v.

MICHAEL FARRELL et al., Defendants and Respondents.

A120147, A121049

Court of Appeals of California, First Appellate District, Division Five

January 21, 2009

Not to be Published in Official Reports

 JONES, P.J.

This dispute centers on a common interest development that is located in Mendocino County. The "Irish Beach Clusterhomes Association Board of Governors" and "William Moores, President" appeal contending the trial court interpreted the development's governing documents incorrectly. Michael Farrell, who owns a home in the development with his wife Sandra Trujillo, also appeals contending the trial court erred when it declined to award him attorney fees. We conclude the underlying complaint was filed by an entity that does not exist and that the underlying judgment was partially void. In addition, we will affirm the order declining to award attorney fees.

I. FACTUAL AND PROCEDURAL BACKGROUND

The property that is at issue in this appeal is located at Irish Beach in Mendocino County. It was owned originally by William and Tona Moores who in 1980, subdivided it and established a common interest development. The development, known as Unit 8, consists of 16 lots and a large common area. It is governed by the Irish Beach Clusterhomes Association (the Association), and by recorded covenants, conditions and restrictions, (CC&Rs) and bylaws.

Moores built homes on six of the lots in Unit 8, selling five and keeping one for himself. Moores or his daughter still own the remaining 10 undeveloped lots.

Although a homeowners association was in place, it was moribund. There were no formal meetings from 1980 through 1997, and Moores acted informally on the Association's behalf. Furthermore, prior to 2004, there were no formal budgets or assessments.

Things began to change in 2003 when a fire on the property destroyed the homes owned by Moores and Farrell. After the fire, Moores asked Farrell to act as president of the Association in order to pursue the fire insurance claim and to rebuild the two homes. Farrell agreed.

The rebuilding process did not go smoothly and tensions arose between Moores and Farrell. Because of those tensions, two factions emerged. One was led by Moores. He sent letters to the homeowners in Unit 8 notifying them that meetings would be held in May and June 2004. At those meetings, the only persons present were Moores, his wife, and their daughter. Casting 11 votes, (1 for their home and 10 for their 10 vacant lots) they allegedly elected a president and board of governors and imposed certain assessments on the homeowners in Unit 8.

Farrell and the other homeowners of Unit 8 constituted the other faction. They executed and recorded an amendment to the Association's CC&Rs that modified their voting rights.

The power struggle between these two factions resulted in the complaint and cross-complaint that are at issue in the current appeal. In March 2005, "The Irish Beach Clusterhomes Association Board of Governors" and "William Moores, President" filed a complaint against Farrell alleging four causes of action. The first sought to collect the assessments that had been imposed at the May and June 2004 meetings. The second sought the appointment of a receiver and an accounting from Farrell for the sums he had spent rebuilding the burned homes. The third sought injunctive relief to prevent Farrell from acting on the Association's behalf. The fourth sought a judicial declaration of the parties' rights to manage and operate the Association.

In May 2005, Farrell alone filed a cross-complaint against "The Irish Beach Clusterhomes Association Board of Governors" and against Moores in his individual capacity. It alleged three causes of action. The first sought a declaration that the Association's board of governors had not operated the Association properly under the applicable law. The second sought injunctive relief to force the Association's board of governors to properly manage the Association. The third was against Moores personally and alleged that he had breached his fiduciary duties as developer of the property.

The case came to trial before a judge of the Sonoma County Superior Court. The primary issue at trial was whether the actions taken by the Association's board of governors at the May and June 2004 meetings were valid. That question turned on who had the right to vote. The trial court interpreted the Association's CC&Rs and by-laws and concluded that only lots that had been improved with a home were entitled to vote. Applying that methodology, the court ruled the actions taken by the board at the May and June 2004 meetings were invalid. Accordingly, the court ruled that the "plaintiffs" were to take nothing on their complaint and that the "cross-defendants" were enjoined from imposing any assessments against Farrell. The court also ruled that Moores individually had breached his fiduciary duties to the Association, but awarded only nominal damages of $1.

