Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Contra Costa County Super. Ct. No. C04-02341
Ruvolo, P.J.
I. Introduction
Appellant Jones Ranch Homeowners Association (HOA) enacted amendments to its governing covenants, conditions and restrictions (CC&R’s) that were designed to regulate large-scale social events sponsored by HOA members. In the HOA’s action for declaratory relief to determine the enforceability of the amendments, the trial court (1) declared the existence of a justiciable controversy validating the pursuit of declaratory relief; (2) adjudged three of the four amendments valid and enforceable; (3) ruled that the amendment allowing a 500-fold increase in the amount of fines that could be levied against a homeowner was unreasonable and unenforceable; and (4) awarded the HOA 80 percent of its attorney fees.
Kevin F. Degnan (Dr. Degnan) does not attack the enforceability ruling. Rather, he persists in his assertion that the predicate justiciable controversy is lacking and claims he, not the HOA, is entitled to a fee award. The HOA in turn appeals the fee award, assigning error to the trial court’s reduction of its fee award for partial success.
In his opening brief Dr. Degnan likewise challenged the trial court’s denial of his motion to strike the complaint under Code of Civil Procedure section 425.16. However, the order so denying his motion is an appealable order. (Code Civ. Proc., § 904.1, subd. (a)(13).) Dr. Degnan failed to appeal from the order, the order thus became final and this court lacks jurisdiction to review it in the instant appeal. (Id. at § 906.) Dr. Degnan concedes this state of affairs in his reply brief.
We affirm the trial court’s conclusions in all respects.
II. Factual and Procedural Background
A. Circumstances Leading to Amendments of CC&R’s
Jones Ranch is a common interest development consisting of approximately two dozen large high-end luxury homes in Alamo. The Jones Ranch HOA operates the development under governing CC&R’s first adopted in 1987. Dr. Degnan owns the largest site sitting high on a hilltop and comprised of three parcels spanning 13 acres. Access to the property is by way of a long driveway which is gated at the bottom of the hill. In front of appellant’s house is a large paved turnaround area that can accommodate at least 50 cars. The backyard is also very large, with a swimming pool and, as expressed by the trial court, “majestic views.”
The trial judge conducted a site visit.
Dr. Degnan selected this home for its privacy and seclusion. The nature of the home is designed for entertaining; Dr. Degnan enjoys entertaining and holding large-scale social events.
Two events in particular had repercussions within the Jones Ranch community. Dr. Degnan hosted a Halloween pajama party on October 31, 2003. A homeowner found an Evite invitation in the curb by Dr. Degnan’s driveway the next morning that was titled, “DR DEGNANS HALLOWEEN PARTY.” The invitation also included this language: “THIS IS A HALLOWEEN/PAJAMA PARTY, SEXY COSTUMES ARE ENCOURAGED FOR WOMEN. . . . Gentlemen will be expected to bring at least two ladies or you will not get in—NO EXCEPTIONS.”
Dr. Degnan testified he never saw the invitation. Apparently it was sent out by an acquaintance of Dr. Degnan’s.
The next morning the street was littered with beer cans and bottles, a resident’s brick mailbox had been damaged the night before and a resident complained that her driveway was blocked. The president of the HOA spoke with Dr. Degnan about these matters.
Dr. Degnan hosted another large social event on September 11, 2004, which he described as a pajama-themed costume party. Dr. Degnan testified he invited 15 to 20 couples and 15 to 20 friends, with a restriction that single male friends had to bring two girlfriends. Contra Costa County Deputy Sheriff Mack Cuttitta responded to three calls from Jones Ranch residents about the affair. According to Deputy Cuttitta, there were about 500 people at the event, “in various stages of dress and undress,” with many of the women “just dressed in lingerie.” To him, the scene “looked like it was getting ready to be a rock concert.” The crowd was “very loud, very boisterous,” cars were double parked, driveways were blocked and the numerous parked vehicles impeded the flow of traffic. Some guests on the street shouted obscenities at the private security guards. There were reports of littering, loud music and public drinking. At one point a helicopter landed in Dr. Degnan’s yard with guests, and later flew off at 1:00 or 2:00 a.m.
In the aftermath of this event the HOA cited Dr. Degnan for violations of the then-existing CC&R’s and proposed a third amendment to the CC&R’s designed to regulate large-scale social events in Jones Ranch. The board noticed a hearing and special meeting for October 4 to address the alleged violations and the proposed amendment, which was included with the notice.
Adamont Georgeson, Dr. Degnan’s attorney, wrote to the HOA on September 24, 2004, notifying the HOA that Dr. Degnan was not available on October 4 to attend the hearing. In the letter, Georgeson pointed out that “we believe that the proposed third amendment to the CC&R’s is improper,” developing numerous points to support this position. The letter also alluded to litigation over the proposed amendment, noting that “California courts frown on enforcing acts of an Association which have any of the significant defects apparent in the proposed amendment,” that the “lack of a good ‘paper trail’ of Association’s notice and informal dispute resolution procedures is [sic] typically fatal to later enforcement proceedings,” and that “[c]ourts give a tepid reception to relatively minor disputes among neighboring property owners.” Georgeson reminded the HOA of Dr. Degnan’s resolve to see that the “rights to continue to use his property as he has in the past will be preserved, and he has the resources necessary to resist the Association’s improper efforts in a dispute not of his making. Dr. Degnan will bring all of his resources to bear in a lawful and diligent fashion.”
