Court Rules Statute Awarding “Costs” to Prevailing Association does not Include “Attorney Fees”

CERTIFIED California Appellate Court decision (August 23, 2017)

This case involved two lawsuits filed by homeowners (“Owners”) against their homeowners association (“Association”) for alleged violations of state laws pertaining to common interest developments (California’s Davis-Sterling Common Interest Development Act).  The Owners that brought the suit were all former Association board members and in their complaint they alleged that Association wrongfully conducted Association business outside of board meetings and failed to maintain and make available certain records.

The first case that was filed by the Owners was voluntarily dismissed by the Owners because they had not complied with a requirement that a certificate stating that alternative dispute resolution, or an attempt to participate in alternative dispute resolution prior to the filing of the lawsuit, be filed with the complaint. The Owners subsequently filed a second action that was virtually identical to the first compliant but with the second complaint, Owners included a certificate that purported to satisfy the requirement that had not been met when the first complaint was filed.  They subsequently determined that the certificate that was filed was insufficient so the second complaint was dismissed by the court without leave to amend. The court also made a determination that the Owners’ second complaint was “frivolous” and therefore the court awarded Association costs and attorney fees that were incurred in defending against the complaint. The language in the statute that was relied upon for the award of the attorney fees, California Civil Code §5235(c), states that, “a court may award a prevailing association any costs” and the court ruled that “costs” included attorney fees.

The Owners then appealed the trail court’s decision contending that the language in the applicable statute that makes reference to “costs” does not include attorney fees. Owners further contended on appeal that the language in the statute that provides for an award of costs also states that the award of costs applies only if the action is deemed to have been “frivolous, unreasonable, or without foundation,” and Owners contended that the trial court’s determination that their second complaint was “frivolous” was erroneous.

In reviewing the case on appeal, the appellate court ruled that the award of “costs” under the state statute in question did not include an award of attorney fees.  The court commented that if the Legislature had intended to authorize an award of attorney fees to a prevailing association in an enforcement action that had been brought under the statute in question, it would have expressly stated that in the language of the statute.  The appellate court also upheld the trial court’s determination that the Owners’ second action was frivolous because the Owners had failed to properly file the required certificate on two occasions. This finding by the trial court justified the award of costs. Thus, the trial court’s judgment was affirmed with respect to the award of costs to Association, but reversed with respect to the award of attorney fees.

See Case Decision: Retzloff_v._Moulton_Parkway_Residents’_Ass’n_(Cal._App._2017)1