CALIFORNIA ATTORNEY'S FEES

Homeowner Associations: $390,668 Fee Award To HOA Affirmed When Appellate Court Affirmed HOA Interpretation Of Palm Tree View CC&Rs And Accompanying Policies

HOA Interpretation Of Palm Tree View Policies Was Correct, Such That It Was The Prevailing Party.

            Over the years, because a lot of us live in common interest developments, we are used to seeing homeowner association fights with homeowners, many occurring based on view restriction or tree limitations—generating plenty of disputes by both sides.  In the next case, HOA prevailed and, with it, garnered a substantial attorney’s fees award under the CC&Rs prevailing fees provision and the Davis-Stirling Act fee-shifting section.  We have seen this before in our category “Homeowner Associations,” which can be easily accessed for prior decisions—many large, some for the HOAs and some for the homeowners.  But a lot are not good in the end, resulting in financial issues for the losing homeowners or special assessments for the HOA members bearing the brunt of a lot of HOA fights.

            In Maravich v. Dover Shores Community Association, Case Nos. G056152/G056965 (4^th Dist., Div. 3 Mar. 5, 2020) (unpublished), homeowners sued HOA because palm trees on other properties grew to detract from scenic views of the Eastbluff area of Newport Beach and dramatic night light views of Fashion Island.  The dispute centered on CC&Rs and policies granting the HOA discretion to take appropriate action for trees that “impede and block” views.  HOA sided with the downhill homeowners, finding it had discretion to allow the taller trees to stay. 

            The trial judge rendered a “split” type of decision, although awarding HOA prevailing party fees of $390,668 (yep, no typo here).  On appeal, the appellate court went with the HOA interpretation of the tree ordinances, so the fee award was sustained completely.  Just goes to show you how HOA disputes can be prohibitively expensive for homeowners where fee-shifting provisions are in place.

            Justice Ikola authored the 3-0 opinion. 

Homeowner Associations, Special Fee Shifting Statutes: Error In Lower Court’s Narrow Interpretation Of Civil Code Section 5975(c) Led To Reversal Of Attorney Fees Denial To Prevailing Defendants

Gravamen Of Plaintiff’s Complaint Was On Enforceability Of The Governing Documents.

            In Alexander v. Singletary, Case No. D075943 (4^th Dist., Div. 1 January 21, 2020) (unpublished), one of five homeowners in a common interest development unsuccessfully sought judicial declaration that the governing documents were unenforceable as to him, and for partition from the development.

            As prevailing defendants, the other four homeowners moved for section 5975(c) (Davis-Stirling Act fee-shifting provision) attorneys’ fees.  The lower court denied – concluding Plaintiff’s action did not seek “to enforce” the governing documents.

            Two of the four defendants appealed, and the 4/1 DCA reversed – finding Plaintiff’s entire action revolved around the enforceability of the governing documents within the meaning of section 5975(c), and that Plaintiff could not avoid the fee provision simply because he phrased his complaint to seek a finding that the governing documents are “unenforceable.”

            The 4/1 DCA’s reversal applied only to the two defendants who appealed, with judgment considered final as to the two non-appealing defendants.

Homeowner Associations, Section 1717: $220,000 Fee Award To HOA Under CC&Rs Fees Clause Was Proper

Plaintiff’s Unsuccessful Action Was Founded On CC&Rs Rights, Not Just Solely Sounding In Tort; HOA; Directors Had Sought $322,840 In Fees.

            HOA and HOA directors were awarded $220,000 in attorney’s fees against an unsuccessful plaintiff bringing a suit to challenge HOA’s policies and CC&Rs about parking and the permitting process, as well as enforcement thereof.  In Merritt v. Gandhi, Case No. H043615 (6^th Dist. Dec. 20, 2019) (unpublished), the lower court based the fees award upon Civil Code section 1717 (CC&Rs) and section 5975 (the Davis-Stirling Act fee-shifting provision).  The Sixth District affirmed based on the section 1717 fee entitlement basis.  It found that the gravamen of plaintiff’s action was founded upon rights under the CC&Rs rather than sounding only in tort.  It also found the fee award to be reasonable, given that the lower court did not award the $322,840 in fees requested by HOA and the directors. 

Appealability, Homeowner Associations, Prevailing Party, Special Fee Shifting Statutes: Second District Affirms $67,458.07 Attorneys’ Fees Awarded To Prevailing Defendant On Remand

Gravamen of Plaintiffs’ Action Was Based On Governing CC&Rs Which Made Defendant Prevailing Party For Attorneys’ Fees Purposes When She Defeated The Action Through Demurrers And Plaintiffs’ Voluntary Dismissal.

