Tag Archives: Litigation

AB-1184 (Patterson) Common interest developments: association management and meeting procedures.

Would make substantive changes to the Open Meeting Act, association records inspection, and operating rule changes.

Current Status: Pending

FindHOALaw Quick Summary:

The Davis-Stirling Common Interest Development Act requires the board of an association to provide general notice of a proposed rule change at least 28 days before making the rule change, in accordance with certain procedures. However, existing law permits the board to make an emergency rule change if it determines that the change is required to address an imminent threat to public health or safety, or an imminent risk of substantial economic loss to the association.

This bill would amend Civil Code Section 4360 to require the general notice for an emergency rule change to include the text of the rule change, a description of its purpose and effect, and the date when the rule change will expire.

The Common Interest Development Open Meeting Act prohibits the board of a common interest development from taking action on any item of business outside of a board meeting. Existing law also prohibits the board from conducting a meeting via a series of electronic transmissions, except in specified emergency circumstances.

This bill would amend Civil Code Section 4910 to prohibit a majority of the directors of the board, outside an authorized meeting, from using a series of communications of any kind, directly or through intermediaries, to discuss, deliberate, or take action on any item of business within the board’s subject matter jurisdiction, except in an emergency. The bill would also exempt from this prohibition certain informational and ministerial communications that do not solicit responses, do not involve discussion among a majority of directors, and do not result in board action.

Existing law authorizes the board to adjourn to, or meet solely in, executive session to consider litigation and other specified matters. Existing law requires any matter discussed in executive session to be generally noted in the minutes of the immediately following meeting that is open to the entire membership.

This bill would add Civil Code Section 4921 to require the board, if the association becomes involved in litigation, to provide notice of the occurrence as part of the annual budget report distributed to the members. It further amends Civil Code Section 4935 to require that discussions regarding ongoing litigation have the case name included as part of the executive session meeting minutes.

This bill would add Civil Code Section 4941 to require, if open session meetings of the board are electronically recorded using audio, or audio and video, that the recordings be considered a record of the association and to be available to members on the same basis as written meeting minutes. The bill would require notice to be given at the beginning of every open session of the board that the meeting is being recorded.

Existing law requires the minutes, minutes proposed for adoption that are marked to indicate draft status, or a summary of the minutes of a board meeting, other than an executive session, to be available to members within 30 days of the meeting and distributed to a member upon request and upon reimbursement of the association’s cost for making that distribution.

This bill would amend Civil Code Section 4950 to prohibit the imposition of a charge for minutes that are distributed electronically. The bill would allow minutes posted on the association website to meet minute distribution requirements. This bill would also require the minutes, or proposed minutes, to include specified information, including the date and time of the meeting.

Under existing law, the operating rules are part of the governing documents of a common interest development. Existing law requires an amendment to the governing documents to be held by secret ballot in accordance with specified procedures.

This bill would amend Civil Code Section 5100 to exclude an amendment to the operating rules from the requirement that the amendment be held by secret ballot.

Existing law requires the board provide general notice of the tabulated results of the election within 15 days of the election.

This bill would amend Civil Code Section 5120 to require the meeting minutes to state the term for each elected director.

Existing law permits an association to bill a requesting member for the direct and actual cost of copying and mailing requested association records.

This bill would amend amend Civil Code Section 5205 to prohibit the association from charging for the emailing of documents already in electronic format and which do not require any redacting.

Existing law authorizes a member to bring a civil action to enforce that member’s right to inspect and copy association records.

This bill would amend Civil Code Section 5235 to require the court to award a member who prevails in a civil action reasonable attorney’s fees and court costs, and to allow the court to impose a civil penalty of up to $500 for each violation.

View more info on AB 1184
from the California Legislature's website

Related Links

‘Substantial Compliance Test’ Possibly Applicable to Open Meeting Act Requirements Published on HOA Lawyer Blog (01/05/16) Email Discussion Between HOA Board Members are not "Meetings" Published on HOA Lawyer Blog (09/185/23)

AB-21 (DeMaio) Common interest developments: association management and meeting procedures.

Would enact the Homeowner Association Accountability and Transparency Act of 2025 to make substantive changes to the Open Meeting Act, association records, and records inspection, and would impose additional penalties for violations of these provisions.

Current Status: Dead

FindHOALaw Quick Summary:

The Davis-Stirling Common Interest Development Act governs the management and operation of common interest developments by an association. If a provision of the Act requires an association to deliver a document by “individual delivery” or “individual notice,” the Act requires the association to deliver that document in accordance with the preferred delivery method specified by the member. Existing law also requires the board of an association to provide general notice of a proposed rule change at least 28 days before making the rule change, in accordance with certain procedures.

This bill would amend Civil Code Section 4360 to require the board to provide individual notice of a proposed rule change.

Existing law prohibits the board of a common interest development from taking action on any item of business outside of a board meeting. Existing law also prohibits the board from conducting a meeting via a series of electronic transmissions, except in specified emergency circumstances.

This bill would amend Civil Code Section 4910 to prohibit a majority of the members of the board, outside an authorized meeting, from conducting communications of any kind, directly or through intermediaries, to discuss, deliberate, or take action on any item of business within the board’s subject matter jurisdiction.

Existing law requires an association to generally give notice of the time and place of a board meeting at least 4 days before the meeting and requires the notice to contain the agenda for the meeting.

This bill would amend Civil Code Section 4920 to require the notice containing the agenda to have instructions on how a member may get a copy of the agenda packet for the open session portion of the meeting and would establish procedures for the board to follow in responding to those requests. This bill would also amend Civil Code Section 5200 to include all documents constituting the agenda packet of meetings of the members, the board, and any committees appointed by the board as association records.

Existing law authorizes the board to adjourn to, or meet solely in, executive session to consider litigation and other specified matters. Existing law requires any matter discussed in executive session to be generally noted in the minutes of the immediately following meeting that is open to the entire membership.

This bill would add Civil Code Section 4921 to require the board, if the association becomes involved in litigation, to announce the litigation at its subsequent meeting, including stating the name of the court and case number in the meeting minutes. The bill would also require the board, if the association files an insurance claim or has an insurance policy change, to announce the claim or policy change at its subsequent meeting. The bill would further amend Civil Code Section 4935 to require discussions regarding ongoing litigation to have the case name included as part of the executive session meeting minute notes.

