AMBERG v. ROLLING HILLS COMMUNITY ASSOCIATION OF RANCHO PALOS VERDES

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Court of Appeal, Second District, Division 5, California.

H. Lawrence AMBERG et al., Plaintiffs and Appellants, v. ROLLING HILLS COMMUNITY ASSOCIATION OF RANCHO PALOS VERDES, Defendant and Respondent.

Civ. 69487.

Decided: January 20, 1984

Smith & Hilbig and Milan D. Smith, Jr., Torrence, for plaintiffs and appellants. Mason & Kinley, Thomas G. Styskal and William Kinley, Long Beach, for defendant and respondent.

 Plaintiffs appeal from an order sustaining defendant's demurrer to their complaint for declaratory relief without leave to amend on the ground that no justiciable controversy is alleged which relates to the legal rights and duties of the parties.1

Plaintiffs, 92 of approximately 2,076 members of the Rolling Hills Community Association of Rancho Palos Verdes (hereinafter referred to as Association), brought this action seeking a declaration that the method used by the Association to assess members for maintenance and improvements, as provided for under the declaration of restrictions set up by the original developer of the Rolling Hills Community of Palos Verdes Estates in 1936, had become unfair and inequitable after the passage of Propositions 13 and 8.   Plaintiffs also claim that the court should order the board of directors of defendant Association to adopt some different, legal and more equitable assessment method.

The assessments are made on the basis of the appraised value of the property as determined by the Los Angeles County assessor.   The plaintiffs are new owners who have purchased their property since the passage of Proposition 13, which amended the California Constitution, article XIII A to provide, among other things, that the full cash value of property is to be the county assessor's valuation as of the 1975–76 tax year and that, thereafter, all property acquired shall be taxed at the appraised value at the time of acquisition.  (Cal. Const., art. XIII A, § 2.) 2

 With the occurrence of each sale, remodeling or new construction on a lot within the boundaries of the Association, members who have not so sold, remodeled or built within the boundaries of the Association pay a decreasing proportion of the Association's annual budget.3

Plaintiffs contend that, because of the effects of Propositions 13 and 8, they and others who have purchased or improved approximately 200 lots within the confines of the Association are paying in excess of one-half of all the Association assessments ($767,703—fiscal 1982–83), even though they only constitute two-sevenths (2/727ths) of the total number of Association members, and that the Association's method of assessing property owners is grossly and inherently inequitable and should, therefore, be held to be unenforceable.

In Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281, the Supreme Court upheld Proposition 13 (Cal. Const., art. XIII A) noting that failure to tax property of equal current value equally did not constitute a deprivation of equal protection.   In holding that the system of state taxation under Proposition 13 is supported by a rational basis, the court stated at page 235, 149 Cal.Rptr. 239, 583 P.2d 1281:

“By reason of section 2, subdivision (a), of the article, except for property acquired prior to 1975, henceforth all real property will be assessed and taxed at its value at date of acquisition rather than at current value (subject, of course, to the 2 percent maximum annual inflationary increase provided for in subdivision (b)).   This ‘acquisition value’ approach to taxation finds reasonable support in a theory that the annual taxes which a property owner must pay should bear some rational relationship to the original cost of the property, rather than relate to an unforeseen, perhaps unduly inflated, current value.   Not only does an acquisition value system enable each property owner to estimate with some assurance his future tax liability, but also the system may operate on a fairer basis than a current value approach.   For example, a taxpayer who acquired his property for $40,000 in 1975 henceforth will be assessed and taxed on the basis of that cost (assuming it represented the then fair market value).   This result is fair and equitable in that his future taxes may be said reasonably to reflect the price he was originally willing and able to pay for his property, rather than an inflated value fixed, after acquisition, in part on the basis of sales to third parties over which sales he can exercise no control.”  (Original italics.)

 The plaintiffs/appellants purchased their homes within the confines of this restrictive and exclusive tract after the passage of Proposition 13, amending the California Constitution, article XIII A et seq. to provide for just what the plaintiffs/appellants are complaining, to wit, that their taxes and assessments were going to be more.   They knew or should have known of the basic changes in property taxation and the burdens provided in the equitable servitudes.   The court cannot remake the contracts they entered into for the purchase of their homes, nor can it redraw the Covenants, Conditions and Restrictions, so-called contractual equitable servitudes (hereinafter CC & R's).

