Opinion
NOT TO BE PUBLISHED
APPEALS from a judgment and postjudgment order of the Superior Court of Los Angeles County, No. BC370914, William F. Highberger, Judge.
Ostergar Hunter Law Group and Allen C. Ostergar III for Clovis R. Duclos.
Peters & Freedman, L.L.P., Keenan A. Parker and Mickey Jew for Marina Pacifica Homeowners Association, Inc.
PERLUSS, P. J.
Clovis R. Duclos, the owner of a condominium in the 570-unit Marina Pacifica condominium complex in Long Beach, sued the Marina Pacifica Homeowners Association, Inc. (Homeowners Association) for claims, including unfair competition under Business and Professions Code section 17200, arising from the purchase of the land underlying the development. The trial court granted summary adjudication in favor of the Homeowners Association on the majority of Duclos’s claims. Duclos prevailed on the remaining claims after a bench trial.
On appeal Duclos challenges the trial court’s grant of summary adjudication and its determination the Homeowners Association was the prevailing party for purposes of litigation costs. The Homeowners Association appeals from the trial court’s postjudgment order denying its motion for attorney fees. We reverse the judgment only to the extent it denied Duclos his costs and affirm the postjudgment order denying the Homeowners Association’s attorney fees.
We have consolidated the two appeals on our own motion.
FACTS AND PROCEDURAL BACKGROUND
1. The Purchase of the Property Underlying the Condominium Development; the Special Assessments
The Marina Pacifica condominium development was constructed in 1973. At that time the property on which the complex was built, as well as the marina around which it was developed, was owned by the McGrath Trust. The developers acquired a long-term leasehold interest in the property from the McGrath Trust; the original leasehold interest was then converted into smaller individual leasehold interests that were assigned to each condominium unit.
Duclos purchased his condominium unit in 1977. Like all other Marina Pacifica condominium owners, he was required to make a monthly lease payment to the McGrath Trust and to pay an assignment fee to the developers. The lease and assignment provisions included escalation clauses dramatically increasing the rent and assignment fees in 2006 and 2021. The lease from the McGrath Trust also had an expiration date in 2041; after that date condominium owners would, in effect, lose the right to occupy their units.
Faced with the prospect of escalating lease payments and the eventual forfeiture of the ownership in the condominiums when the leasehold interest terminated, in the late 1990’s the Homeowners Association, acting through its board of directors, began efforts to purchase the property. The Homeowners Association also sought to acquire the developers’ assignment fee interest to eliminate those additional monthly payments.
The McGrath Trust agreed to sell the property for $17 million. In August 1999 the Homeowners Association distributed an information statement proposing two special assessments to finance the purchase of the property and acquisition of 56.25 percent of the assignment fee holders’ interests. (One of the developers would not sell his 43.75 percent share of the assignment fees.) The information statement explained a loan of up to $20 million would be necessary to complete the transaction, which included the establishment of a reserve: “The proposed new loan for the acquisition of the Land (which may include funding for approximately $200,000 to $250,000 of the cost of the assignment fee interest) is expected to be an amount up to $20,000,000. This amount provides for the payment of all or substantially all of the costs related to the transaction, including any commissions and fees, title insurance, escrow fees, legal fees for both the Association and the lender and other costs. This amount will also establish a reserve for the lender and Association to be used in the event that not all owners pay the amounts required to be paid when due. The Association will seek to make certain that any substantial reserve will be placed in an interest bearing account for the benefit of the Association so that interest on the reserve could be used to help offset payments on the loan. The reserve will eventually be returned to the Association, likely to be applied to the final payment of the loan.” Ninety-one percent of homeowners, including Duclos, approved the special assessments.
Although initially estimated at $20 million, the Homeowners Association obtained a 30-year loan for $22 million with a 9.37 percent interest rate. The special assessments for each homeowner were calculated assuming the loan was fully amortized over its 30-year life and allocated on the same pro rata basis as allocations for common area expenses as set forth in the Homeowners Association’s recorded declaration of conditions, covenants and restrictions (CC&Rs). Duclos’s monthly payment was $434.38 for the property purchase special assessment and $72.51 for the assignment fee special assessment.
