Opinion
D070708
09-01-2017
WAVE CREST HOLDINGS, LLC, Plaintiff and Appellant, v. WAVE CREST OWNERS' ASSOCIATION et al., Defendants and Respondents.
Niddrie Addams Fuller and David A. Niddrie, John S. Addams for Plaintiff and Appellant. Epsten Grinnell & Howell and Anne L. Rauch, William S. Budd; Klinedinst and G. Dale Britton, Greg A. Garbacz, Thomas E. Daugherty, for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 37-2016-00006763-CU-MC-CTL) APPEAL from an order of the Superior Court of San Diego County, Gregory W. Pollack, Judge. Affirmed in part, reversed in part, dismissed in part and remanded with directions. Niddrie Addams Fuller and David A. Niddrie, John S. Addams for Plaintiff and Appellant. Epsten Grinnell & Howell and Anne L. Rauch, William S. Budd; Klinedinst and G. Dale Britton, Greg A. Garbacz, Thomas E. Daugherty, for Defendants and Respondents.
Plaintiff and appellant Wave Crest Holdings, LLC (Holdings) appeals from an order denying its motion for a preliminary injunction and granting the Code of Civil Procedure section 425.16 special motion to strike of defendants and respondents Wave Crest Owners' Association (Association) and current or former Association directors Scott Gray, Robert Munoz, Stuart Rosenberg, Robert Brosius, Jeanne DeVaney and Patricia Krusee. Association's members own interests in timeshare vacation property. Holdings had sued defendants for breach of fiduciary duty and declaratory relief, alleging in part that they failed to share a property appraisal and purchase offer with Association's members, disclose conflicts of interest, or call a vote of the owners/members about whether to pursue a sale of the property. Characterizing the causes of action as "mixed," the trial court ruled the complaint was directed at defendants' affirmative statements that were made in a public forum in connection with an issue of public interest and also fell within the constitutional right of petition or free speech in the context of an ongoing controversy. It further ruled Holdings had not established a probability of prevailing on its claims both for purposes of avoiding operation of the anti-SLAPP statute or obtaining preliminary injunctive relief.
Statutory references are to the Code of Civil Procedure unless otherwise specified. Section 425.16 is commonly known as the anti-SLAPP (strategic lawsuit against public participation) statute. (Baral v. Schnitt (2016) 1 Cal.5th 376, 381 & fn. 1.)
Holdings contends the court erred by granting the anti-SLAPP motion because (1) the gravamen of its case was defendants' failure to disclose information or hold a vote, and thus its claims do not involve written or oral statements for purposes of applying the anti-SLAPP statute; (2) its action was not based on conduct in furtherance of the exercise of the constitutional right of free speech; (3) its claims did not involve an issue of public interest or a public issue; and (4) it established a probability of prevailing on the merits. Holdings asks that if this court concludes the complaint involves "mixed" causes of action, we require defendants to reframe their motion in accord with the California Supreme Court's recent clarification in Baral v. Schnitt, supra, 1 Cal.5th 376. Finally, Holdings contends we should reverse the court's order denying its motion for a preliminary injunction even though certain events have rendered the appeal moot.
On our de novo review, we conclude defendants met their burden to establish some of Holdings' claims for breach of fiduciary duty and declaratory relief are based on protected speech and activity under the anti-SLAPP law, but that the law does not protect Holdings' breach of fiduciary duty claims based on defendants' failure to disclose conflicts of interest and Association's collective decision to hold certain votes as against Association only, as well as the claim for a judicial declaration as to the validity of Association's amended CC&Rs. We further conclude with respect to the claims based on protected speech and activity, Holdings cannot establish a probability of prevailing on the merits under a proper construction of Association's governing documents, and those claims are stricken. We conclude that Holdings' appeal from the order denying preliminary injunctive relief is moot, and we dismiss that aspect of Holdings' appeal. Thus, we affirm the order in part, reverse it in part and remand to the trial court with directions set forth below.
FACTUAL AND PROCEDURAL BACKGROUND
We state the background facts in this anti-SLAPP context from the complaint's allegations and the admissible evidence submitted in connection with the motion, resolving conflicts in the record evidence and drawing inferences in Holdings' favor. (Lee v. Silveira (2016) 6 Cal.App.5th 527, 532; Armin v. Riverside Community Hospital (2016) 5 Cal.App.5th 810, 816.)
Association is a nonprofit mutual benefit corporation operated by a five-member volunteer board of directors. It operates as a homeowner association and is governed by by-laws as well as a declaration of covenants, conditions and restrictions for vacation ownerships (CC&Rs). Association members own "timeshares" or weekly vacation intervals in the 31-unit Wave Crest vacation ownership resort, which is located on coastal real property in Del Mar, California (the property). There are a total of 1,550 vacation ownership intervals at the property belonging to 995 distinct owners.
In 2014, Nicholas Woravka discovered the property while walking by it after dinner, and was surprised to learn it was a timeshare. He believed the market values of the timeshare ownership interests were dwarfed by the real property's apparent market value. Woravka began purchasing ownership interests. In mid-2015 he formed Holdings to hold his interests, which eventually amounted to 8 percent of all the ownership interests.
Woravka commissioned an appraisal of the property in August 2014. The appraisal reported that the property's value as a timeshare was about $10.2 million, but its value as multi-family residences, a condominium complex, or six single family residences ranged from $21 million to $75 million. In November 2015, Woravka e-mailed the appraisal to the then members of Association's board, informing the board he had been purchasing ownership interests because he believed they were undervalued. He stated that his assessment was that the property would be worth substantially more than the collective value of the timeshare interests if sold on the open market. Woravka set out alternative sale scenarios. He explained he was telling the board what he was doing so it could give the other owners the option to vote to terminate the CC&Rs and sell the entire property.
Association's then President, Scott Gray, responded to the e-mail. He informed Woravka that he responded in his capacity as an owner, that each owner had a vested property interest in the resort, and that under Woravka's alternatives, 100 percent of the owners would have to deed their interests to the new owner. Gray questioned whether a developer would be willing to take an interest in the property when one owner could stop the acquisition. He also pointed out that many owners who owned "turf" units paid substantial amounts for their weeks, and informed Woravka as an example that Gray had paid just under $50,000 a week for each of his turf weeks.
According to Woravka, a turf unit was a unit rented during racing season at the Del Mar race track.
In December 2014, a developer, Zephyr Partners-RE, LLC (Zephyr), sent the board an unsolicited written offer to purchase the property for $20 million. At the end of that month, Gray e-mailed the Wave Crest 2014 Winter Report to approximately 767 owners, including Woravka. On the issue of Woravka and the Zephyr purchase offer, Gray wrote that an investor was purchasing a large number of units, and sought to promote the sale of the property in its entirety to a developer or third party. He wrote that "the CC&Rs provide that if a sale occurred, all 1550 units would be treated equally and each owner would receive an equal 1/1550 interests [sic] in the proceeds regardless of the unit being a Surf studio or 2 bedroom Turf unit. The CC&Rs require a majority of units to approve any sale and state that upon approval, all owners would be required to sell." He also stated the board had not sought a legal review and that a "non-binding unsolicited offer of $20,000,00 has been made but not investigated or reviewed" on which the board had not taken a position. He advised owners that the board would discuss the matter at its January 2015 meeting.
At the January 2015 board meeting, which was open to attendance by other owners, Association's board discussed owners' concerns about Woravka purchasing intervals for investment, as well as the Zephyr purchase offer. The board rejected the offer based on the owners' desire to keep the property for the owners' use.
In late January 2015, Woravka wrote to all Wave Crest owners asking if they were interested in directing the board to seek a professional opinion to determine the property's fair market value and having a vote on whether to sell it. He told the owners that the value of each timeshare week owned based on the Zephyr offer would be about $12,903 minus closing costs, and he wanted the board to give owners a chance to vote. He wrote it was imperative board did "due diligence" to determine if owners could get more than $20 million for the property. A majority of the owners who responded stated they were interested in having the board obtain a professional opinion of the property's fair market value.
In February 2015, Gray wrote to Woravka and some of the other Wave Crest owners advising them that the board was aware of Woravka's efforts to sell the property to developers or other wealthy owners, and that the board was opposed to the property's sale. He stated that article 12 of the CC&Rs permitted the property to be sold if the majority of owners wanted it sold, and Woravka would be required to get a majority of the ownership units to vote in favor of selling. Gray stated he disagreed with Woravka on two points: that the property was not replaceable to Gray's family, and the property's sale did not benefit all owners since one and two-bedroom owners would probably suffer a financial loss. He asserted the sale would benefit Woravka.
Woravka responded to the board via e-mail in early March 2015, stating that each week interval had a market value, and if the board felt compelled to influence the issue, it should disclose conflicts of interest. He suggested that if the board was unwilling to entertain the Zephyr offer, it should hire a commercial real estate broker to market the property for the highest offer, and that the process should be transparent.
