Rose II v. FGH CA2/6 ( 2023 )

Filed 5/31/23 Rose II v. FGH CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
ROSE II LLC et al., 2d Civil No. B321538
(Super. Ct. No. 56-2022-
Plaintiffs and Appellants, 00563081-CU-BC-VTA)
(Ventura County)
v.
FGH LLC,
Defendant and Respondent.
Plaintiffs Rose II LLC; Oxnard Place LLC; and Rose TIC,
LLC (Plaintiffs) own property in a shopping center (the center)
subject to covenants, conditions, and restrictions (CC&R’s).
Plaintiffs seek to enjoin a neighboring owner, FGH LLC, from
opening a cannabis dispensary. They contend cannabis sales
violate federal law and thus violate the CC&R’s prohibition
against use of the premises for “violation of any law.”
Because the terms of the CC&R’s do not incorporate
subsequent legislation regarding cannabis use and both
California and federal law prohibited cannabis sales when the
CC&R’s were adopted in 1996, the CC&R’s continue to prohibit
such activity. We reverse the order denying Plaintiffs’ motion for
a preliminary injunction because there is a reasonable probability
that Plaintiffs will prevail on the merits and direct the trial court
to issue the preliminary injunction.
FACTUAL AND PROCEDURAL HISTORY
The center is subject to CC&R’s recorded in August 1996.
They provide: “No portion of the Shopping Center shall be used
for . . . any violation of any law, ordinance, rule or regulation of
any governmental authority with jurisdiction over any portion of
the Shopping Center.”
In 2019, FGH purchased property in the center for the
purpose of operating a cannabis dispensary. FGH applied to the
City of Oxnard for a commercial cannabis business permit.
Following an extensive application process, the planning
commission approved the special use permit. After the city
council denied Plaintiffs’ appeal, Plaintiffs sued FGH for breach
of the CC&R’s and declaratory and injunctive relief.
Plaintiffs sought a preliminary injunction to enjoin FGH
from operating a cannabis facility at the center during the
pendency of the lawsuit. The trial court denied the injunction,
concluding Plaintiffs did not demonstrate a reasonable
probability they would prevail on the merits. The court did not
balance the relative harm to the parties if it enjoined FGH from
operating a cannabis dispensary during the pendency of this
litigation.
DISCUSSION
Preliminary injunction
A preliminary injunction preserves the status quo pending
a determination on the merits of the action. (People v. Uber
Technologies, Inc. (2020) 56 Cal.App.5th 266, 283.) The status
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quo “ ‘ “has been defined to mean ‘the last actual peaceable,
uncontested status which preceded the pending controversy.’ ”
[Citation.]’ ” (14859 Moorpark Homeowner’s Assn. v. VRT Corp.
(1998) 63 Cal.App.4th 1396, 1408.) “In determining the propriety
of preliminary relief, neither the trial court nor an appellate court
may undertake a final adjudication of the lawsuit.” (Hunt v.
Superior Court (1999) 21 Cal.4th 984, 999.)
“In deciding whether to issue a preliminary injunction, a
court must weigh two ‘interrelated’ factors: (1) the likelihood that
the moving party will ultimately prevail on the merits and (2) the
relative interim harm to the parties from issuance or nonissuance
of the injunction.” (Butt v. State of California (1992) 4 Cal.4th
668, 677-678.) Issuance of a preliminary injunction requires a
showing of “a reasonable probability that plaintiff will be
successful in the assertion of his rights.” (Continental Baking Co.
v. Katz (1968) 68 Cal.2d 512, 528.)
A ruling granting or denying a preliminary injunction is
generally reviewed for abuse of discretion. (Cohen v. Board of
Supervisors (1985) 40 Cal.3d 277, 286.) We reverse the denial of
a preliminary injunction only if “the trial court abused its
discretion in ruling on both factors.” (Id. at pp. 286-287.)
However, “issues of fact are subject to review under the
substantial evidence standard; issues of pure law are subject to
independent review.” (People ex rel. Gallo v. Acuna (1997) 14
Cal.4th 1090, 1136-1137.)
Cannabis statutes
Medicinal cannabis was decriminalized in California by
Proposition 215 in November 1996. Nonmedical use of cannabis
was authorized by the Control, Regulate and Tax Adult Use of
Marijuana Act (AUMA), enacted by Proposition 64 in November
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2016. The AUMA was renamed the Medicinal and Adult-Use
Cannabis Regulation and Safety Act (MAUCRSA; Bus. & Prof.
Code, § 26000 et seq.) and amended to authorize nonmedical
retail sales effective June 27, 2017.
While MAUCRSA permits sales of cannabis for medicinal
and recreational purposes subject to licensure and other
requirements (Bus. & Prof. Code, § 26000, subd. (b)), federal law
does not. The Controlled Substances Act (CSA; 21 U.S.C. § 801 et
seq.) classifies marijuana as a controlled substance, provides that
its distribution is unlawful, and provides criminal penalties for
violations. (21 U.S.C. §§ 841(a)(1) & (b), 812(c), Schedule I
(c)(10).)
