Would make non-substantive changes to Code of Civil Procedure 1281.2 regarding arbitration agreements.
Current Status: Chaptered
FindHOALaw Quick Summary:
Existing law requires a court, on petition of a party to an arbitration agreement alleging (1) the existence of a written agreement to arbitrate a controversy and (2) that a party to the agreement refuses to arbitrate the controversy, to order the petitioner and the respondent to arbitrate the controversy if the court determines that an agreement to arbitrate exists, unless the court makes other determinations, including, among other things, that grounds exist for the rescission of the agreement.
**UPDATE: AB 3247 was signed by the Governor on July 16, 2018. Its changes to the law will become operative on January 1, 2019.
[Attorney’s Fees; ADR; Pre-Litigation] Pre-litigation attorney’s fees that are incurred in alternative dispute resolution (ADR) are recoverable by the prevailing party in subsequent ligation.
Robert J. Rosati for Defendant and Appellant.
Michael A. Milnes for Plaintiffs and Respondents.
OPINION
FRANSON, J.—
INTRODUCTION
This appeal involves a dispute between a homeowners association and property owners who built a cabana and fireplace in their backyard without obtaining prior approval from the homeowners association. The homeowners association contends the applicable governing documents prohibited the cabana and fireplace. Thus, the homeowners association concludes it properly denied the owners’ request for a variance and properly imposed a fine of $10 per day until the cabana and fireplace were removed.
The trial court interpreted the governing documents as allowing the cabana and requiring the fireplace to be 10 feet from the property line. Applying this interpretation, the court required the fireplace to be modified, concluded a variance was not needed for the cabana, and vacated the continuing fine. The trial court also awarded statutory attorney fees to the property owners after deducting 10 hours for the unsuccessful claims. The fee award included attorney time spent on prelitigation mediation.
[1131]
(1) In the unpublished portion of this opinion, we conclude that the trial court properly interpreted the governing documents of the homeowners association and, when awarding attorney fees, did not abuse its discretion by deducting only 10 hours of attorney time for the unsuccessful claims. In the published portion of this opinion, we address a novel issue of statutory construction concerning the scope of the attorney fees provision in the Davis-Stirling Common Interest Development Act (the Davis-Stirling Act) (Civ. Code, § 1350 et seq.). We interpret Civil Code section 1354, subdivision (c) to allow a prevailing party to recover attorney fees and costs incurred in prelitigation mediation.
We therefore affirm the judgment and the order granting the motion for attorney fees.
After Neil and Doredda Grossman (the Grossmans) obtained a judgment in their favor against defendant Park Fort Washington Association (the Association), they filed a motion requesting attorney fees for 331.9 hours that their attorney worked on their behalf. The attorney time included 38.1 hours incurred between July 12, 2007, and November 26, 2008, in connection with a mediation of the parties’ dispute. The mediation occurred before the lawsuit was filed in June 2009. The Grossmans’ motion also requested costs, including $875 paid as one-half of the fee charged by the retired justice who conducted the mediation.
[1132]
The Association’s opposition to the motion for attorney fees included the argument that the recovery for time spent on prelitigation mediation was not authorized by the attorney fees provision contained in Civil Code section 1354, subdivision (c).
Ultimately, the trial court granted the motion for attorney fees and awarded the Grossmans $112,665 in attorney fees. This award included compensation for the 38.1 hours incurred in the prelitigation mediation.
A. Statutory Provisions
The Davis-Stirling Act includes provisions addressing alternative dispute resolution (ADR), including the initiation of such nonjudicial procedures, the timeline for completing ADR, and the relationship between ADR and any subsequent litigation. (See Civ. Code, §§ 1369.510–1369.590.) Among other things, the legislation provides that an “association or an owner or a member of a common interest development may not file an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution pursuant to this article.” (Civ. Code, § 1369.520, subd. (a).)
The Davis-Stirling Act also includes the following mandatory attorney fees provision: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (Civ. Code, § 1354, subd. (c).)
One way this attorney fee provision and the ADR requirements interact is addressed in Civil Code section 1369.580: “In an enforcement action in which fees and costs may be awarded pursuant to subdivision (c) of Section 1354, the court, in determining the amount of the award, may consider whether a party’s refusal to participate in alternative dispute resolution before commencement of the action was reasonable.”
B. The Association’s Contentions
The Association reads the statutory language in subdivision (c) of Civil Code section 1354 as authorizing only the recovery of fees and costs incurred in the action to enforce the governing documents. Based on this interpretation, the Association argues that the Grossmans are not entitled to recover fees and costs incurred in prelitigation ADR and the trial court erred, as a matter of law, in awarding such fees and costs.7
[1133]
The Association’s argument is purely textual. (See Scalia & Garner, Reading Law: The Interpretation of Legal Texts (2012) p. 16 [“exclusive reliance on text when interpreting [a statute] is known as textualism”].) It has not presented any legislative history that demonstrates, either directly or by implication, the Legislature intended to have attorney fees and costs incurred in ADR excluded from the award. Also, the Association has indentified no public policy that would be promoted by its interpretation of the statute.
C. Interpretation of Attorney Fees Statute
(2) Civil Code section 1354, subdivision (c) reads: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” This text does not explicitly limit the recovery of attorney fees and costs to those items incurred in the lawsuit itself. Instead, it specifies two conditions that must exist before the award of reasonable attorney fees and costs is mandatory. The first statutory condition is the existence of an “action to enforce the governing documents … .” (Civ. Code, § 1354, subd. (c); see Salawy v. Ocean Towers Housing Corp. (2004) 121 Cal.App.4th 664, 670 [17 Cal. Rptr. 3d 427] [attorney fees provision expressly limits award to actions to enforce governing documents].) The second condition is the existence of a prevailing party. (Chapala Management Corp. v. Stanton (2010) 186 Cal.App.4th 1532, 1546 [113 Cal. Rptr. 3d 617] [attorney fees are awarded as a matter of right to the prevailing party].)
Here, the Grossmans satisfied both conditions. The lawsuit was an action to enforce terms in the master declaration of covenants, conditions, and restrictions easements recorded in September 1984 (CC&R’s)—particularly section 7.14 of the CC&R’s. It is undisputed that the CC&R’s are “governing documents” for purposes of the attorney fees provision in the Davis-Stirling Act. (See Civ. Code, § 1351, subd. (j) [“ ‘[g]overning documents’ ” defined].) In addition, the trial court determined the Grossmans were the prevailing party, a determination not challenged on appeal.
Thus, if the analysis is limited to the actual language in subdivision (c) of Civil Code section 1354, the critical word to deciding whether attorney fees and costs expended in ADR are recoverableis whether those fees and costs were “reasonable.”
(3) Our analysis of what is reasonable is affected by other provisions in the statutory scheme created by the Davis-Stirling Act. (See State Farm Mutual Automobile Ins. Co. v. Garamendi (2004) 32 Cal.4th 1029, 1043 [12 [1134] Cal. Rptr. 3d 343, 88 P.3d 71] [courts construe the words of a statute in context and with reference to the entire scheme of law of which they are a part].)
First, Civil Code section 1369.520, subdivision (a) requires a prospective plaintiff to endeavor to submit the dispute to ADR before filing a lawsuit to enforce the governing documents. This provision effectively makes ADR mandatory and, therefore, precludes a determination that the time and effort spent pursuing ADR was unreasonable per se.
Second, Civil Code section 1369.580 provides that a party’s refusal to participate in ADR before the start of the action could affect the amount of the attorney fees awarded. This provision strongly implies that the attorney fees a prevailing party spent trying to convince a recalcitrant party to submit the dispute to ADR could be recovered, if otherwise reasonable.
Lastly, we have not found, and the Association has not identified, any policy reasons for excluding attorney fees and costs incurred in ADR from the award given to a party that has pursued ADR and subsequently prevailed in a lawsuit involving the same dispute.
(4) Based on the foregoing, we conclude that a party does not act unreasonably when it spends money on attorney fees and costs during prelitigation ADR. The alternate view—that such expenditures are categorically unreasonable—is contrary to the strong public policy of promoting the resolution of disputes through mediation and arbitration. (E.g., Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 235, fn. 4 [145 Cal. Rptr. 3d 514, 282 P.3d 1217] [public policy favors arbitration as a means of dispute resolution].) Thus, when attorney fees and costs expended in prelitigation ADR satisfy the other criteria of reasonableness, those fees and costs may be recovered in an action to enforce the governing documents of a common interest development. (Civ. Code, § 1354, subd. (c).)
Thus, the trial court did not err in awarding those fees and costs.
The judgment and the order granting the motion for attorney fees are affirmed. The Grossmans shall recover their costs on appeal.
Levy, Acting P. J., and Gomes, J., concurred.
On January 15, 2013, the opinion was modified to read as printed above.
* Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of the Facts, Proceedings, and parts I.–V. and VII. of the Discussion.
7 The attorney fees relate to 38.1 hours incurred between July 12, 2007, and November 26, 2008. The costs include $875 paid as one-half of the fee charged by a retired justice to conduct the ADR proceeding.
[Attorney’s Fees; ADR; Settlement Agreement] An action to enforce a settlement agreement reached between a HOA and an owner through Alternative Dispute Resolution (ADR) was held to be an action to enforce the governing documents entitling the prevailing party to an award of attorney’s fees and costs pursuant to Civ. Code § 5975.
OPINION
HOLLENHORST, J.