The Homeowners Association began collecting the special assessments after the transaction closed in December 1999. In January 2000 the individual condominium owners were advised they could prepay their special assessments, allowing each owner “to purchase [his or her] share of the Land... and convert [his or her] leasehold interest into a ‘fee simple’ interest in [his or her] condominium.” The owners were also instructed how the purchase price would be calculated if they chose to prepay and the procedures and conditions necessary, including the signing of various documents, to effect the prepayment.
2. Duclos’s Attempt To Prepay His Special Assessments; the Homeowners Association’s Prepayment of the Loan
In January 2006 Duclos decided to prepay his special assessments. He paid a $550 attorney fee to complete the transaction, as required by the Homeowners Association. Upon reviewing the documents he was required to sign, however, Duclos objected to a provision that would amend the CC&Rs to give the Homeowners Association’s board of directors “the power to (a) enter into a contract to acquire, finance, refinance, pledge, assign, sell, hypothecate, transfer, restructure or take other action related to a Permitted Asset [defined to include the property purchased from the McGrath Trust]....” Duclos believed this provision would impermissibly expand the board’s powers and was inconsistent with representations in the information statement received that, after the loan was paid off, “you and the other homeowners would have full beneficial unencumbered ownership of the Land either through the Association or directly.” Duclos refused to sign the documents and was unable to prepay his special assessments.
The information statement also stated, “The Association is seeking from the lender the right for each individual owner to ‘prepay’ his or her share of the loan. This should permit the prepaying owner to then obtain a true ownership interest in the Land.”
Because the majority of the individual owners had prepaid their special assessments, on July 1, 2006 the Homeowners Association was able to fully repay the loan. The lender refunded $519,316.96 to the Association, which had been set aside in the lender’s reserve account from the initial loan proceeds to be used in case of delinquent loan payments. The Homeowners Association deposited the refund into the reserve account it is statutorily required to maintain for repair or replacement of major building components.
Although the Homeowners Association had repaid the loan, it continued to collect the special assessments from Duclos and the other individual owners who had not prepaid them. As of October 2006 only 28 owners had not prepaid their special assessments. Due to a change in the Homeowner Association’s accounting (that is, separate ledgers were no longer being maintained for ordinary operations and the property acquisition), special assessments collected as of that date were deposited into the Homeowners Association’s general revenue account and used to pay operating expenses.
3. The First Amended Complaint
On April 27, 2007 Duclos sued the Homeowners Association and on August 24, 2007 filed a first amended complaint asserting eight causes of action. Duclos’s first three claims were for violation of California’s unfair competition law (Bus. & Prof. Code, § 17200): The first cause of action alleged the Homeowners Association had wrongfully attempted to expand the board’s powers to sell or encumber the property without approval of the homeowners; the second alleged the Homeowners Association’s continued collection and use of the special assessments after the loan had been paid was a violation of Civil Code section 1366.1, which prohibits an association from imposing or collecting an assessment that exceeds the amount necessary to defray the costs for which it was levied; and the third cause of action alleged the Homeowners Association had failed to obtain the membership’s approval for the $550 attorney fee to complete the prepayment transaction. Duclos’s fourth and fifth claims were for declaratory relief based on the allegations of the first and second causes of action, respectively; the sixth cause of action sought an accounting of funds; the seventh sought imposition of a constructive trust; and the eighth cause of action prayed for an injunction prohibiting the expansion of the board’s powers, as alleged in the first cause of action.
Statutory references are to the Civil Code unless otherwise indicated.
4. The Trial Court’s Grant of Summary Adjudication
In February 2008 the Homeowners Association moved for summary judgment or, in the alternative, summary adjudication. The court heard oral argument on May 16 and May 22, 2008. At the second hearing the court requested financial statements from the Homeowners Association, partly in an effort to practically resolve the dispute over the continued collection of the special assessments. As the court indicated during its extensive questioning of the parties, any revenue collected from the individual owners in excess of the actual cost of the loan was, in its view, sensibly deposited in the Homeowners Association’s building maintenance and repair reserve account, which appeared to be severely underfunded. The court also expressed the strong sentiment Duclos’s claim the Homeowners Association had violated section 1366.1 was “an absurd application” of the law and any success in litigation would “be the most pyrrhic victory you could possibly imagine.”
