CALIFORNIA ATTORNEY'S FEES

Homeowner Associations, Prevailing Party: HOA Obtaining Preliminary Injunction To Aid Fumigation Of Separate Units Was Prevailing Party Entitled To Fee Recovery

Lower Court Fee Award And Appellate Fees Were Warranted In Favor OF The HOA.

            Although we do not know the amount of fees awarded below, the homeowners in Windham at Carmel Mountain Ranch Assn. v. Lacher, Case No. D071799 (4^th Dist., Div. 1 Jan. 16, 2019) (unpublished) obviously were dismayed when the lower court awarded HOA fees after the trial judge issued a preliminary injunction in favor of the HOA. Under the terms of the preliminary injunction, the homeowners had to vacate their unit and provide a key while separate units were being fumigated. The appellate court affirmed the finding that the HOA was the prevailing party, given that a preliminary injunction assisting the fumigation process so as to demonstrate that the organization obtained its litigation objectives. (Rancho Mirage County Club Homeowners Assn. v. Hazelbacker, 2 Cal.App.5^th 252, 262 (2016); Press v. Lucy Stores, Inc., 34 Cal.3d 311, 316 (1983).) To add more insult, HOA was entitled to fees for prevailing on appeal.

Homeowner Associations: Trial Judge Did Not Error In Reducing Homeowner Fees To Prevailing Defendant By Over $100,000

Main Problem Was Failure To Properly Introduce Another Counsel’s Work In Admissible Fashion—Declaration By Later Counsel Did Not Do It.

            In Eith v. Ketelhut, Case No. B272028 (2d Dist., Div. 6 Dec. 17, 2018) (partially published; fees discussion unpublished), many homeowners got involved in a dispute which hinged on whether a HOA Board of Directors properly made a decision on the proper characterization of a defendant homeowners’ operation of a vineyard for purposes of violating CC&Rs and for purposes of an award of attorney’s fees under the Davis-Stirling Act (Civ. Code, § 5975(c)).   The defense won as prevailing parties based on judicial deference to the Board’s decision, which was affirmed on appeal by a majority decision over a dissent by Justice Yegan (with Justice Perren filing a concurring opinion, although joining in the majority decision authored by Presiding Justice Gilbert). The trial judge did award prevailing defendants $250,506.50 in fees, although the fee request of $351,432.55 was cut down over $100,000.

            Both sides appealed, but there was no change in result. Defendants did prevail on the key claims, with plaintiffs forfeiting the argument that payment was stayed based on a bankruptcy automatic stay because the issue was never raised below. With respect to the defense challenge that the $100,000-plus reduction in awards was error, the appellate court found that the biggest item was not properly introduced through declaration testimony, with subsequent counsel not being able to authenticate or get around a hearsay objection as far as the work provided by prior counsel. Although the fact payment was made by the client on the invoice was proper even with hearsay evidence, the nature of the work performed by prior counsel could not be let in without a proper foundation through admissible proof.

            BLOG OBSERVATION—This result, although occurring through fee declaration testimony rather than live trial proof, is consistent with the conclusion of the 4/3 DCA in Copenbarger v. Morris Cerullo World Evangelism, Inc., 29 Cal.App.5^th 1 (2018) [No. 9 of our Top 25 2018 Decisions], where a client was held to have not competently testified as to the work or reasonableness of fees by client’s counsel.

Homeowner Associations, Mediation, Reasonableness Of Fees: $225,000 Fee Recovery In Favor Of HOA And Against Losing Condo Owner Affirmed On Appeal

Mediation Requirement Did Not Apply To HOA-Owner Dispute, Owner Failed To Specifically Identify Objections Fees, And Lower Court Did Award Substantially Reduced Fees From The HOA’s Requests.

            We have done many posts showing how HOAs or owners can be subject to substantial fee exposure for losing HOA-owner disputes. Seahaus La Jolla Owners Assn. v. Witt, Case No. D071229 (4^th Dist., Div. 1 Nov. 27, 2018) (unpublished) illustrates how this can happen, with the non-prevailing condo owner hit with $225,000 in fees in a losing effort.

            HOA sued condo owner to recapture costs incurred in repairing condo owner’s unit after a water leak, with owner cross-complaining against HOA and certain of its directors. The condo owner lost on both the complaint and the cross-complaint after bench proceedings. The trial judge later awarded HOA $ 150,000 in fees (out of a requested $240,000) on its complaint and $75,000 in fees (out of a requested $160,000) for defending against the cross-complaint.

            These determinations were affirmed on appeal. No prelitigation mediation was required because that only applied to developer-condo owner disputes, not HOA-condo owner controversies. Plaintiff failed to identify what portions of the fee requests were duplicative, excessive, or unreasonable, with the trial judge’s reduction showing good discretion was exercised.

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.)

Allocation, Homeowner Associations: Neighbor Winning $784,208 In Damages Against Another Neighbor Based On CC&R/Nuisance/Prospective Economic Advantage Damages Properly Awarded CC&R Fees Of $363,571.56

Lack Of Fee Hearing Transcript Meant No Adequate Record On Appeal; However, Claims Looked To Be Interrelated Such That No Apportionment Was Required.  

             We have noticed an increasing trend among appellate courts to affirm fee awards or fee denials where the appealing litigant failed to provide a reporter’s transcript, especially where abuse of discretion or non-legal issues are involved. The Second District, Division 5 has been especially vigilant on this issue, and we have seen an uptick in denying fee appeals by our local Santa Ana Court of Appeal based on the lack of an adequate record. Kinsman v. Rodarte, Case No. G048812 (4^th Dist., Div. 3 June 7, 2018) (unpublished) illustrates this well.

            There, a jury found in favor of a plaintiff neighbor governed by CC&Rs as against a nearby defendant neighbor. It awarded $784,208 in damages based on nuisance, prospective economic advantage interference, civil harassment, and CC&R claims, also rejecting defendant’s cross-claims. No one disputed that plaintiff was other than a prevailing party based on a CC&R fees clause which was broadly worded. Plaintiff sought fees of $438,571.56 in contractual fees, with the court awarding $363,571.56.

            Plaintiff’s appeal of the fee award did not result in any change. Plaintiff argued that the fee awarded should have only been awarded for work on the CC&R claims. However, no fee hearing transcript was submitted such that the appellate court did not know the reason(s) why the trial court lowered the requested award, perhaps even restricting the award to work only on the CC&R claim. Beyond that, on the merits, there was no perceived abuse of discretion because the CC&Rs declared that any violation of the Declaration was a nuisance, such that the work on the tort causes of action were inextricably intertwined with the contractual CC&R violations—meaning apportionment would have been unnecessary in any event.

           Acting Presiding Justice Moore authored the 3-0 panel opinion.

Allocation, Homeowner Associations: Judge Presiding Trial Did Not Abuse His Discretion By Failing To Apportion Fee Work Between Contract and Noncontract Claims Where Work On These Claims Was Inextricably Intertwined

Plus . . . Lower Court Did Significantly Reduce Fee Request In Awarding $507,000 In Fees And $33,699 In Costs To HOA.

            We repeatedly have demonstrated in posts how homeowner association disputes can be a pricey proposition, depending on which side prevailed (or, for that matter, where no side has been found to prevail). Over the years in posting in the HOA areas, we see substantial six-figure and even seven-figure awards of fees/costs. That happened in Majestic Asset Mgt., LLC v. The Colony at Calif. Oaks Homeowners Assn., Case Nos. D972627/D072628 (4^th Dist., Div. 1 May 10, 2018) (unpublished).

