CC&Rs Are An Enforceable Contract

In the recent case of Sands v. Walnut Gardens Condominium Association, the California Appellate Court considered whether condominium owners can make their homeowners association pay for a water leak. Sands sued and went to trial against the Walnut Gardens Condominium Association, Inc. and its property manager for breach of contract and negligence. The trial court granted a nonsuit (motion under Code of Civil Procedure section 581c where, disregarding conflicting evidence and indulging in every legitimate inference from the plaintiff’s evidence, there is no substantial evidence to support a verdict for the plaintiff).

The Sandses appealed, arguing the trial court erred by granting the nonsuit, by excluding certain evidence, and by denying their motion for a new trial. The Appellate Court reversed and remand the contract nonsuit, and affirmed the tort nonsuit.

The Sandses owned a unit in the Walnut Gardens development. A pipe on the roof broke and water entered the Sandses’ bedroom. The association’s agent hired people to repair the pipe and roof.

The association had responsibility to maintain its common areas, including the piping and roof. The Sandses sued the association for breach of contract and negligence. The trial court selected a jury, heard the Sandses’ two witnesses in their case in chief, and granted a nonsuit.

The Sandses claimed a breach of contract of the association’s covenants, conditions, and restrictions ("CC&Rs"), one part of which required the association to keep the project in “a first class condition.”

The Sandses’ first witness, however, testified the association was performing no preventive maintenance at all, even though preventive maintenance was desirable. The roof and pipes over the Sandses’ unit had not been inspected or maintained in years.

The association’s oral motion for nonsuit was concise to a fault. It first argued there was “a complete absence of evidence” to show a breach of contract. This first argument was incorrect. Reasonable jurors could have concluded a total failure to maintain common areas breached a promise to keep these areas in first class condition.

The association next argued no evidence showed the association was “on notice that it needed to make repairs or do something to the roof or the pipes.” This argument was also incorrect. The property manager testified “[m]aintenance wasn’t happening. It was a very sad situation for the homeowners.” A jury could find buildings need maintenance to remain in first class condition. The association knew “[m]aintenance wasn’t happening.” As a prima facie matter (Latin for "at first look" or "on its face", meaning evidence is sufficient to prove case unless there is substantial contradictory evidence), no more was needed.

In the course of granting the motion, the trial court added oral reasoning beyond the contents of the nonsuit motion. The court said the Sandses’ lack of expert testimony would force the jury to “speculate” about how a pipe broke and the roof leaked. By suggesting expert testimony was essential, this contract analysis erred. A complete lack of preventive maintenance is evidence the association did not keep the roof or pipes in first class condition. The jury would not need experts to grasp this.

Neither the motion nor the court’s rationale challenged the idea that CC&Rs comprise a contract between the association and individual owners.

Nor did the motion or rationale hint at the rule of deference governing owner suits against homeowner associations.  The nonsuit argument did not consider these points. Therefore, neither did the Appellate Court, and it reversed and remanded the nonsuit judgment about the contract.

However, it affirmed the nonsuit tort judgment.

The association argued there was no evidence “as far as negligence [was] concerned” showing the association “was on notice of any condition that required repair.” The trial court rightly decried this effort to “tortify” a creature of private ordering. If every negligent breach of a contract gives rise to tort damages, the limitation that "breach of contract is tortious only when some independent duty arising from tort law is violated" would be meaningless, as would the statutory distinction between tort and contract remedies.

Outside the CC&Rs, the association had no independent duty as to the pipes and roof arising from tort law. The Sandses’ trial counsel conceded the evidence for their negligence claim was “pretty much the same, under the same thing as a contract . . . .” The Sandses presented no authority for a cause of action in tort. They state: “As with the cause of action for contract, the duties and obligations for which the HOA, Walnut Gardens, was responsible, are found in the [CC&R's] ”

Even had the association omitted this issue in its nonsuit motion, nothing the Sandses could have done at trial would have summoned into existence a tort claim barred by law.

LESSONS:

1.         CC&Rs are an enforceable contract, and analysis of the incident and contract language is essential to determine if a breach of contract claim has merit.

2.         Do not assume that if there is a breach of contract claim, there is also a negligence claim.

3.         A tort claim, in addition to a breach of contract claim, requires an independent duty arising from tort law that is violated.