In 2008, Keith Turner was retained by a title insurance company to defend its insured, who was being sued by an out-of-control homeowner’s association, including over fifty neighbors, for building a two-story home allegedly in violation of the CC&Rs .  The case was hard fought, with multiple emergency motions for an injunction to stop construction, protracted evidentiary / trial hearings, and multiple motions for reconsideration and appeal challenging every substantive ruling.

The plaintiffs were members of the alleged Tract  19051 Homeowner’s Association, however, Yeldell eventually proved that the CC&Rs which  created the HOA had expired.  Although the plaintiffs included over fifty neighbors who were allegedly HOA members, a number of the neighbors later claimed that they did not agree to be plaintiffs. Some even claim that the HOA and its attorneys forged their signatures on the petitions authorizing the lawsuit.

Plaintiffs sued under the Davis Stirling Act, alleging that HOA was a common interest development, sought statutory attorneys fees under Civil Code section 5975 (formerly section 1354), which provides: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” The term “governing documents,” was defined in the statute to mean the official documents governing “the operation of [a] common interest development,” which includes the CC&Rs.

The trial court eventually ruled that Tract 19051 was not a common interested development, and granted attorney fees to the defendant. On appeal, plaintiffs successfully overturned the attorney fees award. They argued that, since Tract 19051 was not a common interest development, the statutory attorney fees provision in Civil Code section 5975 should not apply. The Court of Appeal agreed and reversed the attorney fees award in an unpublished opinion.

In an extremely rare move, the California Supreme Court granted review of the unpublished Court of Appeal opinion, limiting review to the attorney fees issues. After briefing and oral arguments, the Court issued its opinion today, reinstating the attorney fees award.  The Court held because the plaintiffs had sued to enforce the governing documents (the CC&Rs), the “prevailing party” language in the statute meant that it was a reciprocal attorney fee provision, which applied even if the defendant prevailed by showing that the governing documents were valid or the Davis Stirling statute did not apply.   As the Court stated:

“For the reasons discussed hereafter, we conclude that the Court of Appeal erred in reversing the attorney fee award in favor of defendants. First, the trial court’s award of attorney fees is supported by the language of the statute: Plaintiffs’ underlying lawsuit was an action to enforce the governing documents of a common interest development, and defendants were the prevailing party in the action. Second, because plaintiffs clearly would have been entitled to an award under the statute had they prevailed in the action, denying defendants an award under the statute when they were the prevailing party would unquestionably violate the reciprocal nature of the statute and thus defeat the evident legislative intent underlying the statute. As we shall explain, prior California interpreting and applying comparable statutory attorney fee provisions that mandate an award of attorney fees to the prevailing party, directly support this interpretation of former section 1354(c). Finally, the Court of Appeal decision in Mount Olympus, supra, 59 Cal.App.4th 885, 69 Cal.Rptr.2d 521, upon which the Court of Appeal in this case relied in reaching a contrary result, is clearly distinguishable from the present case.  Accordingly, we reverse the judgment of the Court of Appeal insofar as it reversed the attorney fee award in favor of defendants.”

 

Tract 19051 Homeowners Ass’n v. Kemp (2015) 60 Cal.4th 1135 is important for many reasons. It is a great example of a property owner standing up to a big and out-of-control HOA, and it shows just how extreme HOA can be. Litigating against a big HOA and over 50 of its members is a difficult and daunting mission, especially when they employ questionable, unfair tactics. In the end, after years of hard-fought litigation, the Court  rightfully did not allow the HOA to escape the consequences of its conduct of suing and the risk posed by the Davis Sterling attorney’s fees provision.

Read the Tract 19051 Supreme Court and on WestlawNext or LexisAdvance.