## Facts

- Common areas of a 46-unit condominium complex were damaged in the 1994 Northridge earthquake.
- The homeowners association hired a public insurance adjuster to handle the insurance claim, agreeing to pay 10% of insurance proceeds recovered.
- The association received about $1.4 million in insurance proceeds but refused to pay the adjuster’s fee.
- The adjuster obtained a money judgment for $140,196.59 plus $59,881.19 prejudgment interest; the association did not pay.
- In post-judgment enforcement, the creditor sought assignment of the association’s regular and special assessments.
- The association claimed assessment income was exempt because it was needed for “essential services” under Civil Code § 1366(c).
- The trial court found regular assessments necessary for essential services were exempt from execution, but treated the unpaid judgment as an “extraordinary expense” under § 1366(b) and concluded the association had power to levy an emergency assessment to pay it.
- After continued nonpayment and refusal to levy an emergency assessment, the trial court appointed a receiver and ordered the association to levy an emergency assessment sufficient to satisfy the judgment.

## Issues

1. Whether a court may order a homeowners association to levy a special or emergency assessment on members to satisfy a civil money judgment against the association.
2. Whether Civil Code § 1366(b) permits treating a judgment as an “extraordinary expense” fundable by an emergency assessment, notwithstanding § 1366(c)’s exemption for assessments needed for essential services.
3. Whether appointing a receiver was a proper equitable measure to enforce the judgment through an ordered assessment.

## Decision

- The Court of Appeal affirmed the order appointing a receiver and compelling the association to levy an emergency assessment.
- A valid civil money judgment against a common-interest development association may be treated as an “extraordinary expense” under Civil Code § 1366(b), permitting an emergency assessment to fund payment.
- Civil Code § 1366(c) shields essential-service assessment income from direct execution but does not eliminate the association’s obligation to satisfy judgments through lawful means.
- The trial court acted within its equitable enforcement authority by ordering the association to exercise its assessment power and by appointing a receiver when the association refused to do so.

## Legal Principles

- A homeowners association may be compelled to levy a special or emergency assessment to satisfy a valid civil money judgment when the liability constitutes an “extraordinary expense” under Civil Code § 1366(b).
- Statutory protection of assessment revenues needed for “essential services” bars execution on those funds but does not confer practical immunity from money judgments.
- Courts may use equitable remedies, including receivership, to enforce judgments where statutory limits restrict ordinary execution and the debtor entity refuses to employ available lawful payment mechanisms.

## Conclusion

The court held that an HOA cannot avoid a civil money judgment by relying on statutory exemptions for essential-service assessments; instead, it may be ordered to levy an emergency assessment as an extraordinary expense, and a receiver may be appointed to ensure compliance with that enforcement remedy.


James F. O’Toole Co. v. Los Angeles Kingsbury Ct. Owners Ass’n, 126 Cal. App. 4th 549 (Cal. Ct. App. 2005)