Policy Of Encouraging Parties To Resolve Disputes Without Resort To Litigation Supports Liberal Construction Of Statutory Language.
“This case presents the question of whether the Davis-Stirling Act, and particularly the fee-shifting provision of section 5975, subdivision (c), applies to an action to enforce a settlement agreement arising out of a mediation conducted pursuant to the mandatory alternative dispute resolution requirements of the Act.” Rancho Mirage Country Club Homeowners Association v. Hazelbaker, et al., No. E063272 (4/2 8/9/16) (Hollenhorst, Ramirez, Miller).
Section 5795, the fee-shifting provision, applies to litigation “to enforce the governing documents.” So is an HOA lawsuit to enforce an agreement that was reached during mediation, is an action “to enforce the governing documents” of the HOA? Yes, says the Court of Appeal, on the facts here.
The pre-litigation ADR scheme applying to HOA disputes is intended to encourage the parties to an HOA dispute to settle their dispute through ADR rather than through litigation. The Court reasoned that the policy would be thwarted if an “action to enforce the governing documents” was narrowly construed, because then a party could settle an HOA dispute through mediation, not fulfill its settlement obligations, and avoid cost-shifting entirely. Besides, the gravamen of the HOA’s original complaint here was that the defendants had not taken the steps necessary to bring their property into compliance with the HOA’s CC&Rs.
COMMENT: The HOA dispute originally arose over unapproved changes to a patio area. The prevailing party here, the HOA, sought $31,970 in attorney’s fees, and the trial court awarded only $18,991 in attorney’s fees. Now the Court of Appeal has awarded the HOA its additional costs and attorney’s fees on appeal . Kinda argues in favor of the mediation process, and carrying out settlement obligations after an agreement has been reached.