Opinion
G057540
08-06-2020
ANCHOR R&R, LLC, Plaintiff and Appellant, v. THE ESTATES AT MONARCH COVE COMMUNITY ASSOCIATION, Defendant and Respondent.
Law Office of Brett Ferguson and Brett Ferguson for Plaintiff and Appellant. Law Offices of Jeri E. Tabback and Jeri E. Tabback for Defendant and Respondent.
ORDER MODIFYING OPINION AND DENYING REHEARING; NO CHANGE IN JUDGMENT
It is ordered that the opinion filed herein on August 6, 2020, be modified as follows:
On page 14, at the end of the first full paragraph, add the following footnote:
2 Anchor filed a petition for rehearing in which it argued: "Diminution of value was not the sole basis for Anchor's claim for relief sought in the trial [c]ourt. Nor was the issue briefed in the pleadings on appeal." Anchor's arguments are without merit. First, as discussed in detail ante, in the proposed fourth amended complaint Anchor sought damages for continuing nuisance solely based on allegations Anchor was unable to sell the property for $15.75 million due the condition of the wall and thus suffered damages in the amount of $8 million. The proposed fourth amended complaint did
not allege any other type of damages aside from the loss in value of the property (e.g. its diminution in value) for that claim.
Second, in the appellate respondent's brief, the Association cites Gehr, supra, 165 Cal.App.4th at pages 670 through 671 in support of its argument: "The law is well established that diminution in value damages—or, as Plaintiff puts it, 'inability to alienate' the property—are not considered 'loss of use' damages which would be recoverable on a continuing nuisance theory." The Association also argued, "Plaintiff's only claimed damages are diminution in value based on an alleged lost sale of the property." Anchor, however, elected not to respond to these arguments in its reply brief.
As so modified, there is no change in judgment. The petition for rehearing is DENIED.
FYBEL, J. WE CONCUR: ARONSON, ACTING P. J. IKOLA, J.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2016-00833891) OPINION Appeal from a judgment of the Superior Court of Orange County, William D. Claster, Judge. Affirmed. Law Office of Brett Ferguson and Brett Ferguson for Plaintiff and Appellant. Law Offices of Jeri E. Tabback and Jeri E. Tabback for Defendant and Respondent.
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INTRODUCTION
The only issue presented by this appeal is whether the trial court erred by denying a motion by plaintiff Anchor R&R, LLC (Anchor) for leave to file a fourth amended complaint asserting a cause of action for continuing nuisance. Anchor is the former owner of a vacant residential lot located at 1 Monarch Cove Drive (the property), situated within the small six-lot community of the Estates at Monarch Cove development (the development) in Dana Point (the City). In February 2016, Anchor sued defendant The Estates at Monarch Cove Community Association (the Association) for several claims. The claims included one for private nuisance, which stemmed from an alleged long-standing poor condition of a retaining wall and was based, in particular, on an allegation the retaining wall had been modified without required permits about 10 years earlier in 2006. Anchor alleged it lost a buyer for the property in 2015 because the buyer was concerned about the unpermitted condition of the retaining wall.
Early in the case, the trial court sustained with leave to amend the Association's demurrer to, inter alia, Anchor's private nuisance claim. Anchor did not amend its pleading at that time.
The trial court granted the Association's motion in limine seeking to exclude evidence that the retaining wall had been modified without the required permits. It did so on the ground a claim based on such allegations was time-barred. Anchor then filed a motion for leave to file a proposed fourth amended complaint to include, as pertinent to this appeal, a claim for continuing nuisance. Anchor argued that therefore the court could admit evidence of the unpermitted status of the retaining wall without running afoul of the three-year statute of limitations applicable to a permanent nuisance claim.
The trial court's order denying the motion for leave to amend is not included in our record. Nevertheless, the court's statements during the hearing suggest it denied the motion because it believed Anchor was engaging in gamesmanship to delay trial, had failed to amend its pleading after the court granted it leave to amend after sustaining the Association's demurrer, and the newly pleaded nuisance claim was otherwise not viable. Following a jury trial, judgment was entered in favor of the Association.