As the court explained, “But now you understand the economic reality. When they have common obligations, whether it’s to buy out the fee simple or to roof the building in the next 10 years and to pay the workers’ comp. for the gardener, a dollar is a dollar when it swishes around.”
With respect to Duclos’s claims the Homeowners Association had impermissibly attempted to expand the board’s power by demanding the authority to sell or encumber the property without approval by the membership of the association itself, the Homeowners Association explained the Corporations Code requires it to obtain the members’ approval to sell or hypothecate property. Thus, the Homeowners Association argued, the language in the proposed amendment to the CC&Rs that Duclos objected to had no legal effect and was, at worse, superfluous. After the Homeowner’s Association indicated it would agree to be enjoined from encumbering the property unless it complied with the relevant provisions of the Corporations Code, counsel for Duclos stated, “If they agree to be enjoined that they will not enter into a major transaction encumbering the property without further approval from the homeowners, then that’s all we are seeking.”
Corporations Code section 7911, subdivision (a), provides, “(a) [A] corporation may sell, lease, convey, exchange, transfer or otherwise dispose of all or substantially all of its assets when the principal terms are: [¶] (1) Approved by the board; and [¶] (2) Unless the transaction is in the usual and regular course of its activities, approved by the members... either before or after approval by the board and before or after the transaction.”
At a status conference held on June 13, 2008 the parties again argued at length about the merits of the Homeowners Association’s motion. The court announced its tentative decision to grant the motion in its entirety and to award the Homeowners Association its costs, including any allowable attorney fees. After counsel for Duclos inquired whether, “with respect to the issue of the order restricting the Board from transferring, selling, encumbering the property without approval from the homeowners, is it your Honor’s inclination to enter that order,” the court responded, “Not necessarily. This has become such a fool’s errand that, although I’ve thrown some things out hoping that peace would break out, if your client is adamant he wants a merits ruling on this, he’ll get a merits ruling.” The court trailed the matter to July 22, 2008 because proper notice to rule on the motion had not been provided and to give the parties another opportunity to settle the matter.
On July 22, 2008 the court granted summary adjudication in favor of the Homeowners Association on all Duclos’s claims except the first and eighth causes of action, which concern the alleged wrongful attempt to expand the powers of the board.
5. Judgment Entered after Trial of the Remaining Claims; the Court’s Determination the Homeowners Association Was the Prevailing Party for Purposes of Costs
After a bench trial on September 15 and 16, 2008 the trial court found in favor of Duclos on the remaining two claims. The court issued a permanent injunction prohibiting the board from taking any action to sell or encumber the property without the approval of the members of the Homeowners Association. The court also ordered the Homeowners Association to pay restitution of $7,500 to Duclos to compensate him for the lost investment value of the interest payments he made after his failed effort to prepay his special assessments. Notwithstanding Duclos’s success in obtaining an injunction and limited restitution, the court determined the Homeowners Association was the prevailing party for purposes of costs under Code of Civil Procedure section 1032 because it had obtained summary adjudication on the causes of action concerning its continued collection of the special assessments after repayment of the loan, which the court characterized as Duclos’s most significant claims.
6. The Trial Court’s Denial of the Homeowners Association’s Motion for Attorney Fees
Contending the court had already declared it the prevailing party after trial concluded, on November 20, 2008 the Homeowners Association moved for attorney fees pursuant to section 1717, subdivision (a), based on the attorney fee provision in the CC&Rs. The Homeowners Association also argued it was entitled to attorney fees under section 1354, subdivision (c), which provides, “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.”
Article XI, section 3(c) of the CC&R’s states, “In the event of proceedings brought to enforce or restrain violation of any of said Covenants, or to determine the rights or duties of any person hereunder, then the prevailing party shall be entitled to recover its costs in such proceedings as well as reasonable attorneys’ fees.”
