(originally published in Winter 2005)
Salawy v. Ocean Towers Housing Corporation (2004) 121 Cal.App.4th 664.
It is well established that in an action to enforce the governing documents of a common interest development, the prevailing party is entitled to reasonable attorneys fees pursuant to California Civil Code section 1354(f) [now 1354(c)]. In Salawy v. Ocean Towers Housing Corporation (2004) 121 Cal.App.4th 664, the California Court of Appeal narrowly interpreted this statutory right to require an action to enforce an association’s governing documents before fees can be awarded.
The apartment cooperative where Salawy lived was seriously damaged in the 1994 Northridge earthquake. As a result, all residents were told to vacate the premises for approximately one year while repairs and renovations were conducted, and it was represented to them that certain move-out and related expenses would be paid. When such expenses were not reimbursed, the residents filed complaints against the association, alleging breach of those promises which they claim they relied on. The residents did not allege in their lawsuit that they were seeking to enforce the governing documents of the cooperative.
After the residents dismissed their complaint, the association sought reimbursement of legal fees under Civil Code section 1354, arguing the gist of the lawsuit was to enforce the association’s obligations of repair under the governing documents. The association claimed that the governing documents vested the board of directors with the responsibility for renovations and repairs, and there was no requirement under the CC&Rs to pay for any reconstruction or expenses incident thereto. They also argued that the residents’ proprietary leases empowered the association and its board with discretion concerning maintenance of the building, and provided that no abatement of rent or other compensation could be made to tenants in connection with repairs or improvements to the project.
The residents, on the other hand, asserted that their claims were based on promises made but not contained in the governing documents, and thus such claims were not an action to enforce the governing documents so as to entitle either side to request attorneys fees.
The Court of Appeal agreed that the residents’ claims were not an action to “enforce the governing documents,” since the lawsuit contained no claim based on a right or remedy under the governing documents, but was based on promises unrelated to the governing documents. The fact that the association raised the obligation of repair under the CC&Rs as a defense to the claim for move-out expenses was to no avail. Thus, the attorneys fees provision in Civil Code section 1354 did not apply, and the association was denied its attorneys fees.
In this case, the gist of the lawsuit was not to enforce the governing documents, but was instead to enforce a promise made by the association. The Court of Appeal agreed that a plaintiff cannot avoid the attorneys fees provision if the root of a claim is, in fact, to enforce the governing documents. The Court justified its holding by arguing that the legislature could have written the statute more broadly to provide for attorneys fees to the prevailing party in any action “arising out of or related to” the governing documents or in which they are enforced, but it did not. As a result, the court was not free to give the words of the statute a definition different from the plain meaning of the terms used.
This decision narrowly construes an “enforcement action” for purposes of awarding fees. Even though the CC&Rs in this case appeared to indicate the move-out expenses would have been required, and were directly related to those obligations which only arose under the CC&Rs, the Association was denied its fees because the claim made in the lawsuit by the residents was not an action to enforce the CC&Rs, but was instead an action to enforce a promise by the association.