the date it was
performed, the time expended, and the fee incurred for the
service. There is no supporting declaration from Myers, Widders.
As to Jeffrey Ketelhut’s declaration, plaintiffs objected to
the following statement: “My former attorneys of record
submitted invoices to me for attorney fees incurred in the defense
of myself and Marcella Ketelhut in the amount of $75,930.05. A
true and correct copy of the original attorney bills is attached
hereto as Exhibit ‘B.’ ” The ground for plaintiffs’ objection was
that “Mr Ketelhut has no personal knowledge of the contents,
authenticity, or originality of the billings he has attached as
Exhibit B.”
As to the billing statements (Exhibit B), plaintiffs objected:
“The contents of Exhibit B are unauthenticated hearsay, and lack
any foundation for admissibility under any exception to the
hearsay rule. Mr. Ketelhut . . . further [is] not a qualified witness
with personal knowledge adequate to testify to the genuineness
or authenticity or accuracy of any of the contents of Exhibit B,
which are documents prepared by other persons and/or entities.”
The trial court sustained plaintiffs’ objections. It
disallowed the fees in their entirety because they are “not
properly established.” The court provided no further explanation
for its ruling.
32
“ ‘ “ ‘[A]n appellate court reviews any ruling by a trial court
as to the admissibility of evidence for abuse of discretion.’ ”
[Citation.]’ [Citation.] ‘The court's “ ‘discretion is only abused
where there is a clear showing [it] exceeded the bounds of reason,
all of the circumstances being considered.’ ” [Citation.]’
[Citation.]” (Soto v. BorgWarner Morse TEC Inc. (2015) 239
Cal.App.4th 165, 199.) We also review for abuse of discretion a
trial court’s decision to award or deny attorney fees. (Connerly v.
State Personnel Bd. (2006) 37 Cal.4th 1169, 1175.)
The Ketelhuts contend that the billing statements were
admissible pursuant to the following rule of Pacific Gas & Elec.
Co. v. G. W. Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33,
42-43 (Pacific Gas): “Since invoices, bills, and receipts for
[attorney fees] are hearsay, they are inadmissible independently
to prove that liability for the [fees] was incurred, that payment
was made, or that the charges were reasonable. [Citations.] If,
however, a party testifies that he incurred or discharged a
liability for [attorney fees], any of these documents may be
admitted for the limited purpose of corroborating his testimony
[citations], and if the charges were paid, the testimony and
documents are evidence that the charges were reasonable.
[Citations.]”
Because “there was testimony in the present case that the
invoices had been paid,” the billing statements in Exhibit B were
admissible to corroborate Jeffrey Ketelhut’s declaration that he
had incurred liability for the attorney fees. (Pacific Gas, supra,
69 Cal.2d at p. 43.) They were also admissible to show that the
fees were reasonable. (Ibid.)
But “[t]he individual items on the invoices . . . were [to be]
read, not [only] to corroborate payment or the reasonableness of
33
the charges, but to prove that [the claimed services] had actually
been [performed]. No qualified witness was called to testify that
the invoices accurately recorded the [services performed] by
[Myers, Widders], and there was no other evidence as to what
[services] were [performed]. This use of the invoices was
[impermissible]. [Citations.] An invoice submitted by a third
party is not admissible evidence on this issue [i.e., to prove that
the services described in the invoice were actually performed]
unless it can be admitted under some recognized exception to the
hearsay rule.” (Pacific Gas, supra, 69 Cal.2d at p. 43.) “It might
come in under the business records exception (Evid. Code, § 1271)
if ‘. . . supported by the testimony of a witness qualified to testify
as to its identity and the mode of its preparation.’ [Citation.]”
(Id. at p. 43, fn. 10.)
In Pacific Gas the defendant damaged the plaintiff’s
turbine. Plaintiff brought an action against defendant to recover
its cost of repair. “To prove the amount of damages sustained,
plaintiff presented invoices received from . . . [the] repairer of the
turbine, the drafts by which plaintiff had remitted payment, and
testimony that payment had been made.” (Pacific Gas, supra, 69
Cal.2d at p. 42.) Although the invoices were admissible to show
the reasonableness of the charges for the repairs, they were not
admissible “to prove that these specific repairs had actually been
made.” (Id. at p. 43.)
Here, as in Pacific Gas, the billing statements from Myers,
Widders were not admissible to show that the services described
in the statements had actually been performed. No qualified
witness testified as to the “identity and . . . mode of . . .
preparation” of the statements. (Evid. Code, § 1271, subd. (c).)
Accordingly, the trial court did not abuse its discretion in
34
sustaining plaintiffs’ objections and concluding that the
Ketelhuts’ claim for attorney fees billed by Myers, Widders had
not been “properly established.”