            We first discussed our next case – Durack v. Wang, Case No. B293597 (2d Dist., Div. 7 November 18, 2019) (unpublished) – in a September 27, 2017 post.  In that appeal, Wang, who prevailed on demurrer against most of plaintiffs’ causes of action – with the remaining causes of action voluntarily dismissed by plaintiffs – challenged the trial court’s denial of her motion for attorneys’ fees. There, the 2/7 DCA found Wang to be the prevailing party under Civ. Code section 5975(c) [the Davis-Stirling Act] as Plaintiffs’ complaint sought to enforce CC&Rs.  With that, the 2/7 DCA reversed and remanded with direction to the lower court to enter a fee award to Wang with proper apportionment.

            On remand, Wang filed a peremptory challenge under Code Civ. Proc. § 170.6 to the trial judge who determined the first attorneys’ fees motion.  After the case was reassigned to a different department, Wang filed her second motion for attorneys’ fees seeking $72,158.57.  Plaintiffs opposed – seeking denial of Wang’s motion in its entirety – with the trial court finding the request to be “patently improper in light of the Court of Appeal’s direction to grant Wang’s motion for attorneys’ fees.”  After some apportionment and reductions, the trial court awarded Wang $67,458.07.

            Plaintiffs were not deterred.  They marched right back to the 2/7 DCA with a slew of failing arguments to support their claim that the trial court erred in awarding the fees as directed on remand.

            First, they argued the peremptory challenge should not have been accepted.  However, the proper procedure for such a review is a petition for writ of mandate.  Next, they argued the trial court failed to properly assess fee and non-fee claims.  This was without merit as the trial court had conducted an evaluation of the legal work Wang’s attorneys performed and appropriately reduced and apportioned for time spent litigating causes of action that did not allow Wang to recover fees. 

            Plaintiffs also focused two of their arguments on Wang’s specific factual defense – claiming she was not entitled to fees because she did not prevail on that specific defense, and because that defense was a lie.  Neither argument gained any traction because Civ. Code section 5975(c) did not require Wang to prevail on every issue or defense, just to achieve her main litigation objective – which she did by defeating all of the causes of action against her.  As to her specific defense being a lie, there was no “lie.”  The parties never resolved/litigated that issue with plaintiffs dismissing their complaint against Wang.

            Finally, plaintiffs attacked the fees charged by Wang’s counsel – claiming her counsel deferred work to a law clerk and submitted improper block billing entries to support the fees request.  To these arguments, the 2/7 DCA found the trial court had correctly ruled that legal assistant and support staff time is routinely included in fee awards – that, if anything, work delegated to the law clerk only served to reduce the amount of an otherwise reasonable fee award.  As to the examples plaintiffs cited as “block billing,” the 2/7 DCA came to no such conclusion.  Rather, they found them to be descriptive entries showing the amount of time spent on each specific task.  One exception to this was the 85.6 appellate work hours Wang’s counsel included in his declaration.  Although the declaration did not include detail, the 2/7 DCA found the significance of detailed time entries reduced for appellate work – with only a few kinds of tasks for which an appellate lawyer bills.  In this case, the amount of time cited was very reasonable given the filing of both an opening and reply brief, appearance for oral argument, and successful reversal of the trial court’s fee denial.

Allocation, Homeowner Associations, Interest, Special Fee Shifting Statutes, Standard of Review: Plaintiff Owner/Developer’s Award Of $1,673,691 In Damages and Entire Fee Request Upheld On Appeal

Defendant HOA’s Breach Of Owner/Developer’s Valid Contractual Access Rights Was The Common Core Involved In The Causes Of Action, So Apportionment Of Fees Not Required.

            In Millennium-Diamond Road Partners v. Diamond Bar etc., Case No. B285539 (2^nd Dist., Div. 3 Sept. 24, 2019) (unpublished), Owner/Developer Millennium sued HOA when it revoked Millennium’s access to undeveloped parcels of land Millennium had purchased for the purpose of developing residential properties. 

            The undeveloped parcels of land were landlocked and adjacent to a guard-gated residential community known as Diamond Bar Country Estates.  From 1997 until October 2013, Millennium had easement access via Country Estates – access that was abruptly revoked when a new group of board members began to oppose Millennium’s development.

            Substantial evidence doomed HOA at trial – with the trial court finding that HOA breached Millennium’s valid contractual access rights pursuant to CC&Rs, a second contractual agreement providing Millennium an option for access rights for which Millennium had tendered the required fee, and a recorded annexation agreement under which the Millennium parcels became a part of the Country Estates development. 