We affirm. We do not need to decide whether the trial court abused its discretion by denying Anchor leave to file the proposed fourth amended complaint because any error was harmless. Damages for diminution in value of property are not recoverable for a continuing nuisance claim. The proposed fourth amended complaint solely sought such damages and therefore did not state a viable claim. Anchor does not suggest it could amend its complaint further to address this deficiency.
FACTUAL AND PROCEDURAL BACKGROUND
I.
ANCHOR INITIATES THE INSTANT LAWSUIT
In February 2016, Anchor filed a complaint naming the Association, South Coast Property Management, Inc. (the management company), and the City as defendants. The complaint alleged: "[The development] includes a common area retaining wall that provides direct lateral support for Lots 2-5 ('Wall'). The Wall ranges from about seven to ten feet tall. It is on the border of said lots with the St. Regis Monarch Beach Golf Links . . . . In and about September 2006, the Wall was modified at the behest of and/or with the consent of various current and/or former owners of some or all of Lots 2-5 in Estates. The various current and former owners comprise Does 1-30. Does 41-50 are the persons and/or entities that were hired by Does 1-30 to modify the wall."
The complaint further alleged that in April 2015, Anchor accepted an offer to sell the property for $15.75 million. In May 2015, Anchor disclosed "various facts and circumstances regarding the modification of the Wall, including the fact that the modification of the Wall was unpermitted, and provid[ed] reports regarding the Wall by an engineer and the City's Code Enforcement Officer." On June 24, 2015, the buyer informed Anchor it "regretfully will be withdrawing the offer to purchase" because of the unpermitted modification of the wall. The complaint included claims for breach of the development's covenants, conditions, and restrictions (CC&Rs), permanent injunction, nuisance, and declaratory relief against the Association; breach of contract, breach of fiduciary duty, civil conspiracy and violation of civil rights against the management company; preliminary injunction against the Association and the City, preliminary injunction against the City; and negligence against all defendants.
In support of the nuisance claim, the complaint alleged the Association was "responsible to maintain, and/or control access to the unpermitted modified Wall" and that the retaining wall "is creating a nuisance that has injured [Anchor] and continues to injure [Anchor] by reason of [Anchor]'s loss of the sale of the Property and the detriment to the present value to the Property."
II.
THE ASSOCIATION DEMURS TO THE COMPLAINT AND AGAIN TO THE
FIRST AMENDED COMPLAINT.
The Association and the management company filed a demurrer to the complaint. They demurred to the nuisance claim on the ground it failed to allege facts sufficient to state a claim because Anchor failed to "specify whether a public or private nuisance is being alleged" and "the allegations supporting this cause of action are identical to those supporting the negligence cause of action. [Citation.] Where a nuisance cause of action is merely a clone of a negligence cause of action—though under a different label—it fails as a separate cause of action."
Our record is unclear whether the trial court ruled on the demurrer before Anchor filed its first amended complaint in June 2016. In the first amended complaint, Anchor alleged as to the nuisance claim: "Defendants own, manage, control, and/or have responsibility for maintaining the Wall. Defendants have failed to maintain the Wall by allowing it to remain in its unpermitted modified condition. The unpermitted modified condition of the Wall has caused and continues to cause damage to [Anchor]'s Property in the form of, without limitation, impairing [Anchor]'s ability to sell the Property. The unpermitted modified condition of the Wall constitutes a private nuisance which has and is currently interfering with [Anchor]'s beneficial use, occupancy, and enjoyment of [Anchor]'s Property. [¶] . . . The present condition of the Wall therefore constitutes a private nuisance within the meaning of California Civil Code sections 3479 and 3481. Within the three-year period prior to the filing of this complaint, [Anchor] gave both oral and written notice to Defendants to abate their private nuisance, and defendants, in conscious and reckless disregard of [Anchor]'s rights and interests, have failed to and refused to abate the private nuisance condition." The complaint sought injunctive relief to avoid further damage to its property and also sought $8 million in damages.