In setting forth these matters, Mr. Georgeson also clarified that “Dr. Degnan purchased his property specifically because of its size, location, and physical characteristics, and with the intention to entertain often and lavishly. The restrictions proposed constitute an impairment of private property rights and an impermissible abridgment of other fundamental rights of assembly, expression, and association.”
Georgeson attended the October 4 meeting on Dr. Degnan’s behalf, reporting that it was “extremely emotionally charged.” At that meeting, Georgeson offered no alternative to the proposed amendment, nor did he give the HOA any assurances that future parties would not be disruptive as in the past. On behalf of Dr. Degnan he denied that any violations of existing CC&R’s had taken place, and reiterated Dr. Degnan’s intention to “entertain frequently and lavishly.”
Following up to that meeting, in a letter to Steven Weil, the HOA’s attorney, Georgeson wrote to the HOA on October 8, 2004, requesting that action relating to the proposed third amendment be postponed until after October 31, “while we engage in an amicable resolution of current issues.” The reason for the postponement was also requested because “Dr. Degnan will be having a Halloween party and will implement some of the suggestions made by the homeowners, along with those discussed with Lieutenant Terry of the Contra Costa Sheriff’s office.”
Georgeson again alluded to litigation barring an informal resolution of the matter: “In the event that the [HOA] adopts unreasonable CC&R amendments . . . and seeks to obtain attorneys’ fees for their efforts against Dr. Degnan, this letter shall serve as notice to the [HOA] . . . that Dr. Degnan has sought an amicable resolution of all of the Homeowners’ concerns prior to the [HOA] incurring any fees in enforcement proceedings. Having addressed and we believe resolved any legitimate concerns of his neighbors, we believe that Dr. Degnan would be successful in resisting the overreaching amendments to the CC&R’s recently proposed, in which event we will seek recovery of attorneys fees incurred.” And, as changes to the amendment were proposed, Georgeson reflected in another letter: “[T]he Association is inviting litigation of its over-reaching restrictions on Dr. Degnan’s conduct.”
There is no indication in the record whether the Halloween party was held, although given the tenor of future communications on the subject of the third amendment and Dr. Degnan’s use of his property, it is fair to infer from the lack of any subsequent mention of it that the Halloween party was cancelled.
The third amendment contains four key provisions: (1) restricting a member or member’s guest from parking more than 10 vehicles in the common area at any given time, without board permission; (2) prohibiting the use of helicopters and light aircraft in Jones Ranch except for emergencies; (3) requiring a member desiring to host a gathering attended at any one time by more than 100 persons to submit an application to the HOA board 45 days in advance the event; and (4) permitting the HOA to levy reimbursement assessments to be enforced by lien with power of sale, and increasing the upper limit on fines that can be levied against a member from $50 to $25,000. Ballots were sent to the HOA members and the necessary 75 percent approved the amendment. Dr. Degnan was the only member who voted against it.
The application must provide information about the date and time of the event, the estimated number of guests, whether guests will be indoors or outdoors and if there will be outdoor music, and a description of arrangements for security and cleanup. As well, the applicant must provide evidence of liability insurance naming the HOA as an additional insured, and a deposit of $1,000 to cover any costs incurred as a result of the event. The board must consider the application at least 30 days prior to the event and shall approve the same unless it finds it more likely than not that proceeding with the event will result in violation of the CC&R’s. If not approved, the applicant shall have an opportunity to meet conditions for approval identified by the board in its notice of rejection.
These assessments may be levied for failure to comply with CC&R’s in cases where the violation requires the HOA to expend funds to achieve compliance, or results in imposition of a fine.
Georgeson then advised the board by letter dated December 9, 2004, that Dr. Degnan “ha[d] just decided to hold an Open House party on December 31, 2004. He is uncertain how many guests will be attending.” Weil, counsel for the HOA, contacted Georgeson on December 17, to discuss the planned event. Georgeson refused to say how many people would be attending the Open House, claiming that he did not know. He did not say he would ask Dr. Degnan how many would be attending.
On December 20, counsel for both sides wrote letters to the other, discussing a number of issues. Weil’s letter included a reference to the possibility that the HOA would seek a temporary restraining order (TRO) to prevent the Open House from proceeding on December 31. Weil offered that the HOA would drop its plan to seek a TRO if Dr. Degnan signed a statement indicating that no more than 100 people would attend the party, and that he would otherwise comply with the new amendment conditions.
In his December 20th letter, Georgeson reiterated his continuing claim “that the [HOA] has acted improperly toward [Dr. Degnan] and that the CC&R’s are not enforceable.” Additionally, he indicated that the board had no basis to believe that more than 100 persons would be attending the Open House at any one time. Georgeson was clear that should the HOA seek injunctive relief against Dr. Degnan, Dr. Degnan would seek sanctions, and any unnecessary legal expenses which the HOA caused him to suffer would be an element of his damages in any later proceeding to declare the amendments unlawful.
B. Legal Proceedings
The HOA sued Dr. Degnan on December 28, 2004, seeking an injunction to prohibit the Open House and for a declaration affirming the enforceability of the third amendment to the CC&R’s. An ex parte application for a TRO was also filed seeking to prevent the Open House from proceeding on December 31, to the extent it violated the terms of the third amendment.