The board held open meetings in April and July, and discussed the status of Zephyr's inquiry to purchase the property as well as Woravka's request that the board form a committee to review the property's proposed sale. At the April 2015 meeting, the board agreed to modify article 12 of its CC&Rs to require 75 percent owner approval to disband the timeshare. Ultimately, the board found no need to form a committee to review the proposed sale.
In July 2015, Gray e-mailed owners the "Wave Crest Summer 2015 Owners Report," in which he addressed, among other things, Holdings' claim the property had hidden value and Holdings' request for an appraisal. In an e-mail response to the board copied to other owners, Woravka accused the board of a lack of transparency in disclosing the Zephyr offer in the 2014 Winter Report. Woravka complained in his e-mail that the report was sent to only 23 percent of the ownership based on the property manager's e-mail list, and he cautioned the "magnitude of these matters should not be hidden from any owner." He criticized Gray as portraying his efforts as "negative" when, according to Woravka, he was seeking an opportunity to create value for Association.
In October 2015, Association sent an "official notice" and ballot to members regarding a vote to approve an amendment to the CC&Rs in part allowing for sale of the property only after 2065 and by vote of 75 percent of the membership. It included a letter from the board explaining that "Wave Crest is coming under increasing pressure from an outside investor to shut Wave Crest down for financial gain" and that a CC&Rs committee had recommended updates. The board summarized the changes and the reasons for them, and recommended their approval. At its November 2015 meeting, the board reiterated its decision not to form a property sale review committee. It adopted various resolutions relating to the proposed sale, in part confirming Association's intention to operate the property for the personal use and enjoyment of its owners as a timeshare.
In April 2016, after Holdings filed suit, Association held a vote in which a majority of the members approved the amendment of the CC&Rs.
In February 2016, Holdings filed the present action against Association and the named individual board members. In part, it alleged the parties disputed the meaning and effect of a provision of Association's CC&Rs—paragraph 12.02—addressing the CC&Rs' duration and termination. It alleged defendants—both Association and its individual directors—breached their fiduciary duties of loyalty, disclosure and fair dealing by failing to provide either Woravka's property appraisal or Zephyr's sales offer to the members; failing to disclose the conflict of interest of some of the director defendants; failing to call a vote of owners about whether to pursue a sale; making misleading, untruthful, inaccurate or partial communications to owners about the property's value, the prospect and opportunity of selling the property, and a sale's potential financial benefits to owners; and requesting that the owners amend the CC&Rs to make it more difficult to vote for a sale. Holdings sought declaratory relief against Association only, seeking a judicial declaration that Association had a duty to fully and fairly disclose purchase offers and indicia of the property's value to owners, and to call for a vote by the owners on whether to pursue purchase offers for the property. It also sought a judicial declaration to invalidate or declare ineffective the "purported" amendment of the CC&Rs.
Shortly after, Holdings moved for a preliminary injunction to (1) restrain defendants from amending or recording any amendments to Association's CC&Rs pending resolution of the case and (2) direct defendants to comply with the CC&Rs by disclosing to all Association members all information regarding the potential or actual sale of the property and/or the property's value. Defendants eventually stipulated not to record any amended CC&Rs until after the court had ruled on the motion.
Defendants filed a special motion to strike under the anti-SLAPP statute. They argued Holdings' complaint arose from constitutionally-protected First Amendment conduct and communications to timeshare owners falling within section 425.16, subdivisions (e)(3) and (e)(4); that the possibility of selling the property was a public issue because it affected all of the owners' property rights, and its conduct and communications were made in a public forum (board meetings open to the public, meeting minutes, and e-mailed quarterly reports) as part of an ongoing controversy, dispute or discussion. They argued the First Amendment protected not only their affirmative speech but also their right not to speak, and thus their decision to decline to pass along the unsolicited appraisal, create a committee or call for a vote was subject to section 425.16. According to defendants, Holdings could not prevail because defendants had no duty—there was no statutory or contractual basis under the CC&Rs—that they do the actions Holdings alleged they failed to do, but rather exercised their good faith discretion and were protected by the business judgment rule. Defendants further argued Holdings could not prove damages.
In opposition, Holdings argued the gravamen of its claims was defendants' withholding of information and suppression of material facts, which did not implicate section 425.16, subdivision (e)(3) because the claims did not involve written or oral statements. It further argued the alleged wrongdoing was not protected conduct within the meaning of subdivision (e)(4) of section 425.16 because its gravamen was defendants' breach of their affirmative duty to make full and complete disclosures; Holdings distinguished the authorities involving the "right not to speak" by asserting that, unlike those cases, defendants' fiduciary duties were based on "the failure to disclose facts by defendants who were duty-bound to speak." It argued it was likely to prevail, first because paragraph 12.02 of the CC&Rs allowed for the property's sale upon a majority vote of the members at any time, and second because defendants owed all owners common law fiduciary duties but suppressed and withheld material information or failed to disclose conflicts of interest. Holdings argued it could establish damage given evidence that if the property sold for $20 million, it would receive approximately $1.6 million minus closing costs.
In a May 2016 minute order, the trial court both denied Holdings' motion for a preliminary injunction and granted defendants' anti-SLAPP motion. As to preliminary injunctive relief, it ruled Holdings could not establish a reasonable likelihood of prevailing in the action because the "fundamental premise" of its complaint and argument—that the property could be sold at any time, even before December 31, 2033—was unsupported under a proper interpretation of paragraph 12.02 of Association's CC&Rs. As for defendants' anti-SLAPP motion, it found defendants met their burden to show Holdings' claims fell within subdivisions (e)(3) and (e)(4) of section 425.16. It ruled the action involved "mixed" causes of action targeting both protected affirmative speech— the sufficiency of the board's communications concerning selling the property—and unprotected failures to disclose, justifying striking the entire claim. It ruled the affirmative acts were not merely incidental or collateral to the unprotected conduct. It also found defendants' affirmative statements fell within the constitutional right of petition or free speech and were made in the context of an ongoing controversy. For the reasons set forth in its preliminary injunction ruling, the court ruled Holdings did not meet its burden to establish a probability of prevailing on its claims.
Holdings filed this appeal.
DISCUSSION
I. The Anti-SLAPP Statute: Legal Principles and Review Standard
Section 425.16, subdivision (b)(1), the anti-SLAPP statute's "core provision" (Barry v. State Bar of California (2017) 2 Cal.5th 318, 321), "authorizes defendants to file a special motion to strike '[a] cause of action against a person arising from' the petition or speech activities 'of that person . . . in connection with a public issue.' " (Ibid.; Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062 (Park).) An anti-SLAPP motion may only target claims arising from such acts. (Park, at p. 1062.) "[T]he Legislature has defined such protected acts in furtherance of speech and petition rights to include a specified range of statements, writings, and conduct in connection with official proceedings and matters of public interest." (Ibid.) Relevant here, the anti-SLAPP statute defines an act in furtherance of speech or petition rights to specifically include "any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest" or "any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest." (§ 425.16, subds. (e)(3), (4).)
"The analysis of an anti-SLAPP motion proceeds in two steps: ' "First, the court decides whether the defendant has made a threshold showing that the challenged cause of action is one 'arising from' protected activity. [Citation.] If the court finds such a showing has been made, it then must consider whether the plaintiff has demonstrated a probability of prevailing on the claim.' " (Barry v. State Bar of California, supra, 2 Cal.5th at p. 321; see Lee v. Silveira, supra, 6 Cal.App.5th at p. 538.) In making both of these determinations, the court " ' considers "the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based." [Citation.] For purposes of an anti-SLAPP motion, "[t]he court considers the pleadings and evidence submitted by both sides, but does not weigh credibility or compare the weight of the evidence. Rather, the court's responsibility is to accept as true the evidence favorable to the plaintiff . . . ." ' " (Lee v. Silveira, at p. 538; Navellier v. Sletten (2002) 29 Cal.4th 82, 89 ["In deciding whether the initial 'arising from' requirement is met, a court considers 'the pleadings, and supporting and opposing affidavits stating the facts upon which the liability or defense is based' "]; City of Cotati v. Cashman (2002) 29 Cal.4th 69, 71.) We consider only whether defendants' contrary evidence establishes its entitlement to prevail as a matter of law. (Park, supra, 2 Cal.5th at p. 1067.)
"The defendant has the burden on the first issue; the plaintiff has the burden on the second issue. [Citations.] We review the trial court's rulings independently under a de novo standard of review." (Jackson v. Mayweather (2017) 10 Cal.App.5th 1240, 1251-1252; Park, supra, 2 Cal.5th at p. 1067.) That is, "[w]e exercise independent judgment in determining whether, based on our review of the record, the challenged claims arise from protected activity." (Ibid.) " ' "Only a cause of action that satisfies both prongs of the anti-SLAPP statute . . . is a SLAPP, subject to being stricken under the statute." ' " (Barry v. State Bar of California, supra, 2 Cal.5th at p. 321.)
