Common Fund, Homeowner Associations, Section 1717: Developers Properly Denied $1.950 Million In Attorney’s Fees Against HOA Under Either Civil Code Section 1717 Or The Common Fund/Substantial Benefit Doctrine

HOA Would Not Have Been Entitled To Fees If It Had Won, So Developers Did Not Prevail, With Equitable Doctrines Not Supplying An Anchor For An Award.

            Market Lofts Community Assn. v. 9^th Street Market Lofts, LLC, Case Nos. B280446/B282412 (2d Dist., Div. 2 Nov. 13, 2018) (unpublished) involved a case where an HOA lost a suit against Developers based on a Parking License Agreement (PLA) to which HOA was not a party, with the PLA containing a fees clause. HOA was a party to a sublicense agreement with a fees clause. The lower court denied fees to certain Developers totaling about $1.950 million, as against HOA, finding that it was not a party to the PLA (which prevented Civil Code section 1717) and that the common fund/substantial benefit theory could not provide an anchor for recovery.

            Those determinations were affirmed on appeal.

            Developers were not entitled to fees under the sublicense agreement because the gravamen of the lawsuit was whether the PLA prohibited defendants from charging condo eventual owners for parking—with HOA not a party to the PLA and with the narrow fees clause not extending exposure to HOA, following Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4^th 858, 898-900 (2008) in this regard. With respect to the common fund/substantial benefit theory, this was an equitable theory which could only benefit the HOA in limited circumstances, such that it could form the “reciprocity” basis for recovery; “[a]llowing the Developers to utilize this equitable doctrine to recoup millions of dollars in attorney fees would turn equity on its head.” (Slip Op., at p. 21.)