Defendants and appellants Thomas B. Hazelbaker and Lynn G. Hazelbaker own, through their family trust, a condominium in the Rancho Mirage Country Club development. Defendants made improvements to an exterior patio, which plaintiff and respondent Rancho Mirage Country Club Homeowners Association (Association) contended were in violation of the applicable covenants, conditions and restrictions (CC&Rs). The parties mediated the dispute pursuant to the Davis-Stirling Common Interest Development Act (Davis-Stirling Act or the Act), codified at sections 4000-6150 of the Civil Code[1] (formerly sections 1350-1376). The mediation resulted in a written agreement. Subsequently, the Association filed the present lawsuit, alleging that defendants had failed to comply with their obligations under the mediation agreement to modify the property in certain ways.
While the lawsuit was pending, defendants made modifications to the patio to the satisfaction of the Association. Nevertheless, the parties could not [256] reach agreement regarding attorney fees, which the Association asserted it was entitled to receive as the prevailing party.
The Association filed a motion for attorney fees and costs, seeking an award of $31,970 in attorney fees and $572 in costs. The trial court granted the motion in part, awarding the Association $18,991 in attorney fees and $572 in costs. Defendants argue on appeal that the trial court’s award, as well as its subsequent denial of a motion to reconsider the issue, are erroneous in various respects.[2]
For the reasons discussed below, we affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
In November 2011, defendants applied for and received approval from the Association’s architectural committee to make certain improvements to the patio area of their property. Subsequently, however, the Association contended that defendants had made changes that exceeded the scope of the approval, and which would not have been approved had they been included in defendants’ November 2011 application.
On June 19, 2012, the Association sent defendants a request for alternative dispute resolution pursuant to former section 1369.510 et seq., identifying the disputed improvements and proposing that the parties mediate the issue. Defendants accepted the proposal, and a mediation was held on April 8, 2013. A “Memorandum of Agreement in Mediation” dated April 9, 2013, was reached, signed by two representatives of the Association, its counsel, and Thomas Hazelbaker (but not Lynn Hazelbaker). The agreement called for defendants to make certain modifications to the patio, in accordance with a plan newly approved by the Association; specifically, to install three openings, each 36 inches wide and 18 inches high, in a side wall of the patio referred to as a “television partition” in the agreement, and to use a specific color and fabric for the exterior side of drapery. The agreement provided for the modifications to be completed within 60 days from the date of the agreement. It also provided for a special assessment on defendants’ property to pay a portion of the Association’s attorney fees incurred to that point, and included a prevailing party attorney fees clause with respect to any subsequent legal action “pertaining to the enforcement of or arising out of” the agreement.
The modifications described in the mediation agreement were not completed within 60 days. The parties each blame the other for that circumstance.
[257]
On September 4, 2013, the Association filed the present lawsuit, asserting two causes of action: (1) for specific performance of the mediation agreement, and (2) for declaratory relief. Subsequently, the parties reached agreement regarding modifications to the property, slightly different from those agreed to in mediation; instead of three 36-inch-wide openings, two openings of 21 inches, separated by a third opening 52 inches wide, were installed in the wall, and a different fabric than the one specified in the mediation agreement was used for the drapery. The modifications were completed by defendants in September 2014. The parties could not reach a complete settlement, however, because they continued to disagree about who should bear the costs of the litigation.
On October 15, 2014, the Association filed a motion seeking attorney fees and costs pursuant to section 5975, subdivision (c). The motion sought $31,970 in attorney fees, plus $572 in costs. On October 30, 2014, the hearing of the matter, initially set for November 10, 2014, was continued to November 25, 2014, on the court’s own motion. Defendants filed their opposition to the motion on November 14, 2014.
At the November 25, 2014 hearing on the motion, the trial court noted that defendants’ “paperwork was not timely and the Court did not consider it.”[3] The court further observed that the bills submitted by the Association in support of its motion were heavily redacted, sometimes to the point where it could not “tell what’s going on.” The court declined to review unredacted bills in camera, and further remarked that “if I can’t tell what’s going on, I’m not awarding those fees.” At the conclusion of the hearing, the court took the matter under submission.
On December 2, 2014, the trial court issued a minute order granting the Association’s motion, but awarding less than the requested amount; $18,991 in attorney fees, plus $572 in costs. The trial court denied the Association’s motion with respect to fees incurred prior to the mediation, awarding $3,888.50 in “[p]ost mediation fees” incurred by one law firm on behalf of the Association “starting 60 days post mediation,” and $15,102.50 in “litigation fees” incurred by another law firm. With respect to the “[p]ost mediation fees,” the court commented as follows: “The court had great difficulty determining the nature of the billings because so much information was redacted from the billings. All doubts were resolved in favor of the homeowner.”
Judgment was entered in favor of the Association on December 17, 2014, and on January 14, 2015, a notice of entry of judgment was filed. On January [258] 21, 2015, defendants filed a motion for reconsideration of the trial court’s order regarding fees and costs. On February 27, 2015, after a hearing, the trial court denied the motion as untimely, further noting that the motion “did not set forth any new facts, law, or a chance in circumstances.”
II. DISCUSSION
A. The Association’s Lawsuit Is an “Action to Enforce the Governing Documents” Under the Davis-Stirling Act.
This case presents the question of whether the Davis-Stirling Act, and particularly the fee-shifting provision of section 5975, subdivision (c), applies to an action to enforce a settlement agreement arising out of a mediation conducted pursuant to the mandatory alternative dispute resolution requirements of the Act. We conclude that it does apply in at least some circumstances, and more specifically that it applies on the facts of this case.
“The Davis-Stirling Act, enacted in 1985 [citation], consolidated the statutory law governing condominiums and other common interest developments.” (Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, 81 (Villa De Las Palmas).) “The Davis-Stirling Act includes provisions addressing alternative dispute resolution (ADR), including the initiation of such nonjudicial procedures, the timeline for completing ADR, and the relationship between ADR and any subsequent litigation.” (Grossman v. Park Fort Washington Assn. (2012) 212 Cal.App.4th 1128, 1132 (Grossman).) Among other things, the legislation provides that “[a]n association or a member may not file an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution pursuant to this article.” (§ 5930, subd. (a).)
The Act also includes the following mandatory attorney fees provision: “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (§ 5975, subd. (c).) This language has been interpreted to allow recovery of not only litigation costs, but also reasonable attorney fees and costs expended in pre-litigation ADR pursuant to the Davis-Stirling Act. (Grossman, supra, 212 Cal.App.4th at p. 1134 [interpreting former section 1354, later renumbered as § 5975 without substantive change].)
In Grossman, although the parties participated in a mediation prior to the litigation, there is no indication that the mediation produced any sort of agreement, and the complaint was explicitly framed as an action to enforce a specific provision of the CC&Rs at issue. (Grossman, supra, 212 Cal.App.4th[259] at pp. 1131, 1133.) In contrast, the mediation between the parties in this case did produce an agreement, and the complaint was framed as an action to enforce that agreement. Grossman therefore does not directly address whether the Association’s claim for attorney fees and costs is properly treated as falling within the scope of the Davis-Stirling Act. Grossman in essence interprets the term “action” in section 5975 to encompass both the mandatory pre-litigation ADR efforts and any subsequent litigation “to enforce the governing documents.” (Grossman, supra, at p. 1134; § 5975.) But is a lawsuit to enforce an agreement that was reached during mediation (or another form of ADR) an action “to enforce the governing documents,” in the meaning of section 5975, where the mediation was initiated pursuant to the Davis-Stirling Act? In our view, that question must be answered in the affirmative, at least in circumstances similar to those of this case, for the reasons discussed below.
We must construe the words of a statute in context and with reference to the entire scheme of law of which they are a part. (State Farm Mutual Automobile Ins. Co. v. Garamendi (2004) 32 Cal.4th 1029, 1043.) The Davis-Stirling Act is intended, among other things, to encourage parties to resolve their disputes without resort to litigation, by effectively mandating pre-litigation ADR. (See § 5930, subd. (a) [enforcement action in civil court may not be filed until parties have “endeavored to submit their dispute” to ADR; § 5960 [in determining amount of fee and cost award, court “may consider whether a party’s refusal to participate in [ADR] before commencement of the action was reasonable”].) Narrowly construing the phrase “action to enforce the governing documents” to exclude actions to enforce agreements arising out of that mandatory ADR process would discourage such resolutions, and encourage gamesmanship. For example, a party might agree to a settlement in mediation without any intention of fulfilling its settlement obligations, but simply to escape the cost-shifting provisions of the Davis-Stirling Act.[4] It is unlikely, therefore, that a narrow construction is preferable.
Moreover, the gravamen of the Association’s complaint is that defendants have not taken certain steps to bring their property into compliance with the applicable CC&Rs. The relief sought by the complaint is an order requiring defendants to take those steps, and a declaration of the parties’ respective rights and responsibilities. The circumstance that the steps to bring the property into compliance with CC&Rs were specified a mediation agreement does not change the underlying nature of the dispute between the parties, or the nature of the relief sought by the Association. Indeed, the parties’ agreement was the product of a mediation conducted [260] explicitly pursuant to the ADR requirements of the Davis-Stirling Act. We see nothing in the Davis-Stirling Act that suggests we should give more weight to the form of a complaint—its framing as an action to enforce a mediation agreement—than to the substance of the claims asserted and relief sought, in determining whether an action is one “to enforce the governing documents” in the meaning of section 5975.
We hold, therefore, that the present case is an “action to enforce the governing documents,” in the meaning of section 5975.[5] As such, the trial court properly considered the Davis-Stirling Act as the basis for any recovery, as the Association requested in its motion for attorney fees and costs. (Parrott v. Mooring Townhomes Assn., Inc. (2003) 112 Cal.App.4th 873, 879-880 [because party sought recovery pursuant to fee-shifting statute, standards for contractual fee-shifting clauses inapplicable].)
B. The Trial Court Did Not Abuse Its Discretion by Determining the Association to Be the Prevailing Party.
Defendants contend the trial court erred by determining the Association to be the prevailing party. We find no abuse of discretion.