II. Evidentiary Rulings
To determine the universe of evidence we may properly consider on our review, we address Holdings' contentions that the trial court erred by excluding some of its evidence offered in opposition to defendant's anti-SLAPP motion. Specifically, in opposing the motion, Holdings presented Woravka's declaration, in which he made the following statements:
• "To this day the Wave Crest Owners Association has never shared the entirety of the appraisal with all of the Wave Crest owners. To the best of my knowledge, Mr. Gray also never disclosed this information about the units he owns or the prices he paid for them to the membership at any time."
• "The Wave Crest Owners Association did not share a copy of the written offer in its entirety with all of the Wave Crest owners at any time, nor did the Wave Crest Owners Association ever call for or entertain a vote of the members to pursue a sale of the property to Zephyr Partners or any other third-party."
• ". . . the Board never, at any time, shared with the owners a complete copy of the appraisal I commissioned or a complete copy of Zephyr's written offer to purchase the property at any time before or after it published the proposed amended CC&Rs."
• "To the best of my knowledge, Mr. Rosenberg never disclosed [that he paid approximately $50,000 each for two of his two bed turf units at Wave Crest] to the membership at any time."
The trial court sustained defendants' objections to these statements on grounds they were speculation and lacked foundation or personal knowledge.
Woravka also made an assertion concerning how many Association members received Gray's December 2014 e-mail: "I am also aware that not all of the owners received [Gray's December 31, 2014 e-mail]. My understanding is that it was e[-]mailed to only 23 [percent] of the Wave Crest Owners (31 [percent] if you include units owned by me). My understanding of this comes from the former Wave Crest property manager from Helm Management, Paul Texiera, who gave me a list of all Wave Crest owners who provided their e[-]mail contact information to management." The trial court sustained defendants' objections to this statement not only on the grounds raised to the previous statements, but also on grounds they were irrelevant and constituted both hearsay and an improper opinion.
This court reviews these rulings for abuse of discretion. (Public Employees' Retirement System v. Moody's Investors Service, Inc. (2014) 226 Cal.App.4th 643, 683 [evidentiary rulings on an anti-SLAPP motion are reviewed for abuse of discretion].) Thus, a reviewing court will not overturn such a ruling on appeal "unless 'the trial court exceeded the bounds of reason, all of the circumstances before it being considered.' " (Public Employees', at p. 683.)
As to the first four statements, Holdings' sole argument is that as an owner, Woravka received communications from Association and the board, and "[a]s such, a rational trier of fact could have found he perceived and recalled whether or not these events happened." But the fact Woravka received Gray's e-mails does not permit a reasonable inference that he had personal knowledge as to who else Gray may or may not have included in those communications or how many other owners were recipients. Nor do Woravka's statements negate the possibility that Gray made other, non-e-mail, communications with owners with respect to the appraisal or the Zephyr purchase offer. Woravka's declaration contains no other facts pertaining to how he would know with whom Gray communicated to overcome the speculation inherent in his statements. Given these circumstances, Woravka's assertion that some of his statements are made "to the best of [his] knowledge" injects enough uncertainty to render them insufficient to establish his personal knowledge of the matters. (Accord, Katelaris v. County of Orange (2001) 92 Cal.App.4th 1211, 1216 [phrase "to the best of my knowledge" may introduce an element of uncertainty in circumstances such as a corporate officer's assertion about whether certain individuals were never elected as corporate officers, but not where an employee responsible for mail describes his regular routine for depositing mail correspondence]; compare, Pelayo v. J.J. Lee Management Co., Inc. (2009) 174 Cal.App.4th 484, 494 [process server's declaration described the manner in which she generally prepared a summons and how she prepared a specific summons, thus her statement that she had done so "to the best of my knowledge" at most raised an issue about the clarity and certainty of her memory, not issues calling into question its admissibility]; Ahrens v. Superior Court (1988) 197 Cal.App.3d 1134, 1151, fn. 13 [addressing admissibility for purposes of summary judgment].) That is, this is not a situation where Woravka was relating some act he had performed or information he was responsible for handling, about which his personal knowledge could be inferred. As to these statements, the court did not abuse its discretion in its ruling.
As for Woravka's assertion that only 23 percent of owners received Gray's December 2014 e-mail, it is assertedly based on an August 2015 list given to him by Association's property manager that, as Woravka described it in his declaration, identified owners who had provided management their e-mail contact information. But Woravka did not provide any basis for his personal knowledge about the content of the list other than from the property manager's description, and to the extent Woravka purported to relate the property manager's description of the list, the statement is hearsay as made "other than by a witness . . . that is offered to prove the truth of the matter stated." (Evid. Code, § 1200, subd. (a).) Holdings asserts the list itself is a business record coming within an exception to the hearsay rule. But Holdings did not provide any foundation necessary to admit the list into evidence on that basis, including evidence that the writing was made in the regular course of the business at or near the time of the act, condition, or event, and that the method and time of preparation were such as to indicate its trustworthiness. (Evid. Code, § 1271, subds. (a)-(d); see Grail Semiconductor, Inc. v. Mitsubishi Electric & Electronics USA, Inc. (2014) 225 Cal.App.4th 786, 798.) Without testimony as to the manner in which the list was prepared, the matters purportedly contained in it cannot be said to have been shown to be reliable or trustworthy. (Accord, Taggart v. Super Seer Corp. (1995) 33 Cal.App.4th 1697, 1706 [reports failed to qualify for admission as business records where custodian testified to their authenticity but offered no evidence as to "what [they] were, how they were prepared, or what sources of information they were based on"], superseded by statute on other grounds as explained in Cooley v. Superior Court (2006) 140 Cal.App.4th 1039, 1044.) Thus, the court did not err by excluding Woravka's declaration regarding this list as hearsay and speculation, as well as lacking personal knowledge or foundation.
We reject Holdings' assertion that the list was admitted "without objection" in connection with the motion. Woravka made his objected-to statement concerning the list, then stated that a true and correct copy of the property manager's e-mail including the list was attached as Exhibit 13. Defendants' objections, and the court's ruling, encompassed Woravka's "true and correct" statement and the referenced list.
III. Defendants Demonstrated that Holdings' Claims Arise in Part from Acts in
Furtherance of the Right of Free Speech or Petition
We begin with whether defendants met their burden on the threshold issue, which is to "show 'the challenged cause of action arises from protected activity.' " (Jackson v. Mayweather, supra, 10 Cal.App.5th at pp. 1250-1251.) The California Supreme Court recently summarized this standard: "A claim arises from protected activity when that activity underlies or forms the basis for the claim. [Citations.] Critically, 'the defendant's act underlying the plaintiff's cause of action must itself have been an act in furtherance of the right of petition or free speech.' [Citations.] '[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute.' [Citations.] Instead, the focus is on determining what 'the defendant's activity [is] that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.' [Citation.] 'The only means specified in section 425.16 by which a moving defendant can satisfy the ["arising from"] requirement is to demonstrate that the defendant's conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) . . . .' [Citation.] In short, in ruling on an anti-SLAPP motion, courts should consider the elements of the challenged claim and what actions by defendant supply those elements and consequently form the basis for liability. (Park, supra, 2 Cal.5th at p. 1063.) At this stage of the analysis, we review the parties' pleadings, declarations, and other supporting documents "only 'to determine what conduct is actually being challenged, not to determine whether the conduct is actionable.' " (Talega Maintenance Corp. v. Standard Pacific Corp. (2014) 225 Cal.App.4th 722, 728 (Talega), quoting Castleman v. Sagaser (2013) 216 Cal.App.4th 481, 490-491.)
Here, in the background section of its complaint Holdings alleges defendants—both Association and its individual directors—breached their fiduciary duties in several different ways: First, it alleges they breached those duties by refusing to provide Woravka's appraisal and the Zephyr purchase offer to the members and by "referenc[ing] the [purchase offer] only in a newsletter that is not sent to all of the members . . . ." Second, it alleges that "[s]everal of the Director Defendants purchased their ownership interests in [the property] for prices higher than the price those Director Defendants would have received in a sale of the property" but those directors "failed to recuse themselves from the process, if any, the Board undertook to address internally the potential sale . . . ." and thus defendants breached their fiduciary duty by "failing to disclose that conflict of interest . . . ." Third, Holdings alleges defendants breached their fiduciary duties "by failing and refusing to call a vote of the owners about whether to pursue a sale of the property." Finally, Holdings alleges that "[l]ater communications from . . . Association to the owners about the prospect of selling [the property] were not truthful, accurate and comprehensive but were slanted in a manner designed to discourage the owners from pursuing a possible sale of [the property]," and in the face of those communications, defendants breached their fiduciary obligations by instead asking owners to amend the CC&Rs to make the property more difficult to sell. Holdings summarizes all of these claimed breaches in its cause of action, stating defendants (with the exception of Munoz as to the request to amend the CC&Rs) took all of these actions "in the presence of . . . Association's misleading communications to the owners about the value of the property and in the absence of a full and fair disclosure of the value of the property, the opportunity to sell it, or the financial benefits to the owners of doing so." (Italics added.)
