MALLANO, P. J.
For the reasons explained below, we conclude that none of the defendants has standing to appeal from the judgment, and we therefore dismiss the appeal.
The substantive dispute in this case involves the allocation of property taxes by a stock cooperative housing project among its leaseholders, who are also commonly referred to as shareholders. (See generally Civ. Code, §§ 1350-1378.) A cooperative, unlike a condominium complex, receives a single tax bill for the entire project. The cooperative's board of directors then allocates the tax bill among the leaseholders.
Here, in 2006, the cooperative, Royal Palms Apartments, Inc. (Royal Palms), was assessed four years of back taxes (2002 to 2006) totaling approximately $430,000. Its board allocated the taxes among the leaseholders on a percentage basis as required by the express terms of its standard "Lease and Occupancy Agreement" (lease), signed by all of the leaseholders. Some, but not all, leaseholders objected to the use of that method and insisted that the back taxes be allocated according to Proposition 13 (Cal. Const., art. XIIIA, §§ 1-6) as implemented by section 65.1, subdivision (b) of the Revenue and Taxation Code (section 65.1). That statute provides: "If a unit or lot within a cooperative housing corporation . . . is purchased or changes ownership, then only the unit or lot transferred and the share in the common area reserved as an appurtenance of such unit or lot shall be reappraised. [¶] . . . [T]he increase in property taxes resulting from such reappraisal shall be applied by the owner of such property to the . . . lessee . . . of such individual unit or lot only, and shall not be prorated among all other units or lots of such property." This dispute did not arise at an earlier time because Royal Palms was financed with a loan from the Department of Housing and Urban Development (HUD), and a HUD loan exempts property from Proposition 13 reassessments. (See Rev. & Tax. Code, § 62(i).) After the HUD loan had been paid off, such that the exemption no longer applied, the Los Angeles County Tax Assessor fell asleep at the switch and failed to reassess the property timely under Proposition 13 and section 65.1. In fact, the assessor failed to recognize and correct the error for approximately eight years. Meanwhile, units were sold, thus pitting the new leaseholders against the old over who was to pay the back taxes.
The Royal Palms board could not resolve the dispute in a manner acceptable to all leaseholders. Over the years, the board members changed, various resolutions were passed but not implemented, and several leaseholders filed small claims actions. Eventually, Royal Palms filed this declaratory relief action against the assessor and all of the leaseholders — 229 in number — seeking a judicial determination of the issue.
Many of the leaseholders defaulted. The small claims actions were consolidated with this action. One leaseholder, Dallas Beardsley, filed an answer but did not ultimately appeal. Thus, with the exception of Beardsley, the remaining defendants either defaulted, signed a stipulation in lieu of an answer and were later dismissed from the case, or filed a small claims action. The stipulation reads as follows:
The question submitted to the trial court was whether the terms of the lease, which mandated a percentage factor allocation of property taxes, trumped section 65.1, which requires an allocation according to Proposition 13. Put another way, could the leaseholders of a cooperative contractually agree to a percentage factor allocation of property taxes and forgo the allocation under Proposition 13 and section 65.1?
For purposes of this case, it is important to understand the differences between a cooperative, like Royal Palms, and a condominium complex. "`The form of co-operative development [sometimes] employed . . . is the co-operative apartment corporation. . . . It is usually organized as a stock corporation for the purpose of obtaining an apartment building to be operated on a co-operative basis. Under this plan the corporate entity holds title to all the premises. The prospective tenant then purchases stock in the co-operative corporation, the number of shares allocated proportionately to the value of the apartment to be occupied. By virtue of his stock ownership, a purchaser is entitled to a `proprietary lease.' The execution of a `proprietary lease' from the owning corporation to the stockholder desiring to be a tenant is vital. This is an important instrument to the purchaser, for, without it, he has no right of occupancy of his apartment. Stock ownership alone will not suffice. [T]he terms embodied in the `proprietary lease' and its legal meaning determine the interest acquired by the [tenant] in the premises in question. Thus, the `proprietary lease' will characterize the relationship between the parties . . . .
"`In legal theory, a corporation is an entity distinct and separate from its shareholders, no one of whom has a right to receive legal title to any specific property of the corporation. In an apartment co-operative, then, the corporation is sole owner of the land and building. It is the shares of the corporation that are sold, and, despite a vernacular use to the contrary, the apartment is not sold but leased under a so-called proprietary lease. The lessee of the proprietary lease is in much the same position as any other tenant under the usual leasing arrangement. By the `proprietary lease' the shareholder tenant acquires a right to occupy a particular apartment.'
"As a result, purchasers of apartments become both stockholders in a cooperative corporation and tenants. Since buying into a cooperative corporation does not entitle them to ownership of a particular apartment but only entitles them to lease that apartment from a cooperative corporation, there simultaneously exists a landlord-tenant relationship and a corporation-stockholder relationship.
