Filed 10/2/13 Lee v. Castelluccio CA3
                                           NOT TO BE PUBLISHED



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 This opinion has not been certified for publication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
                                      THIRD APPELLATE DISTRICT
                                                      (Calaveras)
                                                            ----



DON H. LEE,

                   Plaintiff and Appellant,                                                  C068987

         v.                                                                    (Super. Ct. Nos. 10CV36874,
                                                                                10CV37043 & 10CV37048)
CHRIS CASTELLUCCIO et al.,

                   Defendants and Respondents.




         Two competing factions of a homeowners association filed three lawsuits (which
were later consolidated) seeking control of the Gold Strike Heights residential
subdivision. The “Weiner Parties” (individuals and entities affiliated with Mark Weiner,
who acquired majority control of the association) and the “Homeowners” (individuals
owning lots not owned by the Weiner Parties) participated in mediation and signed a
written settlement agreement.




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       Pursuant to Code of Civil Procedure section 664.6 [judgment by stipulation], the
trial court entered an order for judgment, dismissed all three lawsuits, and included in the
judgment all material terms of the agreement.
       Appellant Don H. Lee, one of the Weiner Parties, signed the agreement. The next
day, however, he asked the trial court to strike three provisions in the agreement before
entering judgment: provision 1d. [establishing the term of the current board and
officers], 1g. [voiding prior amendments and modifications to the bylaws and covenants,
conditions and restrictions (CC&R’s)], and 1h. [requiring amendments to articles, bylaws
and CC&R’s to require a supermajority vote for three years]. The trial court denied Lee’s
motion.
       Lee now contends (1) the challenged provisions violate the portions of the Davis-
Stirling Common Interest Development Act (the Act)1 (Civ. Code, § 1350 et seq.)
requiring secret elections and an independent third party counting the ballots;
(2) provision 1d. violates a portion of the Corporations Code governing the terms of
board members; and (3) the challenged provisions violate public policy.2
       We conclude the trial court did not err in including the challenged provisions in
the judgment. We will affirm the judgment.
                                      BACKGROUND
       Gold Strike Heights is a residential subdivision in Calaveras County. The
subdivision’s developer recorded a declaration of restrictions (CC&R’s) in 2002,



1 The Act was repealed, revised and renumbered in 2012 (Stats. 2012, ch. 180 (Assem.
Bill No. 805), eff. Jan. 1, 2014); references to the Act are to the statutes in effect at the
time of judgment.
2 The Homeowners claim Lee lacks standing because he is not currently a member,
officer or director of the Association. But the issue presented is whether the trial court
erred in entering judgment and dismissing three cases in which Lee was a named party.
Accordingly, we will address the merits.

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designating the subdivision as a senior citizen housing development. The developer
contemporaneously established the Gold Strike Heights Association (Association), a
California nonprofit mutual benefit corporation. The CC&R’s declared each owner of a
lot within the subdivision a member of the Association. The Association is governed by
an elected board of directors, which has the power to levy assessments, adopt and enforce
community rules, and impose disciplinary action against Association members. These
features make the Association a common interest development under Civil Code
section 1352 of the Act.
       The developer abandoned Gold Strike Heights after building homes on fewer than
half of the lots and before completing promised common area improvements. Thirty-one
bare lots in the subdivision were acquired in 2005 and 2006 by Mark Weiner and entities
he controlled. Ownership of these lots gave Weiner a 63 percent majority vote in the
Association; he used that majority in 2007 to nominate and elect a board of directors
which thereafter made substantial changes to the Association’s governance. Lee, an
employee of one of Weiner’s companies, served as an Association director and officer
between 2007 and 2010.
       The three consolidated cases arose from a contentious dispute over control and
management of the subdivision between Weiner and his affiliates on one side and most of
the Gold Strike Heights homeowners on the other side. In February 2011, the two
factions and their respective attorneys participated in a lengthy but successful mediation.
Following many weeks of negotiation, the parties signed a written settlement agreement.
       After signing the agreement, Lee moved the trial court to strike three provisions
and enter judgment on the remainder, or in the alternative, to declare the entire agreement
illegal and unenforceable. The challenged provisions were as follows:
       “1d. The parties agree that the Board of Directors of the [Association], as
presently constituted . . . [,] will remain as the Board of Directors and its officers for a
period of three (3) years . . . ;”