In its cause of action for declaratory relief against Association, Holdings sought a judicial declaration of the parties' rights and obligations under the CC&Rs, including a declaration that Association "has a duty to disclose, fully and fairly, purchase offers and indicia of the value of the Wave Crest property to the owners . . . ." A. Holdings' Claims Based on Defendants' Assertedly Insufficient or Misleading Communications Fall Within the Anti-SLAPP Law
Holdings contends that contrary to the court's ruling, none of its claims fall within the anti-SLAPP statute. It repeats its argument below that section 425.16, subdivision (e)(3) does not apply because its claims do not involve written or oral statements but rather withholding or suppression of information by Association and its directors, comparing the circumstances to those in Talega, supra, 225 Cal.App.4th 722 and Prediwave Corp. v. Simpson Thacher & Bartlett LLP (2009) 179 Cal.App.4th 1204 (Prediwave). For the same reason, Holdings argues section 425.16, subdivision (e)(4)—other conduct in furtherance of the exercise of the constitutional rights of petition or free speech in connection with a public issue or an issue of public interest—does not apply.
Holdings' assertion that its claims do not involve "written or oral statement[s]" within the meaning of section 425.16, subdivision (e)(3) is unavailing. Its claims are not based essentially on defendants' concealment of information about the proposed sale and disputes between Woravka and the board, but the sufficiency of the communications they did make in the newsletter and open meetings. The injury producing conduct is that Association and its directors did not adequately disclose information to owners concerning the purchase offers and valuation of the property. In part, the " 'activity . . . that gives rise to [defendants'] asserted liability' " (Park, supra, 2 Cal.5th at p. 1062) is essentially communicative.
For purposes of meeting the first anti-SLAPP prong, it is enough that some of the injury producing conduct alleged by Holdings underlying both its breach of fiduciary duty and declaratory relief claims consist of protected communications by Association and its directors concerning Woravka's advocacy for the property's sale, the purchase offer from Zephyr, and the desirability of amending the CC&Rs concerning the requirements for a sale. (Baral v. Schnitt, supra, 1 Cal.5th at p. 396.) Liability for breach of fiduciary duty, and one of the grounds for its requested judicial declaration, stems from the assertedly incomplete communications to owners. And defendants presented evidence that Association's communications concerning the property's sale were made either via Grey's e-mails to the membership, the newsletter sent to over 750 Association members, or in board meetings that were open to the public. To the extent Holdings alleges that defendants failed to make full and fair disclosures as they are assertedly required to do, defendants therefore demonstrated that Holdings' claims for breach of fiduciary duty and declaratory relief arise squarely from communications made in a public forum. (Accord, Lee v. Silveira, supra, 6 Cal.App.5th at pp. 539-540 [meetings of homeowner association board at which alleged wrongful acts of board members occurred constituted a public forum]; Cabrera v. Alam (2011) 197 Cal.App.4th 1077, 1087-1088 [annual board meeting to elect directors that was open to the public was a public forum under section 425.16, subdivision (e)(3)]; Damon v. Ocean Hills Journalism Club (2000) 85 Cal.App.4th 468, 478 (Damon) [homeowners association newsletter was a public forum: "Read in context of the entire statutory scheme, a 'public forum' includes a communication vehicle that is widely distributed to the public and contains topics of public interest, regardless whether the message is 'uninhibited' or 'controlled' "]; Silk v. Feldman (2012) 208 Cal.App.4th 547, 553 [newsletter circulated by some members of homeowners association deemed a public forum].)
And defendants further established the communications underlying Holdings' claims involved issues of public interest. Holdings acknowledges that the definition of "public interest" includes "not only governmental matters, but also private conduct that impacts a broad segment of society and/or that affects a community in a manner similar to that of a governmental entity." (Damon, supra, 85 Cal.App.4th at p. 479; see also Colyear v. Rolling Hills Community Association of Rancho Palos Verdes (2017) 9 Cal.App.5th 119, 132, Talega, supra, 225 Cal.App.4th at p. 734.) The Legislature's direction to construe section 425.16 broadly suggests that an issue of public interest " ' " 'is any issue in which the public is interested.' " ' " (Chaker v. Mateo (2012) 209 Cal.App.4th 1138, 1145; Nygård, Inc. v. Uusi-Kerttula (2008) 159 Cal.App.4th 1027, 1042; Industrial Waste and Debris Box Service, Inc. v. Murphy (2016) 4 Cal.App.5th 1135, 1141.) The issue need not be significant, but merely one in which the public takes an interest. (Nygard, at p. 1042.) And where, as here, the matter is not of interest to the public at large but only to a limited portion of the public, the public interest requirement is met if the protected activity " 'occur[s] in the context of an ongoing controversy, dispute or discussion, such that it warrants protection by a statute that embodies the public policy of encouraging participation in matters of public significance.' " (Colyear v. Rolling Hills Community Association of Rancho Palos Verdes, at p. 131 [discussing cases involving issues of public interest in the context of disputes within a homeowners association]; Turner v. Vista Pointe Ridge Homeowners Assn. (2009) 180 Cal.App.4th 676, 686.) In Damon, supra, 85 Cal.App.4th 468, the statements at issue concerned whether to be self-governed or to switch to a professional management company and whether the plaintiff general manager of a homeowners association was competent to manage the association, and thus this court concluded they "pertained to issues of public interest within the Ocean Hills community" as they "concerned the very manner in which this group of more than 3,000 individuals would be governed—an inherently political question of vital importance to each individual and to the community as a whole." (Damon, at p. 479; see also Ruiz v. Harbor View Community Assn. (2005) 134 Cal.App.4th 1456, 1467-1470 [letters concerning dispute over homeowner's building plans and requests for documents fell within anti-SLAPP statute as dispute over governance issue of whether the architectural guidelines were evenhandedly enforced was of interest to definable portion of public, residents of 523 lots, who would be affected by the outcome and would have a stake in association governance].)
Defendants established that Association operates as a homeowners association; it is not a partnership intended to maximize owners' investments or earn a financial return. There are 995 distinct individuals or entities owning the 1550 total weekly use intervals, a substantial number of people. (See Colyear v. Rolling Hills Community Association of Rancho Palos Verdes, supra, 9 Cal.App.5th at p. 131 [an issue of public interest "should be something of concern to a substantial number of people"].) Each owner's interval is recorded in the county recorder's office, as the intervals are deeded interests on which the owners pay property taxes. Because the communications here involved selling the real property on which all of the time share units are located, they involved an issue of concern to every one of the owners as well as their family members. (Accord, Lee v. Silveira, supra, 6 Cal.App.5th at p. 540 [homeowner association directors' acts in approving roofing project affecting multiple units and management contract responsible for day-to-day operations were acts concerning matters of public interest because they impacted a "broad segment, if not all" of the association members].) And the property's potential sale plainly presented an ongoing controversy, dispute or discussion to Association members: owners received communications regarding the issue from both Gray and Woravka, were polled about their opinions about selling, and the board discussed the issue in open meetings. This further demonstrates defendants' acts concerned an issue of public interest.
Holdings maintains no issue of public interest is involved because Association is comprised of time share owners "whose typical stay involves a week," and thus the Association does not involve the same concept of "community" inherent in a typical residential association. We disregard the argument on Holdings' conceded failure to raise it below. (Tiernan v. Trustees of Cal. State University & Colleges (1982) 33 Cal.3d 211, 221, fn. 15; Silk v. Feldman, supra, 208 Cal.App.4th at p. 555 [disregarding argument raised for the first time on appeal by party opposing anti-SLAPP motion seeking to establish probability of prevailing].) The question in this context does not present a purely legal issue that we may consider for the first time on appeal. This court in Damon explained that the public interest principle is met " ' "when a large, powerful organization may impact the lives of many individuals" ' " and found it to be so for a homeowners association, which " 'functions as a second municipal government . . . .' " (Damon, supra, 85 Cal.App.4th at p. 479.) In reaching this conclusion, Damon pointed out that in a planned development community or homeowners association, residents elect a board and delegate powers to it, which delegation "concerns not only activities conducted in the common areas, but also extends to life within ' "the confines of the home itself" ' " and that the Legislature mandated open meetings where members could speak publicly. (Id. at p. 475.) In that case, the board "played a critical role in making and enforcing rules affecting the [residents'] daily lives" and approximately 3,000 residents were affected by the policies it adopted at the open meetings. (Ibid.) Whether Association's conduct impacts the time-share-owner members like a government affects a community as described in Damon requires an assessment of how Association effectively functions and the sorts of powers its members delegate to its governing body, as well as the number of persons affected and the extent to which it impacts their lives. It is an inherently factual analysis that cannot be resolved as a question of law, and it would be unfair to the defendants to consider it when they had no opportunity to present additional evidence on the point below. Nor did Holdings raise any issue as to the "public forum" requirement below, and its cursory appellate argument—that Association's newsletter cannot be construed as a public forum because it was not received by all members, did not reach anyone outside of Association, and did not solicit contrary views—is based on evidence that we have held the trial court properly excluded. It is also an assertion unsupported by any record citation.