            HOA argued that the CC&Rs were not at play as Millennium had not paid monthly assessments.  HOA also claimed Millennium had failed to pay fees owed under the annexation agreement.  The trial court rejected both claims.  The language of the CC&Rs contradicted HOA’s argument– providing the HOA “no power to cause a forfeiture or abridgement of an Owner’s right to full use and enjoyment of his Lot” absent a judicial/arbitral order or foreclosure.  The annexation agreement did include a schedule of payments to be made to the HOA.  However, the first payment under the schedule was triggered by an event that had not yet occurred, so no annexation fees were yet due.

            At trial, Millennium’s expert testified and explained his computations of Millennium’s damages of $1,673,691 in detail.  HOA did not challenge his methodology or calculation, nor did it call its own expert witness regarding damages, and the trial court awarded the entire amount Millennium claimed as damages.  Additionally, the trial court awarded Millennium prejudgment interest at 10% with a start date of January 2014.

            Millennium’s win triggered an award of attorneys’ fees pursuant to Civil Code section 5975(c) which mandates the award of attorneys’ fees in a successful action to enforce the governing documents of a common interest development.  The trial court awarded the full amount requested with no apportionment.

            HOA appealed, but fared almost no better – achieving only a small victory related to the start date for calculation of the prejudgment interest.  The 2/3 DCA found substantial evidence supported the trial court’s decision, but remanded for prejudgment interest calculations to begin on March 23, 2017 instead of January 2014.  It further determined that the HOA had fashioned its appeal largely “as an attack on the factual findings of the trial court.”  Citing Waller v. Brooks (1968) 267, Cal.App.2d 389, 393, the 2/3 DCA stated that the HOA “misconceiv[ed] the function of an appellate court which is to review errors of law, and not to pass on questions of fact.”

            As to apportionment of the attorney fees, the 2/3 DCA found no abuse of discretion as Millennium’s causes of action were so intertwined, and involved a common core of facts which were directly related to enforcement of the governing documents, such that apportionment was impracticable.

Homeowner Associations: Adams Stirling Law Firm In Los Angeles Has An Excellent Summary Of Fee Shifting Provisions With Respect To HOA And Davis-Stirling Act Issues

Numerous Civil Code and CCP Provisions, As Well Case Law, Summarized By The Firm On Its Website.

            We would like to thank Adams Stirling, a Los Angeles law firm specializing in HOA issues, for its excellent summary of HOA and Davis-Stirling Act fees issues and case law, which we post verbatim below and which can be found on its Website.  We would note that the firm is headed by Adrian Adams and Hon. Larry Stirling (Ret.), who authored the Davis-Stirling Act legislation when he was a member of the California Legislature and before he was appointed as a judge (thereafter retiring and joining forces with Mr. Adams to form Adams Stirling).

            Thanks, Adams Stirling law firm for your synopsis below:

            American Rule. “With regard to an award of attorney fees in litigation, California generally follows what is commonly referred to as the ‘American Rule,’ which provides that each party to a lawsuit must ordinarily pay his or her own attorney fees.  The American Rule is codified in Code of Civil Procedure section 1021, which states in relevant part:  ‘Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .’”  (Tract 19051 Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1142.) 

            Pre-Litigation Legal Fees. Neither owners nor associations are entitled to legal fees incurred in a dispute that does not lead to litigation. For example, each side hires a lawyer and exchanges a series of letters with demands and counter-demands. If the matter is resolved or dies away, neither side is entitled to their attorney's fees. Civil Code 5975 only authorizes a prevailing owner to recover their reasonable attorneys’ fees and costs following the conclusion of a successful action (i.e. lawsuit)

            If, however, the dispute turns into litigation, the prevailing party is entitled to reasonable attorney's fees as determined by the court and depending on the nature of the dispute. The starting point for calculating attorney's fees begins with pre-litigation ADR. Because the amount of the award is discretionary with the court, the prevailing party could incur $50,000 in legal fees but be awarded only $20,000 or less by the court. Parties should never enter into litigation believing they will recover their legal fees. Recovery is always uncertain.

STATUTES: The following statutes provide for attorneys' fees and/or costs:

ADR costs		Civil Code §5955
Anti-SLAPP motion		Code of Civil Procedure §425.16
Assessment collection		Civil Code §5650(b), §5740, §5650(a), §5705(a), §5715(a), §5720(a),  §5685, §5658
Governing document enforcement		Civil Code §5975
Contract actions		Civil Code §1717
Escrow Disclosure violations		Civil Code §4540
Discriminatory CC&Rs		Civil Code §4225
Disputed charges		Civil Code §5658
Flags		Civil Code §4705(c)
Foreclosure		Civil Code §5730(a)
Inspection of records		Civil Code §5235
Managing agent		Civil Code §5380
Records inspection		Civil Code §5145
Satellite dishes		Civil Code §4725(d)
Small claims appeal		Code of Civil Procedure §116.780
Solar energy		Civil Code §714

CASE LAW

Marina Pacifica v. S.C. Fin. Corp. (2018). A party's failure to obtain its litigation objective does not automatically make the other party the prevailing party.