The analysis of who is a prevailing party under the fee-shifting provisions of the Act focuses on who prevailed “on a practical level” by achieving its main litigation objectives; the limitations applicable to contractual fee-shifting clauses, codified at section 1717, do not apply.[6] (Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574.) We review the trial court’s determination for abuse of discretion. (Villa De Las Palmas, supra, 33 Cal.4th at p. 94.) “`”The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. When two or more inferences can reasonably be deduced [261] from the facts, the reviewing court has no authority to substitute its decision for that of the trial court.”‘” (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1339 (Goodman).)
The trial court’s determination that the Association prevailed on a practical level is not beyond the bounds of reason. The Association wanted defendants to make alterations to their property to bring it in compliance with the applicable CC&Rs, specifically, by installing openings in the side wall of the patio, and altering the drapery on the patio. The Association achieved that goal, with defendants completing the modifications to the patio in September 2014.
Defendants focus on the circumstance that the modifications that were ultimately made to the property differed in some details from those contemplated by the mediation agreement. This argument, however, frames the issue improperly. The “action” at issue in the section 5975 analysis includes not only the litigation in the trial court, but also the pre-litigation ADR process. (Grossman, supra, 212 Cal.App.4th at p. 1134.) The objective of the Association’s enforcement action, including the pre-litigation ADR process, is reasonably characterized broadly, as seeking to force defendants to bring their property into compliance with the CC&Rs. It was successful in achieving that goal.
Moreover, the differences between the terms of the mediation agreement and the actual modifications that defendants made, and which the Association accepted, are reasonably viewed as de minimis. The openings installed in the patio wall were of different dimensions than were contemplated in the mediation agreement, but nevertheless openings were installed, to the satisfaction of the Association; different fabric was used, but nevertheless the exterior color of the drapery was brought into conformity with the rest of the development. And defendants concede (indeed, insist) that the changes between the terms of the mediation agreement and the final modifications to the property were motivated by physical necessity—the dimensions of the existing wall and its supporting beams, the unavailability of the specified fabric for drapery. Defendants cannot point to any success in any aspect of the litigation itself; prior to the motion for attorney fees at issue, the only significant events in the litigation were the filing of the complaint and the answer. The trial court therefore did not exceed the bounds of reason in determining the Association achieved its main litigation objectives as a practical matter.
Defendants argue that the trial court abused its discretion by refusing to consider their late-filed opposition papers and supporting evidence, and that consideration of that evidence “undoubtedly would have mitigated in [262] favor of [defendants] and necessarily a different ruling as to the prevailing party determination.” This argument fails in several respects. First, a trial court has broad discretion to accept or reject late-filed papers. (Cal. Rules of Court, rule 3.1300(d).) Defendants made no attempt to seek leave to file their opposition late, and made no attempt to demonstrate good cause for having failed to adhere to the applicable deadline. The circumstance that they were, at the time, appearing in propria persona, does not establish good cause. (See Nelson v. Gaunt (1981) 125 Cal.App.3d 623, 638-639 [“When a litigant is appearing in propria persona, he is entitled to the same, but no greater, consideration than other litigants and attorneys [citations]. Further, the in propria persona litigant is held to the same restrictive rules of procedure as an attorney [citation].” (Fn. omitted.).) The trial court acted well within its discretion when it declined to consider defendants’ opposition papers.[7]
Second, defendants are incorrect that consideration of their opposition would likely have made any difference in the trial court’s determination of the prevailing party. Defendants sought to introduce evidence that the terms of the mediation agreement could not be precisely implemented, and evidence of the Association’s “delay and unwillingness to address ambiguities in the agreement.” Even accepting these points as true, however (and they are disputed at least in part by the Association), they would not likely have altered the trial court’s analysis of which party prevailed in the action. The fact remains, as discussed above, the Association contended defendants had altered their property in a manner that was inconsistent with the applicable CC&Rs, and sought successfully to force defendants to make modifications to bring the property into compliance. Because the Association achieved that main litigation objective, it was properly considered to have prevailed in the action as a practical matter, even though the only judgment resulting from the case related to the award of fees and costs, not the merits of the complaint.[8]
In short, the trial court reasonably found the Association to be a prevailing party, for purposes of making an award of attorney fees and costs under the Davis-Stirling Act.
[263]
C. The Trial Court Did Not Abuse Its Discretion in Determining the Amount of Fees and Costs to Award.
Defendants argue that the trial court abused its discretion in determining its award of fees and costs in several different respects. We find no abuse of discretion.
Once the trial court determined the Association to be the prevailing party in the action, it had no discretion to deny attorney fees. (§ 5975; Salehi v. Surfside III Condominium Owners Assn. (2011) 200 Cal.App.4th 1146, 1152 [language of § 5975 reflects legislative intent to award attorney fees as a matter of right when statutory criteria are satisfied].) The magnitude of what constitutes a reasonable award of attorney fees is, however, a matter committed to the discretion of the trial court. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-1096.) As noted above, in reviewing for abuse of discretion, we examine whether the trial court exceeded the bounds of reason. (Goodman, supra, 47 Cal.4th at p. 1339.) In so doing, we presume the “trial court impliedly found `every fact necessary to support its order.'” (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1115-1116, fn. 6, citing Murray v. Superior Court (1955) 44 Cal.2d 611, 619.)
Here, the trial court explicitly took into account the circumstance that the Association had already recovered a portion of its attorney fees pursuant to the agreement of the parties, and awarded fees only for fees incurred starting 60 days after the mediation, when the agreed upon modifications should have been completed. The court also excluded any award with respect to billings that did not provide sufficient “information” for it to “tell what’s going on.” The amount actually awarded was substantially less than the total amount requested, and defendants have not pointed to anything suggesting the amount is unreasonable on its face, given the circumstances of the case. We therefore find no manifest abuse of discretion in the court’s award.
Defendants argue that the trial court did not have enough information to support its findings, pointing to the trial court’s comments about heavy redaction of the billing records. The trial court specified, however, that it awarded no fees with respect to billing items it considered to be excessively redacted, and that it resolved any doubts about the appropriateness of billing entries in favor of defendants. Moreover, unlike some other jurisdictions, California law does not require detailed billing records to support a fee award; “[a]n attorney’s testimony as to the number of hours worked is sufficient evidence to support an award of attorney fees, even in the absence of detailed time records.” (Steiny & Co. v. California Electric Supply Co.[264] (2000) 79 Cal.App.4th 285, 293.) Furthermore, “[a]n award for attorney fees may be made in some instances solely on the basis of the experience and knowledge of the trial judge without the need to consider any evidence. (Fed-Mart Corp. v. Pell Enterprises, Inc. (1980) 111 Cal.App.3d 215, 227.) Defendants’ arguments about the sufficiency of the documentation submitted by the Association in support of its request for attorney fees are without merit.[9]
Defendants also suggest that the trial court erred by not articulating in more detail its findings with respect to how it arrived at the number that it did for an award of attorney fees and costs. It is well settled, however, that the trial court was not required to issue any explanation of its decision with regard to the fee award. (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 101 (Gorman)[“We adhere to our earlier conclusion that there is no general rule requiring trial courts to explain their decisions on motions seeking attorney fees.”].) To be sure, appellate review may well be “hindered” by the lack of any such explanation. (Martino v. Denevi (1986) 182 Cal.App.3d 553, 560.) Without explanation, an award may appear arbitrary, requiring remand if the appellate court is unable to discern from the record any reasonable basis for the trial court’s decision. (E.g. Gorman, supra, at p. 101 [“It is not the absence of an explanation by the trial court that calls the award in this case into question, but its inability to be explained by anyone, either the parties or this appellate court.”) Here, the trial court’s reasoning is not so inscrutable, as discussed above.
D. Judgment Was Properly Entered Against Both Defendants.
Defendants argue that judgment was not properly entered against Lynn Hazelbaker, because she was not a signatory to the mediation agreement. This argument was not raised in the trial court, however, and “[a]s a general rule, `issues not raised in the trial court cannot be raised for the first time on appeal.'” (Sea & Sage Audubon Society, Inc. v. Planning Com. (1983) 34 Cal.3d 412, 417.) Moreover, the argument [265] is without merit. It depends on the characterization of the action as no more than an action on a contract, rather than an action to enforce the CC&Rs, which we rejected above. Moreover, Lynn Hazelbaker was jointly represented by the same attorneys as Thomas Hazelbaker during the periods of the case when they have been represented by counsel, and joined with him in every filing, both in the trial court and in this court.[10] An award of attorney fees to the Association against both Thomas and Lynn Hazelbaker is appropriate.
E. The Trial Court Did Not Err By Denying Defendants’ Motion for Reconsideration.
Defendants argue that the trial court erred by denying their motion for reconsideration as untimely. They are incorrect. Judgment was entered on December 17, 2014, while defendants’ motion was filed on January 21, 2015. “A trial court may not rule on a motion for reconsideration after entry of judgment.” (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 187, 192.)
Defendants further contend that the trial court should have treated their untimely motion for reconsideration as a timely motion for new trial, and granted it. However, defendants’ asserted bases for demanding a “new trial”—really, a new hearing on the issue of attorney fees, since no trial, or any other disposition on the merits of the complaint, ever occurred—are all contentions we have discussed above, and rejected. Defendants’ January 21, 2015 motion was properly denied on the merits, even if it could be construed as timely filed.
F. The Association Is Entitled to Appellate Attorney Fees.
The Association correctly asserts that if it prevails in this appeal it is entitled to recover its appellate attorney fees. “A statute authorizing an attorney fee award at the trial court level includes appellate attorney fees unless the statute specifically provides otherwise.” (Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1499.) Neither section 5975, nor any other provision of the Davis-Stirling Act, precludes recovery of appellate attorney fees by a prevailing party; hence they are recoverable.