            There, HOA won a suit by plaintiffs/alter egos who bought a golf course and agreed to certain use and maintenance obligations. They sued under both contractual and many tort theories, with the defendants also filing a cross-complaint. HOA won a $41,024.20 damages judgment and a permanent injunction. Because there were contractual fees clauses in purchase sale agreements and a trust deed, and plaintiffs also sued for breach of CC&Rs (voluntarily dismissed with prejudice), Civil Code section 1717 and 5975(c) did provide fee entitlement to HOA as the prevailing party. HOA requested fees of $1,166,377 and costs of $35,389 (a total of $1,201,766). In opposition, the non-prevailing parties (the defense) claimed that the fee request was unreasonable and should be reduced by 50% to 75%, such that a reasonable range was $439,349.25 - $579,990.75 based on the analysis of a retained fee expert. The trial judge credited the expert analysis and awarded $507,000 in fees and $33,699 in costs over the defense objection that fees further had to be apportioned between contractual (compensable) and tort (non-compensable) work such that $250,000 - $300,000 was more like it. The trial court found the contract and tort work to be melded together and did not do any apportionment beyond his reductions for reasonableness of the request.

            The appellate court affirmed the fees/costs award. The record showed that the lower court, which presided over the trial, did not abuse its discretion in failing to apportion given the overlap between the various issues. The lower court was in a unique position to make this call given its involvement in the case and the eventual trial producing the judgment and fees/costs award.

Homeowner Associations/POOF!: 2/4 DCA Reinstates Homeowner’s Breach Of Fiduciary/Quiet Title Claims And Allows Further Amendment Of Slander Of Title Claim, Which Causes Attorney’s Fees Award To HOA As Prevailing Party To Go POOF!

$249,861.50 Fee Award Goes Away For Now.

            In Colyear v. Rolling Hills Community Assn. of Rancho Palos Verdes, Case Nos. B278198/B279671 (2d Dist., Div. 4 Apr. 23, 2018) (unpublished), homeowner sued HOA for breach of fiduciary duty, slander of title, and quiet title arising from a tree trimming dispute between neighbors.  (Boy, oh boy, tree disputes are very common in HOA cases.)  The lower court eventually sustained demurrers without leave in homeowner’s action and then awarded HOA attorney’s fees to the tune of $249,861.50.  (Yes, that it no typo.)  All of that went POOF! on appeal because the 2/4 DCA reinstated the breach of fiduciary duty and quiet title claims, allowed homeowner a chance to amend the slander of title claim (if he could plead around a privilege), and found that pre-dispute ADR requirement did not apply to this particular case.  Reversal of fortune, yes indeed.

Homeowner Association: Trial Court Correctly Denied Plaintiff’s Negligence-Based Fee Recovery Against HOA Based On Gravamen Of The Claim—Negligence, Not CC&R Enforcement

Plaintiff’s Fee Request Of $145,212.67 Rebuffed By Trial and Appellate Courts.

            This next case should illustrate how both trial and appellate jurists try to get to the nub of a dispute—with the ultimate decision on the nature of the claim being very decisive on whether there is fee entitlement.

            Martini v. Bel Azure Homeowners Assn., Case No. D072288 (4^th Dist., Div. 1 Apr. 12, 2018) (unpublished) was a situation where a plaintiff sued a HOA after suffering a fall on HOA premises.  Plaintiff did win a negligence action for under $11,000 against HOA affiliates.  She then moved for $137,167.50 in attorney’s fees and $8,045.17 in costs against the HOA Defendants.  The trial court denied the fee request, and the appellate court agreed.

            The problem here was that the CC&Rs, although containing a fees clause, had one which was narrow in scope.  Specifically, the fees clause talked about fee entitlement to a prevailing party in “litigation to enforce or interpret” the CC&Rs.  Although some disputes might fall within the ambit of the fees clause, the negligence cause of action did not.  The Legislature, under the Davis-Stirling Act fee authorization, did not allow a prevailing party to recover fees more broadly than an action to actually enforce the CC&Rs.  Since the action was really a negligence/premises liability claim, no fees were recoverable, as the lower court found. 

            No different result occurred under Civil Code section 1717.  This was really a tort claim, with the CC&R fees clause being too narrow to encompass tort claims.  Second ground, also, did not provide relief to appellant on appeal. 

Homeowner Associations: $707,117 Fee Award To HOA Goes Away Upon Reversal Of HOA’s Victory In Judgment Notwithstanding The Verdict Ruling On Plaintiff Homeowners’ Nuisance Claim

Further Fee Proceeding Remand Occurs In Decade-Spanning Litigation.

            Cathedral Hill Tower Condominium Assn. v. Garbar, Case No. A144036 (1^st Dist., Div. 3 Mar. 27, 2018) (unpublished) was the latest appeal by homeowners against HOA in a decade-spanning action involving claims for nuisance, negligence, and breach of contract by HOA.  A jury found in homeowners’ favor and awarded them nuisance personal injury damages of $280,000, although the trial court denied the negligence and breach of contract claims on procedural or substantive grounds.  The trial judge later granted a JNOV motion in HOA’s favor on the nuisance claim, subsequently awarding HOA $707,117 as the prevailing party under Civil Code section 5975.

            The fee award fell upon review because the appellate court determined that the JNOV on the nuisance claim was improper such that the jury verdict was reinstated.  Because this did impact the prevailing party determination, the matter was remanded for a relook on the fees issue.  

Homeowner Associations: HOA Properly Awarded Fees Against Trustee And An Individual Suing As Property’s Successor-In-Interest

Homeowner Was Assessed With About $76,000 In Fees Awardable In HOA’s Favor.

            Plaintiff, who sued as a trustee of her deceased father’s trust and individually as successor-in-interest to a condominium property, lost an exclusive garage use dispute against the HOA through a summary judgment motion, which was affirmed on appeal.  HOA then was awarded about $76,000 in attorney’s fees as the prevailing party under a CC&R fees clause, with the award entered against plaintiff in both capacities. 

            Plaintiff’s appeal of this dual capacity determination was affirmed in Michaelson v. V.P. Condominium Corp., Case No. D071215 (4^th Dist., Div. 1 Feb. 21, 2018) (unpublished).  The reason was that plaintiff did sue in two capacities, such that the fee award was not just limited to trust assets. 

Homeowner Associations/Reasonableness Of Fees: HOA Properly Awarded $31,375 Out Of $91,936 Base Line Lodestar Fee Request

Trial Judge Did Not Err In Assessing Settlement Offers With Respect To Overall Request.

            In Villa Riviera Condominium  Assn. v. Berg, Case No. B269191 (2d Dist., Di. 3 Feb. 8, 2018) (unpublished), HOA did win a CC&R assessment battle against homeowner on a summary judgment motion, then seeking a lodestar amount of $91,936 in attorney’s fees, plus “fees on fees.”  Homeowner argued that more than half the fees were incurred to unsuccessfully pursue claims against homeowner’s former wife.  Also, opposing party indicated that HOA offered to settle the matter for $40,000 earlier in the case in stark contrast to the $91,936 in fees now requested, drawing objections that these settlement communications were privileged information.  The trial judge overruled the objections and entered a fee order of $31,375 in favor of HOA.

            HOA was not happy and appealed, asking for more.  HOA did not get any more.