This bill would add Civil Code Section 4941 to require open session meetings of the board to be electronically recorded using audio, or audio and video, and would consider the recordings to be a record of the association and to be available to members on the same basis as written meeting minutes. The bill would require notice to be given at the beginning of every open session of the board that the meeting is being recorded.

Existing law requires the minutes, minutes proposed for adoption that are marked to indicate draft status, or a summary of the minutes of a board meeting, other than an executive session, to be available to members within 30 days of the meeting and distributed to a member upon request and upon reimbursement of the association’s cost for making that distribution.

This bill would amend Civil Code Section 4950 to prohibit a charge for minutes distributed electronically. The bill would require the minutes, or proposed minutes, to include specified information, including the date and time of the meeting and whether a quorum of directors was established.

Existing law authorizes a member to bring a civil action for declaratory or equitable relief for a violation by the association of specified provisions governing board meetings within one year of the date the cause of action accrues. Existing law entitles a member who prevails in a civil action under these provisions to reasonable attorney’s fees and court costs.

This bill would amend Civil Code Section 4955 to require a court to void any action taken by the board at a meeting shown to be conducted in violation of the Open Meeting Act. The bill would authorize a cause of action under those provisions to be brought in either superior court or small claims court. The bill would also require a member who prevails in a civil action brought in small claims court to be awarded court costs and reasonable attorney’s fees incurred.

Under the Davis-Stirling Act, the operating rules are a part of the governing documents of a common interest development. The Act requires an amendment to the governing documents to be held by secret ballot.

This bill would amend Civil Code Section 5100 to exclude an amendment to the operating rules from the requirement that the amendment be held by secret ballot. The bill would also prohibit a member from being denied a ballot for any reason other than not being a member at the time when the ballots are distributed.

Existing law requires the board provide individual notice of the tabulated results of the election within 15 days of the election. This bill would amend Civil Code Section 5120 to require the meeting minutes and the individual notice of the election results to state the term for each elected director.

This bill would also amend Civil Code Section 5200 to include signature-redacted copies of voter outer envelopes to association election materials. It would further amend Civil Code Section 5205 to require the association to make available election records in the custody of an association’s vendors for inspection and copying by a member of the association. The association may not charge for the emailing of documents already in electronic format and which do not require any redacting.

Existing law authorizes a member to bring a civil action to enforce that member’s right to inspect and copy association records.

This bill would amend Civil Code Section 5235 to authorize a member to bring a civil action for declaratory, injunctive, and equitable relief and civil penalties. The bill would authorize a cause of action under those provisions to be brought in either superior court or small claims court. The bill would also require a member who prevails in a civil action brought in small claims court to be awarded court costs and reasonable attorney’s fees incurred. A prevailing association may not recover any costs unless the action is found to be frivolous, unreasonable, or without foundation.

The bill amend Civil Code Sections 5105, 5145, and 5230 to update definitions and would make various other related and conforming changes to the act.

View more info on AB 21
from the California Legislature's website

Related Links

‘Substantial Compliance Test’ Possibly Applicable to Open Meeting Act Requirements
Published on HOA Lawyer Blog (01/05/16)

Email Discussion Between HOA Board Members are not "Meetings"
Published on HOA Lawyer Blog (09/185/23)

Davis-stirling Act

Civil Code Section 5986. No Preconditions to Commencement of Builder Claims.

(a) Subject to compliance with Section 6150, which requires the board to provide notice of a meeting with the members to discuss, among other things, problems that may lead to the filing of a civil action, before the board files a civil action against a declarant or other developer, or within 30 days after it files the action, if the association has reason to believe that the applicable statute of limitations will expire, and notwithstanding any provision to the contrary in the governing documents, the board shall have the authority to commence and pursue a claim, civil action, arbitration, prelitigation process pursuant to Section 6000 or Title 7 (commencing with Section 895) of Part 2 of Division 2, or other legal proceeding against a declarant, developer, or builder of a common interest development. If the board includes members appointed by, or affiliated with, the declarant, developer, or builder, the decision and authority to commence and pursue legal proceedings shall be vested solely in the nonaffiliated board members.

(b) The governing documents shall not impose any preconditions or limitations on the board’s authority to commence and pursue any claim, civil action, arbitration, prelitigation process pursuant to Section 6000 or Title 7 (commencing with Section 895) of Part 2 of Division 2, or other legal proceeding against a declarant, developer, or builder of a common interest development. Any limitation or precondition, including, but not limited to, requiring a membership vote as a prerequisite to, or otherwise providing the declarant, developer, or builder with veto authority over, the board’s commencement and pursuit of a claim, civil action, arbitration, prelitigation process, or legal proceeding against the declarant, developer, or builder, or any incidental decision of the board, including, but not limited to, retaining legal counsel or incurring costs or expenses, is unenforceable, null, and void. The failure to comply with those limitations or preconditions, if only, shall not be asserted as a defense to any claim or action described in this section.

(c) Notwithstanding subdivision (a) or (b), any provision in the governing documents imposing limitations or preconditions on the board’s authority to commence and pursue claims shall be valid and enforceable if the provision is adopted solely by the nondeclarant affiliated members of the association and the provision is adopted in accordance with the requirements necessary to amend the governing documents of the association.

(d) This section applies to all governing documents, whether recorded before or after the effective date of this section, and applies retroactively to claims initiated before the effective date of this section, except if those claims have been resolved through an executed settlement, a final arbitration decision, or a final judicial decision on the merits.

(e) Nothing in this section extends any applicable statute of limitation or repose to file or initiate any claim, civil action, arbitration, prelitigation process, or other legal proceeding. Nothing in this section shall affect any other obligations of an association contained in Title 7 (commencing with Section 895) of Part 2 of Division 2, or any other provision in the covenants, conditions, and restrictions of the association related to arbitration or other alternative dispute resolution procedures.

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Related Links

SB 326 Signed! Balconies, Branches, and Builder Defect Actions – Published on HOA Lawyer Blog (October 2019)

Parrott v. Mooring Townhomes Association

(2003) 112 Cal.App.4th 873

[Attorney’s Fees; Prevailing Party] The court found the Association to be the prevailing party and awarded its attorney fees after homeowners filed a request for dismissal of complaint.

Peter M. Parrott and Lane P. Parrott, in pro. per., for Plaintiffs and Appellants.
Swedelson & Gottlieb, Los Angeles, David C. Swedelson and Melanie J. Bingham for Defendant and Respondent.

DOI TODD, J.