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       “1g. The parties agree that all amendments or modifications of the Bylaws and
CC&Rs . . . since July 1, 2010, are withdrawn, void and of no further force and effect;”
and
       “1h. The parties agree that . . . amendments to the Articles, Bylaws and/or
CC&Rs of the [Association] will require a super-majority vote of 75% of the membership
for a period of three (3) years . . . .”
       Each of the challenged provisions involved election of the board of directors and
changes to bylaws and CC&R’s, and each had been expressly labeled a “material” term
in the agreement.
       The trial court denied Lee’s motion, granting instead an opposing motion to enter
judgment enforcing the entire agreement.
                                           DISCUSSION
                                               I
       Lee contends the challenged provisions violate the portions of the Act requiring
secret elections and an independent third party counting the ballots.
       The Act was enacted in 1985 to consolidate in one place an array of statutes
governing common interest developments and, among other things, “resolve problems
faced by homeowners and associations in the operation of common interest
developments, particularly the collection of assessments and amendment of governing
documents.” (1 Sproul & Rosenberry, Advising Cal. Common Interest Communities
(Cont.Ed.Bar 2010) § 1.4, p. 6.) The Act includes very specific and complex rules about
how and when board elections are to take place. (Civ. Code, § 1363.03 [requiring secret
ballots with double envelopes to be opened and tabulated during a noticed and open
meeting by a specially appointed inspector of elections].)
        Although Lee argues that provisions 1d. [establishing the term of the current
board and officers], 1g. [voiding prior amendments and modifications to the bylaws and
CC&R’s], and 1h. [requiring amendments to articles, bylaws and CC&R’s to require a

                                               4
supermajority vote for three years] violate the Act, he does not cite to portions of the Act
governing the term of the current board and officers, or the manner in which articles,
bylaws and CC&R’s are modified, and he does not show exactly how the challenged
provisions are in conflict with the Act. Instead, he simply cites to provisions requiring
secret ballots counted by third parties. Lee has failed in his burden on appeal to show
that provisions 1d., 1g. and 1h. violate the Act.
                                              II
       Lee next contends provision 1d. [establishing the term of the current board and
officers] violates Corporations Code section 7220, subdivision (a), which prohibits board
members of California nonprofit corporations from extending their own terms of office.
Lee draws our attention to the following provision: “No amendment of the articles or
bylaws may extend the term of a director beyond that for which the director was elected,
nor may any bylaw provision increasing the terms of directors be adopted without
approval of the members . . . .” (Corp. Code, § 7220, subd. (a).) Lee’s reliance on this
provision is misplaced.
       Under the parties’ agreement, the Association’s board members “will remain [in
office] until the regular general election in June of 2014.” Lee does not point to evidence
of when the board members were elected or for how long, although he does imply that
the challenged provision would extend their elected terms. The statutory provision he
cites, however, only prohibits the extension of a sitting director’s term of office when the
extension is accomplished by an amendment to the Association’s articles or bylaws.
(Corp. Code, § 7220, subd. (a).)
       Lee relies on Burke v. Ipsen (2010) 189 Cal.App.4th 801, but that case does not
support his contention. Burke involved bylaw amendments proposed by the board of
directors of a labor union which, among other things, extended the directors’ terms of
office and substantially increased membership dues. (Id. at p. 805.) Unlike Burke, this