McAllister v. George (1977) 73 Cal.App.3d 258, is
distinguishable. There, the defendant argued that a bill for
dental services had been properly excluded from evidence
because it was hearsay. The appellate court rejected the
defendant’s argument: “Plaintiff testified that the dental services
were performed, that he received a bill for them, and that he paid
the bill. It has been held that under such circumstances the bill,
which ordinarily would constitute inadmissible hearsay, is
nevertheless admissible for the limited purpose of corroborating
plaintiff's testimony and showing that the charges were
reasonable. [Citations.]” (Id. at p. 263, italics added.) Here, in
contrast, Jeffrey Ketelhut did not declare, and lacked the
personal knowledge necessary to declare, that the numerous
services described in the billing statements had actually been
performed. For example, a statement dated August 31, 2011,
billed the Ketelhuts for attorney conferences in which they had
not participated. The Ketelhuts lacked personal knowledge
whether these conferences had occurred. In his declaration
Jeffrey Ketelhut said that Myers, Widders had “submitted
invoices to [him] for attorneys fees incurred in the defense of
[himself] and Marcella Ketelhut.” He did not say that Myers,
Widders had actually performed the services described in the
invoices. The Ketelhuts could have rectified the situation by
submitting a supporting declaration from Myers, Widders. 4
4SeeCalifornia Attorney Fee Awards (Cont.Ed.Bar 3d ed.,
2018 update) Contents of Comprehensive Fee Motion, § 11.53 [“A
comprehensive fee motion should include the following: . . .
35
Disallowance of Attorney Fees for 2014
Motion (Morrey Wasserman and Eileen Gabler)
In March 2014, plaintiffs Morrey Wasserman and Eileen
Gabler voluntarily dismissed themselves as parties to the action
against the Ketelhuts. The Ketelhuts moved for an award of
attorney fees against Wasserman and Gabler. In June 2014, the
trial court granted the motion and awarded attorney fees of
$156,614.47. Wasserman and Gabler appealed. In an
unpublished opinion, we concluded that the award was
premature. We reversed and “remanded with directions to defer
ruling on [the Ketelhuts’] motion for attorney fees until after the
litigation among the various parties has been resolved.”
(Wasserman et al. v. Ketelhut et al. (Dec. 1, 2015, B258642)
[nonpub. opn.].)
After judgment was rendered in favor of the Ketelhuts as to
all of the parties, the Ketelhuts sought an award of attorney fees
incurred in bringing their unsuccessful 2014 motion to recover
attorney fees from Wasserman and Gabler. The trial court
denied the request, characterizing the 2014 motion as a “failed
motion[].” The Ketelhuts claim that the trial court abused its
discretion because they were the prevailing party. We disagree.
The Ketelhuts were not the prevailing party as to the 2014
Declarations from the attorneys claiming fees, stating their
background and training, their role in the litigation, a description
of their services (often with time records attached as an exhibit to
the declaration), an explanation of why the hours are reasonable
(e.g., hours generated by the losing party's tactics), a description
of any billing judgment exercised, a statement of the hourly rates
and their basis, and any other facts the court needs for its
determination.”
36
motion because the order granting the motion was reversed on
appeal.
Disallowance of Attorney Fees for 2013 Motion (Kelly Park)
Kelly Park was one of the original plaintiffs in the action
against the Ketelhuts. In August 2013 she voluntarily dismissed
herself as a party to the action against the Ketelhuts. In
November 2013 the trial court denied the Ketelhuts’ motion for
an award of attorney fees against Park.
The Ketelhuts assert: “[They] are not appealing the trial
court’s 2013 denial of their attorneys fee motion against Kelly
Park. [They] are appealing the July 28, 2016 Order reducing
[their] fee award by amounts incurred in preparing that 2013
motion.” The trial court said that it had reduced the Ketelhuts’
attorney fees for “the time spent on the failed motion[] for
attorney’s fees against Kelly Park.” The trial court did not abuse
its discretion because the Ketelhuts were not the prevailing party
on the 2013 motion.]]
Disposition
The judgment and postjudgment award of attorney fees and
costs are affirmed. The parties shall bear their own costs on
appeal.
CERTIFIED FOR PARTIAL PUBLICATION.
GILBERT, P. J.
I concur:
PERREN, J.
37
PERREN, J.
I concur.
In a vain effort to “define what may be indefinable,” Justice
Potter Stewart opined, “I know it when I see it.” 5 In like manner,
the dissent “knows unfairness when [it] sees it” - when it sees
how the Ketelhuts harvest their grapes and make and sell their
wine. The majority sees it otherwise. In my opinion this is not a
matter for such subjectivity. Rather, we should defer to the good
faith exercise of discretion and “the board’s authority and
presumed expertise.” (Maj. opn. ante, at pp. 22-23, citing
Lamden v. La Jolla Shores Clubdominum Homeowners Assn.
(1999) 21 Cal.4th 249, 265.)