Artus v. Gramercy Towers (2018). Neither the language of the Davis-Stirling Act, nor the legislative history of the fee provision Artus invokes, evidences any intent on the part of the Legislature to depart from well-established principles that fees and costs are ordinarily not granted for interim success, and that the prevailing party is determined, and fees and costs awarded, at the conclusion of the litigation.

Retzloff v. Moulton Parkway Assn (2017). Former board members sued their association alleging the board was conducting business outside of meetings and failing to maintain and provide certain corporate records. Plaintiffs failed to attempt ADR as required by Civil Code §5950. The association demurred and the court sustained without leave to amend. As prevailing party, the association moved for attorneys' fees. The Court of Appeal reversed the lower court's award of attorneys' fees concluding that Civil Code §5235 does not authorize a court discretion to award fees to a prevailing association. A plain reading of “any costs” as used in section 5235(c) does not support the inclusion of attorney fees as costs. Section 5235(c) entitles a prevailing association to costs, not attorney fees and costs.

Almanor Lakeside Villas Owners Association v. Carson (2016). Even though the court struck down 90% of the fines levied by the association against and owner for a rental violation, the court decided the key issue was the association's right to enforce rules and impose fines for violations, thereby making it the prevailing party.

            The Davis-Stirling Act does not define “prevailing party” or provide a rubric for that determination. In the absence of statutory guidance, California courts have analyzed analogous fee provisions and concluded that the test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives. ( Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 ( Heather Farms); Salehi, supra, at pp. 1153–1154.) The California Supreme Court implicitly has confirmed this test. In Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 94, the court affirmed the award of attorney’s fees in an action to enforce a restrictive covenant under the Davis-Stirling Act, stating: “We conclude the trial court did not abuse its discretion in determining that the Association was the prevailing party … . On a ‘practical level’ 13 [citation], the Association ‘achieved its main litigation objective.’ ” (Ibid. [quoting Heather Farms, at p. 1574 and Rancho Santa Fe Assn. v. Dolan-King (2004) 115 Cal.App.4th 28, 46].)

Nellie Gail Ranch OA v. McMullin (2016). Failure to appeal a fee ruling deprives an appellate court of jurisdiction to decide the fee challenge.

Rancho Mirage Country Club HOA v. Hazelbaker (2016). An association's lawsuit to enforce a settlement agreement entered into during ADR is deemed an action to enforce the governing documents under the Davis-Stirling Act, which entitles the association to recover reasonable attorneys' fees.

Tract 19051 Homeowners Assn v. Kemp (2015). Prevailing owner can recover attorney fees under Civil Code section 5975(c) in a case brought by association against owner to enforce governing documents even though the court found the association didn’t exist. The Supreme Court held the plain reading of 5975(c) supports that the award of attorney fees is reciprocal in an action where the association brings the claim to enforce the governing documents regardless of whether the association exists. The recovery is based solely on the association’s claim to enforce the governing documents and not based on determining whether the association is a common interest development.

Grossman v. Park Fort Washington Assn. (2013). Normally, any attorneys' fees incurred prior to the filing of the complaint are not awarded. Here, the court concluded that the pre-litigation ADR process mandated by the Davis-Stirling Act is the actual start of litigation. Accordingly, it awarded attorneys' fees expended by the homeowner expended in pre-litigation ADR.

Salehi v Surfside III (2011). Susan Salehi sued her association alleging 10 causes of action. Three days before trial, she dismissed eight of her ten claims against the association. The association spent approximately $250,000 defending against her claims. Three days before trial, Salehi dismissed eight of her ten claims. The association subsequently sought recovery of the legal fees it incurred defending against Salehi's dismissed causes of action. The trial court denied the association’s request but the court of appeal reversed. The appellate court found that the association was entitled to recover attorneys fees from Salehi, reasoning that a party suing to enforce the CC&Rs must get their “ducks in a row” both procedurally and substantively before filing suit. Salehi had done neither.

That v. Alders Maintenance Assn (2012). That brought a frivolous election challenge. As the prevailing party, the association sought attorney's fees under the Davis Stirling Act. The award of attorneys' fees is allowable only when authorized by contract, statute or law. If a statute refers to the award of "costs and attorney's fees," attorney's fees are an item and component of the osts to be awarded and are allowable as costs. The court reviewed the statute (now Civ. Code 5145(b)) and concluded the statute did not authorize associations to recover attorney's fees.