The trial court concluded that defendants met their threshold burden, and we agree that for purposes of turning to the second step of the anti-SLAPP analysis, defendants demonstrated that those aspects of Holdings' claims are based on protected activity; they arise, at least in part, from written or oral statements or writings made in a place open to the public or a public forum in connection with an issue of public interest. (§ 425.16, subd. (e)(3).) " 'When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at [the first] stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.' [Citation.] However, 'if the allegations of protected activity are only incidental to a cause of action based essentially on nonprotected activity, the mere mention of the protected activity does not subject the cause of action to an anti-SLAPP motion.' " (Jackson v. Mayweather, supra, 10 Cal.App.5th at p. 1251, in part citing Baral v. Schnitt, supra, 1 Cal.5th at p. 396.) Association's and its directors' assertedly incomplete communications to members concerning the property's sale are not merely incidental to Holdings' claims.
As a separate ground for reversal, Holdings argues the trial court "allowed the statute to be used as a sword to dictate legal strategy rather than as a shield to allow the Board to express their views . . . ." The only cited case arguably supportive of this claim of error is Olsen v. Harbison (2005) 134 Cal.App.4th 278, but the portion of that decision Holdings quotes is the underlying trial court's anti-SLAPP ruling in that case (id. at p. 282), not the appellate court's holding or analysis. Indeed, the issue in Olsen was whether the trial court properly ruled an anti-SLAPP motion was untimely, and whether the ensuing appeal was frivolous. (Id. at p. 280.) This latter contention is without legal support. B. The Anti-SLAPP Law Does Not Apply to Holdings' Claims Based on Defendants' Failure to Disclose Conflicts of Interest or the Collective Board Decision to Hold a Vote on Amending the CC&Rs, and the Request for a Judicial Declaration Concerning the Validity of the Amended CC&Rs
The above-discussed communications are not the sole wrongful injury producing conduct on which defendants' liability is alleged to be based. Holdings claims that defendants breached their fiduciary duty by (1) failing to disclose the fact that some of the directors, who did not recuse themselves from the board's process regarding the potential property sale, had conflicts of interest (as the complaint alleges, by "protecting the interests of the Director Defendants rather than protecting the interest of all of the owners of Wave Crest as a whole") and (2) deciding to conduct a vote of the owners about whether to amend the CC&Rs rather than whether to pursue a sale of the property. As we explain, these claims, with the exception of the claim against the individual board members for their decisionmaking about the vote, arise from conduct that does not implicate the right of free speech:
Holdings' allegation that Association and its directors did not disclose conflicts of interest, and put their own interests above the other owners, alleges conduct akin to those acts falling outside anti-SLAPP protection in Talega, Prediwave, and other cases involving a fiduciary's failure to disclose material information to persons to whom they owe a duty. (Talega, supra, 225 Cal.App.4th at pp. 728-729 [allegations that developer board members failed to disclose information that they had a fiduciary duty to disclose, or directed the expenditure of funds in violation of their fiduciary duties, did not fall within anti-SLAPP statute because there was no "written or oral statements" or constitutionally protected conduct]; Aguilar v. Goldstein (2012) 207 Cal.App.4th 1152, 1157, 1160-1161 ["What the allegations of the complaint in this case . . . make clear is that defendants' alleged liability arises from defendants' purported failure to provide information to the shareholders that would have revealed their alleged conflict of interest, their alleged misrepresentations and/or omissions regarding the Hospital's offer, and their ending negotiations with the Hospital purportedly for their own self-interest. . . . [¶] . . . [¶] . . . The allegations regarding the filing of the Hospital lawsuit are only incidental to plaintiffs' claim that defendants breached their fiduciary duty by putting their own interests ahead of the interests of the shareholders. Thus, the trial court properly found that those allegations do not support defendants' motion to strike under section 425.16"]; Prediwave, supra, 179 Cal.App.4th at pp. 1226-1227 [allegations that a law firm represented plaintiffs in matters in which it had a conflict of interest and failed to take protective action, investigate, or give material information and advice, did not involve statements or writings; rather, the principal thrust of plaintiff's causes of action was attorney's simultaneous representation of conflicting interests resulting in failures to act to protect the corporation's interests], compare, Fremont Reorganizing Corp. v. Faigin (2011) 198 Cal.App.4th 1153, 1170 [basis of breach of fiduciary duty was that attorney violated professional duties to former clients by making protected statements to the California Insurance Commissioner, rather than some other conduct].)
The conflict of interest allegation by itself gives rise to liability. Directors of nonprofit corporations, such as Association here, are fiduciaries whose relationship is governed by a standard requiring directors to exercise undivided loyalty for the interests of the corporation. (Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 513; see e.g., Raven's Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 799 [directors of homeowners association owe a duty of undivided loyalty to the association and may not make decisions for the association that benefit their own interests at the expense of the association and its members].) Liability for breach of fiduciary duty can rest solely on the breach of that obligation. (See, e.g., Cohn v. S & S Construction Co. (1983) 151 Cal.App.3d 941, 945-946 [allegations that developer who controlled homeowners association failed to properly administer CC&Rs, which benefitted its own interests, stated a cause of action for breach of fiduciary duty].) The allegations are not incidental or merely provide context to the claim, nor is the alleged wrongful conduct merely evidence of liability or a step leading to some different act for which liability is asserted. (Park, supra, 2 Cal.5th at p. 1060; San Diegans for Open Government v. San Diego State University Research Foundation (2017) 11 Cal.App.5th 477, 503.) This conduct is an independent basis of liability for breach of fiduciary duty.
With regard to Holdings' claim based on the vote, the wrongful act alleged by Holdings against all of the defendants—both directors and Association itself—is the decision to conduct a vote on amending the CC&Rs pertaining to the owners' election to sell instead of a vote on the potential sale. Though the complaint does not squarely target the individual directors' acts of voting itself, or how they voted, there is no question that the liability of the individual defendants would necessarily arise from their decisionmaking and communications at board meetings about how to deal with the proposed sale issue. In these circumstances, the anti-SLAPP statute protects the individual defendants' acts, but not the board's collective action. (Accord, Lee v. Silveira, supra, 6 Cal.App.5th at pp. 543-545; Schwarzburd v. Kensington Police Protection & Community Services District Board (2014) 225 Cal.App.4th 1345, 1355 [where gravamen of lawsuit was that individual board members violated board policy by voting to extend a meeting and by discussing and voting on a matter that was not properly noticed, the action was barred under section 425.16].)
This court recently discussed these distinctions in Lee v. Silveira, supra, 6 Cal.App.5th 527, in which we concluded that a declaratory relief suit by some individual homeowner association directors against other individual directors based on how the director defendants voted on issues of public interest to a homeowners association (a roofing project and management contract) arose from protected activity under subdivision (e)(3) of the anti-SLAPP statute. (Id. at pp. 543-545.) Among other things, the complaint in Lee alleged the individual board members failed to follow proper bid procedures when they voted to renew the management contract (id. at p. 533); they " 'adopted policies in violation of the rights of plaintiffs to carry out their respective responsibilities and duties as directors and officers of the [homeowners association]' " and further "allowed [a project manager] to control the bidding process on [association] projects including making a recommendation on the bid winner, which was then approved by director defendants in a 'rubber stamp vote' " and as a result neither the association nor its members " 'receive[d] the benefits of the best prices' " for such services and products. (Id. at p. 534.) The complaint sought judicial declarations on multiple subject matters all " 'under [the association] governing documents . . . .' " (Id. at p. 536.) The trial court denied the defendants' special motion to strike, and we reversed, directing the court to grant the motion with respect to each director defendant. (Id. at pp. 549-550.) We found it significant that the plaintiffs had sued only the individual directors, who were volunteers as well as residents and duly elected to serve on the board, and thus representing the community's interests when serving. (Id. at p. 542.) We concluded the acts complained of involved director defendants' decisionmaking on public issues that divided the board, and that their acts in voting were not merely incidental to the allegations of wrongful conduct. (Id. at pp. 542-543.)
In Lee, we compared the circumstances to those in Schwarzburd v. Kensington Police Protection & Community Services District Board, supra, 225 Cal.App.4th 1345, involving a writ petition filed by some board members against both a local board and other individual board members, challenging the salary of and merit bonus awarded to a police chief. (Lee v. Silveira, supra, 6 Cal.App.5th at p. 543.) We observed the appellate court in Schwarzburd held the defendants were sued based on how they voted and expressed themselves at board meetings, and thus the claims against those individuals were based on protected activity, but that the petition did not arise from protected activity insofar as it targeted the board as an entity. (Lee, at p. 543, citing Schwarzburd, at p. 1353.) We also looked to San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees' Retirement Association (2004) 125 Cal.App.4th 343 (San Ramon), in which the appellate court held a board's collective action in requiring the plaintiff District to make additional contributions to a retirement fund did not implicate the rights of free speech or petition: "In the present case, the litigation does not arise from the speech or votes of public officials, but rather from an action taken by the public entity administered by those officials." (Id. at p. 353, discussed with approval in Park, supra, 2 Cal.5th at p. 1064.) Finally, we pointed out that in City of Montebello v. Vasquez (2016) 1 Cal.5th 409 (Vasquez), the California Supreme Court relying on Schwarzburd held votes by former councilmembers and a city administrator cast in favor of a hauling contract were protected activity under the anti-SLAPP law: " '[E]lected officials may assert the protection of section 425.16 when sued over how they voted without chilling citizens' exercise of their right to challenge government action by suing the public entity itself.' " (Lee, at pp. 544-545, quoting Vasquez, at p. 427.)
