Homeowners filed suit against the Chula Vista Homeowners Association (the “HOA”) based on adverse actions taken by the HOA. The homeowners prevailed on a slander-of-title claim under A.R.S. § 33-420(A), which makes a person who records a false interest in property liable for damages “and reasonable attorney fees.” The homeowners were awarded $5,000 in statutory damages plus $35,000 in attorneys’ fees and $318 in costs. The HOA filed a notice of appeal and a motion for supersedeas bond. When a party appealing a judgment wishes to stay enforcement of the judgment, it may be required to post a bond. Under A.R.S. § 12-2108 and related Arizona Rule of Civil Appellate Procedure 7, the bond is the lowest of: (1) the total damages amount, (2) fifty percent of the appellant’s net worth, (3) twenty-five million dollars.
In determining the “total damages amount,” an attorney’s fee award generally does not count as “damages.” Fees may count as damages in some limited circumstances, such as when the fees “are a legal consequence of an original wrongful act,” also known as the “tort of another” principle. Under that exception, fees incurred in third-party litigation necessitated by the breach of another party are considered part of damages against the breaching party. The superior court judge reasoned that the attorneys’ fees were a “legal consequence” of the HOA’s wrongful act and were therefore damages, and set the amount of the supersedeas bond at $40,318 – the total amount of the judgment.
The HOA filed a special action challenging the amount of the supersedeas bond. The Court of Appeals accepted jurisdiction and vacated the order setting the bond. The court found that the superior court had abused its discretion by including the attorneys’ fee award in the amount of the bond. Fees incurred as a result of the underlying litigation between the two parties in an action generally are not “damages” between the two parties. Additionally, the court found that although A.R.S. § 33-420(A) authorized an award of attorneys’ fees, the superior court did not award the fees as damages, but rather as a “distinct part” of the judgment.
Judge Eppich authored the opinion, which was joined by Judges Vasquez and Espinosa.
Posted by: Nathan T. Arrowsmith