Subsequently, Farrell filed a motion asking the court to award him the attorney fees he had spent litigating the dispute. The court conducted a hearing on the motion and denied the request.

Plaintiffs have now appealed the judgment, and Farrell has appealed the court's decision to deny his request for fees as to Moores individually. This court has consolidated both appeals for purposes of decision.

II. DISCUSSION

A. The Appeal of Irish Beach Clusterhomes Association Board of Governors and Its President

Appellants contend the trial court interpreted the Association's governing documents incorrectly when it ruled that only those lots that had been improved with a home were entitled to vote. We need not reach this issue because appellants are not legal entities that have the power to bring or defend a suit.

A civil action can only be maintained by a legal entity. (Oliver v. Swiss Club Tell (1963) 222 Cal.App.2d 528, 537.) When a suit is brought by or against an entity which legally does not exist, the proceeding is void ab initio and its invalidity can be called to the attention of the court at any time. (Ibid.) The common-sense rationale of this rule is that courts sit to settle disputes between existing parties, and when a plaintiff or defendant does not exist, no lawful judgment can be rendered for or against such a party. (Id. at p. 538.)

Here, the plaintiffs in the court below and the appellants in this appeal are the "Irish Beach Clusterhomes Association Board of Governors" and "William Moores, President." However, both parties now concede that the Irish Beach Clusterhomes Association Board of Governors is not a legal entity that is capable of bringing suit. While Moores himself is a person who would be capable of filing suit in his individual capacity, the complaint plainly states he is bringing suit in his capacity as "President" of the Association's board of governors. A person who files suit on behalf of a nonexistent entity does not thereby manufacture an ability to sue that does not otherwise exist.

The only argument that has been advanced that might save the judgment has been put forth by Farrell. He argues the appeal can proceed, (and by implication the judgment is not void) because Moores sued and was sued in his individual capacity. It is not true that Moores sued in his individual capacity. As the trial court noted, the complaint states Moores was filing suit in his capacity as president of the board. While it is true that Moores was sued in his individual capacity in the cross-complaint, the question at this juncture is whether a judgment against an entity that does not exist—Irish Beach Clusterhomes Association Board of Governors and its President—is beyond the authority of the court, or in excess of its jurisdiction. (2 Witkin, Cal. Procedure (5th ed. 2008) Jurisdiction, § 316, p. 928.) We conclude the judgment is void to the extent it is in favor of, or against the "Irish Beach Clusterhomes Association Board of Governors" and "William Moores, President" and that it was therefore in excess of trial court's jurisdiction. Our role in this circumstance was made clear by our Supreme Court in Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180: "`When, as here, there is an appeal from a void judgment, the reviewing court's jurisdiction is limited to reversing the trial court's void acts.'" (Id. at p. 200, quoting Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 701.)

B. Attorney Fees

After the trial court issued its judgment, Farrell filed a motion that asked the court to award him the attorney fees he had spent litigating the dispute. He relied on Civil Code section 1354, subdivision (c) that states the prevailing party in an action to enforce the governing documents of a common interest development is entitled to recover fees. The trial court conducted a hearing on Farrell's motion and denied it, reasoning that because the plaintiffs in the underlying complaint were not legal entities, they could not be made to pay attorney fees. The court also declined to award fees because it did not consider Farrell to be a "prevailing" party within the meaning of the statute. Farrell now appeals contending the trial court erred when it declined to award him fees.

Civil Code section 1354, subdivision (c), states: "[i]n an action to enforce the governing documents [of a common interest development], the prevailing party shall be awarded reasonable attorney's fees and costs." The trial court is granted the discretion to determine whether and who is the prevailing party, and its ruling will be reversed on appeal only where the court abused its discretion. (Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 449.)