Dr. Degnan did not appear and, finding good cause, the court issued a TRO on December 29, 2004, forbidding him from holding a party attended by more than 100 people at any one time, and otherwise requiring him to comply with the notice and parking restrictions contained in the third amendment to the CC&R’s.
There is nothing in the record indicating that a party of any type proceeded on December 31, and counsel for Dr. Degnan conceded at oral argument that the Open House was cancelled under the threat of the TRO.
Subsequently, the HOA filed an amended complaint restricted to a request for declaratory relief. Dr. Degnan demurred, specially moved to strike and sought judgment on the pleadings, all to no avail. During the course of discovery the court entered evidentiary and monetary sanctions against Dr. Degnan, and directed further responses.
The matter proceeded to trial and the trial court issued a statement of decision and judgment upholding the notice, aircraft and parking restrictions but concluding the fine provisions were unenforceable. As to the justiciability of the dispute, the only finding challenged by Dr. Degnan on appeal, the court found:
“. . . The evidence is clear that Dr. Degnan was actively involved in a protracted dispute with the HOA over the enforceability of the third amendment at the time of the filing of this complaint. Through his attorney he had threatened to ‘resist’ the ‘over-reaching restrictions’ imposed by the amendment. He threatened litigation over the enforceability of the third amendment and threatened to make his neighbors’ ‘lives hell’ because of it. Just a little over one week before this action was filed, while he was preparing to throw his next party, this time on New Year’s Eve, he informed the HOA that he continued to claim that the third amendment was not enforceable. The uncertainty caused by his actions and the continued disruption to the lives of the members of the HOA resulting from that uncertainty has clearly created a controversy appropriate for resolution through declaratory relief.”
The court further determined that the HOA was the prevailing party, awarding it $173,427.32, or 80 percent of requested fees. These appeals followed.
III. Legal Discussion
A. The HOA’s Action Is Justiciable
1. Standard of Review
Code of Civil Procedure section 1060 (section 1060) states: “Any person interested under a written instrument . . . , or under a contract, or who desires a declaration of his or her rights or duties with respect to another . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action . . . for the 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. . . . The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.”
We note at the outset that the parties differ on what is the appropriate standard of review with respect to the question of whether a justiciable controversy was presented. In general, the decision to deny or grant declaratory relief rests within the discretion of the trial court and will not be disturbed on appeal absent a showing of clear abuse. (Hannula v. Hacienda Homes (1949) 34 Cal.2d 442, 448; Dolan-King v. Rancho Santa Fe Assn. (2000) 81 Cal.App.4th 965, 974.) However, as explained in Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885 (Sierra County), “[w]hether a claim presents an ‘actual controversy’ within the meaning of . . . section 1060 is a question of law. . . . We glean this standard of review both from the language [of the statute] that makes the presence of an ‘actual controversy’ a jurisdictional requirement to the grant of declaratory relief and from case law outside of the context of the statute that ripeness is a matter of law subject to de novo review. [Citations.]” According to the Sierra County court, once the justiciability threshold is met, it is up to the discretion of the trial court to grant or deny declaratory relief. (Ibid.)
The Sierra County approach makes sense. The trial court’s discretion to grant or deny declaratory relief only comes into play when an “actual controversy” within the meaning of section 1060 exists. Thus, justiciability is a threshold jurisdictional condition that must exist as a matter of law before the trial court can exercise its discretion to grant declaratory relief. (Accord, County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 606.) However, even if the justiciability threshold is met, it does not automatically follow that the trial court will issue a declaration. Code of Civil Procedure section 1061 underscores the discretionary nature of the trial court’s power: “The court may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper at the time under all the circumstances.”
Because we review the court’s determination de novo, “[w]e may affirm the trial court if its ruling is right, even if we disagree with one of the precise rationales the trial court selected. (See D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 19 . . . .) ‘ “If right upon any theory of the law applicable to the case, [the ruling] must be sustained regardless of the considerations which may have moved the trial court to its conclusion.” ’ (Ibid., quoting Davey v. Southern Pacific Co. (1897) 116 Cal. 325, 329 . . . .)” (County of Lake v. Smith (1991) 228 Cal.App.3d 214, 234.)
2. Analysis
Dr. Degnan maintains on appeal, as he did below, that no justiciable controversy existed to justify declaratory relief because there was no evidence that he violated or intended to violate the amended CC&R’s, or that such a violation was imminent. But, an action for declaratory relief in the interests of preventive justice may be pursued before any breach of rights occurs. Unlike coercive relief such as damages or an injunction, a declaratory judgment merely declares the legal relationship between the parties. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal.4th 888, 898.) The purpose of declaratory relief is to resolve controversies before they lead to repudiation of obligations, invasion of rights, or perpetration of wrongs. (Sierra County, supra, 158 Cal.App.4th at p. 884.)
The “actual controversy” contemplated by section 1060 embraces “a probable future controversy relating to the legal rights and duties of the parties. [Citation.] For a probable future controversy to constitute an ‘actual controversy,’ however, the probable future controversy must be ripe. [Citations.] A ‘controversy is “ripe” when it has reached, but has not passed, the point that the facts have sufficiently congealed to permit an intelligent and useful decision to be made.’ [Citation.]” (Sierra County, supra, 158 Cal.App.4th at p. 885.)