Peter M. Parrott and Lane P. Parrott appeal the award of attorney fees to respondent [*118] The Mooring Townhomes Association, Inc. (the Association) after appellants voluntarily dismissed their complaint seeking injunctive and declaratory relief against the Association. Appellants contend (1) the trial court was without jurisdiction to award attorney fees after the dismissal of the complaint, and (2) attorney fees are barred by Civil Code section 1717, subdivision (b)(2). We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The Association is comprised of owners of town homes located in a common interest development in Hermosa Beach, California. Appellants are members of the Association by virtue of their ownership of one of the town homes. On April 3, 2002, association members were notified that a vote was to be conducted on April 13, 2002 to consider approval of an assessment of $1,372,500, or $18,300, on each of the 75 owners, to replace all of the exterior siding of the town homes with stucco. Counsel for the Association informed the members that this “special assessment” required a vote of 51 percent of a quorum for approval. Appellants objected, asserting that the vote required a “super majority” of 75 percent, i.e., 57 members, pursuant to Section 7.01 of the Association’s Declaration of Covenants, Conditions and Restrictions (CC & R’s), as a “Restoration,” or a 66-2/3 percent vote, i.e., 50 members, to change the “exterior appearance” of the town homes, pursuant to section 9.01(d)(3) of the CC & R’s. At the meeting, a simple majority of 43 of the members approved the proposal.

On April 17, 2002, appellants filed suit against the Association for injunctive and declaratory relief to invalidate the vote approving the special assessment to replace the siding with stucco. On May 13, 2002, appellants sought a temporary restraining order and preliminary injunction, seeking to enforce the “super majority” rule. The court granted a preliminary restraining order to maintain the status quo, but on May 31, 2002, denied a preliminary injunction and dissolved the restraining order.

On June 14, 2002, the Association filed an answer to the complaint. On June 18, 2000, appellants filed a request for dismissal of their complaint without prejudice, which was entered by the clerk the same day.

Pursuant to Civil Code section 1354, subdivision (f), the Association then moved to be determined the prevailing party and for recovery of attorney fees incurred in defending the action. The court found the Association to be the prevailing party and awarded it $9,000 in fees. This appeal followed.

DISCUSSION

The Court Had Jurisdiction to Award Attorney Fees to Respondent

Appellants contend that the trial court “was ousted from subject matter jurisdiction” by their dismissal of the lawsuit under Code of Civil Procedure section 581, subdivision (b). Appellants argue that under Harris v. Billings (1993) 16 Cal.App.4th 1396, 1405, 20 Cal.Rptr.2d 718, a trial court is without jurisdiction to take further action after the plaintiff has voluntarily dismissed the lawsuit.[FN.1]

[*119] Appellants filed this lawsuit pursuant to Civil Code section 1354, subdivision (a), which provides that an owner of a separate interest in a common interest development may enforce covenants and restrictions as set forth in a recorded declaration which is intended to be an enforceable equitable servitude.

Subdivision (f) of Civil Code section 1354, pursuant to which the Association sought recovery of its fees, provides as follows: “In any action specified in subdivision (a) to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs. Upon motion by any party for attorney’s fees and costs to be awarded to the prevailing party in these actions, the court, in determining the amount of the award, may consider a party’s refusal to participate in alternative dispute resolution prior to the filing of the action.”

Relying on Harris v. Billings, supra, 16 Cal.App.4th at page 1405, 20 Cal.Rptr.2d 718, appellants contend that because the statute does not define who is a “prevailing party,” the trial court was required to make this “substantive determination” after the lawsuit had been dismissed and the court had lost subject matter jurisdiction. But as the Association points out, appellants rely on an incomplete statement of the rule set forth in Harris, which provides in full: “Following entry of a dismissal of an action by a plaintiff under Code of Civil Procedure section 581, a `trial court is without jurisdiction to act further in the action [citations] except for the limited purpose of awarding costs and statutory attorney’s fees.‘” (Id. at p. 1405, 20 Cal.Rptr.2d 718, italics added; quoting Associated Convalescent Enterprises v. Carl Marks & Co., Inc. (1973) 33 Cal.App.3d 116, 120, 108 Cal.Rptr. 782.)

Appellants assert that Associated Convalescent Enterprises “held that a trial court cannot make a substantive, prevailing party determination in a case after a voluntary dismissal of the action has been entered by the clerk.” But appellants misstate the holding of the case. The court in Associated Convalescent Enterprises held that the defendants, against whom a lawsuit had been voluntarily dismissed by the plaintiff, could not be considered prevailing parties under the then language of Civil Code section 1717 because no final judgment was rendered. (Associated Convalescent Enterprises v. Carl Marks & Co., Inc., supra, 33 Cal.App.3d at p. 121, 108 Cal.Rptr. 782.) But the appellate court never stated that the trial court was without authority to make this determination after the dismissal had been filed. To the contrary, the appellate court specifically stated that because the prevailing party had a statutory right to recover fees under section 1717, “such issue required a judicial determination.” (Associated Convalescent Enterprises, at p. 120, 108 Cal.Rptr. 782.) Nor do any of the other authorities cited by appellants state that a trial court may not make a determination of “prevailing party” status for the purpose of awarding statutory attorney fees after the action has been voluntarily dismissed.

Appellants attempt to distinguish the case of Heather Farms Homeowners Ass’n. v. Robinson (1994) 21 Cal.App.4th 1568, 26 Cal.Rptr.2d 758, but we find this case to be persuasive. In Heather Farms, a homeowners’ association dismissed its suit without prejudice against an association owner in a dispute to enforce the association’s CC & R’s after the parties had settled the action. The settlement judge made a finding that there were no prevailing parties with respect to the dismissal. [*120] ( Id. at p. 1571, 26 Cal.Rptr.2d 758.) Following the dismissal, the homeowner sought recovery of his attorney fees as a “prevailing party” under Civil Code section 1354. The trial court denied the request, agreeing with the settlement judge that there was no prevailing party within the meaning of section 1354. (Heather Farms, at p. 1571, 26 Cal.Rptr.2d 758.) The appellate court affirmed: “[W]e hold that a trial court has the authority to determine the identity of the `prevailing party’ in litigation, within the meaning of Civil Code section 1354, for purposes of awarding attorney fees.” (Id. at p. 1570, 26 Cal.Rptr.2d 758.) The court clarified that such an analysis should be made by determining who prevailed on a “practical level.” (Id. at p. 1574, 26 Cal.Rptr.2d 758.)

