Court Opinion

ID: 9745181
Source: CourtListenerOpinion
Date Created: 2023-08-26 22:40:30.261067+00
Date Added: 2024-06-11T07:24:57.363644
License: Public Domain

RUBIN, J., Concurring and Dissenting.
I concur in the portions of the majority’s decision affirming both the liability of The Churchill and the order for injunctive relief, but I dissent from those portions of the decision (1) denying The Churchill directors their reasonable attorney’s fees; and (2) awarding the Ritters virtually the full amount of their requested attorney’s fees.
1. The Directors Were the Prevailing Parties
As the directors of a nonprofit mutual benefit corporation, the five Churchill directors had no liability to the Ritters if they acted in good faith in what they reasonably believed were the best interests of the corporation. (Corp. Code, §7231, subds. (a)-(c) (section 7231); Finley v. Superior Court (2000) 80 Cal.App.4th 1152, 1157 [96 Cal.Rptr.2d 128].) The jury in this case apparently made such a finding by exonerating The Churchill directors from liability on each cause of action. The majority believes a fee award was proper against these individuals because The Churchill could act through only its directors, and the directors “merely avoided liability” by virtue of section 7231. Implicit in this is the notion that section 7231 is a mere technicality that allows corporate directors to avoid personal liability for their wrongful acts. I disagree.1
*130Section 7231 establishes a statutory standard of care for the directors of nonprofit mutual benefit corporations. (See Lamden v. La Jolla Shores Clubdominium Homeowners Assn. (1999) 21 Cal.4th 249, 258 [87 Cal.Rptr.2d 237, 980 P.2d 940]; Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 506, fn. 13, 513-514 [229 Cal.Rptr. 456, 723 P.2d 573].) The standard of care is an essential element of any plaintiff’s cause of action. (Miller v. Los Angeles County Flood Control Dist. (1973) 8 Cal.3d 689, 703 [106 Cal.Rptr. 1, 505 P.2d 193]; accord, Stonegate Homeowners Assn. v. Staben (2006) 144 Cal.App.4th 740, 748-749 [50 Cal.Rptr.3d 709] [excluding plaintiff’s evidence on standard of care was error because such evidence would have allowed plaintiff to overcome nonsuit motion].) In short, if the directors did not violate the applicable standard of care, they did not commit a wrongful act. Because The Churchill directors were found not liable on every cause of action, they were the prevailing parties. (Hsu v. Abbara (1995) 9 Cal.4th 863, 876-877 [39 Cal.Rptr.2d 824, 891 P.2d 804] [where party obtains a simple, unqualified victory on contract claims, it is prevailing party as matter of law].) A plaintiff who sues individual members of a governing board when its claim is legally against only the board itself should not be rewarded by denying the successful members the attorney’s fees to which they are otherwise entitled.
The only other possible basis for denying The Churchill directors their attorney’s fees is the injunction that ordered them and The Churchill to hold an informational meeting for the homeowners and then have the owners vote whether to have The Churchill pay to repair the slab penetrations in each unit. Although an injunction against the directors might have been proper, because an injunction against a corporation is sufficient by itself to bind the directors (Signal Oil & Gas Co. v. Ashland Oil & Refining Co. (1958) 49 Cal.2d 764, 779-780 [322 P.2d 1]), it was unnecessary. As the majority itself notes when concluding that injunctive relief was proper despite the jury’s exoneration of the directors, “[t]he fact that the directors were named individually in the judgment on the injunctive relief is not a reflection of their individual liability on the negligence or other counts; rather, it reflects the simple reality that an entity acts through its board and/or agents . . . .” (Maj. opn., ante, at p. 124.) To hold that innocent corporate directors are liable for attorney’s fees (or are to be denied otherwise authorized attorney’s fees) whenever they and their corporate entity are both enjoined to remedy some corporate breach of contract undermines both the spirit and the intent of section 7231.
*131Therefore, I would reverse the order denying The Churchill directors their attorney’s fees and remand the matter to the trial court with directions to determine the directors’ reasonable attorney’s fees for establishing their section 7231 defense.
2. The Fee Award Against The Churchill Should Be Reversed
The Ritters asked for much at trial, but obtained little. They sued both The Churchill and the directors, alleging damages of $200,000 for the diminished value of their units while seeking an injunction requiring defendants to spend potentially hundreds of thousands more to repair the slab penetrations in not just their unit but in every condominium in the complex. All they got was their own unit repaired at a cost of a few thousand dollars, a vote of the other unit owners refusing to fund the repairs of the other units, and relief from the fines imposed by The Churchill for failing to make their own repairs. All five directors were exonerated of liability while the Ritters were found to be 25 percent at fault for the events leading to this action. Despite this, the Ritters were found to be the prevailing parties and were awarded virtually all of their requested attorney’s fees, totaling more than $531,000.2
Given these obviously mixed results, I believe the trial court abused its discretion and should have determined there were no prevailing parties on the Ritters’ complaint. (See Deane Gardenhome Assn. v. Denktas (1993) 13 Cal.App.4th 1394, 1398 [16 Cal.Rptr.2d 816] [determination of no prevailing party typically results when the ostensibly prevailing party receives only part of the relief sought].) Alternatively, I would reverse the fee award because the Ritters’ limited victory made an award of the full amount unreasonably high. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095-1096 [95 Cal.Rptr.2d 198, 997 P.2d 511] [lodestar determination of attorney’s fees may be reduced for several factors, including the success or failure of the prevailing party’s case]; In re Gorina (Bankr. C.D.Cal. 2002) 296 B.R. 23, 32-33 [awarding prevailing party full amount unreasonable under California law when losing party defeated six of seven causes of action].) The amount of attorney’s fees spent on this matter was appalling. Awarding the full *132amount of attorney’s fees rewards the recklessness of the attorneys’ unbridled advocacy. What should have been a manageable dispute to be resolved, perhaps, by a one- or two-day arbitration without significant discovery turned into a brakeless locomotive that crashed and destroyed most, if not all, of the benefits achieved in this unfortunate litigation.

 Attorney’s fees have been awarded to parties whose litigation victories were far more “technical” than what transpired here. For example in Elms v. Builders Disbursements, Inc. (1991) 232 Cal.App.3d 671, 673, 675 [283 Cal.Rptr. 515], the trial court dismissed a breach of contract complaint for failure to prosecute but denied the successful defendant its attorney’s *130fees. The Court of Appeal reversed the attorney’s fees denial, concluding the defendant was the prevailing party. (See also M & R Properties v. Thompson (1992) 11 Cal.App.4th 899, 901 [14 Cal.Rptr.2d 579].)

 According to the Ritters’ appellate brief, they have agreed not to enforce their fee award against the directors. I find the directors’ liability for contractual attorney’s fees puzzling because, absent allegations that the directors entered a contract with the Ritters on their own behalf or purported to bind themselves personally for breach of the CC&R’s (covenants, conditions and restrictions), the directors cannot be held liable for breach of contract. (Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d at p. 512, fn. 20.) However, that issue does not appear to have been raised either below or on appeal.