The Association and the management company demurred to the first amended complaint. As to the nuisance claim, they again argued that the allegations supporting the nuisance claim were the same as those supporting the negligence claim. They also argued: "Permanent structures, such as walls and fences, have long been considered permanent nuisances for the purposes of the three-year statute of limitations for nuisance. [Citation.] As [Anchor] alleges the Wall in question was constructed in September 2006 and this action was commenced February 3, 2016, this cause of action is necessarily barred by the applicable statute of limitations and should be dismissed with prejudice."
III.
THE TRIAL COURT SUSTAINS THE DEMURRER TO THE FIRST AMENDED COMPLAINT;
ANCHOR'S SECOND AND THIRD AMENDED COMPLAINTS DO NOT INCLUDE A NUISANCE
CAUSE OF ACTION; ANCHOR LOSES THE PROPERTY TO FORECLOSURE SALE.
Although the trial court's order on the demurrer to the first amended complaint is also not in our record, in later hearings the trial court mentioned it had sustained the demurrer as to the nuisance claim with leave to amend. In September 2016, Anchor filed its second amended complaint which did not include the nuisance claim. On January 9, 2017, Anchor filed its third amended complaint, which also does not include a nuisance claim. The third amended complaint in our record names the Association and the management company as defendants and names as doe defendants individuals who owned lots 3, 4, and 5 of the development. It contains claims for (1) breach of the CC&Rs against the Association and the individual defendants; (2) breach of contract against the management company; (3) breach of fiduciary duty against unnamed doe defendants; (4) negligence against the Association and the management company; (5) violation of civil rights against the Association and the individual defendants; and (6) violation of Civil Code sections 712, 713, 4710, and 4730 against the Association and the individual defendants.
It appears the version of the third amended complaint in our record is not the operative third amended complaint approved by the trial court. In the August 4, 2017 minute order ruling on a motion for summary judgment and/or summary adjudication, the trial court clarified that it had granted Anchor leave to file the version of the third amended complaint that was attached to the Supplemental Schumacher Declaration dated January 5, 2017. The court ordered stricken a different version of the third amended complaint that had been filed on January 9, 2017 and deemed the third amended complaint attached to the Supplemental Schumacher Declaration to be the correct version. Our record does not contain the supplemental declaration of Schumacher in support of the motion for leave to file the third amended complaint or its attachments. In their appellate briefs, both parties cite the version of the third amended complaint filed on January 9, 2017 that had been ordered stricken by the court.
In July 2017, Anchor lost the property after its lender conducted a foreclosure sale.
IV.
THE TRIAL COURT DENIES THE ASSOCIATION'S MOTION FOR SUMMARY JUDGMENT BUT
GRANTS ITS MOTION IN LIMINE SEEKING TO EXCLUDE EVIDENCE OF UNPERMITTED
MODIFICATION TO THE RETAINING WALL.
In August 2017, the trial court denied the motion for summary judgment that was filed by the Association and other named defendants but granted summary adjudication on several issues raised in the motion (Anchor does not challenge the summary adjudication rulings). In finding there was a triable issue of material fact as to the breach of CC&Rs claim which had been challenged as time barred, the court stated in its minute order: "For the parties' guidance and in anticipation of the trial in this case, it is worth repeating that the ruling on this aspect of the TAC likely would have been different if the First Cause of Action had been limited to the alleged unpermitted modification of the wall. [Anchor] was aware of that issue no later than 2010, which is well outside the statute of limitations period. Given this conclusion, the Court is not inclined to allow any claim for damages based on this event." The court observed that the breach of the CC&Rs claim was not only based on the alleged unpermitted modification of the retaining wall, but also on the failure to maintain the wall. Inasmuch as the moving defendants had not shown when the damage to the retaining wall ceased, the court found they failed to show the statute of limitations had run.