Bear Creek Planning Committee v. Ferwerda (2011). If empowering language is provided for in the CC&Rs, architectural committees may adopt standards beyond those set forth in the CC&Rs, i.e., it can adopt new design standards related to the improvement or development of lots. However, a committee may not unilaterally establish an attorneys’ fees provision for itself. Attorneys’ fees must be reciprocal and contractual--the committee's fee provisions did not seek to clarify existing language in the CC&Rs. Rather, it was an inappropriate attempt by the committee to insert a new provision that bound homeowners without their approval. Nothing in the CC&Rs gave the committee the power to insert into their architectural standards an attorney fee provision that was never in the CC&Rs.

Parrott v. Mooring Townhomes Assn. (2003). Plaintiff sought a preliminary injunction against his association. When he failed to receive one, he dismissed his complaint. The court awarded the association attorneys' fees. A prevailing party is one who prevailed on a practical level.

Mount Olympus POA v. Shpirt (1997). An owner does not have the right to recover attorneys' fees under the Davis-Stirling Act if his HOA is a voluntary association of homeowners having no power to charge or collect assessments. Such associations do not fit the definition of a common interest developments under the Act.

Heather Farms HOA v. Robinson (1994). The court declined to adopt a rigid interpretation of the term "prevailing party" and, instead, analyzed which party had prevailed on a practical level. The court concluded that a a voluntary mutual dismissals as part of a global settlement does not create a prevailing party.

Homeowner Associations: Defendant Condo Owner Voluntarily Dismissed From Suit Against HOA And Condo Owner By Other Condo Owners Before Trial Improperly Denied Fee Recovery Under Both Davis-Stirling Act And Code Of Civil Procedure Section 1032(a)(4)

Suit Did Involve CC&Rs, And Defendant Did Prevail By Being Dismissed, Such That Reversal Means Defendant Condo Owner Will Get Some Fees On Remand.

            Fee entitlement and prevailing party determinations often are matters of law, as they were here where the pleadings and facts made a reversal of a fee denial – something which was directed by our local Santa Ana appellate court in Richardson v. Stevenson, Case No. G056112 (4^th Dist., Div. 3 Aug. 26, 2019) (unpublished).

            Of all things, this was a dispute challenging defendant condo owner’s successful HOA application to convert a window into a door, a decision challenged by another condo owner.  Plaintiff sued HOA and defendant for injunctive relief under the Davis-Stirling Act, not the CC&Rs directly (even though the claim arose from the CC&Rs).  Defendant condo owner was voluntarily dismissed from the action before trial and three years into the litigation for “tactical” reasons, leaving injunctive-based claims against the HOA.  The lower court denied defendant’s request for fees against plaintiff, not believing that plaintiff was suing under CC&Rs and not finding that defendant had prevailed because it was unknown whether the owner could convert window into a door.

            The 4/3 DCA, in an opinion authored by Presiding Justice O’Leary, reversed.    The first ground for denial did not hold up because the pleading showed that the CC&Rs were the basis for the suit (even though not directly sued upon), such that the Davis-Stirling Act was triggered because the case was a suit based on HOA “governing documents.”  Defendant also did prevail on two grounds:  (1) he was now a stranger to the case with the dismissal, which meant he achieved an important litigation objective to get out of the dispute; and (2) he prevailed under CCP § 1032(a)(4) which allows contractual attorney’s fees for non-contractual claims such as this suit under the Davis-Stirling Act.  (See Honey Baked Hams, Inc. v. Dickens, 37 Cal.App.4^th 421, 428 (1995).)

Homeowner Associations: Homeowners Were Not Catalysts For Easement Agreement Assumption, Because They Wanted A More Expansive Amendment

HOA Was Prevailing Party Under Easement Agreement Fees Clause, Awarded Its Fully Requested $51,460 In Fees. 

            In Lemley v. Aliso Homeowners Assn., Inc., Case No. B288789 (2d Dist., Div. 3 July 3, 2019; posted July 5, 2019) (unpublished), HOA and homeowners got entangled in an easement agreement dispute in which homeowners wanted specific performance/declaratory relief to enforce an amendment to the agreement, while HOA defended on the principal grounds of mootness because it recorded an assumption of obligations in the original easement agreement.  HOA won, was declared the prevailing party, and was awarded $51,460 in attorney’s fees under the easement agreement fees clause.  Homeowners appealed, claiming they were actually the prevailing parties as the catalyst for the HOA’s easement agreement assumption.  The appellate court affirmed the result below, determining that homeowners wanted an amendment, not an assumption, and that HOA did prevail by obtaining dismissal of homeowners’ suit.  (In fact, homeowners’ failure to appeal the prior dismissal on the merits cemented that they were not the catalysts for the assumption by the HOA.)

