Dallas and Marylou Bunney wanted to build a new home. Unfortunately for them, their plans called for a home that exceeded the height limit set by their homeowners associations (“HOAs”). But hey, you only live once. So the Bunneys figured, whatever, you only live once. They built the thing anyway.
The HOAs sued for violation of the HOA covenants. The trial court (1) enjoined the building of the Bunneys’ home and (2) awarded the HOAs their attorneys’ fees for the Bunneys’ prelitigation bad faith conduct. In Greenbank Beach and Boat Club, Inc. v. Dallas K. Bunney (Division 1, May 29, 2012), the Court of Appeals affirmed the trial court’s injunction, but reversed the award of attorneys’ fees.
Apparently, during the process of HOA approval, “Mr. Bunney was hostile, threatening, and belligerent.” And when it became clear the HOA was not going to permit the above-limit house, the Bunneys basically just went ahead and built the damn thing without approval. That’s pretty bad faith. Indeed, the trial court found as a matter of fact that “the Bunneys did not make good faith efforts to resolve the concerns of the [HOAs]. They chose to construct their home with full knowledge that their plan exceeded the height restriction, that it had been rejected by the associations, and that it blocked the view of others in the neighborhood.”
The trial court awarded injunctive relief despite the fact that HOAs’ complaint did not request injunctive relief. The Bunneys argued this was error. The Court of Appeals disagreed, and “reject[ed] as overly technical the argument that a lawsuit cannot be a ‘suit to enjoin the construction’ unless it contains the words ‘injunction’ and ‘enjoin.’” The complaint did seek a declaratory judgment that the Bunneys’ house “should be modified to bring it into compliance with the height restriction.” According to the Court, the HOA’s “request was functionally similar to asking for injunctive relief.”
Regarding the fee award, the Court of Appeals noted that “a court may resort to its inherent powers only to protect the judicial branch in the performance of its constitutional duties, when reasonably necessary for the efficient administration of justice.” “Prelitigation misconduct is one of three recognized types of bad faith conduct” that can support an award of attorneys’ fees. “The term [prelitigation misconduct] refers to obdurate or obstinate conduct that necessitates legal action to enforce a clearly valid claim or right.”
However, it takes more than just any misconduct to support a fee award. “Prelitigation misconduct, to be sanctionable by an order to pay the other party’s attorney fees, necessarily involves some disregard of judicial authority.” As an example, the Court cite to “discreditable prelitigation tactics . . . to obstruct . . . a right that had already been judicially determined.” (emphasis added.) In this case, while the Bunneys disregarded the HOA’s covenant restrictions, they “did not disregard judicial authority.” (emphasis added.)
Accordingly, the Court of Appeals reversed the trial court’s fee award. In reaching that decision, the Court limited to its facts – a breach of fiduciary duty in connection with dissolution of a partnership – a prior case awarding attorneys’ fees under a trial court’s inherent power.