Our Supreme Court has made it clear that the requirement of ripeness as a component of the doctrine of justiciability “prevents courts from issuing purely advisory opinions. [Citation.] It is rooted in the fundamental concept that the proper role of the judiciary does not extend to the resolution of abstract differences of legal opinion. . . . [T]he ripeness doctrine is primarily bottomed on the recognition that judicial decisionmaking is best conducted in the context of an actual set of facts so that the issues will be framed with sufficient definiteness to enable the court to make a decree finally disposing of the controversy.” (Pacific Legal Foundation v. California Coastal Com. (1982) 33 Cal.3d 158, 170 (Pacific Legal Foundation).) Further developing the concept of ripeness, the high court looked to the following statement from Aetna Life Ins. Co. v. Haworth (1937) 300 U.S. 227, 240-241: “ ‘The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. [Citation.] It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.’ ” (Pacific Legal Foundation, supra, at pp. 170-171.)
It has long been the law of this state that declaratory relief is appropriate to test the enforceability of covenants asserted against a property owner. (Marra v. Aetna Construction Co. (1940) 15 Cal.2d 375, 377.) Importantly, the owner need not violate the restrictions in order to ascertain his or her legal rights. (Ibid.) Homeowner associations, in turn, have standing to institute litigation in matters pertaining to enforcement of the governing documents of a common interest development. (Civ. Code, § 1368.3.) However, “[e]nforcement is impossible where governing documents are unclear as applied in a given context. Interpretation of governing documents is undoubtedly a ‘matter pertaining’ to their enforcement. Accordingly, we conclude [former] Code of Civil Procedure section 374[] authorizes homeowner associations to file declaratory relief actions . . . where there is a need for an authoritative interpretation of governing documents.” (Duffey v. Superior Court (1992) 3 Cal.App.4th 425, 432 (Duffey).)
Former Code of Civil Procedure section 374 was repealed by Statutes 1992, chapter 178, section 16, page 889. Its substance currently is continued in Civil Code section 1368.3.
We agree with the trial court that there existed a substantial controversy between the parties having adverse legal interests of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. There was nothing vague, ethereal, or hypothetical about the dispute arising out of Dr. Degnan’s social activities. The parties not only set out their respective legal positions regarding the legality of the third amendment, but Dr. Degnan repeatedly refused to be bound by the new restrictions. He also alluded to the inevitability of litigation barring an “amicable” resolution; a result that was plainly impossible given the intractable respective positions of the parties. His counsel remarked in several letters that Dr. Degnan had purchased the property specifically so he could throw “frequent[] and lavish[]” parties, and that, for this reason, his “rights to continue to use his property as he has in the past will be preserved,” including bringing “all of his resources to bear in a lawful and diligent manner” in resisting the HOA’s newly-enacted restrictions on large-scale social events. Without real doubt, the “facts [had] sufficiently congealed to permit an intelligent and useful decision to be made. [Citation.]” (Sierra County, supra, 158 Cal.App.4th at p. 885.)
Moreover, Dr. Degnan’s counsel vigorously lamented that the passage of the third amendment, “constitute[s] an impairment of private property rights and an impermissible abridgment of other fundamental rights of assembly, expression, and association.” As we have already observed, a declaratory judgment “ ‘serves to set controversies at rest before they lead to repudiation of obligations, invasion of rights or commission of wrongs; in short, the remedy is to be used in the interests of preventive justice, to declare rights rather than execute them.’ [Citations.]” (Babb v. Superior Court (1971) 3 Cal.3d 841, 848, italics added; accord, County of San Diego v. State of California, supra, 164 Cal.App.4th at pp. 607-608.)
Here, Dr. Degnan complained that he was already being deterred from freely exercising his constitutional rights, especially those rights protected by the First Amendment, by the restrictions designed to regulate large-scale social events. It therefore appears that passage of the third amendment to the CC&R’s brought the HOA into a direct conflict with Dr. Degnan giving rise to a case or controversy; and a declaratory judgment was necessary to clear the cloud of uncertainty surrounding Dr. Degnan’s right to exercise his perceived constitutional rights.
Dr. Degnan argues on appeal that there is no evidence he violated or intended to violate the amended CC&R’s, or that such a violation was imminent, and as such there was no justiciable controversy. As we have already expressed, a justiciable controversy exists even before there is an actual or threatened violation of the disputed CC&R amendment. To the extent the point raised by Dr. Degnan is material, his assertion simply ignores what transpired in connection with his planned December 31st Open House and the logical inferences the trial judge was justified in drawing from those facts. On the heels of two “lavish” parties attended by hundreds of people, Dr. Degnan announced a plan to hold an Open House on December 31. He and his counsel refused to tell the HOA how many people were expected, even after the HOA offered to avoid a court battle over a TRO if Dr. Degnan would cooperate. The TRO ultimately obtained did not stop Dr. Degnan from hosting all parties, only those where more than 100 persons would attend, or which otherwise violated the third amendment. Yet, Dr. Degnan cancelled his New Year’s Eve Open House. The trial court could infer from these facts that Dr. Degnan cancelled his party because he anticipated that more than 100 guests would attend and thus, he faced the imminent threat that the HOA’s prohibitions against large-scale parties would be enforced against him; therefore his rights were presently being affected, demonstrating the existence of a justiciable controversy.