            The appellate court found that the settlement offer was probative, given it was offered to show that the fees incurred by HOA were disproportionate to the perceived value of HOA’s claim.  Beyond that, the reviewing court relied on Meister v. Regents of University of California, 67 Cal.App.4^th 437, 449-450 (1998) to recognize that a settlement offer may be used to assess the reasonableness of a later fee request.  As far as to the amount of fees awarded, the lower court did not abuse its discretion in reducing fees and did not have to articulate its findings in a detailed ruling. 

Homeowner Associations/Prevailing Party: Mixed Results In Transfer Fee Litigation Means No One Obtained Fees Or Costs

Gotta Look At The Big Picture, Appellate Court Reminds Us On Prevailing Party Status.

            Marina Pacifica Homeowners Assn. v. Southern California Financial Corp., Case No. B276719 (2d Dist., Div. 8 Feb. 5, 2018) (published) was hard fought litigation over the validity and timing of an assignment/transfer fee.  In the end, the trial court—after bifurcating the trial into several phases—decided the transfer fee could not be collected after December 31, 2008, the fees imposed before that date should have been calculated on 4% of fair market value rather than 10%, and the escalation in the fee for a certain period of time did not fail for lack of consideration. 

            So, what next happened?  I assume you guessed it—both sides filed dueling motions for attorney’s fees and costs as the prevailing party.  The lower court determined no one prevailed, denying all of the requests.  This prompted appeals by both sides.

            Nothing changed, in a published opinion issued by the 2/8 DCA.

            The real conclusion in this case was one of pragmatism.  Mixed results occurred for both sides in the litigation below, with respect to both fees and costs.  Plaintiff sought to rid the homeowners of the burden of an assignment fee in its entirety, but this did not occur.  However, defendant did not gain the 10% FMV position either.  (Plaintiff sought to pay nothing, but defendant established a right to recovery $39 million rather than the $97 million it sought to charge.)  Not necessarily a tie, but no clear winner.

            From a substantive perspective, the 2/8 DCA panel rejected the notion that settlement communications constituted “pleadings, trial briefs, opening statements, and similar sources” which could be used to compare the relief awarded on the contract with the parties’ demands/litigation objectives.  Obviously, the settlement “privilege” in Evidence Code section 1152 figured heavily in this determination. 

Homeowner Associations/Prevailing Party: Homeowner’s Interim Preliminary Injunction Success, Although Ultimately Losing On The Merits, Did Not Make Her Prevailing Party Under Davis-Stirling Fee-Shifting Provision

Analogy To California Homeowner ‘s Bill Of Rights Fee-Shifting Scheme Unavailing On Appeal.

            In Artus v. Gramercy Towers Condominium Assn., Case No. A147297 (1^st Dist., Div. 1 Jan. 24, 2018) (published), plaintiff homeowner sued HOA claiming it illegally failed to enforce cumulative voting standards under governing documents.  The trial court granted homeowner a preliminary injunction on two of her three statutory claims, but she eventually lost on the merits.  HOA then held a second a meeting at which direct, rather than cumulative, voting was passed by a substantial margin, such that the same adverse result occurred—leading the trial judge to deny any permanent injunctive relief.  Homeowner moved for statutory attorney’s fees under the Davis-Stirling Act, Civil Code section 5145, which the trial court denied.

            Homeowner did not get them on appeal.  She made a pitch to the appellate court that interim provisional victories should make her the “prevailing party,” much like the result under the California Homeowner’s Bill of Rights, by analogy.  The reviewing court disagreed, finding that nothing in the Davis-Stirling Act allowed recovery for interim successes, such that the “prevailing party” determination had to await the end of the litigation.  Since homeowner lost on the merits at the end of the day, no fee entitlement was in order under section 5145.

Homeowners Association, Family Law, Prevailing Party: Appellate Courts Deal With Trifecta Of Fees Issues In Unpublished November 9 Opinions

Homeowners Association—Anaheim Hills Planned Community Assn. v. Chen, Case No. G053128 (4^th Dist., Div. 3 Nov. 9, 2017) (Unpublished).

            In this first one, homeowner appealed a trial court’s award of appellate fees to HOA in a CC&R dispute under both a prior settlement agreement and the Davis-Stirling Act.  The appellate fee award of $36,830.50 was affirmed.   An action to enforce a settlement agreement does permit a fee award under the Davis-Stirling Act.  (Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker, 2 Cal.App.5^th 252, 259-260 (2016).)  HOA also did prevail, given that it forced the homeowner to remedy the CC&R violations—its primary litigation objective.  Justice Moore authored the decision on behalf of a 3-0 panel.

Family Law—Marriage of Aubry, Case No. E066624 (4^th Dist., Div. 2 Nov. 9, 2017) (Unpublished).

            The second one involved an ex-wife’s appeal of a needs-based $10,000 fees award to ex-husband under Family Code sections 2030 and 2032.  The award was reversed because the trial judge was unaware of a capped $6,000 fee arrangement between ex-wife and her counsel, it was unclear if consideration was given to any net income received by husband from assets, and it was unclear if the trial court considered wife’s monthly income.  These vagaries required a reverse and re-do by the court below.

Prevailing Party—Law Offices of Mark B. Plummer PC v. Bayuk, Case No. G053836 (4^th Dist., Div. 3 Nov. 9, 2017) (Unpublished).

            The last opinion in the trifecta reviewed here involved a battle between attorneys representing a client in various proceedings, with the appellant suing for more compensation before finally admitting at trial that he basically received what was owed, leading the trial judge to enter judgment in favor of the opposing attorneys.  Opposing attorneys were granted fees under a contractual fees clause in an operative settlement agreement between some of the parties (although the provision could encompass even another non-party attorney to the settlement agreement).  The trial judge’s entry of an actual judgment precluded appellant’s argument that it really voluntarily the dismissed the matter so as to rise to the Santisas bar to fee recovery.  Appellant argued that attorneys represented themselves in defense, but the record showed that one co-defendant represented another defendant attorney and that another attorney had independent representation (both completely proper), dashing hopes that a Trope v. Katz defense would apply.  Justice Moore also authored this one on behalf of the 4/3 panel.   

Homeowner Associations: Trial Court’s Refusal To Award HOA-Affiliated Individual Defendant Fees, As Against Voluntarily Dismissing Plaintiffs, Under Statutory Fee-Shifting Provision Reversed On Appeal

Santisas Argument Did Not Apply To CC&R Statutory Fee Provision And Gravamen Of Plaintiffs’ Action Was Based On CC&Rs.

            In Durack v. Wang, Case No. B276086 (2d Dist., Div. 7 Sept. 25, 2017) (unpublished), homeowners sued the HOA and several individual defendants for negligence and breach of fiduciary duty (among other claims), but referencing the CC&Rs in some portions of the operative complaint.  Plaintiffs reached a settlement with all defendants except one HOA-affiliated individual defendant (Wang, who was an HOA board of director), with everyone preparing for trial, with plaintiffs asking for more money from Wang (although the other settling defendants wanted Wang included), and with plaintiffs voluntarily dismissing without prejudice shortly before the start of trial.  The lower court refused to award attorney’s fees to Wang after the voluntary dismissal, an order reversed on appeal.