A trial date was set for October 16, 2017. On September 28, 2017, the Association and other named defendants filed Motion in Limine No. 1 in which they sought an order precluding the admission of evidence that (1) "the wall at issue was modified without permits;" (2) "the modification of the wall at issue required permits;" (3) "the failure to obtain permits for the wall modification constitutes a failure to properly maintain the wall;" and (4) Anchor "was damaged in any way by the wall at issue being modified without permits." The moving defendants argued: "It is Defendants' belief that [Anchor] intends to elicit evidence at trial that the wall at issue was modified without permits, and that such modification required permits. It is Defendants' further belief that [Anchor] intends to elicit evidence at trial that the alleged purchase offer for [Anchor]'s property in 2015 was cancelled due solely to the contention that the wall was modified without permits, and that the failure to remedy that condition constitutes a failure to 'maintain' the wall. As set forth herein, such testimony would be irrelevant, and even if relevant the alleged probative value thereof is substantially outweighed by the probability that its admission will create a substantial danger of undue prejudice, confusion of the issues, and be misleading [to] the jury."
On October 16, 2017, the trial court granted Motion in Limine No. 1. After Anchor expressed interest in seeking writ review of the court's ruling, the trial court continued trial.
V.
THE TRIAL COURT DENIES ANCHOR'S MOTION FOR LEAVE TO FILE A
PROPOSED FOURTH AMENDED COMPLAINT.
On June 13, 2018, Anchor filed a motion for leave to file its proposed fourth amended complaint by which it sought to add, inter alia, an eighth cause of action for private nuisance against the Association and the individual defendants. Anchor argued it should be permitted to amend the complaint to add the proposed private continuing nuisance claim because the court had granted Motion in Limine No. 1. That ruling, Anchor argued, "necessitate[d] the return of Plaintiff's cause of action for nuisance as it is no longer subsumed in the negligence cause of action." The proposed fourth amended complaint contained the following allegations supporting the nuisance claim:
"94. Defendants acknowledge that the Wall was modified in about September 2006 without plans, engineering, permits or inspections. Thereby placing the wall in a non-code-compliant, e.g., unmaintained state. Defendants have known since about September 2006, that the Wall was in an unmaintained state.
"95. Plaintiff has repeatedly demanded that Defendants mitigate the unmaintained condition of the Wall, but Defendants have repeatedly failed and refused to do so.
"96. The failure of Defendants to mitigate the unmaintained state of the Wall comprises a failure to maintain the Wall. Defendants' failure to maintain the wall comprises a continuing private nuisance interfering with Plaintiff's use and enjoyment of the subject Property, said use and enjoyment, including, but not limited to the aforementioned loss of the sale of the Property for $15.75 million.
"97. Plaintiff's cause of action did not accrue until June 2015, at which time the prospective buyer cancelled its purchase of the Property. Until that time, Plaintiff's only damages were prospective and not recoverable as the law does not provide for diminution damages in connection with a private nuisance.
"98. For purposes of determining time-related defenses, this cause of action relates to the filing of the original complaint in this matter, wherein Plaintiff asserted a nuisance cause of action.
"99. Plaintiff thereupon seeks damages, in an amount to be proven at trial, but presently believed to be in excess of $8 million."
The trial court denied the motion for leave to file the proposed fourth amended complaint. The court's order is not included in our record on appeal.
In November 2018, in response to a stipulation by counsel, the trial court dismissed the negligence cause of action and dismissed the management company from the case. The court also dismissed the individual defendants.
VI.
AFTER A JURY TRIAL, JUDGMENT IS ENTERED IN FAVOR OF THE ASSOCIATION.
A jury trial was held in December 2018. The jury returned a general verdict in favor of the Association. Judgment was thereafter entered in favor of the Association. The judgment provided for an attorney fees award to be decided by postjudgment motion. Anchor appealed.
DISCUSSION
The sole issue raised by Anchor in this appeal is whether the trial court prejudicially abused its discretion by denying its motion seeking leave to file its proposed fourth amended complaint with regard to the continuing nuisance claim. The trial court's order ruling on the motion is not included in our record. Assuming Anchor's challenge to the court's ruling is not forfeited for failure to designate a complete appellate record, it is without merit.
"Any judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading." (Code Civ. Proc., § 576.) The court's discretion should be exercised liberally in favor of amendments. (Nestle v. Santa Monica (1972) 6 Cal.3d 920, 939.) "If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense, it is not only error but an abuse of discretion." (Morgan v. Superior Court (1959) 172 Cal.App.2d 527, 530.)