[266]
III. DISPOSITION
The judgment is affirmed. The Association is awarded its costs and attorney fees on appeal, the amount of which shall be determined by the trial court.
RAMIREZ, P. J. and MILLER, J., concurs.
[1] Further undesignated statutory references are to the Civil Code.
[2] The Association did not file a cross appeal challenging the trial court’s award of less than the full amount requested.
[3] Defendants concede that their opposition to the motion for attorney fees was filed late, only seven court days before the hearing. (See Code Civ. Proc., § 1005, subd. (b) [opposition papers due nine court days before hearing].)
[4] We here speak in hypotheticals; we do not suggest a finding that defendants have engaged in such gamesmanship.
[5] It bears mention that our conclusion here may not apply to every action to enforce a settlement agreement arising out of ADR conducted pursuant to the Davis-Stirling Act. Consider the situation of a dispute arising regarding the application of CC&Rs, resolved at mediation by an agreement for one party to buy the other party’s property, with payments to be made on a specified schedule. Suppose the payments are not made on time, and a lawsuit to enforce the settlement is brought. It would be difficult to characterize such an action as one to “enforce the governing documents,” at least in the same sense as the action at issue in this appeal. But we may leave for another day the question of whether a dispute like our hypothetical would nevertheless fall within the scope of section 5975.
[6] Section 1717 provides that when an action on a contract “has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party” for the purpose of an award of attorney fees pursuant to a contractual prevailing party clause. (§ 1717, subd. (b)(2).) Because section 1717 is inapplicable to this case, we need not and do not discuss in detail defendants’ arguments that rest on application of that section.
[7] Defendants’ arguments to the contrary rely heavily on case law from the summary judgment context. This reliance is out of place. Even if a motion for attorney fees is the last issue remaining in a case, it is not, as defendants put it, a “case dispositive motion” in the same sense that a motion for summary judgment is.
[8] Like the trial court, we need not address the Association’s contention that defendants not only filed their opposition late, but also never properly served the documents and supporting evidence on the Association.
[9] Moreover, defendants never objected to the adequacy of the documentation submitted by the Association in support of its motion for attorney fees, either at the hearing on the motion, or in their late-filed opposition papers. The court raised the issue of excessive redactions on its own motion, not at the prompting of defendants. As such, even if defendants’ challenge to the adequacy of the evidentiary basis for the trial court’s award of fees had merit, it would have been forfeited. (See Robinson v. Grossman (1997) 57 Cal.App.4th 634, 648 [party that failed to object to the trial court that the opposing party’s attorney fees were not sufficiently documented waived the right to object on appeal to the amount of the fee award].)
[10] For example, defendants’ opposition to the Association’s motion for attorney fees and costs is entitled “Declaration of Thomas B. Hazelbaker in Opposition to Plaintiff[‘]s Motion for Attorneys’ Fees and Costs,” but the heading indicates the document was filed on behalf of both Thomas B. Hazelbaker and Lynn G. Hazelbaker, as “Defendants, In Pro Per,” and Lynn Hazelbaker filed no separate opposition to the motion.
[ADR; Bylaws Amendment] An amendment to the Bylaws by the HOA incorporating an arbitration provision does not bind ongoing disputes and accrued claims.
Green, Bryant & French, Matthew T. Poelstra; Boudreau Williams and Jon R. Williams for Defendant and Appellant.
Robert L. Bouchier for California State Club Association as Amicus Curiae on behalf of Defendant and Appellant.
Slovak Baron Empey Murphy & Pinkney, Thomas S. Slovak and mCharles L. Gallagher for Plaintiffs and Respondents.
Arbogast and Bowen and David M. Arbogast for Consumer Attorneys of California as Amicus Curiae on behalf of Plaintiffs and Respondents.
OPINION
RYLAARSDAM, J.
—Ironwood Country Club (Ironwood or the Club) appeals from an order denying its motion to compel arbitration of the declaratory relief action brought by plaintiffs William S. Cobb, Jr., and Elizabeth Richards, who are former members of Ironwood, and Patrick J. Keeley and Helen Riedstra, who are current members. The motion to compel was based on an arbitration provision Ironwood incorporated into its bylawsfour months after plaintiffs’ complaint was filed. Ironwood argues (1) that its new arbitration provision was fully applicable to this previously filed lawsuit because the lawsuit concerned a dispute which was “ongoing” between the parties, and (2) that its right to amend its bylaws meant that any such amendment would be binding on both current and former members.
The trial court disagreed, reasoning that Ironwood’s subsequent amendment of its bylaws was insufficient to demonstrate that any of these plaintiffs agreed to arbitratethis dispute, and that if Ironwood’s basic premise were [963] accepted, it would render the agreement illusory. We agree with both conclusions and affirm the order.
When one party to a contract retains the unilateral right to amend the agreement governing the parties’ relationship, its exercise of that right is constrained by the covenant of good faith and fair dealing which precludes amendments that operate retroactively to impair accrued rights. Plaintiffs certainly did not agree to any such illegal impairment in this case.
And Ironwood’s basic premise, which is that each member’s agreement to the bylaw provision allowing for future amendments to its bylaws means those members are automatically bound by whatever amendments the Club makes in accordance with that provision—even after the members have resigned their membership—would doom the agreement as illusory if it were correct. Fortunately, it is not.
FACTS
Plaintiffs’ complaint, filed in August 2012, alleges that two of the plaintiffs are current members of Ironwood, and two are former members. In 1999, the Club entered into an agreement with each of its 588 members, whereby each member loaned the club $25,500 to fund the Club’s purchase of additional land. The members were given the option of paying the funds in a lump sum or by making payments over a period of 20 years into a “Land Purchase Account.” In connection with the loans, the Club represented that if any member sold his or her membership before the loan was repaid, the Club would be “absolutely obligated to pay the Selling Member the entire amount then standing in the Member’s Land Purchase Account.” Moreover, any new member would be required to pay, in addition to the regular initiation fee, an amount equal to the hypothetical balance in a Land Purchase Account, as well as the “remaining unamortized portion of the Land Purchase Assessment.” (Italics omitted.)
In reliance on the Club’s representations, the members voted to approve the land purchase and enter into the loan agreements. Three of the plaintiffs paid the lump sum, and one plaintiff elected to make monthly payments into a Land Purchase Account. The Club consistently reported these payments in financial disclosures as a liability owed to each member, payable upon “sale of a member’s certificate” to a new member. (Italics omitted.) In April 2012, Ironwood represented that it had repaid the $25,500 land purchase assessment to 10 resigned members whose memberships were subsequently purchased by new members, since 2003.
However, plaintiffs alleged that despite the Club’s initial description of how the funds would be generated to reimburse resigning members, it [964] “inexplicably failed” to require new members to pay the equivalent of the land purchase assessment when they joined.
More significantly, in January 2012, Ironwood announced that “[a]fter substantial due diligence, [it had] concluded that the practice of repaying the Land Assessment to forfeiting members . . . must cease effective immediately.” (Italics omitted.) Thereafter, Ironwood made various conflicting and confusing statements and unilaterally imposed new rules to justify writing off its previously acknowledged liability to the members.
Based on those described facts, plaintiffs alleged that an actual controversy has arisen between themselves and Ironwood, with respect to the Club’s obligation to repay the land purchase assessment to each plaintiff.
When plaintiffs filed their complaint, Ironwood’s bylaws contained no arbitration provision. However, four months later, in December 2012, the Club’s board of directors notified the membership that it was contemplating amendments to the bylaws, including the adoption of a bylaw mandating arbitration of “any claim, grievance, demand, cause of action, or dispute of any kind whatsoever . . . of or by a Member past or present . . . arising out of, in connection with, or in relation to Club Membership, Club property, Club financial obligations of whatever nature, Club equipment, and/or Club and/or Member’s activity, and involving the Club and/or the Club’s officers, directors or agents.” When it did not receive a sufficient number of objections from members in response to these proposed amendments, Ironwood’s board adopted the arbitration provision into its bylaws effective December 28, 2012.
In January 2013, Ironwood filed a motion to compel plaintiffs to arbitrate their claim against it, based on Ironwood’s “recent bylaw amendment.” The Club asserted, without analysis, that because plaintiffs each agreed to abide by its bylaws when they became members, including a provision which allowed those bylaws to be amended, they were automatically deemed to have “accepted and agreed to” the arbitration amendment subsequently adopted. Plaintiffs opposed the motion, arguing (1) Ironwood’s amendment of its bylaws did not comply with either legal requirements for corporate voting or the bylaw’s own requirements, (2) Ironwood’s amendment of its bylaws did not establish their agreement to arbitrate this dispute, (3) the provision was unconscionable, and (4) Ironwood had waived any right to arbitrate by using the court process to litigate plaintiff’s claim.
The trial court denied the motion to compel arbitration, concluding that Ironwood’s motion represented an improper effort to apply its new arbitration bylaw retroactively to a pending case. The court reasoned that Ironwood’s subsequent amendment of its bylaws did not reflect any agreement by these [965] plaintiffs to arbitrate this already pending dispute. And because arbitration is a matter of agreement, no party can be compelled to a dispute he has not agreed to submit. The court also pointed out that “[t]aken to its logical extreme, [Ironwood’s] argument would allow for an ever shifting playing field. Indeed, [Ironwood] could arguably amend and require arbitration years into a lawsuit, or amend to make conduct that was wrongful when an action was filed allowable.”