            The appellate court initially determined that the Civil Code section 5975(c) applied, which allows the prevailing party reasonable fees and costs “[i]n an action to enforce the governing documents [under the Davis-Stirling Act].”  Because this statutory provision applied, the pre-dismissal Santisas governing principle under Civil Code section 1717 did not come into play given it applies only to contract versus statutory fee shifting.  That brought the appellate court to the key issue of whether plaintiffs’ actions were truly based on the CC&Rs.  The reviewing court concluded “yes,” given that the CC&Rs were mentioned in salient portions of the complaint and the claims did seek to enforce CC&Rs.  Beyond that, Wang did prevail on the two causes of action—she achieved her litigation objectives in obtaining demurrer dismissals and an eventual total voluntary dismissal.  On remand, the trial court was directed to enter a fee award to Wang, but making sure that apportionment analysis was properly considered.

Homeowner Associations: HOA Not Entitled To Fees Where Gist Of Successor Homeowner’s Suit Was Fraud Based

Denial Of HOA’s Fee Request Affirmed On Appeal.

            In Mims v. Park Hill on Pepper Avenue Community Association, Case No. E065990 (4^th Dist., Div. 2 Sept. 13, 2017) (unpublished), successor homeowner initially sued HOA on various fraud-based claims based on the failure to provide her notice that the property was within the HOA and subject to HOA fees, mainly under the Truth in Lending Act and other laws.  Importantly, plaintiff never cited the HOA’s CC&Rs in her pleadings and dismissed HOA after it filed an answer.  The lower court denied HOA’s request for fees under Civil Code section 5975(c) as a purported prevailing party.  The 4/2 DCA affirmed, agreeing with the trial judge that the lawsuit was not about enforcing CC&Rs but actually seeking an exemption from the governing HOA documents due to alleged violations of disclosure laws as well as misrepresentation. 

Homeowner Associations: 4/3 DCA Determines Civil Code Section 5235(c) Only Allows Costs Award To Prevailing HOA If Homeowner Action Is Frivolous

Fee Recovery Not Allowed Under Section 5235(c), With DCA Also Providing Guidance On Definition Of “Frivolous” Under Same Provision.

            The Fourth District, Division 3 faced a first impression statutory interpretation of Civil Code section 5235(c), which provides that “[a] prevailing association may recover any costs if the court finds the action to be frivolous, unreasonable, or without foundation,” in Retzloff v. Moulton Parkway Residents’ Association, No. One, Case No. G053164 (4^th Dist., Div. 3 Aug. 23, 2017) (published). 

            What happened in this one was that homeowners, former HOA directors, basically lost attempts to force HOA to make available corporate records,  because homeowners did not engage in mandatory ADR efforts.  Eventually, the trial judge awarded HOA $13,750 in attorney’s fees and $1,688.60 in costs based on the theory the homeowners’ claims were frivolous in nature.  The appellate court partially reversed, in a 3-0 opinion authored by Justice Moore.  In extensive reasoning, the 4/3 DCA panel concluded that section 5235(c) only allows for routine costs to be awarded, reversing the fee recovery.  As far as the challenge by losing plaintiffs that their case was not frivolous, our local appellate court concluded that this should be guided by whether “any reasonable attorney would agree it is completely without merit in the sense that it lacks legal grounds, lacks an evidentiary showing, or involves an unreasonable delay,” a standard not met by homeowners below.  Cost award affirmed; fees award reversed. 

Homeowners Association: HOA Winning $1,881 In Damages Against Homeowner Also Was Entitled To Attorney’s Fees Of $201,750

HOA-Homeowner Battles Can Result In Large Fee Exposure

            We do not really need to get into the specifics of Mustafa v. Mountain View Park Homeownerss Assn., Inc., Case No. E063529 (4^th Dist., Div. 2 Aug. 8, 2017) (unpublished), but the end result in sobering for purposes of our blog.   Basically, homeowner lost a gnarly dispute against a HOA, with HOA obtaining a whopping award of $1,881 in damages.  But, just saying, HOA also obtained a fee award of $201,750 as prevailing party, which was affirmed in entirety when the appellate court agreed with the trial court conclusion’s across the board.  Ouch!

Homeowner Associations: HOA Fee Award Reversed Because HOA Elections Win Did Not Qualify For Award Under Frivolous Fee-Shifting Standard

 

 

HOA Argued For More General Prevailing Party CC&R Status—Did Not Get It.

 

            Thompson v. Lakewood Hills Homeowners’ Assn., Case Nos. A144674/A146081 (1^st Dist., Div. 5 May 19, 2017) (unpublished) highlights how the basis for fee entitlement can drive the result in a case.  In a word, HOA was awarded fees/costs by the trial judge after HOA prevailed in an HOA election dispute with homeowner.  That was reversed based on the gravamen of the action, which was crucial in this context.  In an election dispute, HOA can only gain fee recovery if the homeowner contested it frivolously, unreasonably, or without foundation.  (Civ. Code, § 5145(b).)  However, under the more general statute, an HOA can recover if it is the prevailing party under a CC&R governing document dispute without regard to whether the action was frivolous in nature.  (Civ. Code, § 5975(c).)  In this one, the election dispute was the gravamen, such that the fee award in favor of HOA was reversed as a matter of law. 

Homeowner Associations: HOA Losing Tree Trimming CC&R Properly Hit With $200,000 In Fees And $20,621.15 In Costs

 

HOA Disputes Can Be Costly, Especially With Fee Shifting!

Aspen trees. 2015. Carol M. Highsmith, photographer. Library of Congress.

    We have explained that HOA – homeowner disputes can be costly. Especially where one party prevails, in this case the homeowner. In Lingenbrink v. Del Rayo Estates Homeowners Assn., Case No. D070966 (4^th Dist., Div. 1 Mar. 22, 2017) (unpublished), homeowner successfully enforced a CC&R requiring one property owner's trees and other vegetation from interfering with the view of any property owner in an action against the HOA. In the end, both at the trial and appellate levels, the homeowner's attorney's fees award of $200,000 and $20,621.15 in costs stood up against the HOA. Ouch – even if a special assessment is not in the offing to cover the loss!

Fee Clause Interpretation, Homeowner Associations, Section 1717: Large Fee Recovery To Prevailing Defendants In Common Interest Development Parking Space Dispute With Other Homeowners Reversed

 

Only Time Finite Fees On Trespass Claim Recoverable Under HOA Fee-Shifting Statute.

     In Hussein v. Driver, Case Nos. A144786/A145655 (1^st Dist., Div. 4 Jan. 27, 2017) (unpublished), plaintiffs and defendants, homeowners in a common interest development as well as the parents of defendants, were drawn into a parking space dispute where slander of title, interference with contract, and trespass claims were involved. Defendants eventually prevailed either on the merits or some dismissals along the way, with the trial judge eventually awarding over $370,000 in attorney’s fees to the defendants based on Civil Code sections 1717 (contractual fee basis) and 5975 (HOA CC&R/Declaration enforcement actions).

     The appellate court reversed in major portions, favorably to the non-prevailing plaintiffs.

     Section 1717 did not apply because the claims were torts, not contract-based claims allowing for recovery. With respect to section 5975, the result was driven by the narrowness of the HOA Declaration provision stating that “[t]he Association or any Owner, shall have the right to enforce by any proceeding at law or in equity, all restrictions, conditions, covenants, reservations, liens and charges now or hereafter imposed by the provisions of this Declaration, and in such action shall be entitled to recover reasonable attorneys’ fees as are ordered by Court.” The reviewing court found that only the trespass claim fell within the ambit of this provision so as to be recoverable under section 5975, although a dismissal limited the time during which fees could be sought on remand.