"The entire cooperative is covered by a blanket mortgage, and a cooperative association pays real estate taxes on the entire venture. Taxes are assessed on a building as one entity rather than on any individual cooperative unit. A cooperative corporation is liable for taxes, as well as payments for mortgage interest and principal. A cooperative corporation acquires money for these payments by assessing the cooperative unit owners. Taxes and mortgage interest on a building are allocated to cooperative unit owners according to the percentage of shares of stock each of them holds." (Rohan & Reskin, Real Estate Transactions: Cooperative Housing Law and Practice — Forms (Matthew Bender 2011) § 1.04[1], fns. omitted.)
"A home owner is not responsible for his neighbors' payment of property taxes or mortgage installments. In a cooperative, though, since the building and land are owned by a single entity, property taxes are assessed against the premises as a whole. Also, the operation is financed by a single blanket mortgage. If one shareholder-tenant fails to meet his monthly assessments, the entire apartment house is subject to a single tax lien and foreclosure of the mortgage unless the other shareholder-tenants pay his share of these obligations.
"In times of prosperity there is little problem with this mutual financial responsibility, for upon a tenant's default he is summarily evicted and his interest is sold to someone else who will assume the obligations. In time of acute economic distress there is a real danger. Not only may there be no market for the defaulting tenant's interest, but worse, the solvent tenants may be so financially pressed that they will be unable to make up the default of the insolvent tenants. Thus, a solvent tenant could lose his interest without ever having himself missed a single payment. As a matter of fact this is exactly what happened in the great depression of the thirties, where in some metropolitan areas fifty per cent to seventy-five per cent of the cooperatives failed. While the cooperative proponents rightly argue that such a depression is very unlikely to happen again, it is said that this danger acts as a major deterrent to many people who would otherwise buy into a community apartment.
"A condominium allegedly avoids this deterrent to purchasers, because the interests of the individual owners will be separately taxed and financed." (Comment, Community Apartments: Condominium or Stock Cooperative? (1962) 50 Cal. L.Rev. 299, 323-324, fns. omitted.)
Although we do not reach the merits of the tax dispute, we point out that "anyone who buys a unit in a common interest development[, be it a cooperative or a condominium,] with knowledge of its owners association's discretionary power accepts `the risk that the power may be used in a way that benefits the commonality but harms the individual.' . . . Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development's governing documents, and comply with public policy. . . .
". . . [S]ubordination of individual property rights to the collective judgment of the owners association together with restrictions on . . . real property comprise the chief attributes of owning property in a common interest development. . . . `[I]nherent in the [cooperative] concept is the principle that to promote the health, happiness, and peace of mind of the majority of the unit owners since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice which he [or she] might otherwise enjoy in separate, privately owned property. [Cooperative tenants] comprise a little democratic subsociety of necessity more restrictive as it pertains to . . . [cooperative] property than may be existent outside the [cooperative] organization.' [¶] . . . [¶]
"One significant factor in the continued popularity of the common interest form of property ownership is the ability of homeowners to enforce [lease terms] against other owners (including future purchasers) of project units. . . . Generally, however, such enforcement is possible only if the restriction that is sought to be enforced meets the requirements of equitable servitudes or of covenants running with the land. . . .
"Restrictive covenants will run with the land, and thus bind successive owners, if the deed or other instrument containing the restrictive covenant particularly describes the lands to be benefited and burdened by the restriction and expressly provides that successors in interest of the covenantor's land will be bound for the benefit of the covenantee's land. Moreover, restrictions must relate to use, repair, maintenance, or improvement of the property, or to payment of taxes or assessments, and the instrument containing the restrictions must be recorded. . . .
"Restrictions that do not meet the requirements of covenants running with the land may be enforceable as equitable servitudes provided the person bound by the restrictions had notice of their existence." (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 374-375, citations omitted, italics added.) Here, the "restriction" — a percentage factor allocation of property taxes — was set forth in the lease.
Courts will not enforce restrictions if they are arbitrary or violate fundamental public policy. (See Nahrstedt v. Lakeside Village Condominium Assn., supra, 8 Cal.4th at pp. 380-384.) "These limitations on the equitable enforcement of restrictive servitudes that are either arbitrary or violate fundamental public policy are specific applications of the general rule that courts will not enforce a restrictive covenant when `the harm caused by the restriction is so disproportionate to the benefit produced' by its enforcement that the restriction `ought not to be enforced.'" (Id. at p. 381.) In short, "[w]hen a . . . restriction bears no relationship to the land it burdens, or violates a fundamental policy inuring to the public at large, the resulting harm will always be disproportionate to any benefit." (Ibid.) Nevertheless, "courts are generally disinclined to question the wisdom of agreed-to restrictions." (Ibid.)