Both the majority and the dissent appeal to “Common
sense.” (Maj. opn. ante, at p. 22; dis. opn. post, at p. 3.) 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
5
Jacobellis v. Ohio, (1964) 378 U.S. 184, 197.
1
Clubdominum Homeowners Assn., supra, 21 Cal.4th at pp. 270-
271, italics added.)
This dispute and the resulting expense and acrimony are
strong testament to the wisdom of such deference.
CERTIFIED FOR PUBLICATION.
PERREN, J.
2
YEGAN, J., Dissenting:
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.
Judicial 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.” (Lamden v. La Jolla Shores
Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 265
(Lamden).) In Lamden our Supreme Court concluded that the
courts should defer to the board’s treatment of a termite problem
1
because it was “a matter entrusted to [the board’s] discretion
under the [CC&Rs] and [now repealed] Civil Code section 1364.”
(Id. at pp. 264-265.) Here, there is no statute or provision in the
CC&Rs entrusting to the discretion of the Los Robles Hills
Estates Board of Directors (Board) whether a homeowner is
engaging in prohibited business or commercial activity within the
meaning of the CC&Rs. This is a straightforward legal question
to be decided by the courts, not members of the Board who lack
legal expertise. (See Smart v. Carpenter (N.M.Ct.App. 2006) 134
P.3d 811, 814 [it “is a question of law” whether homeowner
violated covenant prohibiting “‘commercial activity or business’
on any tract in the Subdivision”].)
The inapplicability of the judicial deference rule is
supported by Dover Village Assn. v. Jennison (2010) 191
Cal.App.4th 123 (Dover Village). There, the issue was whether a
sewer pipe was ordinary “common area to be maintained and
repaired by the Association” or “‘[an] exclusive use common area’”
designed to serve a particular homeowner who would be
responsible for its maintenance. (Id. at pp. 126-127.) The
Association decided that the sewer pipe was the defendant
homeowner’s responsibility because it exclusively serviced his
condominium. The appellate court concluded that the sewer pipe
was not an exclusive use common area. It rejected the
Association’s argument that, under Lamden, it should defer to
the Association’s decision: “The argument fails because it
confuses a legal issue governed by statutory and contract text
with matters that genuinely do lend themselves to board
discretion. [¶] [¶] There is an obvious difference between a legal
issue over who precisely has the responsibility for a sewer line [or
whether a homeowner is engaged in prohibited business or
2
commercial activity within the meaning of the CC&Rs] and how a
board should go about making a repair that is clearly within its
responsibility. . . . [W]e know of no provision in the Davis-
St[e]rling Act or the CC&R’s that makes the Association or its
board the ultimate judge of legal issues affecting the
development.” (Id. at p. 130)
The court considered Lamden to be “a nice illustration of
matters genuinely within a board's discretion.” (Dover Village,
supra, 191 Cal.App.4th at p. 130.) Unlike Lamden, the legal
issue here is not genuinely within the Board’s discretion. In
Lamden the Supreme Court noted, “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.” (Lamden, supra, 21 Cal.4th
at pp. 270-271.) In contrast to Lamden, the Board is not
equipped to determine whether the Ketelhuts were engaged in
business or commercial activity in violation of the CC&Rs.
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) 189 Cal.App.4th 930,
940.)
The 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
3
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) 88
Cal.App.4th 595, 602.) On its face paragraph 1.01 prohibits any
business or commercial activity without qualification or
exception. Subparagraph 3 of paragraph 2.03 of the CC&Rs
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.” (Italics
added.) How can the operation of a commercial vineyard not
qualify as commercial use?
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 and 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
4
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 which 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
5
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 hosting
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
6
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. 27.) 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 p. 27.) 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 use. Had it been so
informed, the Committee probably would not have approved the
landscape plan.
7
Difficulties may arise in applying the majority opinion’s
standard of whether business or commercial activity affects the
residential character of the 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.
8
They are at fault and they should pay for it.
CERTIFIED FOR PUBLICATION.
YEGAN, J.
9
Henry J. Walsh, John Nguyen, Judges
Superior Court County of Ventura
______________________________
Richland & Associates, Felipa R. Richland, in propria persona, for
Plaintiffs and Appellants Felipa Richland Eith and Jeffrey Eith.
The Aftergood Law Firm, Aaron D. Aftergood for Plaintiffs and
Appellants Thomasine Mitchell, John Mitchell, Philip Chang and Eileen
Gabler; Freeman Freeman & Smiley, Steven E. Young for Plaintiffs and
Appellants Stacy Wasserman and Morrey Wasserman.
Yoka & Smith, Christopher E. Faenza, Christine C. De Metruis for
Defendants and Appellants Jeffrey Ketelhut and Marcella Ketelhut;
Slaughter, Reagan & Cole, Barry J. Reagan, Gabriele M. Lashly, Michael
Lebow for Defendants and Respondents Los Robles Hills Estates HOA,
Michael Daily, Jeanne Yen and Frank Niesner.
10