Homeowner Associations, Prevailing Party: Defendants Homeowners/HOA’s Fee Recovery As Prevailing Party Affirmed On Appeal

 

Losing Plaintiff’s Fee Denial Also Affirmed In Dueling Fee Motion Case.

    Homeowner/landowner cases seem to bring a lot of angst and emotions, maybe not as much as the recent presidential election, but still on the top level on a range scale from 1 to 10—we would say most disputes are in the 7-10 range. The problem in these controversies is that there are often CC&R contractual fee clauses, as well as fee-shifting statutes under the Davis-Stirling Act applicable to common interest developments, which can impose attorney’s fees on the non-prevailing party.  So, not only does the loser lose on the merits, but the loser may have to loser’s attorney’s fees as well as winner’s attorney’s fees.  Talk about angst.

    Sui v. Price, Case No. G052248 (4th Dist., Div. 3 Nov. 9, 2016) (unpublished) is a case on point for illustrating how these general observations actually find resonance in a real life case.  There, the defense obtained a favorable demurrer without leave ruling, resulting in a judgment against plaintiffs, giving rise to their fees claim as the prevailing parties under Civil Code section 1717 (based on a fees clause in the CC&Rs) and under Civil Code section 5975 (the fee-shifting provision in the Davis-Stirling Act applicable to actions to enforce governing documents such as CC&Rs).  The defense so moved, but plaintiffs also sought fees because they had won by defeating a prior SLAPP motion and by asserting that they actually prevailed in their action.  The lower court granted the defense fee motion and denied plaintiffs’ fee motion as moot after determining the defendants prevailed in the action.

    The 4/3 DCA, in a 3-0 decision by Justice Ikola, affirmed.  The defendants did prevail under the CC&Rs and Davis-Stirling Act by obtaining a demurrer without leave dismissal of plaintiff’s action.  Once they were found to be the prevailing parties, plaintiffs’ fee motion was moot, especially given that they failed to move for SLAPP fees way earlier in the litigation so as to timely assert entitlement under the SLAPP fee-shifting statute.

Appealability/Homeowner Associations: Nellie Gail/McMullin Decision Now Published

 

Failure To Appeal Fee Ruling Or Amended Judgment With Fee Ruling Deprived Appellate Court Of Jurisdiction To Decide Fee Challenge.

     In our October 3, 2016 post, we discussed Nellie Gail Ranch Owners v. McMullin, an unpublished 4/3 DCA decision, at the time, which decided it could not entertain a homeowner challenge to an HOA fee award because homeowner did not separately appeal the fee decision or the amended judgment incorporating the fee decision. We can now report that this case was certified for publication on October 27, 2016 and it now citable.

Appealability/Homeowners Association: Failure To Appeal Post-Judgment Fee Award Was Fatal To Homeowners’ Challenge Fees Awarded To HOA

 

Result Was That Appellate Court Could Not Entertain Challenge To $187,000 Fee Award.

    For you readers out there which follow our post, we have many, many times observed that practitioners should independently appeal any separate fee awards no matter when made just to be safe.  This next case illustrates why this needs to be done because it may otherwise deprive the litigant of appellate review.

    Nellie Gail Ranch Owners Assn. v. McMullin, Case Mp. G051244 (4th Dist., Div. 3 Oct. 3, 2016) (unpublished) involved a case where HOA won a battle with homeowners who built a retaining wall and sports court on common area property without HOA’s consent.  The trial judge ordered homeowners to remove the retaining wall and sports court, later awarding $187,000 in fees and $10,000 in costs under the Davis-Stirling fee-shifting statute and routine costs statute. 

    Homeowners appealed the fee/costs award, but the appellate court—in a 3-0 decision penned by Justice Aronson—concluded it did not have jurisdiction to entertain the challenge.  Homeowners’ problem was in not appealing from the separate fees award, but simply appealing from the judgment.  The fee award was separately appealable.  But homeowners tried to argue there was a twist because the lower court later entered an amended judgment including the fees and costs.  However, the appellate court decided that the appeal could not subsume this later amended judgment because it was not a clerical amendment giving rise to a nunc pro tunc “relation back.”  (Colony Hill v. Ghamaty, 143 Cal.App.4th 1156, 1171-1172 (2006).)

Homeowners Association/Reasonableness Of Fees/Section 1717: $25,614 Post-Judgment Enforcement Fee Award To HOA Affirmed On Appeal

 

HOA Counsel Did Good Job Of Apportioning Fees As Far As Reasonableness Of Amount.

    The attorney for the prevailing homeowners association (HOA) did something very smart in Bryan Ranch Homeowners Assn. v. Lawrence, Case No. A147659 (1st Dist., Div. 1 Sept. 16, 2016) (unpublished), which we will now describe.

    There, a homeowner and HOA were embroiled in a 14-year conflict involving compliance with HOA’s CC&Rs.  The parties reached a settlement agreement, but clashed for nine more of those 14 years.  The lower court, among other things, awarded HOA $25,614 in attorney’s fees and $190 in costs for HOA post-judgment efforts to enforce the judgment.  Homeowner’s appeal of this award was unsuccessful.

    Although arguing Civil Code section 1717 did not allow for such an award, homeowner ignored the fact that the settlement agreement had an express provision allowing for post-judgment enforcement fee recovery based on the judgment entered as a result of the settlement.  With respect to the argument that HOA was not the prevailing party, this was foreclosed by the lack of an appeal of this aspect of the original judgment.

    Finally, that takes us to the smart move by HOA’s counsel.  That attorney only asked for about half of what was billed to HOA during the epic dispute, asking only for time spent on post-judgment enforcement efforts.  The appellate court, as did the lower court, found this fully supported the reasonableness of the requested fees by HOA.

Homeowner Association: Does An Action To Enforce A Settlement Agreement Out Of A Mandatory HOA ADR Provision Also Enforce CC&R Documents Under The Davis-Stirling Act?

 

You Betcha, Said 4/2 DCA In Recent Opinion Affirming Noncompliance With Settlement Agreement And Fee Recovery Of About $19,000 Against Homeowners.

     Rancho Mirage Country Club Homeowners Assn. v. Hazelbaker, Case No. E063272 (4^th Dist., Div. 2 Aug. 9, 2016) (published) involved a situation where an HOA and homeowners reached a mediated written settlement agreement under mandatory ADR Davis-Stirling Act provisions relating to patio improvement modifications. The lower court determined homeowners breached the agreement and awarded attorney’s fees of about $19,000 to HOA (well short of the approximate $32,000 requested by HOA).

     The 4/2 DCA affirmed the fee award on appeal. The critical legal issue was whether a settlement agreement resulting from the mandatory Davis-Stirling ADR process was an “action to enforce the governing documents” under the appropriate fee-shifting statute. It was, according to the appellate court, otherwise “the [ADR] process would discourage such resolutions, and encourage gamesmanship.” (Slip Opn. at p. 8.)

Homeowner Associations/POOF!: $159,269.61 In Attorney’s Fees And Costs To HOA Evaporated On Appeal In Landscaping Plan Submission Dispute

 

Sobering Case for HOAs, Good One for Homeowners.

     Winchester Community Assn. v. Perrotta, Case No. C075562 (3d Dist. July 21, 2016) (unpublished) involved a situation where homeowners and an HOA got into a dispute over the review of submission of landscaping plans. Association won at the trial level and was awarded attorney’s fees and costs of $159,269.61.