Plaintiffs contend they demonstrated a reasonable
probability of success on the merits because a cannabis
dispensary would violate the prohibition in the CC&R’s against
use of the premises for “any violation of any law.” We agree.
Jurisdiction
The CC&R’s prohibit “any violation of any law . . . of any
governmental authority with jurisdiction over any portion of the
Shopping Center.” Plaintiffs assert the federal government has
jurisdiction over the shopping center because the CSA applies
even in states, like California, that permit cannabis activities.
(Gonzales v. Raich (2005) 545 U.S. 1, 9, 29-33; City of San Jose v.
MediMarts, Inc. (2016) 1 Cal.App.5th 842, 848.)
Plaintiffs are correct. The federal government has
jurisdiction over federal crimes “ ‘everywhere within the United
States.’ ” (United States v. McCalla (9th Cir. 2008) 545 F.3d 750,
756.) The CSA applies even though “[t]he United States
Department of Justice . . . ‘has declined to enforce [21 U.S.C.]
§ 841 when a person or company buys or sells marijuana in
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accordance with state law.’ ” (Sandusky v. Goetz (10th Cir. 2019)
944 F.3d 1240, 1242.) It did not lose jurisdiction based on
Congressional appropriations bills that prohibit the Department
of Justice from expending funds to prosecute federal medical
marijuana offenses for conduct that complies with state law.
(United States v. McIntosh (9th Cir. 2016) 833 F.3d 1163, 1169-
1170; City of San Jose v. MediMarts, Inc., supra, 1 Cal.App.5th at
p. 848, fn. 1.) The appropriation bills do “not provide immunity
from prosecution for federal marijuana offenses. . . . Anyone in
any state who possesses, distributes, or manufactures marijuana
for medical or recreational purposes (or attempts or conspires to
do so) is committing a federal crime.” (McIntosh, at p. 1179, fn.
5.)
We decline FGH’s invitation to apply an administrative
definition of a superficially similar phrase. Building standards
define “Authority Having Jurisdiction” as “[a]n organization,
office, or individual responsible for enforcing the requirements of
a code or standard, or for approving equipment, materials, an
installation, or a procedure.” (E.g., Cal. Code Regs., tit. 24, part
3, ch. 1, art. 100 (Electrical Code 2022).) But the reference in the
CC&R’s to “any law . . . of any governmental authority with
jurisdiction over any portion of the Shopping Center” (italics
added) is clearly more expansive and includes the federal CSA,
whether it is currently enforced or not. Therefore, we conclude
the federal government is a governmental authority with
jurisdiction over the center.
Violation of law
Because a recorded declaration of CC&R’s is treated as a
contract (Pinnacle Museum Tower Assn. v. Pinnacle Market
Development (US), LLC (2012) 55 Cal.4th 223, 240), we interpret
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it pursuant to contract principles. (Eisen v. Tavangarian (2019)
36 Cal.App.5th 626, 635.) Where interpretation of CC&R’s is not
based “ ‘on the credibility of extrinsic evidence, we independently
interpret the meaning of the written instrument.’ ” (Ibid.) Here,
the plain language of the CC&R’s prohibits uses that violate
federal law.
FGH contends cannabis sales are lawful based on Civil
Code section 1550.5, subdivision (b), which provides:
“Notwithstanding any law, including, but not limited to,
[Civil Code] Sections 1550, 1667, and 1668 and federal law,
commercial activity relating to medicinal cannabis or adult-use
cannabis conducted in compliance with California law and any
applicable local standards, requirements, and regulations shall
be deemed to be all of the following:
“(1) A lawful object of a contract.
“(2) Not contrary to, an express provision of law, any policy
of express law, or good morals.
“(3) Not against public policy.” (Italics added.)
But Civil Code section 1550.5, which was enacted in 2017,
does not apply to the CC&R’s, which were recorded in 1996. “No
part of [the Civil Code] is retroactive, unless expressly so
declared.” (Civ. Code, § 3.) “[A] statute is presumed to be
prospective only in operation and will not be retroactively applied
unless such intention clearly appears from the language of the
statute itself. [Citations.] This is true even though the statute
were to be held to be remedial in nature.” (Whitmire v. H. K.
Ferguson Co. (1968) 261 Cal.App.2d 594, 602.)
The legislative history of Civil Code section 1550.5 states
that it “provides individuals working within [the cannabis]
industry in California and their attorneys with the security
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needed to challenge violations of existing contracts in court.”
(Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis
of Assem. Bill No. 1159 (2017-2018 Reg. Sess.) as amended March
28, 2017, pp. 6-7, italics added.) But this language is not
contained in “the language of the statute itself” (Whitmire v.
H. K. Ferguson Co., supra, 261 Cal.App.2d at p. 602) and does not
alter the interpretation of the CC&R’s.
“A contract must be so interpreted as to give effect to the
mutual intention of the parties as it existed at the time of
contracting, so far as the same is ascertainable and lawful.” (Civ.
Code, § 1636.) Covenants that run with the land “bind the
assigns of the covenantor and to vest in the assigns of the
covenantee, in the same manner as if they had personally entered
into them.” (Civ. Code, § 1460.)