 Plaintiffs are bound to the knowledge of the recorded servitudes for the benefit (and detriment) of all in common.   This was part of a uniform plan.   It is a general scheme of restrictions for the common good of all property owners in the tract affected and they are bound thereby.  (Moe v. Gier (1931) 116 Cal.App. 403, 409, 2 P.2d 852.)

 We hold that respondent Association's method of levying its annual assessment based on the valuations of real property and improvements thereon as established by the County Assessor of Los Angeles County for the then current fiscal year has not become inequitable and unenforceable by reason of the 1978 adoption of article XIII A, section 2, subdivision (a) of the California Constitution.  (See Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization, supra, 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281.)

 This court cannot say that the method of assessment is not reasonable.   If respondent board of directors adopted another method, what would it be—number of people, number of cars, amount of one's bank account, number of times one passes through the guard gate, current value?

The original Declaration of Restrictions No. 150, impressed on the subdivision in 1936, provided that the Association could, in their discretion, adopt some other legal and equitable plan to be adopted by the Association provided that the total amount of said annual charge or assessment under such alternate plan shall never exceed one and one-half percent (1 1/212%) of the fair cash value of said property and all improvements thereon as determined by the assessor appointed by the Association.   The CC & R's give the board the discretion to change to any legal method.   It is their discretion and not the court's.   Why should the wisdom of the court be substituted for the wisdom and experience of the duly elected board of directors of the Association?

 Plaintiffs contend for the first time on appeal that their complaint embodies a cause of action for breach of contract.   The complaint sounds in declaratory relief only seeking the court's determination that the method of assessment set forth in the equitable servitudes is unfair.   The complaint does not contain mention of a contract.   Of course, once the levy has been established and made by the board of directors of the respondent, then and only then does a contractual obligation arise to pay the levy.   This is not an action to collect the sums levied.

All plaintiffs purchased their property after Proposition 13 was passed.   Under the circumstances, Proposition 13 cannot be said to have changed their contractual obligations under the CC & R's.

Even if this were not so, their contracts would be subject to the law as changed.

“It is a general principle that into every contract or transaction concerned with public affairs, must be read the reserve power of the State to enact general laws for the public good, and in pursuance of a public policy.   It is an implied condition of every such contract that its fulfillment may be frustrated by the proper exercise of legislative [initiative] power.”   (Phelps v. Prussia (1943) 60 Cal.App.2d 732, 741, 141 P.2d 440.)

This is an action for declaratory relief under Code of Civil Procedure section 1060.

“A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court.  (Code Civ.Proc., § 1060;  Maguire v. Hibernia Sav. and Loan Soc. (1944) 23 Cal.2d 719 [146 P.2d 673, 151 A.L.R. 1062].)   If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to favorable declaration.  (Bennett v. Hibernia Bank (1956) 47 Cal.2d 540, 550 [305 P.2d 20];  Columbia Pictures v. DeToth (1945) 26 Cal.2d 753 [161 P.2d 217, 162 A.L.R. 747].)”  (Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 947, 148 Cal.Rptr. 379, 582 P.2d 970.)

  In the case before us the complaint alleges a controversy over the legal rights and duties of plaintiffs and defendant under the CC & R's impressed upon the Association property in 1936 by the original developer.   However, the trial court, in sustaining defendant's demurrer without leave to amend, determined that plaintiffs were not entitled to a declaration that the Association's method of assessment was inequitable.   The trial court, in effect, determined the rights of the parties.   However, in entering a judgment of dismissal, the court made no formal declaration of rights.   In VTN Consolidated, Inc. v. Northbrook Ins. Co. (1979) 92 Cal.App.3d 888, 155 Cal.Rptr. 172, the court concluded that the proper resolution of a similar procedural dilemma was not to reverse the judgment, but rather to modify the judgment of dismissal so as to declare that the plaintiff was not entitled to the requested relief.   The court stated:

“Appellant's ․ contention that the dismissal of the action by the trial court was procedurally incorrect, is well taken.   As has been underscored in several cases, where, as here, an actual controversy exists between the parties, the proper disposition of the declaratory relief action is a declaration in the judgment that the plaintiff is not entitled to relief, rather than the dismissal of the action (Essick v. City of Los Angeles (1950) 34 Cal.2d 614, 624 [213 P.2d 492];  Sullivan v. San Francisco Art Assn. (1950) 101 Cal.App.2d 449, 455 [225 P.2d 993];  3 Wilkin, Cal.Procedure (2d ed. 1971) Pleading, § 730, pp. 2350–2351).   While the dismissal of the action was concededly erroneous in this case, it is clear that the reversal of the judgment would serve no useful purpose and would simply constitute an idle act.   Therefore, instead of reversing the court's ruling, we follow existing precedent (Berkeley v. Alameda County Bd. of Supervisors (1974) 40 Cal.App.3d 961 [115 Cal.Rptr. 540];  Haley v. L.A. County Flood Control Dist. (1959) 172 Cal.App.2d 285 [342 P.2d 476] ) and modify the judgment of dismissal so as to declare that plaintiff is entitled to no relief under the allegations of its complaint.”  (P. 893, 155 Cal.Rptr. 172.)

The order of dismissal is modified to provide as follows:

Plaintiffs are not entitled to the relief sought, that is, a declaration that the board of directors of defendant Association should impose a method of assessment different than that which is presently employed.   The court will not order the Association to adopt a different method of assessment.

As modified, the judgment of dismissal is affirmed;  costs to respondent.

FOOTNOTES

FOOTNOTE.  

1.   An order sustaining a demurrer is not an appealable order (see Dollar-A-Day Rent-A-Car Systems, Inc. v. Pacific Tel. & Tel. Co. (1972) 26 Cal.App.3d 454, 456, fn. 1, 102 Cal.Rptr. 651;  Beazell v. Schrader (1962) 205 Cal.App.2d 673, 674, 23 Cal.Rptr. 189).   Plaintiffs' appendix in lieu of clerk's transcript contains an order of dismissal.   Accordingly, we construe plaintiffs' notice of appeal as referring to the appealable order of dismissal.  (Call v. Los Angeles County Gen. Hosp. (1978) 77 Cal.App.3d 911, 915, 143 Cal.Rptr. 845;  Gregory v. Hamilton (1978) 77 Cal.App.3d 213, 215, 142 Cal.Rptr. 563.)

2.   The California Constitution, article XIII A, section 2 provides:“(a) The full cash value means the county assessor's valuation of real property as shown on the 1975–76 tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.   All real property not already assessed up to the 1975–76 full cash value may be reassessed to reflect that valuation.   For purposes of this section, the term ‘newly constructed’ shall not include real property which is reconstructed after a disaster, as declared by the Governor, where the fair market value of such real property, as reconstructed, is comparable to its fair market value prior to the disaster.”

3.   The Association article II, section 1 (maintenance and improvement charges) provides:“(1) All of said property and the improvements thereon ․ shall be subject to a continuous maintenance lien securing payment of an annual assessment or charge to be fixed, established and collected from time to time as herein provided.   The Association shall have sole authority:“(a) To fix and establish annually the amount of such annual charge or assessment (including penalties and costs of collection thereon, together with reasonable attorneys' fees) on each and every lot or parcel of said real property or any interest therein and upon the improvements thereon, which said annual charge or assessment shall be based on the assessed valuation of said real property and of the improvements thereon as established by the County Assessor of Los Angeles County, California, for the then current fiscal year at a rate never in any one year in excess of the total annual tax rate established for all purposes for the then current fiscal year by the City Council for the Old City of Los Angeles, or in accordance with some other legal and equitable plan to be adopted by the Association, provided that the total amount of said annual charge or assessment under such alternate plan shall never exceed one and one-half (1 1/2 12%) per cent of the fair cash value of said property and all improvements thereon as determined by the Assessor appointed by the Association.”  (Italics added.)  (See Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 149 Cal.Rptr. 239, 583 P.2d 1281.)

 EMERSON, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

STEPHENS, Acting P.J., and ASHBY, J., concur.