     Those awards went away on appeal. The reason? HOA prevented performance of a settlement agreement between the parties allowing for review of landscaping plans by refusing to review the submissions. The appellate court reversed the fees/costs award, but ordered the HOA to either approve/disapprove the plans and allowed homeowners a specified amount of time to get Placer County final inspections/permitting. This result should remind HOAs that they need to be reasonable in their review process of submitted landscaping or architectural plans by homeowners; if not, the courts may well be the arbiter of what is right—even at the appellate level.

Homeowner Associations: Successor Property Owner Win In Homeowner Assessment Foreclosure Battle Did Not Entitle Owner To Fees Under Davis-Stirling Act Or CC&Rs

 

Nothing in Davis-Stirling Act or CC&Rs Indicated It Applied To Remote Third Parties.

    In Multani v. APB Properties, Case Nos. B260610/B265172 (2d Dist., Div. 7 June 13, 2016) (unpublished), plaintiff HOA were embroiled in a protracted battle against the HOA and successor property owners of the condominiums regarding the propriety of an assessment foreclosure.  During the pendency of the litigation against the HOA, the property was transferred to another entity and then eventually APB Properties.  In a prior litigation in the case and a prior appeal, APB’s predecessor was absolved from liability, which led to APB being dismissed from the litigation based on a res judicata ruling.  APB then moved for and recovered $70,000 in attorney’s fees under the Davis-Stirling Act fee-shifting provision (Civil Code section 5975(c)) and under a fees clause in the CC&Rs.

    Although the res judicata merits ruling held up on appeal, the 2/7 DCA reversed the fee award against former homeowners.  The reason was that APB was included only as an indispensable party for purposes of a quiet title judgment; APB was not sued under any theory that it violated CC&Rs.  The appellate court summarized it this way, both under section 5975(c) and the CC&Rs (finding the CC&R provision to be derivative of the statutory fee claim):  “There is no language in the statute suggesting subdivision (c) was intended to extend to homeowner claims against third parties that have some relation to, or otherwise arise from, an association’s violation of the governing documents. Had the Legislature intended section 5975 to apply in such a broad manner, it could have included language stating as much. Instead, the Legislature chose ‘narrow statutory language’ [not encompassing the actual parties enforcing the CC&Rs].”

Homeowner Associations/Prevailing Party: HOA’s Request For $1.666 Million In Fees Against Homeowner Properly Denied

 

Lower Court Found HOA Did Not “Prevail,” Where Each Side Got Some Relief.

     HOA-homeowner disputes, as well have seen repeatedly, are generally expensive in nature as far as attorney’s fees expenditures. The loser, either way, can face substantial fee exposure under Civil Code section 5975 (the Davis-Stirling Act’s fee shifting provision) and/or Civil Code section 1717 (where CC&Rs have attorney’s fees provisions, which most do). Sometimes, neither side gets fees given that a lower court has lots of discretion to determine that the fee claimant was not a “prevailing party” in light of a determination that neither side obtained the litigation objectives being sought for an “unqualified win” perspective. (Hsu v. Abbara, 9 Cal.4^th 863, 876 (1995) [Civil Code section 1717]; Heather Farms Homeowners Assn. v. Robinson, 21 Cal.App.4^th 1568, 1572-1574 (1994) [former Civil Code section 1354, now section 5975].)

     HOA in Roslyn Lane, LLC v. Cave Street Homeowners Assn., Case No. D065134 (4^th Dist., Div. 1 May 10, 2016) (unpublished) was unhappy and appealed after the trial court denied its request to recover $1,666,203.80 (no typo) in fees in a hard-fought architectural CC&R dispute. Its appeal could not surmount the deferential review standard accorded to a lower court’s “no prevailing party” determination below. The record showed HOA was awarded $161,613.01 in damages on its cross-complaint, while homeowner was awarded $117,121.60 in damages on its complaint (plus, homeowner obtained some declaratory relief victories and HOA was found to have violated several CC&Rs, ordered to accommodate several of homeowner’s architectural objectives). Homeowner, however, had asked for six times the damages ultimately awarded. Since neither party achieved its litigation objectives, the “split” nature of the end result justified the lower court finding that no side “prevailed” under Civil Code sections 1717 or 5975.

Homeowner Associations: $378,712.50 Fee Award To HOA Affirmed On Appeal

 

 

Shows How CC&R Disputes, If Lost, Can Be Expensive For Homeowners Or HOAs, As The Case May Be.

 

     If you go to our category “Homeowner Associations” on our home page, you will see many posts where homeowners or HOAs get hit with substantial fees under the Davis-Stirling Act for losing disputes involving CC&R enforcement. We can now add Whitehawk Ranch at Hubbard Homeowner Assn. v. Bolin, Case No. B252717 (2d Dist., Div. 8 May 10, 2016) (unpublished), where homeowner lost a CC&R dispute and was hit with a $378,712.50 adverse fee award which was affirmed on appeal.

 

 

Homeowner Association/Prevailing Party: $101,803.15 To Prevailing HOA Affirmed On Appeal Where Lower Court Found HOA Could Fine For Short-Term Vacation Rental Activities But Awarded Fairly Small Fines

 

Prevailing Party Under Davis-Stirling Act Is A Pragmatic Inquiry, With Fees Mandatory If Prevailing Status Is Properly Made.

    Almanor Lakeside Villas Owners Assn. v. Carson, Case No. H041030 (6th Dist. Apr. 19, 2016) (published) involves a $101,803.15 fees/costs award to a prevailing homeowner association against homeowners who were found to have violated short-term vacation rental CC&R provisions but were only fined $6,620 in fines out of a requested $19,979.97.  Homeowners were not happy, but got no solace from the Sixth District on appeal.

    The appellate court concluded that the Davis-Stirling Act fee shifting provision is mandatory in favor of a prevailing party, although a pragmatic consideration governs through a judicial determination of what side achieved its litigation objectives in the case.  The trial judge concluded that HOA did, by enforcing the CC&Rs and getting some fines.  The fractional damages award did not negate the broader impact of the ruling that the CC&Rs could be enforced and fines levied.  Nothing in the Act supported the proposition there had to be a reduction based on the degree of success, unlike in other areas (such as civil rights).  Homeowners creatively argued that the damages award was under the $25,000 superior court threshold allowing for discretion to not award any fees at all pursuant to Code of Civil Procedure section 1033(a), but the reviewing court found that section 1033 did not apply in the Stirling-Davis Act context (as opposed to being applicable to FEHA actions).  The appellate court did agree that the lower court could reduce the amount of fees for incomplete success, but was not mandated to do so.  Fee/costs award affirmed in this particular situation. 

Homeowner Associations/Prevailing Party: Mixed Results Meant Remand Was Necessary

 

However, One Party Did Clearly Prevail, But Got No More On Appeal.

     Both trial and appellate courts are faced with situations where some parties prevail to some extent, but then have to determine if one or more truly did prevail on a convincing basis.

     In Marina Pacifica Homeowners Assn. v. So. Cal. Financial Corp., Case No. 255413 (2d Dist., Div. 8 Mar. 4, 2016) (unpublished), HOA billed unit owners for assignment fees in protracted litigation which to say the least produced “mixed results” except for one defendant party. Everyone then moved for attorney’s fees and costs. HOA sought $3.1 million in fees and almost $54,000 in costs, and other parties sought $2.5 million in fees and about $105,000 in costs. The trial judge found that only one defendant truly prevailed, denying fees and costs to everyone else, but awarding the defendant $601,560 in fees (one-fifth of the work) and $25,002.01 in costs (about half of the request when one half of the costs were taxed through a motion to tax costs).