Accordingly, under Harris and Heather Farms, we conclude that the trial court had jurisdiction to determine who was a prevailing party under section Civil Code section 1354, subdivision (f), for the purposes of awarding attorney fees after appellants’ voluntary dismissal.[FN.2]

Civil Code Section 1717(b)(2) Does Not Apply

Appellants also contend that the award of attorney fees was barred by Civil Code section 1717, subdivision (b)(2).[FN.3] Under section 1717(b)(2), attorney fees shall be awarded to a prevailing party in an action on a contract that contains an attorney fee provision, except “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” Appellants assert that since they were seeking to enforce voting provisions in the CC & R’s, which other cases have determined constitute contracts,[FN.4] and because the CC & R’s contain an attorney fee provision (§ 6.24), their voluntary dismissal of the action brings into play the bar of section 1717(b)(2). The Association counters that section 1717(b)(2) has no application where, as here, attorney fees were not sought under a contract, but pursuant to statute (Civ.Code, § 1354, subd. (f)). We agree.

To support their position, appellants rely primarily on the case of Santisas v. Goodin (1998) 17 Cal.4th 599, 71 Cal.Rptr.2d 830, 951 P.2d 399. But Santisas does not advance appellants’ cause. In Santisas, the plaintiffs, who were buyers of a residence, sued the sellers under a real estate purchase agreement with an attorney fee clause. When the buyers dismissed their action with prejudice before trial, the sellers sought to recover their fees under the agreement. Our Supreme Court held that section 1717(b)(2) barred the recovery of attorney fees on the contract claim. (Santisas, at p. 617, 71 Cal.Rptr.2d 830, 951 P.2d 399.) But unlike the situation here, the defendants in Santisas were not seeking to recover their attorney fees under an independent statute. Indeed, the Santisas court itself specifically noted this distinction, stating, “The seller defendants do not contend that their claim for attorney fees [*121] has a legal basis that is both independent of the cost statutes and grounded in a statute or other noncontractual source of law.” (Id. at pp. 606-607, 71 Cal.Rptr.2d 830, 951 P.2d 399.)

In Damian v. Tamondong (1998) 65 Cal.App.4th 1115, 77 Cal.Rptr.2d 262, upon which the Association relies, the court also distinguished Santisas from the situation before it, which is far more analogous to the case at hand. In Damian, the lender under an automobile sales contract, which contained an attorney fee clause, sued the buyer to collect a deficiency judgment after the vehicle had been repossessed. (Id. at p. 1118, 77 Cal.Rptr.2d 262.) Prior to trial, the lender voluntarily dismissed the action. The buyer then sought to recover its attorney fees pursuant to Civil Code section 2983.4 of the Rees-Levering Automobile Sales Finance Act.[FN.5] Like appellants here, the lender opposed the fee request on the ground that section 1717(b)(2) barred the award. The lower court agreed, but the appellate court reversed. The appellate court held that section 1717(b)(2) does not bar a fee award where, as here, the prevailing party’s right to recover fees arises under a fee-shifting statute. In so holding, the court observed that “numerous California courts have held that section 1717 does not control upon dismissal of an `action on a contract’ where a fee-shifting statute, as opposed to a contract, authorizes an award of attorney fees.”[FN.6] (Damian, at p. 1124, 77 Cal.Rptr.2d 262, fn. omitted.) Thus, the court rejected the lender’s contention that even though attorney fees were being sought pursuant to statute, the mere existence of an attorney fee provision in the parties’ contract brings the case within section 1717.

Appellants criticize Damian for not following the proposition in Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 75 Cal.Rptr.2d 376, Jackson v. Homeowners Assn. Monte Vista Estates-East (2001) 93 Cal.App.4th 773, 113 Cal.Rptr.2d 363 and Wong v. Thrifty Corp. (2002) 97 Cal.App.4th 261, 118 Cal.Rptr.2d 276 that application of section 1717(b)(2) is mandatory in contract cases. But these cases are not applicable because in each case the parties were moving to recover attorney fees pursuant to a contract and not, as here, a fee-shifting statute.

Appellants also argue that applying Civil Code section 1354, subdivision (f), but not section 1717(b)(2), violates the rule that statutes which relate to the same subject matter should be harmonized to give effect to both. We disagree. Section 1717(b)(2) deals only with attorney fee provisions in contracts and limits the “prevailing party” specifically “for purposes of this section.” But here, the Association was not seeking [*122] to enforce a contractual attorney fee provision. To the contrary, it was seeking recovery of its fees under an independent fee-shifting statute, and a prevailing party would be entitled to its fees under this statute even without a contractual fee provision. (See, e.g., Heather Farms Homeowners Ass’n. v. Robinson, supra, 21 Cal.App.4th at p. 1572, 26 Cal.Rptr.2d 758.) As the court in Damian v. Tamondong, supra, 65 Cal.App.4th at page 1124, 77 Cal.Rptr.2d 262 noted, the Legislature could have made the attorney fee statutes uniform, but chose not do to so.

We conclude that because the Association sought to recover its attorney fees pursuant to a fee-shifting statute, and not pursuant to a contract, section 1717(b)(2) did not bar an attorney fee award.

DISPOSITION

The order awarding attorney fees is affirmed. Respondent to recover its costs and attorney fees on appeal.

We concur: BOREN, P.J., and NOTT, J.

[*] George, C.J., did not participate therein.

[FN.1] The Association asserts that appellants waived this jurisdictional issue by failing to assert it below. But appellants did raise this issue before the trial court in their pleading entitled “Notice of Objection to Entry of Proposed Judgment Due to the Court’s Lack of Subject Matter Jurisdiction.” In any event, a court’s lack of subject matter jurisdiction is never waived and can be raised for the first time on appeal. (Ash v. Hertz Corp. (1997) 53 Cal.App.4th 1107, 1110-1112, 62 Cal.Rptr.2d 192; Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2003) ¶¶ 3:126, 3:128, p. 3-38.)

[FN.2] Because appellants do not otherwise challenge the trial court’s particular finding that the Association was the prevailing party or the reasonableness of the amount of attorney fees awarded, we do not address those issues here.

[FN.3] For convenience, we will hereafter refer to Civil Code section 1717, subdivision (b)(2) as “section 1717(b)(2).

