CA Ct. Says HOA is Entitled to Recover Attorney Fees for Enforcement of Mediation Agreement

California Appellate Court decision (August 9, 2016) (Certified for Publication).

The defendants in this case were the owners of a condominium located within a common interest development that was governed by the homeowners association (“Association”). The Association commenced this action against the homeowners to seek compliance with the Association’s governing documents which prohibited improvements that had been made by the homeowners to their exterior patio in violation of the Association’s CC&Rs. Prior to filing a lawsuit, the owners and the Association participated in mediation in accordance with applicable California law and the Association’s governing documents. The mediation resulted in a written agreement between the parties that required the homeowners to make certain specified modifications to the area of their property that was the subject of the dispute. Because the homeowners did not initially perform in accordance with their responsibilities under the mediation agreement, the Association filed the lawsuit to compel compliance and recover the costs and attorney fees that had been incurred. During the pendency of the lawsuit, the homeowners made the required modifications to their property, but the issue of the attorney fees claimed by the Association was not resolved. Thereafter, the trial court granted a motion by the Association for an award of attorney fees and award the Association $18,991 of the total fees that had been incurred. The homeowners then appealed the award of the attorney fees.

The primary issue raised in the appeal was whether the Association’s action to enforce the settlement agreement that had been reached at mediation before the lawsuit was filed constituted an action to enforce the governing documents, which would trigger a provision in the applicable state law that provided for the recovery of reasonable attorney fees and costs incurred by the prevailing party. In short, the appellate court addressed the issue of whether a lawsuit to enforce an agreement reached during mediation was an action “to enforce the governing documents.”

In analyzing the substance of the Association’s lawsuit, the appellate court determined that the relief sought by the Association was an order that required the homeowners to modify their property to bring it into compliance with the Association’s CC&Rs. The fact that there was a mediation agreement entered into before the filing of the lawsuit did not chance the underlying nature of the dispute or the relief that was sought by the Association. Thus, the appellate court concluded that the case was an action to enforce the Association’s governing documents.

In their appeal, the homeowners also contended that, because the case was settled (with the exception of the attorney fees and costs issues), there was not prevailing party and the trial court erred in awarding the Association attorney fees. The appellate court that, because the Association was successful in achieving its goal of forcing the homeowners to bring their property into compliance with the Association’s CC&Rs, it achieved its main litigation objectives and was therefore, the prevailing party and entitled to recover its attorney fees that had been awarded by the trial court plus the additional fees and costs that had been incurred in connection with the appeal which the Association prevailed on.

See case decision:Rancho_Mirage_Country_Club_H