"[T]he failure of a proposed amendment to state facts sufficient to constitute a cause of action or defense may support an order denying a motion to amend. [Citation.] That rule would find its most appropriate application, however, in cases in which the insufficiency of the proposed amendment is established by controlling precedent and where the insufficiency could not be cured by further appropriate amendment." (California Casualty Gen. Ins. Co. v. Superior Court (1985) 173 Cal.App.3d 274, 280-281; disapproved on other grounds in Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th 390, 407.)
We do not need to decide whether the trial court abused its discretion by denying the motion to file the proposed fourth amended complaint because any error would be harmless given that Anchor's proposed continuing nuisance claim solely sought diminution in value damages, which are unavailable as a matter of law.
"California law classifies nuisances and trespasses as either continuing or permanent. 'An action for trespass upon or injury to real property' (Code Civ. Proc., § 338, subd. (b)) must be filed within three years of the discovery that the property has been contaminated by a permanent nuisance (Mangini v. Aerojet-General Corp. (1996) 12 Cal.4th 1087, 1096, 1103 (Mangini II)), while a new action can be filed every three years for the damages caused by a continuing nuisance or trespass. A nuisance is regarded as continuing if 'the nuisance can be remedied at a reasonable cost by reasonable means.' (Id. at p. 1103.)" (McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 63, fn. omitted.)
A party may seek damages for diminution in value only for permanent nuisances and not for continuing nuisances. (Santa Fe Partnership v. ARCO Products Co. (1996) 46 Cal.App.4th 967, 977-978 (Santa Fe Partnership).) In Spaulding v. Cameron (1952) 38 Cal.2d 265, 267 (Spaulding), the California Supreme Court explained that originally, diminution in value damages were not available in any nuisance action: "In early decisions of this court it was held that it should not be presumed that a nuisance would continue, and damages were not allowed for a decrease in market value caused by the existence of the nuisance but were limited to the actual physical injury suffered before the commencement of the action. [Citations.] The remedy for a continuing nuisance was either a suit for injunctive relief or successive actions for damages as new injuries occurred. Situations arose, however, where injunctive relief was not appropriate or where successive actions were undesirable either to the plaintiff or the defendant or both. Accordingly, it was recognized that some types of nuisances should be considered permanent, and in such cases recovery of past and anticipated future damages were allowed in one action."
Consequently, the law has evolved to provide that the available remedies and applicable limitations periods for private nuisance actions differ depending on whether the nuisance at issue is classified as continuing or permanent. If a nuisance causes a permanent injury to land, then the plaintiff generally must bring, within three years of the creation of the nuisance, a single lawsuit for all past, present, and future damages. (Gehr v. Baker Hughes Oil Field Operations, Inc. (2008) 165 Cal.App.4th 660, 666 (Gehr).) If the nuisance is one that might cease at any time, it is considered a continuing nuisance, and anyone harmed by the nuisance may bring successive actions for damages until the nuisance is abated. (Id. at pp. 666-667.) Recovery is limited to actual injury suffered prior to the commence of each action; prospective damages are unavailable. (Id. at p. 667.) "This means that if a private nuisance is deemed to be a continuing nuisance, the plaintiff may bring successive actions for damages (except for diminution in value) incurred prior to the commencement of each successive action until the nuisance is finally abated." (Ibid., italics added.)
Citing Spaulding, the appellate court in Gehr explained: "One reason a plaintiff in a continuing nuisance case may not recover diminution in value damages is that the '[p]laintiff would obtain a double recovery if she could recover for the depreciation in value and also have the cause of that depreciation removed.' [Citation.] Another reason is that 'if the defendant is willing and able to abate the nuisance, it is unfair to award damages on the theory that it will continue.'" (Gehr, supra, 165 Cal.App.4th at p. 668.)
In this case, Anchor abandoned any pursuit of a permanent nuisance claim and argued in the trial court and now argues on appeal that the trial court erred by denying it the right to elect a continuing nuisance theory by denying its motion to file the proposed fourth amended complaint. Anchor did not argue in the trial court and does not argue now that it could amend to state a viable claim for permanent nuisance in this case.