DISCUSSION
On appeal, Ironwood makes three points. Its primary contention is that by accepting membership in the Club, plaintiffs agreed to be bound by its bylaws—including the provision for future amendments—and thus they “[n]ecessarily [a]greed” to its subsequent bylaw amendment requiring arbitration of disputes. Ironwood also disputes the idea that its application of the arbitration provision to this dispute qualifies as “retroactive,” because in Ironwood’s view, the dispute is “ongoing.” And third, it claims the trial court’s ruling contravenes the public policy which requires that any doubt as to whether an arbitration agreement governs a particular dispute must be resolved in favor of ordering arbitration. None of these points has merit.
1. Ironwood’s Power to Amend
Ironwood asserts that its bylaws constitute a contract between the Club and each of its members. (See King v. Larsen Realty, Inc. (1981) 121 Cal.App.3d 349, 357 [175 Cal.Rptr. 226].) We agree. However, the Club further contends that because the bylaws include a provision allowing it to amend them, the members—even formermembers—are deemed to have agreed to whatever amendments are made in accordance with that provision. We cannot agree with that further contention.
(1) Indeed, the contract Ironwood describes would qualify as illusory, and be unenforceable. “[W]hen a party to a contract retains the unfettered right to terminate or modify the agreement, the contract is deemed to be illusory.” (Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 15 [96 Cal.Rptr.2d 179, 999 P.2d 71].) On the other hand, while “an unqualified right to modify or terminate the contract is not enforceable[,] the fact that one party reserves the implied power to terminate or modify a unilateral contract is not fatal to its enforcement, if the exercise of the power is subject to limitations, such as fairness and reasonable notice.” (Id. at p. 16.)
And under California law, one very significant restriction on what might otherwise be a party’s unfettered power to amend or terminate the agreement governing the parties’ relationship is the implied covenant of good faith and [966] fair dealing. (Digerati Holdings, LLC v. Young Money Entertainment, LLC (2011) 194 Cal.App.4th 873, 885 [123 Cal.Rptr.3d 736].) The covenant operates “`as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party’s rights to the benefits of the contract.'” (Racine & Laramie, Ltd. v. Department of Parks & Recreation (1992) 11 Cal.App.4th 1026, 1031-1032 [14 Cal.Rptr.2d 335].) “The covenant of good faith finds particular application in situations where one party is invested with a discretionary power affecting the rights of another. Such power must be exercised in good faith.” (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc. (1992) 2 Cal.4th 342, 372 [6 Cal.Rptr.2d 467, 826 P.2d 710].)
(2) With respect to arbitration provisions specifically, this court has already held that the implied covenant of good faith and fair dealing prohibits a party from “mak[ing] unilateral changes to an arbitration agreement that apply retroactively to `accrued or known’ claims because doing so would unreasonably interfere with the [opposing party’s] expectations regarding how the agreement applied to those claims.” (Avery v. Integrated Healthcare Holdings, Inc. (2013) 218 Cal.App.4th 50, 61 [159 Cal.Rptr.3d 444].) In reaching this conclusion, we join other courts. (See Peng v. First Republic Bank (2013) 219 Cal.App.4th 1462, 1474 [162 Cal.Rptr.3d 545] [“The implied covenant also prevents an employer from modifying an arbitration agreement once a claim has accrued or become known to it.”]; Peleg v. Neiman Marcus Group, Inc. (2012) 204 Cal.App.4th 1425, 1465 [140 Cal.Rptr.3d 38] [“A unilateral modification provision that is silent as to whether contract changes apply to claims, accrued or known, is impliedly restricted by the covenant so that changes do not apply to such claims.”].)
(3) Thus, to the extent Ironwood intended to enact an arbitration bylaw that would govern this dispute—a dispute which had not only accrued, but was already being litigated in court by the time the arbitration bylaw became effective—it violated the covenant of good faith and fair dealing implied into the bylaws, and thus exceeded the proper scope of its amendment power. Consequently, there is no basis to infer that plaintiffs agreed in advance to be bound by such an attempt.
2. Retroactivity
Even if it were otherwise theoretically proper for a party to unilaterally impose an arbitration provision that applied to claims which had already accrued, there is an additional problem with Ironwood’s claim that its bylaw amendment reflected an agreement to arbitrate this dispute: i.e., there is nothing in the language of either the bylaws generally, or this specific [967] amendment, that states it is intended to have such a retroactive effect. (Cf. Peleg v. Neiman Marcus Group, Inc., supra, 204 Cal.App.4th at pp. 1432-1433 [in which the disputed provision actually stated it would apply to all unfiled claims, even those that had already accrued].)
The Club addresses this additional problem by denying that application of this arbitration provision to the instant case would qualify as retroactive. In the Club’s view, because plaintiffs have alleged their claim for declaratory relief reflects an “ongoing” dispute concerning the parties’ rights, duties and obligations under the loan agreements, it is distinguishable from the type of dispute that is “based upon some incident which occurred at some finite period of time in the past.” This distinction is specious.
All pending lawsuits—even those which are based on a specific past incident—reflect ongoing disputes. That is the very nature of a lawsuit. Until a lawsuit is resolved by settlement or judgment, or becomes moot, it necessarily reflects an ongoing dispute. Application of the arbitration bylaw to this case would qualify as retroactive because it would affect plaintiffs’ already accrued legal claims, as well as their already accrued rights to seek redress for those claims in court. (See Buttram v. Owens-Corning Fiberglas Corp. (1997) 16 Cal.4th 520, 528-529 [66 Cal.Rptr.2d 438, 941 P.2d 71] [proposition applies retroactively if it affects causes of action that accrued prior to its effective date].)
The Club also points out that even if this court were to construe this declaratory relief action as what it chooses to call a “pre-agreement dispute,” “the law does not otherwise forbid the arbitration of such a dispute.” We might agree with that point, as far as it goes, but the problem for Ironwood is that it doesn’t go very far. Coon v. Nicola (1993) 17 Cal.App.4th 1225 [21 Cal.Rptr.2d 846] (Coon), the case the Club relies on, provides no support for retroactive application of an arbitration provision in the context of this case.
In Coon, the plaintiff was treated by the defendant physician for injuries suffered in a mining accident. Several days later, the plaintiff visited the doctor in his office and signed an arbitration agreement. The agreement provided for arbitration of all claims arising out of “prospective care,” but also included an optional provision governing “`[r]etroactive [e]ffect.'” (Coon, supra, 17 Cal.App.4th at p. 1230.) That provision stated: “`If patient intends this agreement to cover services rendered before the date it is signed (for example, emergency treatment) patient should initial below: Effective as of date of first medical services.'” (Ibid.) The Coon court noted “[i]t is not disputed that respondent signed the agreement and separately initialed the clause expressly agreeing to arbitrate disputes stemming from the care appellant rendered prior to the office visit.” (Ibid., italics added.)
[968] Thus, Coon provides no authority for enforcing a unilaterally imposed retroactive arbitration agreement on a party who has not expressly consented to that retroactive application—which is what Ironwood is attempting to do here. Consequently, it offers no support for Ironwood’s position. Moreover, in the course of rejecting plaintiff’s contention that the retroactive agreement would be unenforceable even though he had expressly agreed to it, the Coon court makes a point that affirmatively harms Ironwood’s effort to enforce its new bylaw here: The court states that “[m]ost significantly, the present case does not limit appellant’s liability in any way but merely provides for a different forum in which to settle disputes.” (Coon, supra, 17 Cal.App.4th at p. 1237, italics added.) On this point as well, the Coon case is distinguishable from ours. The bylaw at issue before us, which Ironwood is attempting to apply retroactively, also purports to limit Ironwood’s liability, in that it additionally mandates a “waive[r of] all claims, rights and demands for punitive and consequential damages.” Coon provides no support for retroactive application of such a provision.
3. Public Policy
(4) Ironwood also relies on the strong public policy favoring arbitration provisions as the basis for asserting that any “`[d]oubts as to whether an arbitration clause applies to a particular dispute are to be resolved in favor of sending the parties to arbitration.'” (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189 [33 Cal.Rptr.2d 188].) However, that presumption is of no assistance to Ironwood here, because it is also true that “[a]rbitration is consensual in nature” (County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47 Cal.App.4th 237, 244 [54 Cal.Rptr.2d 628]) and “`[t]he right to arbitration depends on a contract'” between the parties (id. at p. 245). Thus, “`the policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate.'” (Victoria v. Superior Court (1985) 40 Cal.3d 734, 739 [222 Cal.Rptr. 1, 710 P.2d 833].)
And as we have already pointed out, Ironwood’s unilateral amendment of its bylaws, to add an arbitration requirement that purports to retroactively compel plaintiffs to arbitrate a dispute which is already pending in court, does not create a legally enforceable agreement to arbitrate that dispute. Stated simply, this case does not present any “doubt” as to whether Ironwood’s new arbitration bylaw might apply to this case.
Finally, we note that Ironwood’s fervent commitment to the arbitration of any claims its members might choose to file against it, stands in marked contrast to its apparent unwillingness to commit its own claims to the same system. The arbitration bylaw the Club seeks to enforce here applies only to “any claim, grievance, demand, [etc.,] of or by a Member past or present,[969] [etc.]” (Italics added.) These disputes brought by members are to be arbitrated before a “mutually agreed to retired Superior Court Judge.” By its terms, then, the provision does not extend to any claims brought by the Club itself. And if that omission were not clear enough, the bylaw goes on to specify that “[t]his arbitration provision shall not apply to any dispute arising out of the Club’s decision to impose any disciplinary action upon Members as set forth in these Bylaws.” And while the bylaw also provides for arbitration of “claims by the Club against a Member for the payment of dues, assessments, fees and/or use charges,”those arbitrations are required “to be administered by a judicial arbitration company or service in Riverside County that is selected by the Club.”
(5) Such a one-sided provision, especially when coupled with the purported waiver of any award of “punitive or consequential damages,” could be deemed unconscionable. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 118 [99 Cal.Rptr.2d 745, 6 P.3d 669] [“the doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself”].)