Under these principles, the board's collective decision in this case is treated differently, and is not protected by the anti-SLAPP statute. Such acts of governance, without more, are not exercises of free speech or petition. (See San Ramon, supra, 125 Cal.App.4th at p. 354; Park, supra, 2 Cal.5th at p. 1064.) Our conclusion finds support in the high court's recent decision in Park, supra, 2 Cal.5th 1057, an action against the Board of Trustees of California State University, not individual trustees, in which the court emphasized the distinction between the ultimate decision made by the board to deny tenure, and individual speech and petitioning that may precede or contribute to it. (Id. at pp. 1064, 1071 [citing San Ramon and Vasquez with approval].) In distinguishing authorities relied upon by the university defendant to invoke the anti-SLAPP law, Park pointed out that "to deny protection to individuals weighing in on a public entity's decision might chill participation from a range of voices desirous of offering input on a matter of public importance. But no similar concerns attach to denying protection for the ultimate decision itself, and none of the core purposes the Legislature sought to promote when enacting the anti-SLAPP statute are furthered by ignoring the distinction between a government entity's decisions and the individual speech or petitioning that may contribute to them." (Park, 2 Cal.5th at p. 1071.) Here, though the board's decision to hold a vote to amend the CC&Rs presumably took place in open board meetings and was necessarily accompanied by communications among the directors and to the membership, such communications do not form the basis for liability against the board. Liability is instead based on the fact it collectively decided to conduct a vote that is assertedly contrary to the interests of the membership.
Additionally, Holdings seeks a declaratory judgment only as to Association that "the purported amendment of the CC&Rs in a manner that purportedly would make it more difficult for the owners to vote to sell the property is not valid or effective." Where the subject of a special motion to strike is a cause of action for declaratory relief, the defendant must show that the actual controversy underlying the cause of action arises from protected activity within the meaning of section 425.16, subdivision (e). (City of Cotati v. Cashman, supra, 29 Cal.4th at pp. 78-80; Gotterba v. Travolta (2014) 228 Cal.App.4th 35, 40 [an anti-SLAPP motion may lie against a complaint for declaratory relief].) It is not enough that certain protected activities "merely lead to the liability- creating activity or provide evidentiary support for the claim." (Park, supra, 2 Cal.5th at p. 1064.)
Defendants did not address this particular part of Holdings declaratory relief claim below. On appeal, they argue that "all activities" alleged in the declaratory relief cause of action arise out of conduct in open board meetings and protected communications to the community. But they do not specifically explain how this alleged controversy on which Holdings seeks a judicial declaration—the validity or effectiveness of the amended CC&Rs—implicates their protected speech or petitioning or arises from their communications to Association members. They instead focus on the allegations supporting Holdings' breach of fiduciary duty cause of action. On our de novo review, we conclude defendants did not meet their burden to show this part of Holdings' declaratory relief claim—which is not asserted against the individual directors—falls within the anti-SLAPP law. (See Park, supra, 2 Cal.5th at p. 1063 [explaining that where a plaintiff city sought declaratory judgment that its rent control ordinance was constitutional, an ensuing anti-SLAPP motion should have been denied because the "city's potential entitlement to a declaratory judgment . . . arose from the parties' underlying dispute over whether the ordinance was constitutional, a dispute that existed prior to and independent of [a prior federal court] declaratory relief action by the owners"]; Gotterba v. Travolta, supra, 228 Cal.App.4th at pp. 41-42 [complaint seeking judicial declaration that confidentiality agreement was unenforceable because defendants had "repeatedly threatened legal action" against him based on its violation did not arise from "sabre-rattling demand letters," which were merely evidence that a controversy between the parties existed, but rather on the validity of asserted termination agreements]; compare Country Side Villas Homeowners Assn. v. Ivie (2011) 193 Cal.App.4th 1110, 1118 [homeowners association's declaratory relief action against individual owner seeking interpretation of governing documents arose from complaints raised by owner about management and after she sought financial information; "[i]t is clear from the evidence that the action in this case arose from [the owner's] exercise of her right of free speech in criticizing and speaking out against the action of [the homeowners association's] board"].)
As to the claims based on unprotected activity, we do not reach the secondary inquiry of whether Holdings satisfied its burden of showing probability of success on the merits. (Trilogy at Glen Ivy Maintenance Association v. Shea Home, Inc. (2015) 235 Cal.App.4th 361, 372-373.)
Given our conclusions, we necessarily reject defendants' argument that Holdings' "entire claim arises out of the Association and Director Defendants' protected speech and conduct." In part, they characterize Holdings' allegations as implicating their constitutional "right not to speak." To be sure, it is "well established that the constitutional right of free speech includes the right not to speak." (Kronemyer v. Internet Movie Data Base, Inc. (2007) 150 Cal.App.4th 941, 947; Beeman v. Anthem Prescription Management, LLC (2013) 58 Cal.4th 329, 368 [freedom of speech under article I of the California Constitution "includes both the right to speak and the right to refrain from speaking"]; Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 491 ["the right in question comprises both a right to speak freely and also a right to refrain from doing so at all, and is therefore put at risk both by prohibiting a speaker from saying what he otherwise would say and also by compelling him to say what he otherwise would not say"].) But to conclude that the entire complaint, including the claim for breach of fiduciary duty for failing to disclose conflicts of interest, arises from defendants' right not to speak would mean that nearly any action involving the alleged improper withholding of information, including by a fiduciary who has a duty to disclose conflicts of interest or give material information, would fall within the anti-SLAPP statute's protection. Under defendants' argument, Association and its board could immunize themselves from liability by claiming that an action based on a breach of a duty to disclose is in retaliation for exercising the right of free speech and subject to a motion to strike under the anti-SLAPP statute. We do not believe this was the Legislature's intent, and presume it did not intend such a result. (See City of Cotati v. Cashman, supra, 29 Cal.4th 69, 77.)
For purposes of assessing whether defendants met the first prong of the anti-SLAPP analysis, we disregard the fact that Holdings' causes of action are partly based on unprotected allegations. (Baral v. Schnitt, supra, 1 Cal.5th at p. 396.) However, to the extent the claims are based on unprotected conduct, they are not subject to the motion to strike. (Id. at p. 393 ["the Legislature's choice of the term 'motion to strike' reflects the understanding that an anti-SLAPP motion, like a conventional motion to strike, may be used to attack parts of a count as pleaded"].)
There is no need to remand the matter for further briefing below to permit defendants to comply with its burden under Baral, as Holdings maintains. (See Baral v. Schnitt, supra, 1 Cal.5th at p. 396 ["[a]t the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them"].) As we have stated, our review of Holdings' complaint and evidence under the anti-SLAPP statute is independent. In any event, defendants assert on appeal in the face of Baral that their entire complaint is based on protected activity falling within the anti-SLAPP statute.
IV. Probability of Prevailing
Since defendants made the requisite showing that portions of Holdings' claims fall within the anti-SLAPP law, the burden shifted to Holdings to "demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated." (Baral v. Schnitt, supra, 1 Cal.5th at p. 396; Barry v. State Bar of California, supra, 2 Cal.5th at p. 321; Vasquez, supra, 1 Cal.5th at p. 420.) Holdings only needed to "state and substantiate a legally sufficient claim" (Vasquez, at p. 420); that is, demonstrate that its claims "have at least 'minimal merit.' " (Park, supra, 2 Cal.5th at p. 1061.) In making this assessment, we do not weigh the evidence or resolve conflicting factual claims, but accept as true the evidence favorable to Holdings. (Baral, at pp. 384-385; Hawran v. Hixson (2012) 209 Cal.App.4th 256, 273-274.) However, Holdings' proof must be made upon competent admissible evidence. (San Diegans for Open Government v. San Diego State University Research Foundation, supra, 11 Cal.App.5th at p. 496.)
Holdings contends the trial court erred by concluding it did not meet its burden on this prong under a proper interpretation of paragraph 12.02 of the CC&Rs. It criticizes the court's use of various canons of construction, namely, the "rule of the last antecedent," the construction of text as a whole, and the use of punctuation as an indicator of meaning. Instead, Holdings urges a "fair reading" method, which according to it, "determines 'the application of a governing text to given facts on the basis of how a reasonable reader, fully competent in the language, would have understood the text at the time it was issued." Holdings maintains the fairest reading of paragraph 12.02 is that the property can be sold at any time as long as the majority of membership interests approve the sale, and the court's interpretation otherwise "runs counter to California's strong policy in favor of the free alienation of property." Relying on Florida authority, it argues the passage is ambiguous and should be resolved in favor of the property's free alienability. Alternatively, Holdings argues the court's interpretation of paragraph 12.02 is irrelevant because a different provision of the CC&Rs, paragraph 12.01, permits the owners to terminate the CC&Rs through a majority vote at any time so as to allow a sale.