[FN.4] See, e.g., MacKinder v. OSCA Development Co. (1984) 151 Cal.App.3d 728, 738-739, 198 Cal.Rptr. 864; Huntington Landmark Adult Community Assn. v. Ross (1989) 213 Cal.App.3d 1012, 1023-1024, 261 Cal.Rptr. 875.

[FN.5] Civil Code section 2983.4 provides: “Reasonable attorney’s fees and costs shall be awarded to the prevailing party in any action on a contract or purchase order subject to the provisions of this chapter….”

[FN.6] The Damian court also cited to Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 1997) ¶¶ 11:39.20 to 11:39.22, pp. 11-23 to 11-24 for the proposition that “section 1717(b)(2) does not apply where fees are awardable by statute to the `prevailing party’; in such cases, the trial court must determine which party prevailed on a practical level.” (Damian v. Tamondong, supra, 65 Cal.App.4th at p. 1125, 77 Cal.Rptr.2d 262.) Appellants note that in Wegner, Fairbank & Epstein, Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2002) ¶ 17:153.1, p. 17-71, the authors state “Statutory provisions authorizing attorney fees to the `prevailing party’ are not subject to the definition of `prevailing party’ in … Civ[il Code section] 1717.” In their reply brief, appellants ask to correct this misstatement in a published opinion. We decline to so because we find it to be a correct statement of the law.

 

Related Links

The court found the Association to be the prevailing party and awarded its attorneys fees after homeowners filed a request for dismissal of complaint

Market Lofts Community Association v. 9th Market Lofts, LLC

(2014) 222 Cal.App.4th 924

[Association Standing to Sue] Right of association to challenge developer agreements; right to bring suit as representative of association’s members.

COUNSEL

Freeman, Freeman & Smiley, Todd M. Lander and Tracy R. Daub for Plaintiff and Appellant.

Law Offices of Stephen D. Marks, Stephen D. Marks; Katten Muchin Rosenman, Gregory S. Korman, Andrew J. Demko and Johanna R. Bloomfield for Defendants and Respondents.

[927] OPINION

ASHMANN-GERST, J. —

A homeowners association appeals from the judgment of dismissal following the sustaining of a demurrer without leave to amend its second amended complaint (SAC). The trial court sustained the demurrer on the ground that the association lacked standing both on its own behalf and as a representative of the homeowners to assert claims against the developers relating to contractual parking rights. We reverse the judgment of dismissal.

FACTUAL AND PROCEDURAL BACKGROUND

The Parties

Appellant is Market Lofts Community Association (HOA), which is the homeowners association for the condominium owners at a mixed-use upscale development called Market Lofts, located at the corner of 9th and Flower Streets in downtown Los Angeles, adjacent to the Staples Center. Retail spaces are located on the street level and 267 residential condominium units are located above. Respondents are essentially two sets of developers — the developer of Market Lofts (referred to as 9th Street) and the developer of an adjacent parking structure that contains 319 parking spaces for the Market Lofts condominium owners (referred to as CIM).[FN. 1]

Allegations of the SAC

The SAC alleges the following: On May 11, 2006, the Developers entered into a “PARKING LICENSE AGREEMENT” (License Agreement). At this time, construction of Market Lofts had not been completed and the HOA had not been formed. Pursuant to section D of the License Agreement, which is attached to the SAC, CIM agreed to grant to 9th Street “for the benefit of the residential homeowner’s association (the `HOA‘) to be formed in connection with the sale of residential condominium units in the Market Lofts Project and the owners and occupants of the residential units … a license to use the Market Lofts Parking Spaces, which shall be appurtenant to the Market Lofts Property.” (Italics & underscoring added.)

Section 2.1 of the License Agreement specifies that the license granted is “perpetual” for the exclusive use of the 319 parking spaces, and that the [928] license “shall be at no cost” to 9th Street, except for the obligation to pay its proportionate share of “CAM Charges” (common area maintenance) to CIM. Section 2.5 provides that the license is “irrevocable.” Section 13 states that “Upon the First Closing [(defined as the close of escrow for the first residential unit sold)], [9th Street] shall assign or sub-license its rights and obligations under this Agreement to the HOA…. [T]he terms and conditions of this Agreement shall be covenants that run with the land….”

The HOA was formally incorporated on January 10, 2007, and the first sale of a Market Lofts condominium occurred later that year.

On January 24, 2007, the HOA and 9th Street entered into a “Parking Sub-License Agreement” (Sub-License), which is also attached to the SAC. At that time, respondents Lee, Adler and Magdych comprised a “controlling majority” of the HOA’s board of directors and “each was simultaneously serving as an agent, employee, partner and/or member of the 9th Street and/or CIM defendants.” According to the SAC, rather than sublicensing its rights under the License Agreement to the HOA, 9th Street and the other respondents engaged in self-dealing by using the Sub-License “to strip the Association of many of the rights afforded it under the License Agreement and concurrently impose on it financial and other obligations in direct contravention of the terms of [the License Agreement].”

For example, while 9th Street granted to the HOA a sublicense for the exclusive use of the 319 parking spaces pursuant to section 2.1 of the Sub-License, section 3.1 provides that the HOA will pay 9th Street a monthly fee of $75 for each parking space, to be increased annually by 5 percent, and to be adjusted every 10 years to the prevailing market rate for similar parking. Section 4 provides that the term of the Sub-License is the earlier of the date of termination of the covenants, conditions, restrictions and reservation of easements for the Market Lofts project (CC&R’s) or 49 years from the date of the Sub-License with the HOA being permitted to renew the Sub-License no more than five successive 10-year periods. Section 17.6 provides a late fee of 18 percent for any late payment. The SAC details numerous other provisions in the Sub-License that differ from the License Agreement and that “limit the rights of the Association and its members in various respects, all of which contravene the License Agreement.”

The CC&R’s were signed by respondent Lee as both developer and declarant, and were recorded in the Los Angeles County Recorder’s Office on May 23, 2007. According to the SAC, the CC&R’s “are notable not for the information provided in their 80 pages, but rather for what they fail to disclose,” namely, that “the License Agreement plainly extended a perpetual and irrevocable license to the Association and the homeowners.” The SAC [929] alleges that at paragraph 3 of the CC&R’s, which is attached to the original and first amended complaints but not to the SAC, “the Sub-License is identified as the governing document by which `Declarant has granted a sublicense to the Association for the benefit of the Owners and other “Permitted Users” to use the parking spaces.'” The CC&R’s were distributed to prospective purchasers in advance of their acquisition of the residential units. The Sub-License and License Agreement were buried in a “massive package” of documents submitted to prospective purchasers of the Market Lofts units, and there was no identification or specific disclosure of the existence of the two agreements or “the critical distinctions in their terms.”

