Court of Appeal Affirms Denial of Fee Request under Civil Code section 1354.
Section 1354 of the Davis-Sterling Common Interest Development Act, Civil Code section 1354(d), provides that the prevailing party shall be awarded attorney's fees in an action to enforce the governing documents (usually, CC&Rs). Because the statute contains no definition of "prevailing party," case law establishes that courts are to analyze the issue under a flexible test focusing on "which party had prevailed on a practical level." (See Heather Farms Homeowners Association v. Robinson, 21 Cal.App.4th 1568, 1574 (1994); Donald v. Cafe Royale, Inc., 218 Cal.App.3d 168, 185 (1990); Elster v. Friedman, 211 Cal.App.3d 1439, 1444 (1989).) Both the lower and appellate courts in the next case used this "practical level" test in denying a fee request to a condominium owner which had a dispute over interconnection of its unit fire alarms into the condominium association's master fire alarm system.
Owner owned a commercial condominium in a Chula Vista 13-building project managed by a condominium association. Owner did not obtain prior approval from the association before interconnecting its unit alarm system to the master alarm system, and did not comply with a recorded declaration provision requiring the procurement of proof of insurance and naming the association as a named insured. Owner sued association and association's president for damages, declaratory relief, and injunctive relief. The lower court denied a TRO to owner, requiring the parties to work the matter out through submission of alarm plans to the association. Not much later, association approved owner's submitted plans with some conditions. Eventually, the action was dismissed at owner's request.
Owner then moved for $24,813 in attorney's fees under section 1354 as the "prevailing party" in the litigation. The lower court denied the request, stating that both parties achieved what they sought to achieve—plaintiff was able to interconnect to the master alarm system, while association did obtain oversight and made the interconnection subject to certain conditions. Owner appealed.
In Starboard Street, LLC v. Venture Commerce Center-Eastlake Condominium Assn., Case No. D051955 (4th Dist., Div. 1 Sept. 30, 2008) (unpublished), the Fourth District, Division One affirmed the denial of owner's fee request.
Using the Heather Farms pragmatic test for determining the "prevailing party," the Court of Appeal found that the lower court correctly recognized that both sides achieved relief: owner obtained the interconnection, but association was able to approve the interconnection upon certain terms (including a proof of insurance requirement). The appellate panel was influenced by the fact that owner had initially neither sought association approval nor obtained proof of insurance such that "[t]o allow [owner] fees under these circumstances would encourage the violation of the governing documents of common interest developments."