The premise of Holdings' theory of damages was that paragraph 12.02 of the CC&Rs provision permitted the property's sale at any time on a majority vote of the owners; it argued below in connection with the probability of prevailing prong that its evidence showed in a sale Holdings would have yielded approximately $1,600,000 minus closing costs and thus it made out a prima facie case of damage. If we conclude Holdings' interpretation cannot be sustained and that a sale of the property was not possible until after 2033, then we must conclude Holdings cannot make out a prima facie factual showing sufficient to prove damage for purposes of meeting its anti-SLAPP burden. A. Principles of Contract Interpretation
Recorded CC&Rs are contracts, and thus contract interpretation rules apply. (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at pp. 512-513; Harvey v. Landing Homeowners Assn. (2008) 162 Cal.App.4th 809, 817; Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563, 575.) The interpretation of a written instrument is essentially a judicial function to be exercised according to generally accepted canons of interpretation so that the purposes of the instrument may be given effect. (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) It is solely a judicial function "when it is based on the words of the instrument alone, when there is no conflict in the extrinsic evidence, or when a determination was made based on incompetent evidence." (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395; see Steiner v. Thexton (2010) 48 Cal.4th 411, 417, fn. 7; Parsons, at p. 865.) The goal is to give effect to the mutual intention of the parties as it existed at the time of contracting. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264; Seith, at p. 575.) If possible, a court infers such intent solely from the written provisions of the contract, and the contract's language will govern if it is clear and explicit. (State of California v. Continental Insurance Co. (2012) 55 Cal.4th 186, 195; Seith, at p. 575; Civ. Code, § 1638.)
Further, "[t]o the extent practicable, the meaning of a contract must be derived from reading the whole of the contract, with individual provisions interpreted together, in order to give effect to all provisions and to avoid rendering some meaningless." (Zalkind v. Ceradyne, Inc. (2011) 194 Cal.App.4th 1010, 1027; Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1265; Civ. Code, § 1641.) Courts should interpret contractual language in a manner that does not render other parts of the contract unnecessary or surplusage. (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 957.) B. Analysis
Our independent analysis of paragraph 12.02 by itself and in the context of the CC&Rs as a whole under conventions of grammar and the foregoing contract interpretation principles, compels us to reject Holdings' proposed interpretation.
Paragraph 12.02 of the CC&Rs is entitled "Duration of Declaration; Election to Terminate Declaration; and Election to Sell Property." The provision reads: "The covenants, conditions, and restrictions herein shall run with the land and shall be binding upon, and inure to the benefit of, all Owners and all persons claiming under them until December 31, 2033, after which time these covenants, conditions, and restrictions shall be automatically extended for successive periods of twenty-one years unless and until this Declaration is earlier terminated and the Property is authorized to be sold by the vote or written consent of (a) both (1) the Declarant and (2) a majority of the total votes in the Association held by Members excluding votes held by Declarant (where Class "B" membership has not yet been converted to Class "A" membership); or (b) Members holding both (1) a majority of the total votes in the Association and (2) a majority of the total votes excluding Declarant votes (where Class "B" membership has been converted to Class "A" membership)." Neither party disputes that the vote referenced in this provision requires a majority of Association's membership.
The structure of paragraph 12.02 is straightforward. The clause provides that Association's CC&Rs are operative and bind owners until the end of 2033, a period of about 50 years after the CC&Rs were originally recorded in 1983. After 2033, the CC&Rs are automatically extended by 21-year periods "unless and until" two events occur: the CC&Rs are terminated and the property is authorized to be sold by a majority of members. Thus, a vote to sell the property is only authorized under the CC&Rs during the renewal periods, and even then only after the CC&Rs are terminated. This reading is supported by the grammatical rule of the last antecedent, a longstanding principle of construction with respect to the qualifying "unless and until" clause. (See Lockhart v. United States (2016) ___ U.S. ___ [136 S.Ct. 958, 962] ["a limiting clause or phrase . . . should ordinarily be read as modifying only the noun or phrase that it immediately follows"]; White v. County of Sacramento (1982) 31 Cal.3d 676, 680 [last antecedent rule "provides that 'qualifying words, phrases and clauses are to be applied to the words or phrases immediately preceding and are not to be construed as extending to or including others more remote' "]; Kelly v. State Personnel Bd. of California (1939) 31 Cal.App.2d 443, 448 [describing last antecedent rule as a grammatical rule].) We acknowledge the last antecedent rule is not absolute and may be rebutted where "the structure and internal logic of the . . . scheme" so militate. (Lockhart, 136 S.Ct. at pp. 962-963, 965; see also Paroline v. United States (2014) ___ U.S. ___, [134 S.Ct. 1710, 1721] [recognizing that this inference can be overcome by " 'other indicia of meaning' " or "common sense"]; People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 530 [rule will not apply if opposed by clear intent of the parties]; McDonald v. Department of Motor Vehicles (2000) 77 Cal.App.4th 677, 683, fn. 6.) But that is not the case here.
First, there is no comma between the qualifying "unless and until" language and the 21-year renewal period language. In this circumstance, the last antecedent rule would have us apply the "unless and until" qualification only to the renewal periods and not to the initial 50-year period. (See White v. County of Sacramento, supra, 31 Cal.3d at p. 680 ["Evidence that a qualifying phrase is supposed to apply to all antecedents instead of only to the immediately preceding one may be found in the fact that it is separated from the antecedents by a comma"]; County of Kern v. Workers' Comp. Appeals Bd. (2011) 200 Cal.App.4th 509, 521 [absence of a comma between antecedents and qualifying phrase meant that the qualifying phrase was only reasonably deemed to modify the last antecedent].)
Further, using the last antecedent rule to apply the qualifying "unless and until" clause only to the 21-year renewal periods makes sense in the circumstances under which the CC&Rs were created (Powers v. Dickson, Carlson & Campillo (1997) 54 Cal.App.4th 1102, 1111), and avoids rendering other portions of the CC&Rs surplusage. The CC&Rs provide that they are intended to establish a common scheme for the benefit of all vacation ownership owners, and are "for the purpose of enhancing and perfecting the value, desirability, and enjoyment of the Property" as a vacation resort. As the trial court recognized, there would be no reason to include an initial 50-year duration and successive 21-year renewal periods if the property could be sold by a majority vote of the members before expiration of the initial term. Holdings' suggested interpretation—that the phrase "unless and until" modifies the initial 50-year term, and not only the 21-year renewal periods, would not only render that distinction meaningless, but it runs counter to Association members' reasonable expectation that they would enjoy repeated yearly vacations until the member him or herself decides to sell their ownership interest; that they would not risk losing their interest even shortly after purchase, upon a majority vote of the owners. We accept the interpretation that avoids rendering that portion of paragraph 12.02, as well as other provisions of the CC&Rs setting out trigger events for a sale, surplusage.
For example, article 9 of the CC&Rs permits a sale in the event any portion of the project is destroyed or damaged "[w]here the amount available from the proceeds of the insurance policy for restoration and repair is less than eighty percent of the estimated cost of restoration and repair" and the owners have determined to sell. We agree with defendants that "[t]he restrictions on liquidation in the event of destruction . . . are surplusage if there were an unfettered right of termination in the event of a membership vote at any time for any reason. There would be no issue whether the repair costs were at least 80 [percent] covered by insurance to address property damage . . . , because the timeshare could be terminated regardless of those things if Woravka's interpretation were correct."
We reject Holdings' argument that its contrary interpretation is reasonable in view of Grey's suggestion in e-mails to Association's membership that the property could be sold by a majority vote. Holdings states the board's interpretation of the CC&Rs and its conduct based on that interpretation was relevant to establish the meaning and reasonableness of Holdings' interpretation. It asserts that "both sides acted under the belief that the owners by majority vote could sell [the property] at any time." But Grey's or any other board member's subjective understanding of the CC&Rs is irrelevant. "California recognizes the objective theory of contracts [citation], under which '[i]t is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation.' " (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc., supra, 109 Cal.App.4th at p. 956.)
There is no merit to Holdings' remaining arguments. It maintains its interpretation does not violate the surplusage canon: that "[p]aragraph 12.02's reference to 2033 was not . . . surplusage" because "[i]t is not uncommon for CC&Rs to provide for a termination date." The argument misses the point, which is that under Holdings' interpretation, the CC&Rs would not need to include both the 50-year termination date and the 21-year renewal periods. Holdings further argues that the ambiguity in paragraph 12.02 requires that interpretation be resolved in favor of the property's "free alienability." As we have explained, we disagree the section is ambiguous. And we decline to follow Holdings' cited Florida authority on the point, which is neither binding (Episcopal Church Cases (2009) 45 Cal.4th 467, 490) nor apposite. That case, Webster v. Ocean Reef Community Association, Inc. (2008) 994 So.2d 367, involved whether a provision requiring prior Association approval for a purchase applied to a residential trust and inter vivos transfer that was a gift from the owner to her adult child. (Id. at p. 370.)