In Gehr, supra, 165 Cal.App.4th at page 668, the appellate court considered whether the plaintiff's claim for damages in the form of an interest rate differential constituted a claim for diminution in value, which may not be recovered under a continuing nuisance theory. The plaintiff argued his claim should be construed as one for the loss of use of property and not for diminution in value. (Ibid.) The appellate court, rejecting the plaintiff's argument, stated: "[T]he inability to encumber property is not a physical injury to the property. Indeed, plaintiff has not alleged any actual physical loss of use of his property. Accordingly, he is not seeking the type of damages generally associated with a continuing nuisance." (Ibid.)
In Santa Fe Partnership, supra, 46 Cal.App.4th 967, the plaintiffs similarly "request[ed that the court] 'overrule' existing law and allow 'stigma' damages as a proper remedy for a continuing nuisance caused by chemical pollution of the land." (Id. at p. 978.) They claimed that the remediation of the pollution might at that time take many more years and that it was "difficult, if not impossible, to sell or secure a loan against the land due to the stigma which attaches to previously contaminated property. They argue[d] this prevents a land speculator or investor from realizing his or her profit, and, because investment moneys are locked up in the contaminated property, prevents such persons from using that investment money for other projects." (Id. at pp. 977-978.)
Like the plaintiff in Gehr and Anchor here in its proposed fourth amended complaint, the plaintiffs in Santa Fe Partnership, supra, 46 Cal.App.4th 967 did not seek to abate the nuisance or claim any physical loss of use of their property. The only damages they claimed were for "postcleanup stigma damages" (id. at p. 972), as "a component of the diminution in value of the land caused by the contamination, whether or not complete remediation is feasible in the immediate future" (id. at p. 978). The appellate court, rejecting the plaintiffs' argument, stated: "'[T]he weight of California courts which have spoken to this issue have rejected attempts to recover such damages under continuing trespass or continuing nuisance theories. It is easy to see why. The principal assumption underlying continuing trespass and continuing nuisance theories is that the activity causing the injury can be abated. Thus, the damages are distinct from those arising from conduct constituting permanent trespass and permanent nuisance. To accept [the plaintiffs'] reasoning would permit parties seeking recovery for time-barred permanent trespass and permanent nuisance claims to avoid the statute of limitations simply by recharacterizing them as continuing trespass and continuing nuisance claims. The Court cannot permit the statute of limitations to be eviscerated in this fashion.'" (Id. at p. 980.) The appellate court therefore rejected the plaintiffs' "request to create new law to permit recovery of diminution in value damages in a continuing nuisance case." (Id. at p. 978.)
Here, the allegations supporting the continuing nuisance claim of the proposed fourth amended complaint show that the only remedy Anchor seeks is damages from the lost sale, allegedly due to the diminution of value of the property as a result of the unpermitted modification of the retaining wall in 2006. Anchor does not allege any physical damage to the property affecting its enjoyment of it. As Anchor no longer owns the property, it does not seek injunctive relief. We "can discern no meaningful difference" (Gehr, supra, 165 Cal.App.4th at p. 670) between the damages resulting from Anchor's alleged lost sale due to the unpermitted modifications to the wall, "the inability to refinance the first trust deed" (ibid.) at issue in Gehr, and the "'stigma' damages resulting from the inability to sell or secure a loan against the land in Santa Fe Partnership" (ibid.). In all three cases, the damages sought were "'a component of the diminution in value of the land caused by the [subject nuisance], whether or not complete remediation is feasible in the immediate future.'" (Id. at pp. 670-671, quoting Santa Fe Partnership, supra, 46 Cal.App.4th at p. 978.)
Anchor's continuing nuisance claim, therefore, did not state a claim for available relief. Although Gehr was cited and argued in the trial court, Anchor's appellate briefs do not cite that case and do not address whether Anchor's continuing nuisance claim must fail because it solely seeks diminution in value damages. We conclude any error in denying Anchor's motion for leave to file a proposed fourth amended complaint was harmless as to the proposed continuing nuisance claim.
DISPOSITION
The judgment is affirmed. Respondent shall recover costs on appeal.
FYBEL, J. WE CONCUR: ARONSON, ACTING P. J. IKOLA, J.