This refusal to disclose the number of anticipated guests was defended by Dr. Degnan’s counsel at oral argument when he contended the HOA was not entitled to this information.
Therefore, we agree, albeit perhaps for slightly different reasons, that a justiciable controversy existed between the HOA and Dr. Degnan regarding the validity of the already enacted third amendment. In reaching this conclusion, we find Dr. Degnan’s reliance on Duffey, supra, 3 Cal.App.4th at page 432, in arguing to the contrary, to be misplaced.
In Duffey, the Bertrams proposed an improvement to their property (a patio cover), which next-door neighbors claimed would obstruct their views and violate the governing CC&R’s of their homeowners association. (Duffey, supra, 3 Cal.App.4th at pp. 427-428.) The homeowners association initiated a declaratory relief action to determine whether its CC&R’s prohibited the improvement, naming as a defendant not only the property owner Bertrams, but the complaining neighbors as well. The reviewing court found it dispositive that the association sought no relief against the complaining neighbors who had been named as defendants. (Id. at p. 428.) “[I]t would be incongruous indeed if the expression of opinion to a homeowner association by one neighbor about another neighbor’s proposed construction were to cause to name the objecting neighbor in a lawsuit. Merely standing up at a homeowners’ or board of directors’ meeting to argue that one’s neighbors’ plan to paint their garage Day-Glo orange with magenta polka dots is prohibited by the CC&R’s should not land one in a lawsuit. Even a ‘small’ lawsuit for declaratory relief can be expensive.” (Id. at p. 434.)
Unlike Duffey, Dr. Degnan is not simply an innocent neighbor complaining about the unlawful conduct of another homeowner. Like the Bertrams, he is the very one against whom the complaints have been made. It is Dr. Degnan, based on his own conduct, who is the object of the declaratory relief action. Importantly, the Duffey court had no quarrel with the association pursuing the Bertrams to determine if the planned patio cover violated the CC&R’s: “[I]t is enough for the association to seek a determination of the controversy joining only the arguably offending property owners.” (Duffey, supra, 3 Cal.App.4th at p. 433; see also City of Tiburon v. Northwestern Pac. R.R. Co. (1970) 4 Cal.App.3d 160, 170-173 [city’s right to impose sanctions against landowners for violation of subdivision requirements constituted sufficient and actual controversy for purpose of declaratory relief].)
Finding as a matter of law that there existed a justiciable controversy between the parties based on their different interpretations of the amendments enacted to the CC&R’s to regulate large-scale social events, we hold the trial court did not err in considering HOA’s request for declaratory relief.
B. Attorney Fees
As part of the judgment entered below, the trial court invited each party to file a motion to determine who was the prevailing party for purposes of awarding attorney fees. A motion was filed by the HOA arguing it was the prevailing party because it had achieved its main litigation goal and asking the court to award $203,728.65 in attorney fees. Dr. Degnan filed a similar motion claiming that he had prevailed “on a practical level” and that he was entitled to $177,526.50 in attorney fees.
After hearing oral argument on the two motions and taking the matter under submission, the court entered an order declaring the HOA to be the prevailing party and awarding it all of its claimed litigation costs, plus 80 percent of the attorney fees sought by its motion. In so ruling, the court found that, although the total amount of fees claimed was reasonable, it was awarding only 80 percent of that total amount requested based on the HOA’s partial success in this litigation “due to the finding that the penalty provision was invalid.”
On appeal, Dr. Degnan contends that even if we agree with the trial court’s conclusion that there was a justiciable controversy, and otherwise affirm the judgment, we should set aside the award of attorney fees to the HOA, and instead award attorney fees and costs to him. Specifically, Dr. Degnan argues that the trial court erred in its determination that the HOA was the prevailing party in this litigation, and separately, that he is entitled to recover fees under the attorney fees provision in the CC&R’s because he prevailed on a claim to collect or enforce “assessments, fines, and/or penalties.”
The HOA, on the other hand, has filed a cross-appeal claiming the trial court abused its discretion when it limited the award to 80 percent of the attorney fees sought for “partial success,” because there were no special circumstances extant that would make the full award in this case unjust.
Here, attorney fees are recoverable under Civil Code section 1354, but not under Civil Code section 1717. In an action on a contract, Civil Code section 1717, subdivision (a), permits the party “who is determined to be the party prevailing on the contract” to recover reasonable attorney fees where the contract specifically provides for their recovery. An attorney fees provision in a recorded declaration of CC&R’s is considered a contract within the meaning of Civil Code section 1717. (Huntington Landmark Adult Community Assn. v. Ross (1989) 213 Cal.App.3d 1012, 1024.)
However, Section 2.1 of the CC&R’s entitles the HOA to recover its “ ‘costs, fees, charges and expenditures, including without limitation, attorneys’ fees, late charges, interest and recording and filing fees actually incurred by the Association in collecting and/or enforcing payment of assessments, fines and/or penalties.’ ” On its face, the attorney fees provision is unilateral, giving only the HOA the right to attorney fees. “Section 1717, however, renders the provision mutual, giving either plaintiff or defendant, if a prevailing party, a right to attorney fees on any claims based on the contract.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109 (Scott).)