Finally, Holdings argues that the court's interpretation of paragraph 12.02 is irrelevant in view of the owners' ability to terminate the CC&Rs by a majority vote under paragraph 12.01 and Civil Code section 4270. But paragraph 12.01 as well as Civil Code section 4270 pertain to amendments of the CC&Rs, not their termination, which is expressly covered by paragraph 12.02. The argument fails under the plain reading of Article 12, which contains those separate provisions. Holdings cites a continuing education treatise that contains a warning against putting an expiration date in the governing documents and states, "The owners or members have the right to terminate the time-share plan at any time under the amendment provisions . . . ." Here Association's CC&Rs in the record govern our interpretation, and we will not disregard their plain language and structure based on secondary authority having no persuasive value.
Under this interpretation of the CC&Rs, Holdings cannot demonstrate damages. It therefore has not met its burden to demonstrate a probability of prevailing on the merits of the claims that are based on protected activity.
Where the anti-SLAPP statute applies and the plaintiff fails to establish that he has a probability of prevailing, the claims subject to the anti-SLAPP statute "shall be stricken." (Simpson Strong-Tie Co., Inc. v. Gore (2010) 49 Cal.4th 12, 21.) As we have stated, the claims based on unprotected activity not subject to being stricken under the anti-SLAPP law are (1) Holdings' claim for breach of fiduciary duty based on the allegation that defendants failed to disclose the conflict of interest of some board members; (2) Holdings claim for breach of fiduciary duty against Association (but not the individual directors) based on the allegation that defendants decided to call a vote of the owners about whether to amend the CC&Rs and not whether to pursue a sale; and (3) Holdings claim for declaratory relief seeking a judicial declaration of the validity and effectiveness of the CC&Rs. The remaining claims are based on activity protected by the anti-SLAPP statute and are stricken.
V. Holdings' Appeal From the Order Denying Holdings' Requested Preliminary
Injunction is Moot
"It is well settled that an appellate court will decide only actual controversies and that a live appeal may be rendered moot by events occurring after the notice of appeal was filed. We will not render opinions on moot questions or abstract propositions, or declare principles of law which cannot affect the matter at issue on appeal. [Citation.] This rule has regularly been applied when injunctive relief is sought but, pending appeal, the act sought to be enjoined has been performed." (Daily Journal Corp. v. County of Los Angeles (2009) 172 Cal.App.4th 1550, 1557, citing Giles v. Horn (2002) 100 Cal.App.4th 206, 226-227.)
Holdings contends that though its request for preliminary injunctive relief is moot given that Association has recorded its amended CC&Rs, material questions still remain for this court's determination, and thus we should review the order denying its request despite its mootness. Specifically, Holdings maintains the issues involved with its motion for a preliminary injunction "overlap" with defendants' anti-SLAPP motion, acknowledging the trial court observed Holdings was required to establish a probability of prevailing on its claims. But we have concluded Holdings cannot make that showing with respect to its claims based on protected activity, and Holdings gives us no basis, with discussion of the applicable legal principles or review standard or reasoned legal analysis, to consider the trial court's order on grounds of overlap between the motions.
Holdings next argues that this court can "retain jurisdiction" over the order because Holdings "maintains a significant ownership interest and will continue to pursue its economic interests with future sales prospects . . . ." It argues that if we reverse the anti-SLAPP order, issues remain as to whether defendants have an obligation to fairly and fully disclose to all members a potential sale of the property and hold a vote over the issue. Holdings cites Los Angeles International Charter High School v. Los Angeles Unified School Dist. (2012) 209 Cal.App.4th 1348. There, the Court of Appeal found the circumstances fell within an exception the mootness doctrine where the controversy—whether a school district was required to offer a charter school public school facilities for the 2010-2011 school year—was likely to recur "because the process by which charter schools request facilities from school districts is an annual one." (Id. at p. 1354.) Assuming International Charter sets out a correct statement of the exception (see In re David B. (2017) 12 Cal.App.5th 633, 652-654 [discussing differences in phrasing used by courts describing exceptions to mootness]), Holdings has not shown such recurring activity here.
In addition to preventing the recording of the amended CC&Rs, Holdings sought an order "directing Defendants to comply with its obligations under [paragraphs] 12.02 and 12.04 of the CC&Rs by directing Defendants to disclose to all members of the . . . Association any and all information regarding the potential or actual sale of [the property] to any person and/or any and all information about [its] value." But the amended and recorded CC&Rs now authorize a vote to sell only after 2065, with a 75-percent vote of the membership. Under the circumstances, the board will have a new set of disclosure obligations to members, presenting a different controversy. There is simply no recurring yearly process akin to the one in Los Angeles International Charter High School v. Los Angeles Unified School Dist., supra, 209 Cal.App.4th at p. 1354.) Thus, we decline Holdings' request that we review the merits of this moot aspect of its appeal.
VI. Appellate Attorney Fees
We do not address attorney fees awarded by the trial court below, if any, as such an award was to be addressed in a later motion. The appeal before us involves only the trial court's May 20, 2016 order denying Holdings' motion for a preliminary injunction and granting defendants' anti-SLAPP motion.
Defendants argue they are entitled to an award of attorney fees on appeal. Section 425.16, subdivision (c) states that, with certain exceptions not applicable here, a defendant who prevails on an anti-SLAPP motion "shall be entitled to recover his or her attorney's fees and costs." "The trial court's authority to award fees and costs under section 425.16, subdivision (c), includes authority to award fees incurred in responding to an appeal of an order granting or denying a special motion to strike . . . ." (Carpenter v. Jack In The Box Corp. (2007) 151 Cal.App.4th 454, 461.)
Here, however, defendants' motion was only partially successful. In that event, "the question is whether the results obtained are insignificant and of no practical benefit to the moving party. [Citation.] A court awarding fees and costs for a partially successful anti-SLAPP motion must exercise its discretion in determining their amount in light of the moving party's relative success in achieving his or her litigation objectives." (Cole v. Patricia A. Meyer & Associates, APC (2012) 206 Cal.App.4th 1095, 1123; see also Fremont Reorganizing Corp. v. Faigin, supra, 198 Cal.App.4th at p. 1177; Lin v. City of Pleasanton (2009) 176 Cal.App.4th 408, 426 ["fee award is not required when the [SLAPP] motion, though partially successful, was of no practical effect"].)
In Malin v. Singer (2013) 217 Cal.App.4th 1283, the court reviewed the "numerous factors to be considered" when determining a partially prevailing defendant's right to fees and costs, considering the balance of the competing public policies. (Id. at p. 1305, quoting Mann v. Quality Old Time Service, Inc. (2006) 139 Cal.App.4th 328, 344-345.) " '[A] defendant should not be entitled to obtain as a matter of right his or her entire attorney fees incurred on successful and unsuccessful claims merely because the attorney work on those claims was overlapping. Instead, the court should first determine the lodestar amount for the hours expended on the successful claims, and, if the work on the successful and unsuccessful causes of action was overlapping, the court should then consider the defendant's relative success on the motion in achieving his or her objective, and reduce the amount if appropriate. [¶] This analysis includes factors such as the extent to which the defendant's litigation posture was advanced by the motion, whether the same factual allegations remain to be litigated, whether discovery and motion practice have been narrowed, and the extent to which future litigation expenses and strategy were impacted by the motion. The fees awarded to a defendant who was only partially successful on an anti-SLAPP motion should be commensurate with the extent to which the motion changed the nature and character of the lawsuit in a practical way. The court should also consider any other applicable relevant factors, such as the experience and abilities of the attorney and the novelty and difficulty of the issues, to adjust the lodestar amount as appropriate." (Malin, at p. 1305.)
We leave it to the trial court in the first instance to determine defendants' rights, as partially prevailing on the motion, to their attorney fees and costs on appeal. (Accord, Fremont Reorganizing Corp. v. Faigin, supra, 198 Cal.App.4th at pp. 1177-1178; Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493, 1516-1517 [reserving appellate costs for future adjudication in the trial court].)
DISPOSITION
The order granting defendants' special motion to strike is affirmed in part and reversed in part. The order is reversed as to (1) Holdings' claim for breach of fiduciary duty based on the allegation that defendants failed to disclose the conflict of interest of some board members; (2) Holdings' claim for breach of fiduciary duty against Association (but not the individual directors) based on the allegation that defendants decided to call a vote of the owners about whether to amend the CC&Rs and not whether to pursue a sale; and (3) Holdings' claim for declaratory relief seeking a judicial declaration of the validity and effectiveness of the CC&Rs, and the action shall proceed based on those claims. Holdings' remaining claims based on protected communications are stricken. The appeal from the order denying preliminary injunctive relief is dismissed as moot. On remand, the trial court will determine whether defendants are entitled to an attorney fee and costs award on appeal and the reasonable amount of any award.
O'ROURKE, J. WE CONCUR: BENKE, Acting P. J. AARON, J.