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Chula Vista Homeowners Association v. Irwin

Court of Appeals of Arizona, Second Division

July 27, 2018

Chula Vista Homeowners Association, an Arizona non-profit corporation, Petitioner,
Hon. Charles Irwin, Judge of the Superior Court of the State of Arizona, in and for the County of Cochise, Respondent, and Rodney Olson and Gloria Olson, husband and wife, Real Parties in Interest.

          Special Action Proceeding Cochise County Cause No. CV201600084



          Eppich Judge authored the opinion of the Court, in which Vásquez Presiding Judge and Espinosa Judge concurred.


          EPPICH, JUDGE.

         ¶1 The question presented in this special action is whether attorney fees awarded on claims for declaratory relief, violation of the open meeting laws, and slander of title under A.R.S. § 33-420(A), are damages for purposes of determining the amount of the supersedeas bond under A.R.S. § 12-2108 and Rule 7, Ariz. R. Civ. App. P. We accept jurisdiction because a party who wishes to challenge a trial court's order setting a supersedeas bond has "no equally plain, speedy and adequate remedy by appeal." City Ctr. Exec. Plaza, LLC v. Jantzen, 237 Ariz. 37, ¶ 2 (App. 2015), quoting Salt River Sand & Rock Co. v. Dunevant, 222 Ariz. 102, ¶ 7 (App. 2009); see also Ariz. R. P. Spec. Act. 1(a). Because the respondent judge erred when calculating the bond by including attorney fees he had awarded real parties in interest Rodney and Gloria Olson in their underlying action against petitioner Chula Vista Homeowners Association, he thereby abused his discretion and we grant relief. See Ariz. R. P. Spec. Act. 3(c).

         Facts and Procedural Background

         ¶2 The Olsons own property in Cochise County that is situated within the geographic boundary known as Chula Vista and is subject to certain covenants, conditions and restrictions (CC&Rs). Petitioner Chula Vista Homeowners Association (the HOA) is a non-profit corporation, organized pursuant to the CC&Rs. In 2009, the Olsons obtained a permit to build a 6, 000-square-foot steel structure on the property, which they intended to be ancillary to the residence they planned to build. At some point, the Olsons determined they were financially unable to build a primary residence on the property, and obtained a permit from Cochise County that allowed them to convert the structure into a family residence. In 2011, the HOA rejected the Olsons' request for approval of their plan to convert the structure into a residence, claiming it did not comport with the CC&Rs, but granted them a three-year variance, permitting them to live in the structure while they built a residence.

         ¶3 The Olsons did not build another home, and, in 2015, the HOA took the position they were in violation of the CC&Rs because the structure was "nontraditional" and was not a "First Class Private Dwelling" within the meaning of the CC&Rs as amended in 2007. The HOA recorded a Notice of Violation of Chula Vista Protective Covenants, which it removed shortly thereafter. It filed a second Notice about a month later, stating, as it had in the initial Notice, that the purpose of the recording was to adversely affect the Olsons' "ability to convey marketable title" to their property. The HOA also imposed fines for the violation and denied the Olsons' appeal of its decision.

         ¶4 In February 2016, the Olsons sued the HOA. In the first two counts, they sought declaratory relief, asking the court to determine that the 2007 amendment to the CC&Rs was invalid because it was not signed by a sufficient number of property owners, and that the relevant section was vague, ambiguous, and unenforceable. Alleging the CC&Rs are a contract, the Olsons requested attorney fees and costs pursuant to A.R.S. §§ 12-341.01 and 12-341. In count three of their complaint, the Olsons claimed the HOA had violated the open meeting laws under A.R.S. § 33-1804(A)(5), and requested an award of costs under § 12-341. In the final count they alleged a claim of slander of title under § 33-420(A), seeking damages pursuant to § 33-420(A), the greater of $5, 000 for each plaintiff or actual damages caused by the slander of title, and attorney fees and costs pursuant to § 33-420(A), §§ 12-341.01 and 12-341.

         ¶5 After a trial, the respondent judge entered Findings of Facts and Conclusions of Law and Amended Judgment, ruling in favor of the Olsons on all counts.[1] He found the HOA had violated the open meeting laws, slandered the Olsons' title and was "liable to Plaintiffs for damages caused by the recording, and attorney's fees an[d] costs incurred," adding that the action arose out of contract because CC&Rs are a contract, and as the successful parties, the Olsons were entitled to attorney fees under § 12-341.01. The respondent directed the HOA to record a Notice of Removal of Violation of Protective Covenants to clear title to the Olsons' property and awarded them statutory damages in the amount of $5, 000 pursuant to § 33-420(A). He also vacated the penalty the HOA previously had imposed and awarded the Olsons $318 in taxable costs and reasonable attorney fees in the amount of $35, 000. The total amount of the judgment was $40, 318.

         ¶6 The HOA filed a notice of appeal and a motion for supersedeas bond. It asserted in the motion that under Rule 7, Ariz. R. Civ. App. P., and § 12-2108, the amount of the bond had to be based on $5, 318, "which is comprised of the damages awarded to the Plaintiffs in the form of a $5, 000.00 statutory penalty pursuant to A.R.S. § 33-420(A) and court costs." Relying on City Center, 237 Ariz. 37, and AOR Direct L.L.C. v. Bustamante, 240 Ariz. 433 (App. 2016), the HOA argued the supersedeas bond should not include the amount of attorney fees awarded. However, the Olsons argued that the attorney fees were part of the damages in this case, relying on United States Fidelity & Guaranty Co. v. Frohmiller, 71 Ariz. 377 (1951), Kresock v. Gordon, 239 Ariz. 251 (App. 2016), and Desert Mountain Properties Ltd. Partnership v. Liberty Mutual Fire Insurance Co., 225 Ariz. 194 (App. 2010).

         ¶7 The respondent judge concluded that "the attorney's fees were incurred to protect the Plaintiff's interest based upon the breach of contract of the homeowner's association, and therefore are a legal consequence of the original wrongful act and are recoverable as damages." The ...

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