But, even construing the clause as applying to both parties, it does not apply here. The right to recover attorney fees under Section 2.1 of the CC&R’s was limited to fees incurred in an action to “collect[] and/or enforce payment of assessments, fines and/or penalties.” The declaratory relief action brought by the HOA did not seek this relief. No assessments, fines and/or penalties had been levied on Dr. Degnan, and thus, the HOA was not seeking to recover those sums. Instead, the HOA sought only a declaration that its third amendment, which included a prospective fine provision, was reasonable. Therefore, Section 2.1 was inapplicable to this litigation.
On the other hand, Civil Code section 1354, subdivision (c), provides for the recovery of reasonable attorney fees and costs in an action to enforce CC&R’s in common interest community developments. This provision, which is also applied mutually, is that which is applicable to the current litigation.
The fee provision in Civil Code section 1354, subdivision (c) was formerly found in subdivision (f). A 2004 amendment moved it to current subdivision (c) without change. (Stats. 2004, ch. 754, § 1.)
As to the competing claims for fees, we first consider the trial court’s prevailing party determination. When the matter was briefed below, Dr. Degnan claimed he should be declared the prevailing party because when the “illegal and unenforceable fines provision” was struck down by the trial court, he “succeeded in eliminating an unlawful encumbrance that the HOA improperly placed on every single home in the subdivision.” On the other hand, the HOA claimed it was the prevailing party because it succeeded in forcing Dr. Degnan to comply with “[t]he events provision of the third amendment,” requiring notice and prior approval of large-scale social events, which Dr. Degnan had claimed “was racist, sexist, ageist and violated several provisions of the United States Constitution.”
The trial court’s determination of the prevailing party is reviewed under an abuse of discretion standard. (Scott, supra, 20 Cal.4th at p. 1109 [attorney fees under Civ. Code, § 1717]; Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158 [attorney fees under Civ. Code, § 1717]; Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 (Heather Farms) [attorney fees under Civ. Code, § 1354].) We conclude the trial court acted within its discretion by declaring the HOA the prevailing party.
The Supreme Court has held, “[I]n deciding whether there is a ‘party prevailing on the contract,’ the trial 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 . . . by ‘a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.’ [Citation.]” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876; accord, Scott, supra, 20 Cal.4th at p. 1109.)
In Heather Farms, supra, 21 Cal.App.4th 1568, the court declined to adopt a “rigid interpretation” of prevailing party, but concluded the trial court should “analyze[] which party had prevailed on a practical level.” (Id. at p. 1574.) “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, supra, 20 Cal.4th at p. 1109.)
Although the HOA cannot claim a complete win, it won three of four contested issues, specifically the enforceability of (1) the parking restrictions, (2) the helicopter and light aircraft restrictions, and (3) the events restrictions. The trial court characterized the events restrictions as the “the primary focus of this litigation,” and this appears to be an apt description. By winning on this issue, the HOA succeeded in forcing Dr. Degnan to submit an application to the HOA board if he wishes to host another large-scale gathering at his home attended by more than 100 people. The application will have to include information regarding the date and time of the event, the estimated number of guests, whether the guests will be indoors or outside, and a description of security and common area cleanup arrangements. Dr. Degnan will also be required to obtain liability insurance naming the HOA as an additional insured as well as providing a deposit of $1,000 to cover any costs incurred by the HOA as a result of the event. As a practical matter, by imposing these limitations on Dr. Degnan’s ability to hold large-scale social events in the future, the HOA achieved its main litigation objective. Thus, the record amply supports the trial court’s determination that the HOA “prevailed on a practical level” in this dispute. (Heather Farms, supra, 21 Cal.App.4th at p. 1574.)
We next turn to the argument made in the HOA’s cross-appeal that the trial court abused its discretion in awarding it $173,427.32 in attorney fees, which was 80 percent of the amount requested. The court reduced the HOA’s attorney fees because of its partial success, “due to the finding that the penalty provision was invalid.” The HOA claims that “[n]o circumstances existed that made a full award unjust.” We review the trial court’s award of reasonable attorney fees under a deferential abuse of discretion standard. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096 (PLCM Group) [Civ. Code, § 1717].)
In calculating reasonable attorney fees, California courts ordinarily begin with the “lodestar”––i.e., the reasonable number of hours multiplied by the reasonable hourly rate. (PLCM Group, supra, 22 Cal.4th at p. 1095; Thayer v. Wells Fargo Bank (2001) 92 Cal.App.4th 819, 833.) After the court determines the lodestar figure, “ ‘it shall consider whether the total award so calculated under all of the circumstances of the case is more than a reasonable amount and, if so, shall reduce the [Civil Code] section 1717 award so that it is a reasonable figure.’ ” (PLCM Group, supra, at p. 1096.)
