In a unanimous decision by all seven Justices, the California Supreme Court held that in any action to enforce governing documents of a common interest development, the “prevailing party” is entitled to attorneys fees under Civil Code section 5975, even where plaintiffs fail to establish that a common interest development exists. As the court stated: “because plaintiffs clearly would have been entitled to an award under the statute had they prevailed in the action, denying defendants an award under the statute when they were the prevailing party would unquestionably violate the reciprocal nature of the statute and thus defeat the evident legislative intent underlying the statute.”
The Court’s decision reverses the Court of Appeal, and upholds the trial court’s attorney fees award.
Tract 19051 v. Kemp (Yeldell) originated as a neighbor vs. neighbor case – over fifty homeowners in Tract 19051 filed suit against a neighbor to try to stop construction and remodeling on the neighbor’s property. Plaintiffs sued under the Davis Sterling Act, alleging that Tract 19051 was a common interest development and that defendant’s renovations violated the Tract’s governing documents. Plaintiffs also sought statutory attorneys fees under Civil Code section 5975 (formerly section 1354(c)), which provides: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney‟s fees and costs.”
During the case the original defendant lost the property to foreclosure, which the plaintiffs used to get a judgment entered in their favor, which included an award of their attorney’s fees. Eric Yeldell bought the property and the foreclosure sale and intervened in the action. He moved to vacate the interlocutory judgment, and the trial court eventually ruled that Tract 19051 was not a common interested development, and granted attorney fees to the defendant.
On appeal, plaintiffs successfully overturned the attorney fees award. They argued that, since Tract 19051 was not a common interest development, the statutory attorney fees provision in Civil Code section 5975 should not apply. The Court of Appeal agreed and reversed the attorney fees award in an unpublished opinion.
Yeldell knew that the Court of Appeal’s decision was wrong and he sought Supreme Court review, which is granted in less than 5% of the cases. In an extremely rare move, the California Supreme Court granted review of the unpublished Court of Appeal opinion, limiting review to the attorney fees issues. After briefing and oral arguments, the Court issued its opinion today, reinstating the attorney fees award. The Court held that the “prevailing party” language of the statute allows reciprocal attorneys fees, even if Plaintiff fails to show that the governing documents are valid.
Read the full Supreme Court opinion here. Tract 19051 v. Kemp (Supreme Court Opin.)