A small wrinkle concerning fees in contract cases.

The Tucson Estates homeowners’ association sued the McGoverns for a CC&R violation and lost. The trial court decided that each party should bear its own fees and costs. The McGoverns appealed, arguing for fees under 12-341.01. The Court of Appeals affirms as to fees, though it awards costs.

The statute says that the court “may” award fees but cannot change the contract terms. The Tucson Estates  property owners’ agreement says that the HOA “shall” be entitled to fees but says nothing about the homeowners. Existing precedent holds that in this situation the court may award fees; the McGoverns’ position was that it must award them because its only fair that if they’re mandatory as to one party they should be mandatory as to both. But the court points out that the statute’s purpose is to mitigate the burden of litigation, not to create contractual equity.

(The McGoverns also argued that the trial court should have found in its discretion that they were entitled to fees; the court rather summarily denies these fact-specific arguments.)

Because fees are mandatory for the prevailing party  the trial court apparently concluded that neither prevailed. The HOA sued for declaratory relief and for breach-of-contract damages; it lost both. Though the equitable part doesn’t have to be counted for purposes of determining a prevailing party the breach of contract does. The McGoverns therefore prevailed and were entitled to costs.

(link to opinion)