Homeowner Associations: Homeowner Prevailing In Unlawful Foreclosure Of Condo Unit Case Was Entitled To $434,000 In Damages And $720,000 In Attorney’s Fees

Both Civil Code Section 1354 (Now Section 5975) And CC&R Fee Clause Were In Play. 

            Yikes!  Talk about a change in fortune based on a prior appeal.  Homeowner finally won, obtaining damages and substantial attorney’s fees for hanging in there to the end.

            In Multani v. Castle Green Homeowners Assn., Case No. B278397 (2d Dist., Div. 7 May 28, 2019) (unpublished), HOA earlier won a summary judgment and $90,000 in attorney’s fees in connection with foreclosing on a HOA assessment lien.  However, that victory went away in an earlier appeal against the HOA.  Then, after a bench trial on remand, homeowners won—the lower court concluded that the HOA unlawfully foreclosed on an assessment lien by not giving a 90-day notice of the right to redemption in proper matter such that homeowner was entitled to $434,000 in damages for loss of the condo unit.  (The unit was sold at the assessment lien nonjudicial foreclosure for $20,200).  But that was hardly the end of the story.  Homeowner moved for fees under the Davis-Stirling Act fee shifting provision (former Civil Code section 1354, now section 5975) and the CC&Rs’ fees clause.  The lower court awarded them about $720,000 in fees as the prevailing party.

            Both the merits and fee rulings were affirmed on appeal.  What really sealed the deal for the appellate court was that the HOA argued the same bases for fee entitlement when winning them after the summary judgment motion—it could hardly shift course when the tide turned against it. 

Homeowner Associations, Private Attorney General, Section 1717: Defendant Homeowners Winning A Tree Dispute With Another Homeowner Neighbor Rightfully Denied Attorney’s Fees Under CC&Rs, Civil Code Section 1717, And Private Attorney General Statute

However, A Dissenting Justice Would Have Found Fee Entitlement Under CC&Rs And Section 1717.

           The next case, Shah v. Ross, Case No. B286783 (2d Dist., Div. 5 April 25, 2019) (unpublished), involved a situation where defendants/homeowner neighbors won a tree dispute initiated by fellow plaintiff homeowner. Defendants then sought fees under a CC&Rs fees clause, Civil Code section 1717 mutuality principles, and the private attorney general statute (CCP § 1021.5). The trial judge denied fees on all bases.

            A 2-1 majority of the 2/5 DCA affirmed, with a lengthy dissent by Presiding Justice Rubin.

            On a preliminary basis, the appellate court determined that the lack of a reporter’s transcript of the fee motion did not impede review because only legal construction of fee or statutory entitlement provisions was involved.

            The majority found that the CC&Rs fees clause did not apply to disputes between homeowners, but only a where the HOA was involved. They saw no reason to disturb reasoning to the same effect in Mount Olympus Property Owners Assn. v. Shpirt, 59 Cal.App.4^th 885, 893, 896 (1997). Section 1717 did not afford relief because mutuality only applied where there were putative persons who could be impacted by the fees clause, which was not the case. Finally, the private attorney general statute request properly was denied because the winning parties were vindicating their private interests in preventing a blocking of views by trees.

            Justice Rubin, in an 18-page dissent, believed that the CC&Rs were ambiguous such that fees were allowable in inter se homeowner disputes because certain provisions needed to be read together and other provisions where only the HOA was mentioned made no sense such that homeowner disputes had to be included within the ambit of the CC&Rs fees clause. He also did not like the analysis in Shpirt, which he felt was based on incomplete reasoning such that a “clean slate” approach was warranted. Lastly, Justice Rubin engaged in a section 1717 analysis by which he determined that it should be applied in this particular context based on amendments to the “parties” language in the statute some time ago.

Homeowner Associations: $19,233 In Attorney’s Fees And $815 In Litigation Costs To HOA Obtaining Injunction To Require Access To Condo Unit To Make Repairs Affirmed

HOA Satisfied Prelitigation Efforts To Resolve And Prevailed By Meetings Its Objectives.