Before applying this standard, we note that Farrell now concedes the court could not validly award fees against the "Irish Beach Clusterhomes Association Board of Governors" because that entity does not legally exist. Thus, the issue is narrowed to whether the court erred when it declined to award fees against Moores.

Turning first to the complaint, as we have stated, Moores filed suit as president of the Irish Beach Clusterhomes Association Board of Governors. All parties concede that entity was incapable of bringing suit, and we have concluded that Moores, by filing suit on behalf of a nonexistent entity, did not create an ability to sue that did not otherwise exist. If Moores, acting as president of a nonexistent entity lacked the ability to sue or be sued, we conclude he also could not be ordered to pay attorney fees.

Turning to the cross-complaint, only one cause of action, the third alleging a breach of fiduciary duty, was clearly directed against Moores in his individual capacity. Farrell concedes the court could not validly award fees for that cause of action because it was not an action to "enforce" the governing documents of the common interest development within the meaning of Civil Code section 1354, subdivision (c). As for the remaining two causes of action for declaratory and injunctive relief, the allegations in the cross-complaint are vague and it does not appear that they were directed against Moores in his individual capacity. We conclude the court did not abuse its discretion when it ruled Farrell did not prevail in any meaningful sense based on the vague causes of action that were alleged. (Cf. Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574 [prevailing party for purposes of Civil Code section 1354 must be determined by the court on a "practical level"].)

The arguments Farrell advances do not convince us the trial court erred. First, Farrell argues that even if Moores lacked "standing" to bring certain causes of action, the court could still award attorney fees against him. He relies on Farber v. Bay View Terrace Homeowners Assn. (2006) 141 Cal.App.4th 1007 (Farber), where the court affirmed an award of attorney fees against a former homeowner who lacked standing to file suit. Farber is distinguishable because Moores did not simply lack standing. Acting as "president" of an entity that did not legally exist, he lacked the ability to bring suit. As we have explained, the flaw here is more fundamental than that present in Farber.

Next, Farrell cites Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 504-505 (Frances T.), where the court held that the members of the board of directors of a homeowners association can be personally liable for the torts they commit while acting in that capacity. We do not dispute the holding in Frances T. which is binding in any event. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.) However, this is not a tort case; therefore the analysis set forth in Frances T. is not applicable.

Finally, Farrell relies on Code of Civil Procedure section 369.5, which states that the individual members of an unincorporated association can be proper parties to litigation in some circumstances. While that is undoubtedly true, the question here is not whether a person can be a proper party, but whether Moores was a party against whom a fee award could be imposed. The trial court did not err when it ruled an award of fees against William Moores, the board president, would not be proper under the facts of this case.

III. DISPOSITION

The judgment is void to the extent it is in favor of or against the "Irish Beach Clusterhomes Association Board of Governors" and "William Moores, President." The order declining to award fees is affirmed.

We concur:

Needham, J.

Dondero, J.^*

Footnotes

1. Unless more specificity is needed, we will refer to Farrell and Trujillo collectively as Farrell.

2. Again, unless more specificity is needed, we will refer to William and Tona Moores collectively as Moores.

3. Farrell accuses Moores of misrepresenting the names the appellants in the briefs he filed with this court. We find no misrepresentation. The title on the opening brief describes the appellants as the "Irish Beach Clusterhomes Association, et al." This is simply a shorthand description of the actual appellants as is set forth in the text of the brief. Specifically, the brief states, "This is a dispute between Appellants Irish Beach Clusterhomes Association Board of Governors, William Moores, President, and Respondent Michael Farrell and his wife, Sandra Trujillo."

4. Moores ignores the legal issue and he simply denies that he mischaracterized the names of the appellants.

5. Code of Civil Procedure section 369.5. subdivision (b) states, in part: "A member of the partnership or other unincorporated association may be joined as a party in an action against the unincorporated association."

* Judge of the Superior Court of the City and County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.