On December 19, 2008 the trial court denied the Homeowners Association’s motion “[f]or the reasons set forth by [Duclos] in his opposition.” Duclos had argued the Homeowners Association was not entitled to attorney fees because he had prevailed on the only contract claims subject to an award of attorney fees under section 1717, subdivision (a); section 1354, subdivision (c), is inapplicable to the claims upon which Duclos did not prevail; and, even if that provision is applicable, the Homeowners Association had failed to participate in alternative dispute resolution, a factor the court can take into consideration in determining the amount of an attorney fee award (§ 1369.580).
DISCUSSION
1. The Trial Court Properly Granted Summary Adjudication in the Homeowners Association’s Favor
a. Standard of review
A motion for summary judgment or summary adjudication is properly granted only when “all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Code Civ. Proc., § 437c, subd. (c).) We review a grant of summary adjudication de novo and decide independently whether the facts not subject to triable dispute warrant judgment for the moving party as a matter of law. (Intel Corp. v. Hamidi (2003) 30 Cal.4th 1342, 1348.)
b. Duclos’s claims based on the collection of the special assessments after the loan was repaid
Section 1366.1, part of the Davis-Stirling Common Interest Development Act(§ 1350 et seq.), provides, “An association shall not impose or collect an assessment or fee that exceeds the amount necessary to defray the costs for which it is levied.” Duclos contends the Homeowners Association violated this statute, and thus engaged in unfair competition in violation of Business and Professions Code section 17200, by continuing to collect the special assessments—calculated assuming the loan was not paid off until maturity—after the loan was repaid in July 2006. Duclos argues the cost to repay the loan became fixed and certain at that time and the Homeowners Association was required to reallocate the fixed purchase price, refunding any excess payments to individual condominium owners who had overpaid and reducing the payments due from those who had not yet fully paid their pro rata share. Duclos further contends the Homeowners Association was not permitted to deposit the money collected in excess of the actual loan cost into its general fund or to use the reserve that had been refunded by the lender for repairs or replacements.
Business and Professions Code section 17200 broadly defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [California’s false advertising law (Bus. & Prof. Code, § 17500 et seq.)].” (See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180, fn. 8 [“[b]y proscribing ‘any unlawful’ business practice, ‘section 17200 “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition law makes independently actionable”].)
Justice Ikola, writing for Division Three of the Fourth District in Brown v. Professional Community Management, Inc. (2005) 127 Cal.App.4th 532, explained that section 1366.1 “mean[s], for example, that fees or assessments levied against homeowners for the purpose of defraying the cost of mowing the grass in the common areas, or of painting the association’s clubhouse, or of replacing the deck of the association’s swimming pool, or any other of the myriad of the association’s management and maintenance responsibilities, may not exceed the cost to the association for providing those services.” (Brown, at p. 538.) The Brown court concluded that, “[w]hile section 1366.1 prohibits an association from marking up the incurred charge to generate a profit for itself, [a] vendor, [like the association’s property management company,] is not similarly restricted.” (Id. at p. 539.)
As Duclos contends, the purpose of the special assessments at issue in this case was to repay the loan used to purchase the property and the assignment fee holders’ interests. However, unlike the examples given by the Brown court in which it would generally be easy to determine whether—and when—the cost to paint a clubhouse or replace a deck exceeds the special assessment levied against the homeowners to defray that cost, the special assessments here were part of a complicated transaction with a final, proportionate cost to each individual condominium owner that was not readily determinable when the loan was repaid in July 2006. As Duclos acknowledges, the information statement he received from the Homeowners Association advised him a portion of the loan proceeds would “establish a reserve for the lender and Association to be used in the event that not all owners pay the amounts required to be paid when due.” Although the lender had been repaid as of July 2006, so that the reserve could be refunded to the Homeowners Association for it to hold, the final cost to each participating condominium owner was not ascertainable at that point and would not be finally fixed until all individual owners had paid their assessments in full or, if one or more owners who had not paid their special assessments defaulted on future payments, until the costs associated with those defaults (either in terms of collection costs or covering the missed payments) could be determined. Nothing in section 1366.1 requires the Homeowners Association to perform interim adjustments to its cost estimate regardless of the size of the apparent surplus or limits the Homeowners Association’s use of the surplus funds until such time as final calculations can be performed. (See Miklosy v. Regents of the University of California (2008) 44 Cal.4th 876, 888 [“[i]f the statutory language is unambiguous, we presume the Legislature meant what it said, and the plain meaning of the statute controls”]; Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 990 [In resolving questions of statutory interpretation, the court “must attempt to effectuate the probable intent of the Legislature, as expressed through the actual words of the statutes in question”; the first step “‘“is to scrutinize the actual words of the statute, giving them a plain and commonsense meaning”’”].)