            In Durant Towers Owners Assn. v. Winchester, Case No. B288966 (2d Dist., Div. 8 March 29, 2019) (unpublished), HOA sued defendant condo owner to obtain access to her unit in order to determine if water leakage from her unit was causing damage to a unit below. After ignoring efforts for voluntarily cooperating, HOA sued under the CC&Rs to obtain access to defendant’s unit. At an injunction hearing, defendant agreed to allow access on certain terms, but later reneged. HOA obtained injunctive relief, the repairs were eventually made, and the case was dismissed without prejudice. HOA moved for recovery of attorney’s fees and costs as the prevailing party against defendant, based on the Davis-Stirling Act’s fee-shifting provision for CC&R enforcement (Civil Code section 5975) as well as the CC&R fee provision itself. The lower court obliged, awarding HOA $19,233 in fees and $815 in costs.

            Defendant’s appeal was unsuccessful. She argued that HOA failed to exhaust administrative remedies, but that was rejected because (1) defendant thwarted voluntary efforts to gain access by the HOA, and (2) HOA’s certification of the need for injunctive relief in the complaint satisfied prelitigation efforts under Civil Code section 5950(a)(3). With respect to the claim that HOA did not prevail, it did obtain its main litigation objective to gain access and make repairs such that its voluntary dismissal did not change the fact it did meet its aims in the lawsuit.

Costs, Fee Clause Interpretation, Homeowner Associations, Section 1717: Trial Court Properly Denied Fee Recovery To Prevailing Defendants Under Davis-Stirling Act Or Civil Code Section 1717 And Properly Struck The Costs Memorandum

Action Was Based On Tort, Not CC&Rs; Fee Clause Did Not Reach Tort Claims Under Section 1717; And Defendants Failed To Apportion Costs As Between Themselves.

            In the fee area, you must have a solid fee entitlement basis and you usually have to apportion costs where there are several prevailing defendants rather than claim total costs without an appropriate allocation. Schuchmacher v. McDermott, Case No. B288130 (2d Dist., Div. 3 March 28, 2019) (unpublished) is a case where prevailing defendants obtained no fees and costs because they could not establish fee entitlement and did not apportion routine costs.

            Plaintiffs suffered an adverse summary judgment against an HOA’s general manager and its current directors (who were not directors when the main plaintiff owned the condo unit) in a tort action involving insurance fire proceeds. Prevailing defendants moved to recover attorney’s fees of $361,586 and filed to recover $ 27,290 in routine costs. The trial judge denied the fee motion and struck the costs memorandum.

            The 2/3 DCA affirmed. The problem for defendants was that the tort claims were not efforts to enforce governing HOA documents, so entitlement under Davis-Stirling Act’s Civil Code section 5975(c) was lacking. Civil Code section 1717 was of no help either, because the CC&R fee clauses were narrow and did not apply to the tort claims against a general manager or the current directors. With respect to striking the costs, that was no abuse of discretion because defendants claimed all litigation costs, without apportioning between plaintiffs as well as defendants.

Homeowner Associations, Prevailing Party, SLAPP, Substantiation Of Reasonableness Of Fees: No Abuse of Discretion In Awarding Prevailing Plaintiff $114,990.75 In Lawsuit Against Homeowners Association

Condominium Owner Plaintiff Wisely Sought Fees Only For The Claims On Which She Prevailed Against Association

            The Broadway Hollywood is a 10-story historical building on the corner of Hollywood and Vine. It was constructed in 1927 and originally used as a store. However, the building was abandoned in 1987 and remained vacant for 18 years – until it was revitalized and converted from an obsolete building to modern use. Today the Broadway Hollywood is a common interest development managed by a homeowners association – with the Davis-Stirling Act (Civ. Code section 4000) governing such developments.

            In Yu v. Broadway Hollywood Homeowners Assn., Case No. B280977 (2d Dist., Div. 1 March 7, 2019) (unpublished) Plaintiff, who owns a condominium in The Broadway Hollywood, sued the homeowners association, alleging it violated its governing documents by failing to offer valet parking (development was deficient in meeting current parking code requirements, and was granted a variance to allow for off-site parking) in her first cause of action; for interfering with homeowners’ 2013 and 2014 board elections, in which she sought election, respectively in her second and third causes of action; and for breach of fiduciary duty in her unsuccessful fourth cause of action.

            Association SLAPPed back against Plaintiff’s claims regarding interference with the election – stating it was simply exercising its protected activity of right of petition. The trial court, while finding the “thrust” of the claim arose from unprotected activities, found that Plaintiff was not likely to prevail on this issue. On appeal, the matter was remanded for further proceedings – with the trial court ultimately denying Association’s anti-SLAPP motion. While the SLAPP appeal was pending, a bench trial was held on the parking violation issue, with the trial court finding in favor of Plaintiff. Post-trial, the trial court also awarded Plaintiff attorney fees, pursuant to Civ. Code section 5975, subd. (c), of $114,990.75 (which included Plaintiff’s requested $112,549.75 after her detailed reduction for time spent on claims in which she did not prevail, plus $2,440 for time and costs incurred by Plaintiff’s attorney in connection with the fee motion). Association appealed the judgment, the order denying its anti-SLAPP motion, and the attorney fees award to Plaintiff – claiming the trial court had abused its discretion in awarding these fees.