DISPOSITION
The order is affirmed. Respondents’ request for judicial notice of documents which were lodged, but not filed, in the trial court is denied. Respondents are to recover their costs on appeal.
O’Leary, P. J., and Bedsworth, J., concurred.
Appellant’s petition for review by the Supreme Court was denied April 15, 2015, S224954.
“Prevailing Party”
The Davis-Stirling Act does not define the term “prevailing party,” nor does it provide a metric or formula for making that determination. As a result, California Courts have “concluded that the test for prevailing party is a pragmatic one, namely whether a party prevailed on a practical level by achieving its main litigation objectives.” (Heather Farms HOA v. Robinson (1994) 21 Cal.App.4th 1568, 1574; See also “Prevailing Party & Attorney’s Fees.”)
Attorney’s Fees & Alternative Dispute Resolution (“ADR”) Neither an association nor any of its members may file an “enforcement action” (i.e., a lawsuit) in superior court unless the parties to the dispute have “endeavored” to submit their dispute to “alternative dispute resolution” (ADR) in accordance with Civil Code Section 5930. (Civ. Code § 5930(a); See also “Alternative Dispute Resolution (ADR).”) ADR is essentially mediation where the parties to a dispute (i.e., the homeowner and the HOA) utilize the services of a third-party mediator to try and come to a mutual resolution. While each party to ADR is generally required to bear its own attorney’s fees, those attorney’s fees may become recoverable in any subsequent litigation regarding the dispute or to enforce a settlement agreement that was reached by the parties in ADR. (Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128; Rancho Mirage Country Club HOA v. Hazelbaker (2016) 2 Cal.App.5th 252.)
Other Causes of Action
The following provisions of the California Civil Code and Code of Civil Procedure provide for recovery of attorney’s fees in actions that may involve associations but not necessarily relate to enforcement of an association’s governing documents:
Almanor Lakeside Villas Owners Association v. Carson
(2016) 246 Cal.App.4th 761
Where both sides achieved some positive net effect as a result of the court’s ruling, a prevailing party determination is made by comparing the practical effect of the relief attained by each; After resolving the issue of prevailing party in an action to enforce the governing documents, a trial court has no discretion to deny attorney’s fees.
Grossman v. Park Fort Washington Association
(2012) 212 Cal. App. 4th 1128
Pre-litigation attorney’s fees that are incurred in alternative dispute resolution (ADR) are recoverable by the prevailing party in subsequent ligation.
Rancho Mirage Country Club Homeowners Association v. Hazelbaker
(2016) 2 Cal.App.5th 252
An action to enforce a settlement agreement reached between a HOA and an owner through Alternative Dispute Resolution (ADR) was held to be an action to enforce the governing documents entitling the prevailing party to an award of attorney’s fees and costs pursuant to Civ. Code § 5975.
Heather Farms Homeowners Association v. Robinson
(1994) 21 Cal.App.4th 1568
The determination as to who is the “prevailing party” entitled to its attorney’s fees under the Davis-Stirling Act is based on the court’s analysis of which party prevailed on a practical level. When that determination is made, the court’s ruling should be affirmed on appeal absent an abuse of discretion.
Salehi v. Surfside III Condominium Owners Association
(2011) 200 Cal.App.4th 1146
A HOA is deemed a prevailing party entitled to recover its attorney’s fees where the outcome of the lawsuit results in the HOA realizing its litigation objectives on a practical level.
Tract 19051 Homeowners Association v. Kemp
(2015) 60 Cal. 4th 1135
Attorney’s fees may be recovered by the prevailing party under Civ. Code § 5975 in an action to enforce the governing documents regardless of whether the association is in fact a common interest development that is subject to the Davis-Stirling Act.
Martin v. Bridgeport Community Association
(2009) 173 Cal.App.4th 1024
Plaintiff’s lack of standing does not preclude Defendant HOA’s ability to recover its attorney’s fees as the prevailing party.
In order for a party to initiate alternative dispute resolution (“ADR”), the party is required to serve on the other parties to the dispute a “Request for Resolution” pursuant to Civil Code Section 5935. The Request for Resolution must include all of the following items of information:
A notice that the party receiving the Request for Resolution is required to respond within thirty (30) days of receipt or the request will be deemed rejected; and (Civ. Code § 5935(a)(3).)
If the party on whom the request is served is the member, a copy of Article 3, of Chapter 10 of the Davis-Stirling Act (a copy of Civil Code Sections 5925-5965). (Civ. Code § 5935(a)(4).) However, even if an association does not entirely satisfy this requirement and a lawsuit is ultimately filed by the association, it may not provide grounds to dismiss the lawsuit unless the association’s failure to provide the member with copies of the ADR Code Sections results in prejudice to the member. (Ryland Mews HOA v. Munoz (2015) Cal. App. 4th 705, 710-711.)
Method of Service The Request for Resolution must be served by personal delivery, first-class mail, facsimile transmission, or “other means reasonably calculated to provide the party on whom the request is served actual notice of the request.” (Civ. Code § 5935(b).) Once the Request for Resolution is validly served, the party on whom the Request for Resolution is served has thirty (30) days to accept or reject the request; if the party does not respond within that timeframe, the Request for Resolution is deemed rejected. (Civ. Code § 5935(c).)
ADR Timelines
30 Days to Accept Request for Resolution – A party on whom a Request for Resolution is served has thirty (30) days following service to accept or reject the request. (Civ. Code § 5935(c).) If the party does not accept the request within that period (or simply fails to respond), the request is deemed rejected by that party. (Civ. Code § 5935(c).)
90 Days to Complete ADR – If the party on whom a Request for Resolution is served accepts the request, the parties are required to complete ADR within ninety (90) days after the date the acceptance was received, unless the period is extended by written stipulation signed by both parties. (Civ. Code § 5940(a).)
Effect on Statute of Limitations If a Request for Resolution is served before the applicable statute of limitations has run for commencing an enforcement action, the statute of limitations is tolled:
During the the thirty (30) day period for a response a Request for Resolution, (Civ. Code § 5945(a).) and
If the Request for Resolution is accepted, during the the ninety (90) day period to complete ADR, including any extension of time for completing the ADR that is stipulated to by the parties. (Civ. Code § 5945(b).)
[Architectural Control; Nuisances; Hardsurface Flooring] A HOA has the authority to place restrictions on the type of flooring that may be installed in a homeowner’s unit in order to prevent the creation of nuisances.
Plastiras & Terrizzi, Michael Patrick Terrizzi; and Mariam Smairat for Plaintiffs and Respondents.
Ruben Munoz, in pro. per.; and John M. Wadsworth for Defendant and Appellant.
OPINION
ELIA, Acting P. J. —
In this dispute between defendant Ruben Munoz and plaintiff Ryland Mews Homeowners Association (HOA or Association), plaintiff obtained a preliminary injunction requiring Munoz to remedy the unauthorized modification of the flooring in his upstairs condominium unit to reduce the transmission of noise to the unit below. Defendant contends that the superior court improperly balanced the prospective harm to each party and erroneously concluded that plaintiff would prevail at trial. We find no abuse of discretion and will therefore affirm the order.
Background
When defendant and his wife moved into unit No. 322 of the subject property in February 2011, he replaced the carpets with hardwood floors to accommodate his wife’s severe dust allergy. After the installation, Resty Cruz and David Yborra, occupants of the unit below, began to experience “sound transfer” through the floor. Before defendant’s occupancy Cruz and Yborra had never had any problems with sound transmission from above. But after February 2011 the noise from upstairs at all hours of the day and night became “greatly amplified” and “intolerable,” so that Cruz and Yborra found it difficult to relax, read a book, watch television, or sleep.
On November 28, 2011, Susan Hoffman, an employee of the firm that provided property management services for the Association, wrote to defendant, notifying him that his alteration of the flooring appeared to have been made without prior approval of the HOA. Hoffman requested a copy of the written approval in the event that the property management files were incomplete. Defendant did not respond within the 30 days Hoffman had given him, so on January 31, 2012, with authorization from the HOA board of directors, Hoffman wrote to defendant again, this time requesting alternative dispute resolution (ADR) under the Davis-Stirling Common Interest Development Act, Civil Code former section 1369.530 (now Civ. Code, § 5935).[FN. 1][708] Included in the letter was the text of former section 1369.530, which expressly allowed defendant 30 days in which to accept or reject ADR; after that period, the request was to be deemed rejected. (Former § 1369.530, subd. (c).) Defendant still did not respond.
Plaintiff brought this action on July 12, 2012, seeking an injunction and declaratory relief. Plaintiff alleged that defendant had violated the restrictions applicable to all residents at the time of the floor installation. On September 28, 2012, plaintiff applied for a preliminary injunction, “restraining and enjoining” defendant from “[m]aintaining hardwood flooring” and from violating other HOA restrictions. Attaching declarations from Hoffman, Cruz, and Yborra, plaintiff alleged that without the requested injunction, adjacent homeowners would continue to suffer “great and immediate irreparable harm in that Defendant’s hardwood floors create an acoustic nuisance, both violating the neighboring owner’s sense of quiet enjoyment, but also [sic] reducing property values for all owners within the Association.” Plaintiff further asserted that it was “inevitable” that it would ultimately prevail in the action and that compliance with the HOA rules would be of only “moderate” cost to defendant.
Defendant opposed the motion, contending that hardwood floors were necessary in his home because his wife was severely allergic to dust; consequently, removing the floors and installing new floors not only would be expensive but would endanger his wife’s health. He found the likelihood of plaintiff’s success on the merits to be “questionable” and maintained that no irreparable harm had been shown. Both defendant and his wife, Elena Delgado, submitted declarations describing Delgado’s medical condition. Defendant also stated that he had received no complaints about noise between the time of installation in February 2011 and the notice of November 28, 2011.