     On review, the Court of Appeal remanded the fee/costs denial as to HOA and one party based on the fact the prevailing party determination might change based on the merits appeal decision. However, as to the defendant awarded $601,560 in fees and $25,002.01, that determination was affirmed—the 20% fee award out of requested fees and the reduced costs award had adequate substantiating bases in the record.

Homeowner Association: $147,595 Fee Award To Plaintiffs Voiding HOA Director Election Upheld On Appeal

 

Fee Basis Existed and Fees Were Reasonable Given HOA’s Vigorous Litigation In The Matter.

     Homeowner and HOA disputes are generally contentious and vigorous in nature; the problem is that the winner oft times “gets the spoils,” meaning a large fee recovery even for a victory that is maybe not that major.

     The end result in Murphy v. Anaheim Hills Planned Community Assn., Case Nos. G050817/G050912 (4^th Dist., Div. 3 Jan. 14, 2016) (unpublished) illustrates this vividly, authored by Justice Ikola on behalf of a 3-0 panel.

     There, some homeowners challenged that a quorum was not present for an HOA director election, with homeowners winning. They then moved for recovery of attorney’s fees to the tune of $208,382.50 based on a $475 hourly rate. The trial judge awarded $147,595 based on a $350 hourly rate.

     HOA’s challenges to the merits lost, as well as its challenges to the fee award.

     First of all, there was a fee entitlement basis to the award. It was Civil Code section 5975, which allows for fee recovery with respect to enforcing CC&Rs. The appellate court found no difficulty finding this was the situation, with the election procedural statute simply being a vehicle to CC&R enforcement. (Accord, Kaplan v. Fairway Oaks HOA, 98 Cal.App.4^th 715, 720 (2002).)

     Second, the trial judge did not abuse his discretion in finding homeowners prevailed. Although one may have to wait and see what the pragmatic result of the “win” is, homeowners certainly voided the election and HOA’s subsequent postjudgment actions cannot attempt to nullify the significance of the past relief obtained by homeowners.

    Third, the trial judge did factor in the failure to seek ADR, but this did not dispositively impact the fee award in this situation.

     Finally, the amount of the fee award was not facially shocking in nature given that HOA litigated like crazy with resolve all along the way.

Equities, Homeowner Association, Prevailing Party: Fee Recovery Against Two Voluntarily Dismissing Plaintiffs, Where Other Plaintiffs Still Fighting, Was Abuse Of Discretion Under The Circumstances

 

$156,614.47 Fee Recovery Went POOF! On Appeal.

    Wasserman v. Ketelhut, Case No. B258642 (2d Dist., Div. 6 Dec. 1, 2015) (unpublished) is an interesting common interest development case where multiple plaintiffs were fighting defendants over various CC&R governing document claims about defendants operating a vineyard which encroached on certain CID common areas.  (BLOG NOTE—California state fee cases today both involved wineries—tell you where the economy is going as far as people’s penchant to enjoy wines?  Just sayin’ ….)  Two of the plaintiffs voluntarily dismissed their claims based on wanting to sell their house and just get out, while the lawsuit between seven other plaintiffs and defendants lumbered along.  The trial court, however, awarded defendants $156,614.47 in attorney’s fees under the CID governing documents fee-shifting provision, Civil Code section 5975(c). 

    The appellate court reversed the fee award against the two voluntarily dismissing plaintiffs.

    The key issue was whether the defense truly prevailed on a practical level.  (Salehi v. Surfside III Condominium Owners’ Assn., 200 Cal.App.4th 1146, 1150, 1153, 1156 (2011).)  The appellate court determined that the voluntary dismissal did not render defendants the prevailing parties given that the battle was still being waged with seven other plaintiffs.  Also, the equities predominated such that the fee award was an abuse of discretion because it was unfair to put the total fee burden on two plaintiffs for the efforts against multiple plaintiffs.  The fee decision should have been postponed pending a determination of what ultimately occurred in the case; put another way, the prevailing party determination was premature under the circumstances.  Interesting one!

Homeowner Associations/Reasonableness Of Fees/Section 1717: Prevailing Defendants Get $525 In Fees, Not The Requested $675,000

 

Appellate Court Found No Basis Under HOA Or Section 1717, But Did Affirm The Small Award Not Challenged By The Other Side—Chastising Defendants For Their Realistic Assessment This Was A Small Claims Matter Undeserving Of Large Fees, But Then Requesting $675,000.

     We have to say that our California intermediate appellate courts get interesting fees decisions to consider, some head scratching in nature but interesting nonetheless.

     California Housing Finance Agency v. Rothman, Case No. D068480 (4^th Dist., Div. 1 Oct. 23, 2015) (unpublished) is one of them.

     There, prevailing defendants tried to recoup $675,000 in attorney’s fees under HOA/contractual fee shifting provisions, even though admitting the matter should have been litigated in small claims court. However, the lower court only awarded them $525 in fees under Civil Code section 1717.5, which allows fee recovery for book accounts.

     The appellate court rejected prevailing defendants’ challenge to the fee award, finding no basis for entitlement under the HOA (Civil Code section 1354) or contractual (Civil Code section 1717) fee shifting provisions. However, it affirmed the $525 fee award under section 1717.5, only because the Agency never appealed—finding little basis for it in the record also but sustaining the award given no cross-appeal by the other side.

     Here is what they had to said on the defendants’ argument this should have been brought in the small claims venue: “The Rothman Defendants assert in their opening brief that this case should have been brought in small claims court. They lament the fact it was filed in superior court. Despite admitting that the case did not concern a high dollar amount in potential damages, they asked the superior court for $675,765 in attorney fees. ‘It is elementary that attorney fees must be reasonable.’ (Civic Western Corp. v. Zila Industries, Inc. (1977) 66 Cal.App.3d 1, 16.) Simply based on the Rothman Defendants' own arguments and the limited record before us, we struggle to understand how the Rothman Defendants could even begin to argue that such fees are reasonable in a case that they maintain should have been brought in small claims court.”

Homeowner Associations: Plaintiff Adjacent Owner Losing Challenge To Neighbor’s Plans Based On CC&Rs Upon Demurrer Properly Assessed With Fees

 

 

$89,387.50 Was Fee Recovery, With Trial Court Correctly Apportioning After Passage Of City Resolution.

 

     Although technically not a HOA case, we post under this category because it involved an adjacent property owner in the City of Palm Desert suing another neighbor for having noncompliant construction plans under the HOA’s CC&Rs. The non-prevailing party in these disputes can be rocked by the ultimate fee exposure, in this case close to $90,000.

     Plaintiff challenger of construction plans in Pasternack v. Fagel, Case No. E060349 (4^th Dist., Div. 2 Sept. 11, 2015) (unpublished) eventually had his case dismissed after the HOA Architectural Board approved construction plans and a City resolution confirmed the propriety of what was done (albeit an intervening change in the prior law). The lower court awarded defendants $89,387.50 out of a requested $127,998.32, based on fees incurred after passage of the City resolution.

     The appellate court affirmed, especially finding that the challenge to fee recovery might have had some merit had the entire request been awarded. However, the trial judge’s sagacity in only awarding fees after passage of the City resolution showed the award was no abuse of discretion. The basis for the fees was Civil Code former section 1354 (now 5975), which allows fees to the prevailing party in certain CC&R disputes.