Duclos also claims, even if not illegal, the continued collection of the special assessments after the loan was repaid was unfair. Although the “‘state of the law on what constitutes an unfair business practice in consumer cases is somewhat unsettled’” (Davis v. Ford Motor Credit Co. (2009) 179 Cal.App.4th 581, 706), the continued collection of the special assessments does not constitute an unfair practice under any of the tests recognized by the courts. The special assessments were calculated and collected from Duclos and the other individual owners who had not prepaid exactly as disclosed in the information statement issued by the Homeowners Association and approved by them. Neither Duclos nor the other nonprepaying owners suffered any real harm by the continued collection of those fees until such time as all the assessments had been paid and any refunds could be finally calculated. (See, e.g., Camacho v. Automobile Club of So. California (2006) 142 Cal.App.4th 1394, 1403 [factors that define unfairness are “(1) [t]he consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided”]; Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718 [“‘[i]n brief, the court must weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim’”].) Because the Homeowners Association’s collection of the special assessments was not illegal or unfair, the trial court properly granted summary adjudication on Duclos’s unfair competition claims predicated on this conduct.
c. Duclos’s claims based on the Homeowners Association’s imposition of a fee for legal services to complete the prepayment transaction
Duclos alleged the Homeowner Association’s imposition of a $550 attorney fee to prepay the special assessments constituted unfair competition because it violated section 1366, subdivision (b), which requires owner approval for “special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year....” In support of this claim, Duclos asserted the aggregate attorney fee, if collected from all 570 condominium owners, would have been $313,500, well in excess of 5 percent of the Homeowner Association’s 1999 annual budget of $2,012,305.
Contrary to Duclos’s contention, the attorney fee was not a special assessment imposed on all condominium owners at Marina Pacifica and thus within the ambit of section 1366, subdivision (b). Rather, it was a fee charged only if a condominium owner elected to prepay his or her special assessments. As the information statement disclosed, “The Association is seeking from the lender the right for each individual owner to ‘prepay’ his or her share of the loan.... The amount of the Land acquisition loan allocated to each unit, which would be the amount required to be ‘prepaid’ by each owner, will be based on the allocations for common area expenses as set forth in the CC&R’s. The Association will try to keep the additional costs related to any prepayment of this amount as low as possible, but expects that there will be some costs and fees charged for this prepayment privilege.” As a charge associated with each individual owner’s decision to exercise his or her right to prepay rather than an assessment, the trial court did not err in granting summary adjudication in favor of the Homeowners Association on Duclos’s third cause of action for unfair competition.
The trial court did not err in also granting summary adjudication in favor of the Homeowners Association on the sixth cause of action for accounting and seventh cause of action for a constructive trust because those claims were predicated on the wrongful conduct alleged in the second and third causes of action.
2. The Trial Court Erred in Failing To Award Duclos His Litigation Costs
Except as otherwise provided by statute, a “prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” (Code Civ. Proc., § 1032, subd. (b).) Code of Civil Procedure, section 1032, subdivision (a)(4), specifies four categories of prevailing parties for purposes of awarding litigation costs: “‘[1] [T]he party with a net monetary recovery, [2] a defendant in whose favor a dismissal is entered, [3] a defendant where neither plaintiff nor defendant obtains any relief, and [4] a defendant as against those plaintiffs who do not recover any relief against that defendant.” (See Goodman v. Lozano (2010) 47 Cal.4th. 1327, 1333; Michell v. Olick (1996) 49 Cal.App.4th 1194, 1198 (Michell).) “When any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.” (Code Civ. Proc., § 1032, subd. (a)(4); see Goodman, at p. 1333; Michell, at p. 1198.) “Where, as here, the determination of whether costs should be awarded is an issue of law on undisputed facts, we exercise de novo review.” (City of Long Beach v. Stevedoring Services of America (2007) 157 Cal.App.4th 672, 678.)
