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 The Court of Appeal took the fee recovery away in an unpublished decision.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.