On December 12, 2012, defendant moved to strike the complaint, enter judgment on the pleadings, and refer the matter to ADR. Defendant contended that plaintiff had failed to file a certificate stating that the ADR requirements set forth in former section 1369.530 had been met or waived. The court granted defendant’s motion to strike as authorized by former section 1369.560, subdivision (b). It granted plaintiff leave to amend, however, and it denied defendant’s motion for judgment on the pleadings as well as his request for referral to ADR. Plaintiff then amended its complaint and submitted a certificate of compliance in accordance with former section 1369.560, subdivision (a)(2), (3).
The hearing on the injunction request took place on December 13, 2012. The court confirmed with plaintiff that it was not demanding that defendant [709] “tear up the floors,” but sought only a “proposal through a contractor” for a modification consistent with the HOA rules. Plaintiff added a request for an interim solution, that throw rugs be placed on 80 percent of the floors outside the kitchen and bath areas. The court found those suggestions reasonable and granted the request. Its written order, however, was not filed until April 2013.
In March 2013 defendant demurred to the first amended complaint and again moved to strike, alleging an insufficient certificate showing compliance with the statutory ADR provisions, plaintiff’s failure “to state facts demonstrating a cause of action,” and its failure “to demonstrate the necessity for injunctive relief.” This time, however, the court overruled the demurrer and denied the motion to strike, observing that factual disputes existed which should not be resolved at the pleading stage of the litigation.
On the same day, April 17, 2013, the court filed its order granting the preliminary injunction. As the language of the order informs defendant’s analysis of it as an unjustified mandatory injunction, we quote the relevant portions: “1. Any further installation of flooring or floor covering in your separate interest located at 435 N. 2nd St. #322 San Jose, CA shall be in compliance with the Association governing documents. [¶] 2. You shall reduce undue transmission of acoustic trespass or nuisance from the subject unit in violation of the governing documents. Such transmissions shall be reduced as follows: … 80% of the total flooring area, other than kitchen or bathrooms[,] must be covered with throw rugs or comparable sound[-] dampening material, in particular those areas with heavy travel such as hallways; [¶] 3. You shall present to the Ryland Mews Homeowners Association, through its Board of Directors or design review committee, a proposal for modification to the existing floor covering, such proposal to be within the specific approved guidelines and specifications for floor covering modifications established by the Association.” The modification proposal had to be submitted within 30 days. If plaintiff rejected the proposal in good faith, based on the Association’s architectural standards, defendant then had an additional 15 days to supplement or revise his proposal. If defendant’s plans were approved, defendant had 15 days thereafter to initiate construction of the modifications and 60 days to complete the construction. He then was required to notify the Association and “cooperate with a compliance inspection.” From that order granting the injunction defendant brought this timely appeal.
Discussion
Defendant raises two issues on appeal. He first contends that the court abused its discretion in granting the injunction, which he classifies as mandatory. He then asserts that the court “lacked jurisdiction” to issue the [710] injunction because the ADR request did not comply with former section 1369.530 (now § 5935). Because this second issue will be dispositive if defendant is correct, we address it first.
1. Compliance with former section 1369.530
(1) Under former section 1369.520, subdivision (a), plaintiff, as an association managing a common interest development, was prohibited from filing an action for declaratory, injunctive, or writ relief against defendant unless the parties had “endeavored to submit their dispute to alternative dispute resolution pursuant to this article.” Plaintiff could initiate this process by complying with former section 1369.530. That section required plaintiff to serve on defendant a “Request for Resolution” containing the following: “(1) A brief description of the dispute between the parties. [¶] (2) A request for alternative dispute resolution. [¶] (3) A notice that the party receiving the Request for Resolution is required to respond within 30 days of receipt or the request will be deemed rejected. [¶] (4) If the party on whom the request is served is the owner of a separate interest, a copy of this article.” (Former § 1369.530, subd. (a).)
Defendant’s grievance is directed at the last condition. He complains that he did not receive a copy of the entire article, which comprised the ADR provisions applicable to common interest developments. (See former §§ 1369.510-1369.570.) Defendant insists that in its ADR request to him plaintiff did not substantially comply with former section 1369.530, subdivision (a)(4), when it included a copy of only that statute. He then contends, “Because Mr. Munoz challenged the defect by way of a demurrer and a motion to strike, the trial court should have granted his relief.”
We are not, however, reviewing the court’s order overruling defendant’s demurrer and denying his motion to strike the first amended complaint.[FN. 2] It was in that demurrer and motion to strike, not his opposition to the injunction, that defendant raised the issue of noncompliance with former section 1369.530. Furthermore, defendant cites no authority for his assertion that plaintiff’s failure to provide the entire article 2 of chapter 7 of title 6 of part 4 of division 2 in requesting ADR deprived the court of jurisdiction to issue the preliminary injunction.
Nor does he identify any prejudice attributable to plaintiff’s technical deficiency in complying with the statute. While pointing out that the “obvious purpose” of former section 1369.530, subdivision (a)(4), is to “apprise the [711] owner of important procedural rights and duties involved in the ADR process,” defendant, an attorney, has never asserted that he did not understand his rights. The letter he received requesting ADR informed him that he had 30 days to accept or reject the request, and that if he did not respond, he would be deemed to have rejected it. He implicitly rejected the request. Although the request letter contained the entire text of former section 1369.530 — including subdivision (a)(4), the provision requiring plaintiff to provide a copy of article 2 of chapter 7 of title 6 of part 4 of division 2 — defendant never complained that he had not received the entirety of that article until his motion to strike the complaint. And even then his supporting declaration did not relate any confusion about or misunderstanding of his rights. Also absent in defendant’s argument is any indication that he would have accepted plaintiff’s request if he had received the entire article governing the procedures involved in ADR between him and the Association. In these circumstances we cannot find prejudice in the omission of the remaining statutory provisions in article 2.[FN. 3]
2. Merits of the preliminary injunction request
(2) In deciding whether to issue a preliminary injunction, a court must weigh two “interrelated” factors: (1) the likelihood that the moving party will ultimately prevail on the merits and (2) the relative interim harm to the parties from issuance or nonissuance of the injunction. (Hunt v. Superior Court (1999) 21 Cal.4th 984, 999 [90 Cal.Rptr.2d 236, 987 P.2d 705]; Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432 [261 Cal.Rptr. 574, 777 P.2d 610].) “[T]he decision to grant a preliminary injunction rests in the sound discretion of the trial court.” (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69 [196 Cal.Rptr. 715, 672 P.2d 121].) Accordingly, on appeal we review that decision for abuse of discretion. “A trial court will be found to have abused its discretion only when it has `”exceeded the bounds of reason or contravened the uncontradicted evidence.”‘ [Citations.] Further, the burden rests with the party challenging the injunction to make a clear showing of an abuse of discretion.” (Ibid.; Oiye v. Fox (2012) 211 Cal.App.4th 1036, 1047 [151 Cal.Rptr.3d 65].)
[712] In reviewing the lower court’s ruling for abuse of discretion, we do not reweigh the evidence or evaluate the credibility of witnesses. “`[T]he trial court is the judge of the credibility of the affidavits filed in support of the application for preliminary injunction and it is that court’s province to resolve conflicts.’ [Citation.] Our task is to ensure that the trial court’s factual determinations, whether express or implied, are supported by substantial evidence. [Citation.] Thus, we interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court’s order.” (Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 625 [43 Cal.Rptr.2d 774].)
Defendant contends that a higher level of scrutiny is called for here because the superior court’s order was “clearly a mandatory injunction,” not a prohibitory one.[FN. 4] In his view the injunction “cannot bear that scrutiny because the facts presented in support of the injunction did not demonstrate that this was an extreme case in which the right to mandatory injunctive relief was clear, or that irreparable harm would ensue without the order actually granted.”
Defendant’s argument in effect asks this court to reweigh the evidence. He repeats his assertion that he did not violate the HOA restrictions; two of the alleged rules “didn’t exist when he installed the hardwood floors. He couldn’t have breached them.” He further suggests that his own opposition “cast[s] severe doubt on the credibility of the sound problems described by Mr. Yborra and Mr. Cruz.” Defendant further contests the remedy imposed in the injunction. Noting the interim measure of using throw rugs on the floors, he insists that there were “other, less draconian” remedies than “requiring Mr. Munoz to tear out his entire floor.”
Defendant’s analysis is flawed. Not only does he request an improper reweighing of the witnesses’ credibility, his contentions are premised on an inaccurate representation of the evidence presented below. Contrary to defendant’s assumption, for example, plaintiff was not relying on the 2012 HOA rules; in asking for the injunction it clearly relied on the 1993 [713] “Declaration of Restrictions,” which was in effect when defendant replaced the carpeting with hardwood floors. Section 3.3 of that document provided, “No activity shall be conducted in any Unit or Common Area that constitutes a nuisance or unreasonably interferes with the use or quiet enjoyment of the occupants of any other Condominium.” Section 3.17 more specifically stated, “No Unit shall be altered in any manner that would increase sound transmission to any adjoining or other Unit, including, but not limited to, the replacement or modification of any flooring or floor covering that increases sound transmissions to any lower Unit.” And under section 7.2(v), prior written approval had to be obtained from the architectural review committee before “[a]ny replacement or modification to any floor coverings or wall or ceiling materials or any penetration or other disturbance of any wall, floor, or ceiling, if the replacement[,] modification, penetration or disturbance could result in any increase in the sound transmissions from the Unit to any other Unit.” Defendant’s protest that he was wrongly accused of violating nonexistent restrictions is without merit.