The trial court erred in awarding costs to the Homeowners Association: Whether or not the Homeowners Association prevailed on what the court characterized as Duclos’s primary claims, Duclos’s recovery of $7,500 as a restitution award on his first cause of action was a “net monetary recovery,” entitling him to his litigation costs as a matter of right. (See Michell, supra, 49 Cal.App.4th at p. 1199 [although cross-complainant prevailed on only one cause of action, considered secondary to predominant issue by trial court, she was prevailing party because she obtained net monetary recovery]; Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 188 [“[g]enerally, when a party falls squarely within one of the four situations enumerated in the definition of a prevailing party under section 1032, that party is entitled to recover costs as a matter of right”].)
To be sure, as the Homeowners Association contends, the court in Michell, supra, 49 Cal.App.4th at page 1200 was troubled that a plaintiff may recover costs even if he or she prevailed on a single, insignificant claim included among several unrelated and unmeritorious claims. However, the Michell court recognized it was “[n]evertheless... compelled to apply the statutory directive. The successful plaintiff is entitled to recover the whole of his or her costs, despite a limited victory.” Similarly in this case, the court had no discretion to deny Duclos recovery of his litigation costs despite the limited nature of his success.
In dicta the court in Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1156 suggested a defendant who successfully defeated all but one of the plaintiff’s claims and had also obtained some other form of success “whether by settlement or collateral action,” might be considered the prevailing party under Code of Civil Procedure section 1032. Even if we were to otherwise agree with this construction of the governing statutory language, the Homeowners Association’s reliance on Sears is misplaced. Whether primary or secondary claims, Duclos obtained both injunctive and monetary relief; the Homeowners Association, on the other hand, obtained no affirmative relief of any sort against Duclos “whether by settlement or collateral action.”
The Homeowners Association also contends, notwithstanding Duclos’s monetary recovery, the court had discretion to deny him costs because the amount of his monetary recovery could have been rendered in a limited civil case. (See Code Civ. Proc., § 1033, subd. (a) [“[c]osts or any portion of claimed costs shall be as determined by the court in its discretion in a case other than a limited civil case... where the prevailing party recovers a judgment that could have been rendered in a limited civil case”].) That section is inapplicable, however, because Duclos also obtained a permanent injunction against the Homeowners Association, a remedy he could not have obtained in a limited civil case. (See Code Civ. Proc., § 580, subd. (b)(2) [“permanent injunction, except as authorized by statute,” may not be awarded in limited civil case]; Ytuarte v. Superior Court (2005) 129 Cal.App.4th 266, 275 [“plaintiff in a limited civil action may not obtain a permanent injunction”].)
3. The Trial Court Did Not Err in Determining There Was No Prevailing Party for Purposes of an Award of Attorney Fees
a. Section 1717
Section 1717, subdivision (a), authorizes the trial court to award reasonable attorney fees to the prevailing party in a contract action if the contract specifically provides for an award of such fees. “If a contractual attorney fee provision is phrased broadly enough... it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims: ‘[P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.’” (Santisas v. Goodin (1998) 17 Cal.4th 599, 608; accord, Gil v. Mansano (2004) 121 Cal.App.4th 739, 743 [“a broadly phrased contractual attorney fee provision may support an award to the prevailing party in a tort action”].)
Section 1717, subdivision (a), provides in part, “In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. [¶]... [¶] Reasonable attorney’s fees shall be fixed by the court, and shall be an element of the costs of suit.”
The CC&Rs provide for recovery of attorney fees “[i]n the event of proceedings brought to enforce or restrain violation of any of said Covenants, or to determine the rights or duties of any person hereunder.” The parties do not dispute that Duclos’s claims based on the Homeowners Association’s attempt to amend the CC&Rs to allow it to sell or encumber the acquired property fall within the ambit of this attorney fee provision. Duclos prevailed on those claims. The Homeowners Association contends Duclos’s other claims—the claims on which it prevailed—are also encompassed by the provision’s broad language, “to determine the rights or duties of any person hereunder,” because, but for the CC&Rs, neither Duclos nor the Homeowners Association would have any rights or duties at issue in the litigation. In addition, the CC&Rs establish the Homeowners Association’s powers, including to levy special assessments, which Duclos challenged.
