Villa de Jardines Association v. Flagstar Bank (CA2 4/22/11)

An example of Rule 11 sanctions.

A homeowners’ association sued to foreclose its lien for, apparently, unpaid assessments on several lots. This appeal concerns banks that held first deeds of trust on some of the lots. The trial court granted them summary judgment because the statue specifically gives first deeds of trust priority over homeowners’ assessments. The court awarded Rule 11 sanctions. The homeowners filed motions for reconsideration and new trial, which the court denied. The homeowners appealed.

Substantively, they argued (again apparently; we never complain about terse opinions but since this one is sixteen pages long it’s hard to figure why the facts and issues are so briefly stated) that “first” deed of trust simply means recorded before their liens. The court says that it can’t mean that since the prior sentence of the statute already gives priority to all chronologically prior liens. The association then argued that the judgment was too broad because it covered lots the banks had no interest it. The court says that the argument is “confusing,” which may explain why the court’s explanation of it lacks crystalline clarity, but the court says that’s not what the judgment means.

In awarding sanctions the trial court found no basis for arguing that homeowners’ assessments took priority over first deeds of trust. The association argued that no precedent ruled out its statutory argument and that its title report said it had priority. As to the statute the court says that the argument was contrary to plain language; although the association’s brief used the “extend, modify, or reverse controlling law” argument the association had never suggested below that that’s what it was trying to do nor even, it seems, that the statute was uncertain enough to allow any such thing. And a title report does not “trump the law of the state.” (This is a useful reminder to those who don’t know or haven’t thought of it this way that title reports are a) not infrequently wrong and b) merely insurance policies against happenings that, as conditioned by policy language, occur with every third passing of Halley’s comet.)

Regarding the motion for new trial, the association had tried to amend it at oral argument. The trial court at first denied that, then told the association to file something in writing within five days, then – announcing that it had in the interim read the rule – ruled before the association could do so. The Rule (59) says that motions for new trial must be in writing and can be amended at any time before the ruling. The Court of Appeals says that allowing oral amendments would undermine the requirement of a writing. It also says that the trial court’s changing its mind wasn’t prejudicial because its minute entry said that the court had reviewed the entire file on its on initiative and found no error.

We were buying this opinion – until that last part. The trial court tells a guy he has five days to file, double-crosses him, but that’s okay, no error here – because the trial judge said so himself. On the other hand, context is everything; the association’s performance to that point hadn’t earned it the benefit of much doubt.


(link to opinion)