With respect to section 65.1 and its implementation of Proposition 13, we note that courts have not characterized Proposition 13 as a law embodying a public policy inuring to the public at large. (See, e.g., County of Los Angeles v. Sasaki (1994) 23 Cal.App.4th 1442, 1451 [Proposition 13 drastically cut property tax revenue, thereby sharply reducing funds available to local governments and schools]; California Teachers Assn. v. Cory (1984) 155 Cal.App.3d 494, 501 [Proposition 13 necessitated far-reaching restructuring of fiscal basis of local government, including public education].)
In adjudicating the tax issue in this case, the trial court conducted a two-day trial. The resulting judgment, dated November 2, 2009, decreed that property taxes incurred before October 2, 2009, including the back taxes, be allocated among all current leaseholders as dictated by the lease (on a percentage factor basis), not pursuant to section 65.1, and that all subsequent property taxes be allocated in accordance with the statute and Proposition 13. According to Royal Palms, all but 14 of the leaseholders have, as provided in the judgment, either paid the allocated tax bill in full or are making periodic payments.
On January 5, 2010, a notice of appeal was filed on behalf of "Tod Spence et al." Spence was one of the leaseholders who signed the stipulation and who was consequently dismissed from the case. Thirty-three additional leaseholders joined in the appeal.
In their appellate briefs, appellants do not dispute that they either defaulted, brought a small claims action, or signed the stipulation. None of them contend they filed an answer. They simply argue that the language of the stipulation is not sufficient to preclude an appeal with respect to the trial court's allocation of the back taxes; they do not seek to appeal the trial court's ruling as to the allocation of taxes incurred after October 2, 2009. For three reasons, we conclude that neither Spence nor any of the other appellants have standing to pursue this appeal.
First, a party who defaults may pursue an appeal only for the purpose of attacking the trial court's jurisdiction, fundamental pleading defects, or an award of excessive damages. (See Steven M. Garber & Associates v. Eskandarian (2007) 150 Cal.App.4th 813, 824; Aheroni v. Maxwell (1988) 205 Cal.App.3d 284, 294.) This appeal does not raise any of those issues.
Second, a leaseholder who filed a small claims action may not appeal from the judgment in that action. (See Code Civ. Proc., § 116.710, subd. (a).)
Third, the stipulation bars an appeal because it clearly and expressly forfeits that right. (See Guseinov v. Burns (2006) 145 Cal.App.4th 944, 952; Lovett v. Carrasco (1998) 63 Cal.App.4th 48, 53.) The leaseholders agreed that they were "not taking a position with respect to this Action and agree[d] to be bound by any Judgment . . . reached by the Court." Consistent with the stipulation's recitals — which describe a longstanding dispute the parties wanted to put to rest once and for all — a leaseholder could not agree to remain neutral on the merits and be bound by the trial court's judgment and then, dissatisfied with the result, seek to appeal. The "take no position" provision is clearly inconsistent with an attack on the trial court's decision by way of an appeal. And the term "Court," which repeatedly appears in the stipulation, unambiguously refers to the trial court, not an appellate court. Further, Royal Palms entered a dismissal as to each leaseholder who signed the stipulation in lieu of an answer. A dismissed party has no standing to appeal. (See Bates v. John Deere Co. (1983) 148 Cal.App.3d 40, 53.) The trial court also expressly "retain[ed] jurisdiction pursuant to California Code of Civil Procedure Section 664.6." That statute permits a trial court to enforce summarily a stipulated settlement by motion without the necessity of filing a separate action; section 664.6 would not be referenced in the stipulation if an appeal were contemplated. Finally, Royal Palms agreed not to file the stipulation and not to request a leaseholder's default unless he or she "dispute(s) or in any way whatsoever oppose(s) the Judgment or enforcement of the Judgment entered in this Action." Plainly, an appeal would "dispute" or "oppose" the enforcement of the judgment. And by consenting to the entry of a default, a leaseholder limited his or her appellate rights to matters not pertinent to this appeal, as already mentioned.
Finally, appellants claim that counsel for Royal Palms had a conflict of interest in that the cooperative consisted of leaseholders who disagreed with each other about which of two methods to use in allocating the back taxes. Appellants also complain that the stipulation was drafted by Royal Palms's counsel.
The conflict accusation overlooks that Royal Palms is a corporation, and its counsel represented that entity, as instructed by the board of directors. As so instructed, counsel for the corporation informed the trial court that Royal Palms took no legal position on the merits of the tax allocation issue. Similarly, the stipulation, written in plain English, stated that all leaseholders were neutral as to the outcome. Further, the stipulation recited that each leaseholder had the opportunity to obtain independent legal advice about the matter. All parties were equally "confused" about the proper allocation of the back taxes and, per the stipulation, its signatories agreed in unambiguous language to abide by the trial court's decision and its enforcement without further "dispute" or any opposition "whatsoever."
The appeal is dismissed. Respondent Royal Palms Apartments, Inc., is entitled to costs on appeal from appellants. The remaining parties are to bear their own costs.
We concur:
ROTHSCHILD, J.
JOHNSON, J.