We need not determine whether all of Duclos’s claims fall within the scope of the CC&Rs’ attorney fees provision because, even assuming they do, it was well within the trial court’s broad discretion to determine there was no prevailing party under section 1717. (See Ajaxo Inc. v. E*Trade Group, Inc. (2005) 135 Cal.App.4th 21, 58 [“A trial court is given wide discretion in determining which party has prevailed on a contract. We will not disturb such a determination on appeal absent a clear abuse of discretion.”]; McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456 [no abuse of discretion where trial court “apparently concluded that fairness dictated each side should pay its own attorneys’ fees”].) The test for determining the prevailing party under section 1717 is different from the test under Code of Civil Procedure section 1032. Section 1717, subdivision (b)(1), provides, “[T]he party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract.” (§ 1717, subd. (b)(1).) However, it also authorizes the trial court to “determine that there is no party prevailing on the contract for purposes of this section.” (Ibid.)
In part because the prevailing party test differs (Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1143 [“definition of prevailing party under section 1717 thus differs significantly from [Code of Civil Procedure] section 1032”]), the trial court’s finding the Homeowners Association was the prevailing party for purposes of an award of costs was not determinative, as the Homeowners Association contends, of whether it was also the prevailing party entitled to recover its attorney fees. Although the judgment identified the Homeowners Association as the prevailing party without limitation, and the trial court denied Duclos’s motion to amend the judgment striking the general finding, it is clear from the record the court’s finding, made before any motion for attorney fees had been filed, was related only to the determination of prevailing party for purposes of costs. Indeed, the court, immediately after finding the Homeowners Association was entitled to its costs, stated it would not be inclined at that point to award the Homeowners Association its attorney fees if a motion seeking them were filed.
“[I]n deciding whether there is a ‘party prevailing on the contract,’ the court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by ‘a comparison of the extent to which each party ha[s] succeeded or failed to succeed in its contentions.’” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.) When the judgment is a “‘simple, unqualified win’” for one party on the only contract claims presented at trial, a trial court has no discretion to deny an attorney fee award to that party under section 1717. (Hsu, at p. 876; see also id. at p. 876 [“when the decision on the litigated contract claims is purely good news for one party and bad news for the other—the Courts of Appeal have recognized that a trial court has no discretion to deny attorney fees to the successful litigant”].) Thus, a party “whose litigation success is not fairly disputable” can claim attorney fees as a matter of right. (Id. at p. 876.) When both parties seek relief on a contract but neither party is completely successful, however, the trial court retains discretion to determine there is no prevailing party under section 1717. (Hsu, at p. 875.) “If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.) Typically, a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought. In other words, the judgment is “‘considered good news and bad news as to each of the parties.’” (Nasser v. Superior Court (1984) 156 Cal.App.3d 52, 60.)
In the case at bar there unquestionably was good news and bad news for both parties. For the Homeowners Association, it defeated Duclos’s claims relating to the continued collection of the special assessments after the loan was repaid—the claims that were predominately the focus during the extensive summary adjudication hearings—and his claim regarding imposition of the $550 attorney fee, which was comparatively insignificant. Duclos, however, obtained an injunction prohibiting the board from selling or encumbering the property without owner approval and was awarded restitution to compensate him for the Homeowners Association’s wrongful attempt to require his agreement to the proposed amendment to the CC&Rs as a condition of prepayment.