Defendant further misrepresents the court’s order. The court did not direct him to tear out the hardwood floors; at the hearing it emphasized more than once that it did not want anyone inferring that “he’s got to go back out and tear up the floors. That’s not what I’m ordering.” What the court did order was a proposal from defendant to the board of directors or to a design review committee for modifying the floors to bring them into compliance with the guidelines established by the Association.
(3) We see no abuse of discretion in such an order, even if the injunction was of a mandatory rather than prohibitory nature subject to heightened appellate scrutiny. Indeed, the directive to find a compromise in modifying the flooring, as well as the interim remedy of using throw rugs, reflected a balanced consideration of the circumstances of everyone involved, including the residents below who were adversely affected by defendant’s violation of the noise and nuisance restrictions. The finding that defendant’s violation of the HOA rules had resulted in a continuing “great nuisance” for the occupants below was supported by substantial evidence in the declarations of Cruz and Yborra, whose credibility was for the superior court, not this court, to determine. The evidence clearly supported the court’s weighing of the relative interim harm to the parties and its implied determination that plaintiff would ultimately prevail on the merits. We must conclude, therefore, that defendant has failed to meet his burden to show that the court exceeded the bounds of reason or contravened uncontradicted evidence. Reversal is not required.
[714] Disposition
The order is affirmed.
Bamattre-Manoukian, J., and Mihara, J., concurred.
[FN. 1] All further statutory references are to the Civil Code.
[FN. 2] The challenge to this order was made by a petition for writ of mandate, which this court summarily denied. On appeal defendant duplicates the argument raised in the petition, even to the extent that he refers to himself as the real party in interest.
[FN. 3] In addition to former section 1369.530, article 2 of chapter 7 of title 6 of part 4 of division 2 consisted of (1) an explanation of the terms “`[a]lternative dispute resolution'” and “`[e]nforcement action'” (former § 1369.510); (2) the requirement that ADR be attempted before an association may file an action for injunctive, declaratory, or writ relief (former § 1369.520); (3) the requirement that ADR be completed within 90 days (former § 1369.540); (4) the tolling of the statute of limitations after the ADR request is served (former § 1369.550); (5) the requirement of a certificate of compliance (former § 1369.560); (6) referral of the action to ADR by stipulation of the parties (former § 1369.570); (7) a provision governing the court’s consideration of fees and costs (former § 1369.580); and (8) a requirement that an association provide the members with an annual summary of article 2 (former § 1369.590).
[FN. 4] “`[T]he general rule is that an injunction is prohibitory if it requires a person to refrain from a particular act and mandatory if it compels performance of an affirmative act that changes the position of the parties.'” (Oiye v. Fox, supra, 211 Cal.App.4th at p. 1048, quoting Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435, 446 [60 Cal.Rptr.2d 641].) Although a preliminary mandatory injunction is subject to stricter review on appeal, (Teachers Ins. & Annuity Assn. v. Furlotti (1999) 70 Cal.App.4th 1487, 1493 [83 Cal.Rptr.2d 455]), “[t]he principles upon which mandatory and prohibitory injunctions are granted do not materially differ. The courts are perhaps more reluctant to interpose the mandatory writ, but in a proper case it is never denied” (Allen v. Stowell (1905) 145 Cal. 666, 669 [79 P. 371]).
Allows for either party to IDR to be assisted by an attorney at their own cost; Any resolution reached at IDR must be in writing and signed by both parties.
Current Status: Chaptered
FindHOALaw Quick Summary:
Civil Code Sections 5910 and 5915 require an association to provide a fair, reasonable and expeditious dispute resolution procedure for resolving a dispute between an association and a members. This is commonly referred to as “Internal Dispute Resolution” (or “IDR”). AB 1738 (Chau) would allow for either party to the IDR to be assisted by an attorney or another person in explaining their positions, at their own cost. It would further require that any agreement obtained in IDR be in writing and signed by both parties.
*UPDATE: AB 1738 was signed into law on September 18, 2014. Its changes to the law become effective on January 1, 2015.
When ADR is Required; Prerequisite to “Enforcement Action”
Neither an association nor any of its members may file an “enforcement action” (i.e., a lawsuit) in superior court unless the parties to the dispute have “endeavored” to submit their dispute to “alternative dispute resolution” (ADR) in accordance with Civil Code Section 5930. (Civ. Code § 5930(a).)
ADR Defined
“Alternative dispute resolution” (ADR) is defined as “mediation, arbitration, conciliation, or other nonjudicial procedure that involves a neutral third party in the decision making process.” (Civ. Code § 5925(a).)
“Enforcement Action” Defined
An “enforcement action” means a civil action or proceeding, other than a cross-complaint, for any of the following purposes:
Enforcement of the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code); (Civ. Code § 5925(b)(2).)
Exceptions to ADR Requirement Offering ADR is not required in connection with the following enforcement actions:
If the party is filing a claim in small claims court for money damages; (Civ. Code § 5930(c).)
Where preliminary or temporary injunctive relief is necessary; or (Civ. Code § 5950(a)(3).)
A dispute involving delinquent assessments unless the member requests ADR with the association in connection with the assessment dispute. (Civ. Code §§ 5930(d), 5658(a).)
Participation in ADR When “internal dispute resolution” (IDR) is invoked by a member, the association is obligated to participate in IDR. (Civ. Code § 5910(c); See also “Internal Dispute Resolution (IDR).”) However, there is no such requirement in the Civil Code when a member offers his/her association ADR, though such a requirement may be contained in the provisions of an association’s governing documents (i.e., in its CC&Rs).
Refusal to Participate & Attorney’s Fees – “In an enforcement action in which attorney’s fees and costs may be awarded, the court, in determining the amount of the award, may consider whether a party’s refusal to participate in [ADR] before the commencement of the action was reasonable.” (Civ. Code § 5960.)
Certificate of Compliance At the time an enforcement action is commenced (i.e., a lawsuit is filed), the party commencing the enforcement action is required to file with the initial pleading a certificate stating that one (1) or more of the following conditions are satisfied:
If the party fails to file the required certificate, it provides grounds for a demurrer or a motion to strike “unless the court finds that dismissal of the action for failure to comply with the [Civil Code’s ADR requirements] would result in substantial prejudice to one of the other parties.” (Civ. Code § 5950(b).)
Initiating ADR: “Request for Resolution” To initiate ADR, a party is required to serve on the other parties to the dispute a “Request for Resolution” pursuant to Civil Code Section 5935. In sum, the Request for Resolution includes a description of the dispute, a formal request for ADR, a notice of the required response timeline, and a copy of the Civil Code’s ADR provisions (if the party on whom the request is served is a member of the association). (Civ. Code § 5935(a); See also “Initiating ADR: Request for Resolution.”)
ADR Timelines
30 Days to Accept Request for Resolution – A party on whom a Request for Resolution is served has thirty (30) days following service to accept or reject the request. (Civ. Code § 5935(c).) If the party does not accept the request within that period (or simply fails to respond), the request is deemed rejected by that party. (Civ. Code § 5935(c).)
90 Days to Complete ADR – If the party on whom a Request for Resolution is served accepts the request, the parties are required to complete ADR within ninety (90) days after the date the acceptance was received, unless the period is extended by written stipulation signed by both parties. (Civ. Code § 5940(a).)
Effect on Statute of Limitations If a Request for Resolution is served before the applicable statute of limitations has run for commencing an enforcement action, the statute of limitations is tolled:
During the the thirty (30) day period for a response a Request for Resolution, (Civ. Code § 5945(a).) and
If the Request for Resolution is accepted, during the the ninety (90) day period to complete ADR, including any extension of time for completing the ADR that is stipulated to by the parties. (Civ. Code § 5945(b).)
ADR Costs Borne by the Parties The costs of ADR (i.e., the fees to use a neutral third party mediator or arbitrator) must be borne by the parties to ADR. (Civ. Code § 5940(c).) This requirement for a member to incur costs associated with the ADR proceeding is one of the major distinctions between ADR and internal dispute resolution (IDR); in an IDR proceeding, the member may not be charged a fee to participate in IDR. (Civ. Code § 5910(g); See also “Internal Dispute Resolution (IDR).”)
Recovery of Attorney’s Fees The parties to ADR must generally bear their own attorney’s fees. However, there may be circumstances where attorney’s fees may be recoverable by a party that prevails in a subsequent lawsuit:
ADR Attorney’s Fees are Recoverable in Subsequent Litigation Reasonable attorney’s fees that are incurred by a party in ADR are recoverable by that party if it prevails in any subsequent litigation. (Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128.)
Attorney’s Fees to Enforce a Settlement Agreement Reached in ADR are Recoverable
If a settlement agreement is reached in ADR, and a subsequent lawsuit becomes necessary to enforce compliance with that settlement agreement, the prevailing party in the lawsuit is entitled to recover its reasonable attorney’s fees and costs. (Rancho Mirage Country Club HOA v. Hazelbaker (2016) 2 Cal. App. 5th 252.)
Summary of ADR Procedures in Annual Policy Statement
An association must include a summary of the Civil Code’s provisions pertaining to ADR within the association’s annual policy statement. (Civ. Code § 5965.) The summary must include the following language in accordance with Civil Code Section 5965(a):
“Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 5930 of the Civil Code may result in the loss of the member’s right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.”
(a) An association shall annually provide its members a summary of the provisions of this article that specifically references this article. The summary shall include the following language:
Failure of a member of the association to comply with the alternative dispute resolution requirements of Section 5930 of the Civil Code may result in the loss of the member’s right to sue the association or another member of the association regarding enforcement of the governing documents or the applicable law.
(b) The summary shall be included in the annual policy statement prepared pursuant to Section 5310.
(Added by Stats. 2012, Ch. 180, Sec. 2. Effective January 1, 2013. Operative January 1, 2014, by Sec. 3 of Ch. 180.)
