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In Bertoli v. Dennis, Case No. A150924 (1st Dist., Div. 5 March 5, 2019) (unpublished), a Board of Governors had been elected for the homeowners association managing a common interest development consisting of improved and unimproved lots in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.