                                              5
case does not involve amendments to articles or bylaws effectuated by the board of
directors. Provision 1d. merely maintains the status quo for a period of time.
                                              III
       In addition, Lee argues that the challenged provisions violate public policy.
       Settlement agreements are contracts subject to the same principles as other
contracts, meaning that courts should try to interpret them as lawful and operative
without violating the intent of the parties. (Kaufman v. Goldman (2011) 195 Cal.App.4th
734, 745.) As the court in Kaufman observed, “ ‘Freedom of contract is an important
principle, and courts should not blithely apply public policy reasons to void contract
provisions.’ ” (Ibid., quoting VL Systems, Inc. v. Unisen, Inc. (2007) 152 Cal.App.4th
708, 713.) Further, the California Supreme Court, calling public policy an “unruly horse,
astride of which you are carried into unknown and uncertain paths” stated long ago that
“unless it is entirely plain that a contract is violative of sound public policy, a court will
never so declare.” (Stephens v. Southern Pacific Co. (1895) 109 Cal. 86, 89 (Stephens).)
       The quoted statement from Stephens was cited in Bovard v. American Horse
Enterprises, Inc. (1988) 201 Cal.App.3d 832, one of the rare cases in which a California
court concluded that a settlement agreement was illegal and void. The voided contract
was for the manufacture and purchase of drug paraphernalia which the trial court held
was contrary to the public policy set out in statutes barring possession of marijuana. (Id.
at pp. 839-840.) But the appellate court’s analysis of illegality went beyond mere citation
of the marijuana statute; it carefully applied the factors set forth in the Restatement
Second of Contracts, section 178 [when a term is unenforceable on grounds of public
policy].
       “A promise or other term of an agreement is unenforceable on grounds of public
policy if legislation provides that it is unenforceable or the interest in its enforcement is
clearly outweighed in the circumstances by a public policy against the enforcement of
such terms.” (Rest.2d Contracts, § 178, subd. (1).) Factors weighing in favor of a

                                               6
contract’s enforcement include “(a) the parties’ justified expectations, (b) any forfeiture
that would result if enforcement were denied, and (c) any special public interest in the
enforcement of the term.” (Rest.2d Contracts, § 178, subd. (2).) Factors weighing against
enforcement include “(a) the strength of that policy as manifested by legislation or
judicial decisions, (b) the likelihood that a refusal to enforce the term will further that
policy” and two factors involving misconduct. (Rest.2d Contracts, § 178, subd. (3).)
       Here, in considering the parties’ justified expectations, paragraph (F) of the
agreement says the purpose of the agreement was “to obtain complete peace” with
respect to the claims raised in the litigation. Lee acknowledges that, from 2007 through
2010, the Association’s board of directors was “dominated by” Indian Village Estates,
LLC, an entity controlled by Weiner. Following a contested election in July 2010, the
board was dominated by the Homeowners. Sixteen of the Homeowners were plaintiffs in
the 2010 complaint accusing Weiner, Lee and Weiner’s son of fraud and other serious
misconduct.
       Among other things, the challenged provisions were intended by the parties to
establish stability, eliminate litigation, and give Weiner meaningful input but not
unfettered control.
       A spokesman for the Homeowners stated in a declaration before the trial court that
“severance of any one of these [challenged] provisions would disrupt the entirety of our
agreement from the standpoint of what we fairly bargained for in the negotiating process
at the mediation.” There were 13 provisions designated as “material condition[s]” on the
face of the agreement; all three of the challenged provisions were designated material.
The record indicates that striking the challenged provisions at the behest of Lee would
deprive the other parties of their justified expectations.
       Regarding the other factors in favor of enforcement, there is no evidence of a
“forfeiture” or “special public interest.”



                                               7
       Turning to the factors that would weigh against enforcement, the Act seeks to
assure fairness in decisions affecting the separate property interests of Association
members. But given the history of the Association, Lee has not established that the Act’s
policy goals would be furthered by striking the challenged provisions. Moreover, the
remedy for violation of the election provisions of the Act is an action by a member to
have election results declared void. (Civ. Code, § 1363.09 [stating that a court could also
impose a civil penalty up to $500].) Lee does not cite to any provision in the Act that
would invalidate the settlement agreement provisions.
       In sum, Lee has not established that striking the challenged provisions would
further public policy; instead, the record indicates that his unilateral request would thwart
the policy favoring settlement agreements. (See Abbott Ford, Inc. v. Superior Court
(1987) 43 Cal.3d 858, 871–873.)
                                      DISPOSITION
       The judgment is affirmed.




                                                                 MAURO                    , J.


We concur:


              HULL                    , Acting P. J.


              BUTZ                   , J.




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