While recognizing that “every fee-shifting statute must be construed on its own merits” (Ketchum v. Moses (2001) 24 Cal.4th 1122, 1136), it is a generally accepted proposition that a prevailing party’s relative success or failure in the litigation is an appropriate factor for the court to consider in fashioning an attorney fee award. (Hensley v. Eckerhart (1983) 461 U.S. 424, 436-437; Flannery v. Prentice (2001) 26 Cal.4th 572, 584; PLCM Group, supra, 22 Cal.4th at p. 1096; Sokolow v. County of San Mateo (1989) 213 Cal.App.3d 231, 248; see generally Pearl, California Attorney Fee Awards (Cont.Ed.Bar 2d ed. 2008) § 13.11, Determining Adjustments to the Lodestar, pp. 396.1-396.3, and cases cited therein.) Consequently, the trial court was justified in its belief that the number of hours awarded in HOA’s attorney fees request must be commensurate with the degree of success it had achieved in this litigation.
In this case, the HOA was precluded from achieving the full measure of success that it sought in bringing this lawsuit when the trial court struck down the third amendment’s disciplinary fines provision as “invalid and unenforceable.” Where a litigant has failed to prevail on a claim that is distinct in all respects from the litigant’s successful claims, the hours spent on the unsuccessful claim can legitimately be excluded in considering the amount of a reasonable fee. (Sokolow v. County of San Mateo, supra, 213 Cal.App.3d at p. 248.) In this case the court’s overall reduction of the lodestar was within its discretion because HOA’s partial success in the litigation was attributable to work performed on an unsuccessful claim (the fines and assessment provision), which was separate and distinct from the successful claims (parking, aircraft, and event restrictions). On this basis, we find the court did not abuse its broad discretion by imposing a 20 percent reduction in the hours claimed by the HOA based on fact that the HOA was only partially successful in obtaining the relief it sought.
IV. Disposition
We affirm the declaratory judgment and the order awarding attorney fees and costs. Each party to bear their own costs on appeal.
I concur: Rivera, J.
REARDON, J.
I respectfully dissent. The first amended complaint (FAC) did not allege a justiciable controversy, nor did the evidence adduced at trial establish one.
The FAC merely alleged that Dr. Degnan was the only homeowner who voted against the amendment, objected to it and claimed it was invalid. Generically, the complaint stated: “An actual controversy has arisen and now exists between [the] Association and Degnan concerning their respective rights and duties in that Association contends that the Third Amendment is valid and enforceable in all respects, whereas Degnan contends that the Third Amendment is invalid and unenforceable. Association disputes all of Degnan’s contentions and asserts that he is bound to comply with the requirements of the Third Amendment.” In a word, through the FAC the Jones Ranch Homeowners Association (HOA) sought only a judicial determination of the enforceability of the amended covenants, conditions and restrictions (CC&R’s)—a request for an advisory opinion to settle an abstract difference of opinion. (Pacific Legal Foundation v. California Coastal Com. (1982) 33 Cal.3d 158, 170-171.)
Glaringly absent from the FAC is any allegation that Dr. Degnan violated, intended to violate, said he would violate or threatened to violate the amended CC&R’s; hosted or sought approval of an event that might be subject to or run afoul of the amendment; etc. He expressed an opinion, albeit strongly, by objecting to the amendment and claiming, through his attorney, that it was not enforceable; but in my opinion, this fundamental disagreement as to enforceability does not rise to a justiciable controversy. (City of Santa Monica v. Stewart (2005) 126 Cal.App.4th 43, 64-66 [even if city clerk and city disagreed fundamentally as to constitutionality of local initiative, such disagreement would amount to nothing more than difference of opinion, not actual justiciable controversy].)
Second, unlike the majority, I do not believe the evidence forthcoming at trial closed the gap. While the trial court determined that Dr. Degnan “threatened” litigation, these “threats” consisted of his attorney’s opinions about the legality of the proposed amendment and the outcome of any HOA enforcement or disciplinary action, sprinkled with a little posturing in his correspondence to the HOA attorney. Significantly, most communications from Attorney Georgeson predated adoption of the amendment, and at least two specifically quoted by the majority—those of September 24 and October 8, 2004—addressed his opinion about a proposed amendment that differed from the adopted amendment in important ways. (Maj. opn., ante, at pp. 3-5, 11.) This earlier draft required a homeowner seeking approval for a social event to advise the board as to the “type” of event that was planned, and provided for a $50,000 fine for violation of the CC&R’s. Of note, the September 24, 2004 letter was equally concerned with the procedures and substance of the disciplinary matter pending against Dr. Degnan. And, reflected in both letters was the desire to satisfy the HOA’s concerns informally and amicably.
Moreover, the trial court’s reliance on Dr. Degnan’s comment about making his neighbors’ lives “hell” was misguided because it was not placed in context. Dr. Degnan testified that his comment was prompted by the following circumstance: “They had just told me to take my friends back to Oakland.” In context, the link between the comment and any set of facts that had “ ‘sufficiently congealed’ ” to enable a court to make a helpful and intelligent decision is not apparent. (See Environmental Defense Project of Sierra County v. County of Sierra (2008) 158 Cal.App.4th 877, 885 (Sierra County).) This is so because the possible meanings that could be ascribed to the comment are legion and therefore speculative.
Additionally, the court’s emphasis on the “uncertainty” caused by Dr. Degnan’s actions does not satisfy the justiciability requirement. Lingering uncertainty about the validity of regulations is not a basis for a declaration because the end result is the rendering of an improper advisory opinion. (City of Santa Monica v. Stewart, supra, 126 Cal.App.4th at pp. 65-66.)