            The 2/1 DCA disagreed with Association at every turn, and affirmed on appeal. As to the fees, they found that Plaintiff was the prevailing party as she had achieved her main litigation objectives. To that end, citing PLCM Group, Inc. v. Drexler (2000) 22 Cal.4^th 1084 [our Leading Case No. 1] and Serrano v. Priest (1977) 20 Cal.3d 25 [our Leading Case No. 3], the 2/1 DCA found that the trial court’s order took into consideration the claims on which Plaintiff did not prevail, and that nothing in the record suggested the award was arbitrary or exorbitant.

Homeowner Associations, Section 1717, Special Fee Shifting Statutes: Homeowner Plaintiffs In A Common Interest Development Dispute Over Assessment Liens Must Pay Prevailing Party Defendants $125,796.50 In Attorney Fees

Summary Judgment Hinged On Voting Rights Language In The Covenants Of The Development

            The Davis-Stirling Act (Civ. Code section 4000 et seq.) governs the creation and operation of common interest developments, and requires such developments to be managed by a homeowners association, which homeowners are generally mandated to join.

            In Bertoli v. Dennis, Case No. A150924 (1^st Dist., Div. 5 March 5, 2019) (unpublished), a Board of Governors had been elected for the homeowners association managing a common interest development consisting of improved and unimproved lots in Mendocino County. This Board of Governors had been elected by former owners of the improved lots and their daughter (who collectively owned 10 unimproved lots). Upon election of the Board, certain assessments were levied against 12 homeowners of the 6 improved lots within the development. The assessments went unpaid, and the association employed a debt collection agency that recorded assessment liens against the homeowners.  

            In contesting the validity of the assessment liens, Homeowner Plaintiffs filed an unsuccessful declaratory relief action against the debt collection agency and original owners of the development (who had elected the homeowners association board).  

            The debt collection agency based its successful motion for summary judgment on the fact it had released the liens, no longer worked for the homeowners association (because the association failed to defend or indemnify it), and were no longer parties in interest – therefore, no actual controversy existed as to them.

            Plaintiffs also lost in dueling summary judgment motions with the former owner Defendants. Each sought judicial construction of the key language in the Covenants concerning voting rights – with Plaintiffs believing the language to mean that only owners of improved lots have voting rights. The trial court, however, agreed with the former owner Defendant’s interpretation that the owners of all lots (improved or unimproved) have voting rights, and entered judgment in their favor. Additionally, the trial court granted the former owner Defendants’ opposed request for prevailing party attorney fees – awarding $125,796.50 in fees under Civil Code sections 1717 and 5975.

            Plaintiffs unsuccessfully appealed the summary judgment rulings and attorney fees award – with the 1/5 DCA affirming on appeal, finding no trial court error in granting summary judgment to Former Owner Defendants with regard to voting rights, nor to debt collection agency due to the lack of an actual controversy. The 1/5 DCA further determined that the attorney fees award to former owner Defendants was proper as the Davis-Stirling Act provided the statutory basis for fee shifting in this action.

Homeowner Associations, Section 1717: One Homeowner Prevailing Over Another In Dispute Over Location Of A Fence Was Entitled To Fee Recovery Under Civil Code Section 1717

Dispute Was Covered Under CC&R’s Fee Provision.

            In Hunkel v. Gerhardt, Case No. H044753 (6^th Dist. March 12, 2019) (unpublished), two neighboring homeowners squared off in a dispute over the placement of a fence by one homeowner group. The defendant homeowners claimed that there was no proper board of directors making a decision on the fence dispute, a position ultimately embraced by the trial court. The lower court then awarded prevailing defendants $111,215.50 against losing plaintiffs under both Civil Code section 1717 (the former based on a CC&R fee clause) and Civil Code section 5975 (the latter being a Davis-Stirling Act fee-shifting provision).

            The Sixth District affirmed, based on the Civil Code section 1717 rationale alone.

            Plaintiff neighbors, the losing parties, did sue for declaratory relief, a classic contractual claim covered by a broadly-worded CC&R provision providing for fee entitlement even by individual homeowners.   Defendant neighbors did prevail on a liminal board authority issue, an issue which allowed fee recovery even though they obtained no affirmative relief.

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.