“[L]aws enacted subsequent to the execution of an
agreement are not ordinarily deemed to become part of the
agreement unless its language clearly indicates this to have been
the intention of the parties.” (Swenson v. File (1970) 3 Cal.3d
389, 393.) Swenson recognized “the general rule which
incorporates into contracts existing, but not subsequent, law.
The parties are presumed to have had existing law in mind when
they executed their agreement [citation]; to hold that subsequent
changes in the law which impose greater burdens or
responsibilities upon the parties become part of that agreement
would result in modifying it without their consent, and would
promote uncertainty in commercial transactions.” (Id. at p. 394.)
Here, the terms of the CC&R’s do not incorporate
subsequent legislation regarding commercial cannabis sales.
When the CC&R’s were adopted in 1996, both California and
federal law prohibited cannabis sales. The CC&R’s continue to
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prohibit them. Thus, Plaintiffs are likely to prevail on the
merits.1
Balancing of factors
Whether a preliminary injunction is appropriate requires
the trial court to balance the likelihood of success on the merits
with the relative interim harm to the parties if it grants the
injunction. (Butt v. State of California, supra, 4 Cal.4th at pp.
677-678.) The trial court here did not balance the harms against
the likelihood of success because it found Plaintiffs were not
likely to succeed on the merits. We conclude to the contrary
because the CC&R’s prohibit a cannabis dispensary as a matter
of law.
“[T]he greater the plaintiff’s showing on one [factor], the
less must be shown on the other to support an injunction.” (Butt
v. State of California, supra, 4 Cal.4th at p. 678.) “[I]f the party
seeking the injunction can make a sufficiently strong showing of
likelihood of success on the merits, the trial court has discretion
to issue the injunction notwithstanding that party’s inability to
show that the balance of harms tips in his favor.” (Common
Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 447.)
Plaintiffs contend they would be harmed by operation of a
cannabis dispensary including increased traffic, crime, odors, and
1 Accordingly, we need not resolve Plaintiffs’ alternative
argument that the CC&R’s prohibit cannabis sales as
“ ‘adult’ uses.” And because we conclude Plaintiffs are likely to
prevail based on statutory analysis and contract interpretation,
we decline to reach the constitutional issue of whether Civil Code
section 1550.5, subdivision (b), violates the supremacy clause.
(Facebook, Inc. v. Superior Court (2018) 4 Cal.5th 1245, 1275, fn.
31.)
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loitering, tenant hesitancy, inability to obtain financing,
increased insurance costs, and loss of business. The trial court
found these harms were “unsubstantiate[d] predictions.” But this
conclusion was not made in the context of balancing the relative
harms. Instead, it supported the conclusion that Plaintiffs were
not likely to prevail on the merits of a claim not asserted on
appeal—that a cannabis dispensary would constitute a nuisance.
FGH contends a preliminary injunction would harm them
by depriving them of potential profits, and that failing to operate
would cause their permit to expire.
Because the CC&R’s prohibit a cannabis dispensary at the
center as a matter of law, we conclude FGH has no lawful right to
operate it during the pendency of the lawsuit. Although the trial
court did not weigh the harms in denying the preliminary
injunction, it would have been an abuse of discretion to deny the
injunction on this basis because “the likelihood of appellants’
prevailing at trial is great.” (Heyenga v. City of San Diego (1979)
94 Cal.App.3d 756, 760; Sahlolbei v. Providence Healthcare, Inc.
(2003) 112 Cal.App.4th 1137, 1157, 1160.) Plaintiffs have made
“ ‘a sufficiently strong showing of likelihood of success on the
merits’ ” to warrant a preliminary injunction, even without a
showing “ ‘that the balance of harms tips in [their] favor.’ ”
(14859 Moorpark Homeowner’s Assn. v. VRT Corp., supra, 63
Cal.App.4th at p. 1407, italics omitted.)
Accordingly, we direct the trial court to issue a preliminary
injunction.
Bond
Upon issuance of a preliminary injunction, the trial court
must order the applicant to post a bond. (Code Civ. Proc., § 529.)
We remand to the trial court to exercise its discretion to
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determine the amount of the bond. (Oiye v. Fox (2012) 211
Cal.App.4th 1036, 1061-1062.)
DISPOSITION
The order denying the preliminary injunction is reversed.
The trial court is directed to issue a preliminary injunction
prohibiting FGH from operating a cannabis facility at the center
during the pendency of this action. We remand for the trial court
to determine the amount of bond. Each side shall bear their own
costs in this appeal.
NOT TO BE PUBLISHED.
BALTODANO, J.
We concur:
GILBERT, P. J.
YEGAN, J.
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Mark S. Borrell, Judge
Superior Court County of Ventura
______________________________
Jeffer, Mangels, Butler & Mitchell, Matthew D. Hinks and
Seena M. Samimi for Plaintiffs and Appellants.
Myers, Widders, Gibson, Jones & Feingold and Erik B.
Feingold for Defendant and Respondent.