Although the Homeowners Association characterizes the injunction as “merely an affirmation of what [the Homeowners Association] acknowledged at the outset,” Duclos’s claims on this point had to be litigated to judgment because the parties could not settle them, in no small part due to the Homeowners Association’s hedging. During closing arguments the court stated to counsel for the Homeowners Association, “So I’m trying to find something that makes clear that on which this Board and Association to the best of my knowledge have dithered and equivocated, and have not in a timely fashion early on come out to Mr. Duclos and say, ‘We promise you in blood, that we will always go back to you for majority vote when we propose to do anything that is other than in the ordinary course of business. In particular if we were to mortgage or encumber any of the fee simple in which we the Association have an interest.’ I’ve asked you just five minutes ago to show me where crisply they state it directly. Even in this trial I have heard statements at times that seem to be essentially, ‘We got it fair and square, to wit a delegation or waiver early on, so don’t bother us about the last manifestation of a delegation or waiver.’ Since that’s so unappealing to me I sort of heard a different argument being made which is, ‘We never intended to do it,’ but when I hear both arguments in the same trial I do understand why Mr. Duclos was a little nervous.” Indeed, the court’s final words to the parties at the close of trial were, “It’s unfortunate that the Homeowners Association wasn’t able to make a clear statement of its willingness to comply with the applicable provisions of the Corporations Code and the [Davis-Stirling Common Interest Development Act] in a more timely fashion, such that this dispute could have, at least from my point of view, with the benefit of hindsight, been avoided.”
There is no question the trial court was thoroughly steeped in this case—initially very critical of Duclos’s claims and preliminarily inclined after granting summary adjudication in favor of the Homeowners Association to award it attorney fees if properly claimed. The court’s conclusion after two days of trial that Duclos’s concern about the proposed amendment to the CC&Rs was legitimate, and the court’s own changing perception as to each party’s contribution to the perpetuation of the dispute, strongly supports the conclusion that the court thoughtfully exercised its discretion in finally determining the Homeowners Association was not the prevailing party for purposes of an award of attorney fees. That exercise of discretion was well within the bounds of reason.
b. Section 1354
Section 1354 provides the covenants and restrictions in CC&Rs are enforceable equitable servitudes and the prevailing party in an action to enforce any of the governing documents, not just the CC&Rs, shall be awarded reasonable attorneys fees and costs. For purposes of section 1354, the court should determine “which party had prevailed on a practical level.” (Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574.)
Section 1354 states, “(a) The 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. Unless the declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both. [¶] (b) A governing document other than the declaration may be enforced by the association against an owner of a separate interest or by an owner of a separate interest against the association. [¶] (c) In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.”
Only Duclos’s claims the Homeowners Association impermissibly sought to amend the CC&Rs were intended to enforce the governing documents within the purview of this statute. Because Duclos prevailed on those claims, the trial court did not err in finding the Homeowners Association was not the prevailing party. (Duclos apparently did not seek to recover his attorney fees related to these claims.)
The Homeowners Association, however, contends it is entitled to attorney fees under section 1354, subdivision (c), in connection with Duclos’s claims predicated on its purported violation of section 1366.1. Although those claims fall within the definition of an “enforcement action” within the meaning of section 1369.510, which defines the terms used in article two of the Davis-Stirling Common Interest Development Act governing alternative dispute resolution, section 1354, subdivision (c), does not authorize recovery of attorney fees to the prevailing party in any “enforcement action” under the Act, only an action “to enforce the governing documents.” Duclos’s claim that the Homeowners Association violated section 1366.1 was not an attempt to enforce the CC&Rs or any other governing documents and thus falls outside the ambit of section 1354, subdivision (c).
Section 1369.510 states, “As used in this article: [¶] (a) ‘Alternative dispute resolution’ means mediation, arbitration, conciliation, or other nonjudicial procedure that involves a neutral party in the decisionmaking process. The form of alternative dispute resolution chosen pursuant to this article may be binding or nonbinding, with the voluntary consent of the parties. [¶] (b) ‘Enforcement action’ means a civil action or proceeding, other than a cross-complaint, for any of the following purposes: [¶] (1) Enforcement of this title. [¶] (2) Enforcement of the Nonprofit Mutual Benefit Corporation Law.... [¶] (3) Enforcement of the governing documents of a common interest development.”
DISPOSITION
The judgment is reversed to the extent it awarded costs to the Homeowners Association and denied them to Duclos; in all other respects the judgment is affirmed. The postjudgment fee order is affirmed. The matter is remanded for further proceedings not inconsistent with this opinion. The parties are to bear their own costs on appeal.
We concur: WOODS, J., ZELON, J.