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Please note that the following article is strictly to provide information and neither the content nor transmissions through this website
are intended to provide legal or other advice or to create an attorney-client relationship.
We focus this year's case law update on two important decisions involving prevailing party fee awards in actions arising from alleged violations of the Davis-Stirling Act's record inspection provisions and a plaintiff association's burden to recover damages from a material supplier in a construction defect action brought pursuant to SB 800.
In Moulton Parkway, the Fourth District Court of Appeal considered whether attorney fees are included as part of a prevailing party cost award under Civil Code section 5235(c).
In this case, the dispute arose when former directors sued their association for violations of the Davis-Stirling Act and, in particular, conducting business outside scheduled board meetings and failing to make certain records available for inspection. Plaintiffs dismissed their initial complaint and then filed a second action months later that was nearly identical to the dismissed action. The association demurred to the second complaint and the trial court sustained the association's demurrer without giving plaintiff the ability to amend.
The statute permits a court to award “any costs” to a prevailing association if the court finds the action, in its discretion, that the action to enforce provisions of the Davis-Stirling Act's record inspection provisions was “frivolous, unreasonable, or without foundation.” The association then moved for prevailing party attorney fees and costs and the trial court awarded the Association $13,750.00 in attorneys' fees and an additional $1,688.60 in costs.
The former directors' appealed the judgment and contended prevailing party attorneys' fees were not recoverable under the statute. The Appellate Court reversed the trial court award holding that the plain language of the statute does not support recovery of prevailing party attorney fees as “costs” because the Legislature did not expressly identify attorney fees as items of recoverable costs in the statute.
The ruling clarified whether attorney fees are recoverable when members file civil actions arising from an alleged failure to comply with provisions of the Davis-Stirling Act's record inspection statutes. This is consistent with trial court's hesitation to award prevailing party attorney fees in the absence of express statutory or contractual authority to do so. However, it begs the question of whether the Legislature should revisit the statutory scheme to permit such awards when a trial court concludes the action was frivolous. Or, in the alternative, associations may be well served to include language in governing document amendments that permits courts to award such relief as a remedy.
In Acqua Vista, an association sued a pipe supplier, MWI, Inc. (“MWI”), in a construction defect action arising from allegations that defective cast iron pipe was used throughout the project. As part of the case, a single cause of action arising from SB 800 was alleged against MWI.
During trial, MWI filed a motion for directed verdict on the ground that the association failed to present evidence that MWI violated SB 800 construction standards as a result of negligence or breach of contract. Verdict against MWI was awarded by the jury in the amount of $23,955,796.28. MWI's motion for judgment notwithstanding the verdict was also denied by the trial court. MWI appealed.
On appeal, the Fourth District analyzed whether an association must show a violation of construction standards occurred (i.e., strict liability) or whether the association must also show the violation was caused by the material supplier's negligence or breach of contract.
On appeal, the association and MWI asserted conflicting interpretations of Civil Code section 936 arising from conflicts in the first and last sentence of the statute. The Fourth District reversed the trial court decision and remanded the case back to the trial court and ordered the trial court to grant MWI's motion for directed verdict and entry of judgment in favor of MWI.
In doing so, the Fourth District acknowledged the “…plain language of the final sentence in section 936, when read in isolation, is ambiguous.” However, the Fourth District ultimately ruled that the last sentence of the statute when interpreted within the context of the entire Right to Repair Act, should be interpreted as a carve out for the negligence standard as applied to common law strict liability claims against material suppliers. Since the association did not assert a common law strict liability claim against the MWI, a material supplier, the last sentence of Civil Code section 936 did not apply to the dispute.
This ruling will make it more difficult for association's to pursue claims against material suppliers by mandating a showing of negligence or breach of contract in SB 800 claims. The take away from this case is that associations asserting construction defect claims against general contractors, subcontractors, material suppliers, individual product manufacturers, or design professionals should evaluate and, if possible, assert common law claims outside SB 800 to avoid the heightened burden outlined in this holding.
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