It was not until January 2011 that “the developer dominated Association Board gave way to one controlled by homeowners with no ties to the Defendants,” and “only then, was the [HOA] able to investigate these circumstances comprehensively and initiate ameliorative steps necessary to restore the rights intended by and set forth in the License Agreement.”

The HOA and its members have been damaged in excess of $1 million in paid parking fees. The SAC further alleges that in the event a homeowner refuses to pay the monthly parking fee, the HOA is obligated to do so.

Causes of Action

The HOA first sued the Developers on November 1, 2011. On August 22, 2012, the HOA filed the SAC, which contains two causes of action for declaratory relief, plus causes of action for breach of fiduciary duty, breach of the License Agreement, concealment, unfair business practices, and rescission of the Sub-License. The SAC alleges in both declaratory relief causes of action that the HOA and the Developers dispute their rights under the License Agreement and the Sub-License, and that the HOA seeks a declaration that the Sub-License is void and of no force and effect to the extent that it conflicts with the License Agreement. The HOA brings all other causes of action on its own behalf and as a representative of the condominium owners.

The Demurrer Pleadings and Ruling

The Developers filed a consolidated demurrer to each cause of action in the SAC. The HOA opposed the demurrer, which the trial court sustained without leave to amend on the sole ground that the HOA lacked standing to sue. The trial court concluded that “because the individual homeowners here paid the alleged illegal parking fees and Plaintiff only collected them, Plaintiff has not shown that it suffered an injury such that it has standing.” The HOA then filed this appeal.

[930] DISCUSSION
  1. Standard of Review

We review de novo a trial court’s sustaining of a demurrer without leave to amend, exercising our independent judgment as to whether a cause of action has been stated as a matter of law. (People ex rel. Lungren v. Superior Court (1996) 14 Cal.4th 294, 300 [58 Cal.Rptr.2d 855, 926 P.2d 1042]; Moore v. Regents of University of California (1990) 51 Cal.3d 120, 125 [271 Cal.Rptr. 146, 793 P.2d 479].) We assume the truth of properly pleaded allegations in the complaint and give the complaint a reasonable interpretation, reading it as a whole and with all its parts in their context. (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 558 [71 Cal.Rptr.2d 731, 950 P.2d 1086]; People ex rel. Lungren v. Superior Court, supra, at p. 300.) We may disregard allegations which are contrary to law or to judicially noticed facts. (Wolfe v. State Farm Fire & Casualty Ins. Co. (1996) 46 Cal.App.4th 554, 559-560 [53 Cal.Rptr.2d 878].) “On appeal, we do not review the validity of the trial court’s reasoning but only the propriety of the ruling itself.” (Rodas v. Spiegel(2001) 87 Cal.App.4th 513, 517 [104 Cal.Rptr.2d 439].) Thus, the judgment of dismissal will be affirmed if it is proper on any of the grounds raised in the demurrer, even if the trial court did not rely on those grounds. (Jackson v. Doe (2011) 192 Cal.App.4th 742, 750-751 [121 Cal.Rptr.3d 685].) We apply the abuse of discretion standard in reviewing a trial court’s denial of leave to amend. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58]; Hernandez v. City of Pomona(1996) 49 Cal.App.4th 1492, 1497-1498 [57 Cal.Rptr.2d 406].)

  1. The Trial Court Erred in Sustaining the Demurrer on the Lack of Standing
  2. Declaratory Relief Causes of Action

The first and second causes of action in the SAC seek declaratory relief with respect to the License Agreement and the Sub-License. We agree with the HOA that it has standing to bring these two causes of action on its own behalf.

Code of Civil Procedure section 1060 provides in part that “[a]ny person interested under a written instrument … or under a contract … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.”

[931] (1) As the court explained in Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 606 [98 Cal.Rptr.2d 277]: “All that Code of Civil Procedure section 1060 requires is that there be [an] `actual controversy relating to the legal rights and duties of the respective parties.’ … A cardinal rule of pleading is that only the ultimate facts need be alleged. [Citation.] In a declaratory relief action, the ultimate facts are those facts establishing the existence of an actual controversy. (Code Civ. Proc., § 1060.) … However, to be entitled to declaratory relief, a party need not establish that it is also entitled to a favorable judgment…. `A complaint for declaratory relief is legally sufficient if it sets forth facts showing the existence of an actual controversy relating to the legal rights and duties of the parties under a written instrument or with respect to property and requests that the rights and duties of the parties be adjudged by the court. [Citations.] If these requirements are met and no basis for declining declaratory relief appears, the court should declare the rights of the parties whether or not the facts alleged establish that the plaintiff is entitled to [a] favorable declaration. [Citations.]'” (See Alameda County Land Use Assn. v. City of Hayward (1995) 38 Cal.App.4th 1716, 1722 [45 Cal.Rptr.2d 752] [If the pleaded “facts reveal an actual controversy exists between the parties, the complaint is legally sufficient for declaratory relief”].)

The HOA is an interested party because it is a directly named beneficiary of the License Agreement and is a direct contracting party to the Sub-License. Thus, if the HOA has alleged an actual controversy, it is entitled to seek a declaration of the rights imposed and duties afforded under the License Agreement and the Sub-License. Contrary to the Developers’ assertion, the SAC alleges an actual controversy. The SAC details the material differences in the two agreements, and alleges: “At present, the Association is not enjoying the full benefits of the License Agreement and cannot confer on its member owners the perpetual parking rights prescribed by that agreement.” The SAC also alleges: “There is currently a dispute regarding the efficacy of the License Agreement and the Sub-License, and of the Association’s and its members’ rights under these agreements. The Association alleges that it is entitled to the rights set forth in the License Agreement, and that to the extent the Sub-License conflicts with those rights, it is ineffective. The Association is informed and believes, and on that basis alleges, that the Defendants, and each of them, contest the Association’s claims and allege otherwise.” The HOA seeks numerous declarations regarding the two agreements, including a declaration that the Sub-License is of no force and effect to the extent it conflicts with the License Agreement.