Further, the only relief pursued in the FAC was a declaration as to the enforceability of the amended CC&R’s; no relief was sought against Dr. Degnan and nothing directly happened to him as a result of the trial court’s decision. (See Duffey v. Superior Court (1992) 3 Cal.App.4th 425, 429-430.) The legal effect of such a declaration on Dr. Degnan is indistinguishable from its legal effect on any other member of the Jones Ranch community because there is no factual context informing the declaration. There was no fine sought to be imposed, no party in the works potentially subject to the amendment, etc. The facts had not sufficiently solidified to invite a useful decision, one that would test the limits, constraints and permissible applications of the amended CC&R’s. (Sierra County, supra, 158 Cal.App.4th at p. 885.)
Duffey concerned a declaratory relief action by a homeowners association to determine whether CC&R’s prohibited a proposed improvement. Two homeowners who complained about the proposed improvement were named as defendants but were unable to extricate themselves from the proceeding. The reviewing court found it dispositive of their appeal that the association sought no relief against them and thus nothing would directly happen to them as a result of the trial court’s ultimate decision. (Duffey v. Superior Court, supra, at pp. 429-430.)
The majority identifies the fact that the parties set out their respective legal positions regarding the legality of the amendment as contributing to the existence of a substantial controversy. (Maj. opn., ante, at p. 11.) In my opinion, holding differing opinions about the validity or enforceability of the amended CC&R’s in itself is insufficient to create a controversy. (City of Santa Monica v. Stewart, supra, 126 Cal.App.4th at p. 66.) Nor do I agree with the majority’s assertion that Dr. Degnan repeatedly refused to be bound by the provisions of the amendment, thereby adding fuel to the purported controversy. (Maj. opn., ante, at p. 11.) To reiterate, what we have here are the opinions of Dr. Degnan’s attorney about the validity of the amendments and his prognostication about the outcome of any enforcement efforts. These expressions do not translate into a refusal to be bound by the CC&R’s. Again, there has been no action threatening or indicating a refusal to be bound by the CC&R’s; nor did Dr. Degnan state that he refused to be bound by them.
Finally, the majority also highlights as indicative of a justiciable controversy the communications concerning Dr. Degnan’s proposed December 31, 2004 open house. (Maj. opn., ante, at pp. 12-13.) Per the provisions of the amended CC&R’s, no application for a party is required unless the gathering will be attended at any one time by more than 100 persons, and there is no additional rule requiring homeowners to state how many people might attend a social event if the number were not expected to exceed 100. Georgeson notified the HOA of the proposed December 31 event, upon the suggestion of the sheriff’s department that such notice was “good form.” He was uncertain how many guests would attend. In follow-up correspondence, Georgeson indicated he was not aware of any circumstances implicating the prior permission thresholds articulated in the amended CC&R’s, and had no basis or belief that those thresholds would be met. But even if Georgeson could have done more to placate the HOA, I do not see this communication as a threat to violate the CC&R’s. Georgeson was playing it “by the book” in terms of what the amendment required.
Significantly, it was the HOA that instituted preemptive litigation, not Dr. Degnan. The initial action proceeded to a temporary restraining order (TRO) prohibiting Dr. Degnan for holding a New Year’s Eve party in violation of the CC&R’s. The party did not take place, and nothing violative of the TRO or amendments transpired. Indeed, this was the second party proposed after adoption of the amendments that either did not take place, or took place without incident. Issuance of the TRO resolved the HOA’s misgivings about the proposed New Year’s Eve event. Nothing touching the amended CC&R’s remained to ground the declaratory relief action as it progressed under the FAC.
A Halloween party had been proposed for October 31, 2004.
Perhaps the most telling statement in the record accentuating the absence of an actual, present controversy was the trial court’s summation in overruling appellant’s demurrer: “[H]e still disputes the validity of this. Which means we are headed for another party sometime and we are going to be facing this thing down the road, might as well get it out of the way now, in terms of making a decision whether or not these are valid. [¶] . . . [¶] . . . There would be this cloud over everyone, constantly without knowing whether or not this is going to happen or not, whether it’s valid or not . . . .” Where the allegations and, as here, the evidence “reveal the controversy to be conjectural, anticipated to occur in the future, or an attempt to obtain an advisory opinion from the court, the fundamental basis of declaratory relief is lacking.” (Brownfield v. Daniel Freeman Marina Hospital (1989) 208 Cal.App.3d 405, 410.)
Finally, I am troubled by the implications of the majority opinion. Under this opinion, an attorney cannot vigorously question the legality and potential consequences of enacting newly proposed restrictions on his or her client’s use and enjoyment of property without exposing the client to a preemptive declaratory relief action with an attorney fees trigger. (Civ. Code, § 1354, subd. (c).) Here the HOA initiated litigation against a homeowner not to enforce the CC&R’s in the face of a purported or possible violation, but to establish what the law presumes, namely that the CC&R’s are valid. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 382-383.) Having prevailed, the HOA can extract attorney fees. This preemptive resort to declaratory relief in the absence of an actual, threatened or proposed purported violation of CC&R’s is improper and unfair.
Because I would reverse the declaratory judgment (case No. A118584), I would also reverse the order awarding costs and fees to the HOA and remand for a determination of reasonable attorney fees to Dr. Degnan under Civil Code section 1354 (case No. A119884).
Reardon, J.