Homeowner Associations: Nonprevailing Homeowner Liable For Prevailing HOA’s Pre-Litigation As Well As Litigation Fees And Costs Under CC&Rs/Davis-Sitrling Act

 

6th DCA Reverses Lower Court Denial Of Pre-Litigation Fees Based On ADR Statutory Provision.

    In Rice v. Rancho Palm Grande Homeowners Assn., Case No. H038763 (6th Dist. Sept. 1, 2015) (unpublished), HOA defeated a homeowner’s assessment challenge under the governing CC&Rs and the Davis-Stirling Act fee-shifting provision (Civil Code former section 1354(c)).  The lower then awarded litigation fees and costs to HOA, but refused to award pre-litigation costs under the theory that Civil Code section 1369.570(b) evinced a legislative intent to deny such fees because, in ADR contexts, each party was to bear their own fees and costs.

    On a cross-appeal by HOA, the Sixth District reversed.  It ruled that section 1369.570(b) truly only dealt with ADR expenses, not formal pre-litigation work incurred after ADR failed.  The reviewing court found instructive the reasoning in Grossman v. Park Fort Washington Assn., 212 Cal.App.4th 1128, 1132-1133 (2012) to the same effect.

    Homeowner also argued that fees were not “incurred” by HOA because they were paid by an insurer.  The Sixth District rejected this argument, analogizing it to similar holdings in the Civil Code section 1717 area.  (See, e.g., Staples v. Hoefke, 189 Cal.App.3d 1397, 1410 (1989).)

Homeowner Associations, Prevailing Party: Plaintiff Neighbor Successfully Suing For Coronado Cays CC&R Violations In Replacement Dock Construction Garners $104,718.80 In Attorney’s Fees/Costs

 

Plaintiff Prevailed On Practical Level, Although Trial Judge Found It “Was Close.”

    This next one recalls to mind the quote “close only counts in horseshoes and hand grenades.”    

     Although finding the prevailing party issue to be closed, the prevailing party prevailed enough to garner $104,718.80 in attorney’s fees and additional costs in a neighborhood dispute involved in Hooker v. Rodgers, Case No. D065888 (4th Dist., Div. 1 June 16, 2015) (unpublished).

    There, plaintiff sued several neighbors got involved in a CC&R imbroglio concerning easement rights to use of a dock built for the use of waterfront residential properties in Coronado Cays, mainly stemming from one defendant’s replacement dock construction.  Plaintiff largely prevailed, although the trial judge observed it was a “close call” on the prevailing party determination (given plaintiff won a small amount of damages and had to reimburse the main defendant for construction costs even though winning on many of the easement/equitable claims), but not close enough to prevent awarding substantial fees/costs to plaintiff and against the main defendants.

    The appellate court affirmed the appeal of the postjudgment appeals ruling, finding the trial judge properly found the “gist” of the complaint/cross-claims were to enforce provisions of the governing documents on equitable theories such that plaintiff prevailed and was entitled to fees under Civil Code section 1354(c).  The amount of fees was reasonable given that the lower court reduced the requested fees by 40% to eliminate an award to plaintiff on unsuccessful claims.

    BLOG UNDERVIEW—For you appellate practitioners out there, the decision has an interesting discussion of the “separately appealable order” issue in the context of  modified judgments/clerical versus judicial corrections for appealability purposes—surveying the various tests and nuances in this somewhat arcane area.  It also rejected plaintiff’s request to sanction defendants for a frivolous appeal, even though defendants had flip flopped on whether they were just appealing the postjudgment fee order versus the merits after obtaining a stay of execution due to initially representing that only the fee order was being challenged.

Homeowner Association: $1.2 Million Fee Award Against Homeowners/Short Renting Landlords Affirmed On Appeal

 

Plaintiffs Sought To Create Precedence, Litigated Vigorously, Should Have To Bear The Fee Tab.

     This one is truly frightening and shows why fee shifting is a potential game changer in litigation.

     Plaintiffs were condo owners who also engaged in short term renting, deciding to challenge enforcement of certain HOA regulations imposing fees for such renting activities, with plaintiffs only owing about $10,264 in assessments for these activities. Rather than paying the assessments, plaintiffs sued for declaratory relief, which also triggered a cross-complaint by HOA to collect the assessments and defend the short-term rental obligations. HOA won across the board, including an award of back assessments. Then, in post-trial fee proceedings, plaintiffs were assessed with over $1.2 million in fees for HOA’s work in successfully defending against the complaint and in prevailing on the cross-complaint.

     Plaintiffs were unsuccessful on appeal in Watts v. Oak Shores Community Assn., Case No. B240337 (2d Dist., Div. 6 Mar. 24, 2015) (published). Although not challenging the validity of the short-term rental obligations, plaintiffs did challenge the enforcement of same so as to be entitled to fees under former Civil Code section 1354(c). As far as reasonableness of fees were concerned, the appellate panel basically concluded plaintiffs only had themselves to blame: they could have paid a little over $10,000 in assessments, but chose to vigorously litigate in order to create a precedence. They did that (negatively, we might add), but were also on the hook for the fee tab to HOA as a consequence of attempting to do so.

Homeowner Associations: Defendant Homeowner Prevailing In Plaintiff HOA’s Common Interest Development Enforcement Suit Involving Governing Documents Entitled To Fees Even If No Valid CID/Governing Document Were Proven To Exist

 

Civil Code Former Section 1354(c) Fee-Shifting Provision At Issue—Mutuality Principles Applied to Insure “Prevailing Party” Obtains Fees.

     The California Supreme Court has extended application of mutuality principles outside of Civil Code section 1717 to prevailing homeowner defendants in common interest development (CID) enforcement suits brought by non-prevailing homeowner associations in Tract 19051 Homeowners Assn. v. Kemp, Case No. S211596 (Cal. Supreme Court Mar. 5, 2015) (published).

     At issue was the “prevailing party” fee-shifting language of former Civil Code section 1354(c) (now section 5975(c)). What happened was that defendant homeowner “defensed” plaintiff HOA’s suit to enforce certain CC&Rs (governing documents for a CID), with the trial court awarding fees to the victorious defendant homeowner. Defendant did so because plaintiff could not prove it was a valid CID with valid governing documents. The Court of Appeal took the fee recovery away in an unpublished decision. However, defendant and defense counsel showed moxie by petitioning for review by the California Supreme Court, which request was granted.

     Now, a reversal of fortune for defendant in a published state supreme court decision. The California Supreme Court concluded that former section 1354(c) was reciprocal in nature such that mutuality of remedy should apply to the “prevailing party,” whether on the plaintiff or defense side. Here is the key language of the opinion, in our view: “A statute that limited an award of attorney fees to the prevailing party only to cases in which it is ultimately determined that there are in fact governing documents of a common interest development to be enforced would deny mutuality of remedy to the defendants in any instance, such as the present case, in which the plaintiffs would have obtained attorney fees had they prevailed in their claim, but the defendants would be denied attorney fees because they defeated the plaintiffs’ action by showing that no common interest development exists. Had the Legislature intended to deny equal treatment to the defendants in such a common circumstance, one would expect such an intent to be reflected in the legislative history of former section 1354(c). Nothing in the legislative history of the statute suggests, however, that the Legislature intended to deny attorney fees to the prevailing defendants in such an action and plaintiffs do not point to anything that would support such an intent.”

     BLOG UNDERVIEW—Keith Turner, who practices in Santa Monica, represented defendant ultimately prevailing in this opinion after oral argument in Sacramento. Congratulations, Keith, for a big win and for hanging in there over the course of things on behalf of your client.