(2) The trial court adopted the Developers’ argument that the HOA lacks standing to bring the declaratory relief claims because the HOA is actually seeking a declaration of its members’ rights, rather than its own, since the members pay the parking fees. But this argument overlooks that the HOA is a [932] direct beneficiary of the License Agreement and is a contracting party to the Sub-License. If the Developers’ argument were correct, then the HOA would be powerless to seek a determination of its own rights under either contract. The law allows any party with an interest in a contract to pursue a declaration of rights as to that instrument when an actual controversy exists. (Code Civ. Proc., § 1060.)

The Developers’ additional argument that there is no actual controversy is also without merit. The Developers essentially ignore the License Agreement and focus on the Sub-License, asserting that the HOA understands its obligations under the Sub-License, i.e., to collect parking charges from its members and disburse them to 9th Street. But this argument takes an overly simplistic view of the SAC. The HOA is not asking the trial court to merely interpret the terms of the Sub-License. Rather, the HOA is asking the trial court to resolve the interplay between the two agreements. In other words, the HOA contends that the License Agreement must govern the parking arrangements and that the Sub-License is invalid, while the Developers dispute this contention.

(3) In our opinion, the SAC alleges an actionable dispute between the HOA and the Developers, and the HOA has standing to seek a resolution of this dispute. The trial court therefore erred in sustaining the demurrer to the two declaratory relief causes of action.

  1. Remaining Causes of Action

The HOA contends that it has standing to bring the remaining causes of action for breach of fiduciary duty, breach of the License Agreement, concealment, unfair business practices, and rescission of the Sub-License either by itself or as a representative of the homeowners. We agree.

(4) With respect to the contract causes of action, it goes without saying that a party to a contract or one for whom the contract was intended to benefit may bring actions related to such contracts. Thus, the HOA is the real party in interest entitled to bring contract claims relating to the License Agreement and the Sub-License. The Developers’ reliance on the argument that the HOA is not the real party in interest because it is seeking to enforce rights that belong to its members, not itself, is of no import. The SAC alleges that the HOA is directly obligated to pay the parking fees and that “in the event a homeowner refused to pay the monthly fee, the Association is obligated to do so.” For purposes of the demurrer, we must accept this allegation as true.

(5) With respect to the other causes of action, the HOA has standing to sue as a representative of the individual homeowners. Code of Civil Procedure section 382 provides in part that “when the question is one of a common [933] or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” While this statute is sometimes referred to as the “class action statute,” it also sanctions representative, nonclass actions. “`It may also be true that while all class suits are representative in nature, all representative suits are not necessarily class actions.‘” (Raven’s Cove Townhomes, Inc. v. Knuppe Development Co. (1981) 114 Cal.App.3d 783, 794 [171 Cal.Rptr. 334] (Raven’s Cove).) Thus, California courts have routinely allowed homeowners associations to sue solely as the representatives of their members. (See, e.g., id. at p. 795; Property Owners of Whispering Palms, Inc. v. Newport Pacific, Inc. (2005) 132 Cal.App.4th 666, 672-673 [33 Cal.Rptr.3d 845] [“`[e]ven in the absence of injury to itself, an association may have standing solely as the representative of its members'”]; Salton City etc. Owners Assn. v. M. Penn Phillips Co. (1977) 75 Cal.App.3d 184, 189 [141 Cal.Rptr. 895].)

The two requirements that must be satisfied for a representative action are an ascertainable class and a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented. (Raven’s Cove, supra, 114 Cal.App.3d at p. 795, citing Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 704 [63 Cal.Rptr. 724, 433 P.2d 732].) Here, there is plainly an ascertainable class — the homeowners. There is also a well-defined community of interest concerning the relevant questions of law and fact. Each homeowner is subject to the same parking charges and any invalidity of the Sub-License would affect the homeowners in the same manner. The homeowners are also the victims of the Developers’ alleged self-dealing. Additionally, questions of necessity, convenience and justice likewise support the HOA’s standing, because otherwise 267 homeowners would individually have to prosecute their claims. (See Tenants Assn. of Park Santa Anita v. Southers(1990) 222 Cal.App.3d 1293, 1304 [272 Cal.Rptr. 361] [“we conclude that considerations of necessity, convenience and justice provide justification for the use of the representative procedural device”].)

The Developers argue that the HOA cannot be allowed to proceed as a representative of the homeowners because the Developers would be deprived of defenses they would have against individual homeowners, such as the statute of limitations, notice, reliance, causation, waiver and estoppel. But these factual defenses pertain to the merits of the causes of action, an issue we are not concerned with at this initial pleading stage. Moreover, the Developers have not demonstrated why they would be precluded from pursuing these defenses or conducting discovery in this regard.

Additionally, even if individualized assessments are made, that does not destroy the commonality requirement. In Raven’s Cove, supra, 114 [934]  Cal.App.3d 783, the homeowners association sued to redress defects in common area landscaping and for damage to the exterior walls of individual units. Despite the fact that the damage to each unit would necessarily be individualized, the reviewing court found a sufficient commonality of interest because each owner had a similar beneficial interest in the outcome of the case. (Id. at p. 795.) The same is true here, where each homeowner would receive restoration of the parking rights provided in the License Agreement, if the HOA prevails.

(6) To the extent the Developers also argue that the HOA lacks standing to sue because it is not claiming damage to a common area under Civil Code former section 1368.3, such argument is without merit. This statute dealt with the standing of a homeowners association to sue “in its own name as the real party in interest” in specific matters, including damage to the common area and enforcement of the governing documents. (Civ. Code, former § 1368.3.) This statute had nothing to do with a homeowners association’s standing to sue in a representative capacity.

III. The Developers’ Argument Regarding the CC&R’s

The Developers spend much of their brief arguing that, apart from the issue of standing, the causes of action in the SAC are barred because the Sub-License is part of the governing CC&R’s, a recorded document which is presumptively enforceable, and which was provided to each prospective homeowner. Because a judgment of dismissal can be upheld on any ground raised in the demurrer, even when the trial court did not rely on that ground, we address the merits.

(7) Under the Davis-Stirling Common Interest Development Act (Civ. Code, former § 1350 et seq.) (Davis-Stirling Act), “covenants and restrictions in the declaration shall be enforceable equitable servitudes, unless unreasonable, and shall inure to the benefit of and bind all owners of separate interests in the development.” (Civ. Code, former § 1354, subd. (a).) “This statutory presumption of reasonableness requires that recorded covenants and restrictions be enforced `”unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit.”‘ [Citation.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 239 [145 Cal.Rptr.3d 514, 282 P.3d 1217]; see Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th, 361, 382 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) The Developers argue that the HOA failed to meet its “burden” of showing that the Sub-License parking fee, of which each homeowner had constructive, if not actual, notice was unreasonable.

[935] The Developers’ argument shows that they are trying to impose their own vision of what this case is about. This lawsuit is not a formal challenge to the CC&R’s or an attempt to formally amend the CC&R’s, for which the Davis-Stirling Act provides the procedural amendment requirements. (Civ. Code, former §§ 1354, 1355.) As the HOA noted in its opposition to the demurrer, “[t]his litigation is centered around the efficacy of the License Agreement and Defendants’ actions to unwind the Association’s rights related to that contract.”

(8) The HOA acknowledges that the Sub-License is identified in the CC&R’s, and that the homeowners had at least constructive notice of the existence of the Sub-License. What the HOA complains about is that neither the rights embodied in the License Agreement and how those rights differed from what the Sub-License provided nor the Developers’ alleged self-dealing in systematically unraveling the rights in the License Agreement by way of the Sub-License were disclosed to either the original HOA or to subsequent homeowners. As the HOA noted below, the Developers have conflated two separate and unrelated concepts: Notice and invalidity of the Sub-License. The HOA therefore alleges causes of action for breach of the License Agreement and breach of fiduciary duties. In Raven’s Cove, supra,114 Cal.App.3d 783, the appellate court stated that a “developer and his agents and employees who also serve as directors of an association [in its initial period], like the instant one, may not make decisions for the Association that benefit their own interests at the expense of the association and its members…,” and may therefore be sued for breach of fiduciary duty. (Id. at p. 799.)

Even assuming the Davis-Stirling Act applies here, it does not provide a basis for sustaining the demurrer without leave to amend. We are not prepared to say that the alleged self-dealing by fiduciaries of the HOA that violates the fundamental public policy of the need for trust and accountability with respect to certain special relationships is reasonable as a matter of law. (See Raven’s Cove, supra, 114 Cal.App.3d at pp. 800-801 [“the initial directors and 40officers of the Association had a fiduciary relationship to the homeowner members analogous to that of a corporate promoter to the shareholders. These duties take on a greater magnitude in view of the mandatory association membership required of the homeowner. We conclude that since the Association’s original directors (comprised of the owners of the Developer and the Developer’s employees) admittedly failed to exercise their supervisory and managerial responsibilities … and acted with a conflict of interest, they abdicated their obligation as initial directors of the Association …”].)

[936] DISPOSITION

The judgment of dismissal following the sustaining of the demurrer to the SAC is reversed. The HOA is entitled to recover its costs on appeal.

Boren, P. J., and Ferns, J.,[*] concurred.

[FN. 1]  Respondents shall be referred to collectively as “the Developers.” 9th Street consists of respondents 9th Street Market Lofts, LLC; 645 9th Street, LLC; and the Lee Group, Inc. CIM consists of CIM/830 S. Flower, LLC; CIM Market at 9th & Flower, LLC; CIM/8th & Hope, LLC; and CIM Group, L.P. Respondents also include Jeffrey Lee (Lee); Michael Adler (Adler); and David Magdych (Magdych).

[*] Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

 

Code of Civil Procedure Section 116.780. Attorney’s Fees: Small Claims Appeal.

(a) The judgment of the superior court after a hearing on appeal is final and not appealable.

(b) Article 6 (commencing with Section 116.610) on judgments of the small claims court applies to judgments of the superior court after a hearing on appeal, except as provided in subdivisions (c) and (d).

(c) For good cause and where necessary to achieve substantial justice between the parties, the superior court may award a party to an appeal reimbursement of (1) attorney’s fees actually and reasonably incurred in connection with the appeal, not exceeding one hundred fifty dollars ($150), and (2) actual loss of earnings and expenses of transportation and lodging actually and reasonably incurred in connection with the appeal, not exceeding one hundred fifty dollars ($150).

Code of Civil Procedure Section 116.710. Small Claims Appeal.

(a) The plaintiff in a small claims action shall have no right to appeal the judgment on the plaintiff’s claim, but a plaintiff who did not appear at the hearing may file a motion to vacate the judgment in accordance with Section 116.720.

(b) The defendant with respect to the plaintiff’s claim, and a plaintiff with respect to a claim of the defendant, may appeal the judgment to the superior court in the county in which the action was heard.

(c) With respect to the plaintiff’s claim, the insurer of the defendant may appeal the judgment to the superior court in the county in which the matter was heard if the judgment exceeds two thousand five hundred dollars ($2,500) and the insurer stipulates that its policy with the defendant covers the matter to which the judgment applies.

(d) A defendant who did not appear at the hearing has no right to appeal the judgment, but may file a motion to vacate the judgment in accordance with Section 116.730 or 116.740 and also may appeal the denial of that motion.

Code of Civil Procedure Section 116.231. Small Claims Court Limitations.

(a) Except as provided in subdivision (d), no person may file more than two small claims actions in which the amount demanded exceeds two thousand five hundred dollars ($2,500), anywhere in the state in any calendar year.

(b) Except as provided in subdivision (d), if the amount demanded in any small claims action exceeds two thousand five hundred dollars ($2,500), the party making the demand shall file a declaration under penalty of perjury attesting to the fact that not more than two small claims actions in which the amount of the demand exceeded two thousand five hundred dollars ($2,500) have been filed by that party in this state within the calendar year.

(c) The Legislature finds and declares that the pilot project conducted under the authority of Chapter 1196 of the Statutes of 1991 demonstrated the efficacy of the removal of the limitation on the number of actions public entities may file in the small claims courts on claims exceeding two thousand five hundred dollars ($2,500).

(d) The limitation on the number of filings exceeding two thousand five hundred dollars ($2,500) does not apply to filings where the claim does not exceed five thousand dollars ($5,000) that are filed by a city, county, city and county, school district, county office of education, community college district, local district, or any other local public entity. If any small claims action is filed by a city, county, city and county, school district, county office of education, community college district, local district, or any other local public entity pursuant to this section, and the defendant informs the court either in advance of the hearing by written notice or at the time of the hearing, that he or she is represented in the action by legal counsel, the action shall be transferred out of the small claims division. A city, county, city and county, school district, county office of education, community college district, local district, or any other local public entity may not file a claim within the small claims division if the amount of the demand exceeds five thousand dollars ($5,000).