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Keywords

defendantappealtrialsummary judgmentfiduciarycompliancefiduciary dutygood faith

defendantliabilitytrialsummary judgmentcomplianceregulation

Related Cases

Harvey v. The Landing Homeowners Assn., 162 Cal.App.4th 809, 76 Cal.Rptr.3d 41, 08 Cal. Daily Op. Serv. 5170, 2008 Daily Journal D.A.R. 6265

Facts

The Landing is a four-story condominium complex in Coronado, California, where several fourth-floor homeowners had been using attic space, designated as common area, for storage for many years. After a complaint, the homeowners' association board inspected the units and discovered that many homeowners were using the attic space for storage, prompting the board to investigate and ultimately allow limited use of the attic space for storage under certain conditions. The board's actions were challenged by Harvey, who claimed the board exceeded its authority and acted improperly.

For many years, several fourth floor homeowners used the vacant attic space for storage. In mid–2002, a homeowner complained to the Board about that use, which prompted the Board to inspect the fourth floor units. Of the 23 units on the fourth floor, the Board discovered 18 of the homeowners were using between 50 and 288 square feet of the common area attic space for storage, with 10 homeowners using in excess of 120 square feet of that space as storage.

Issue

Did the homeowners' association board exceed its authority and breach its fiduciary duty by allowing certain homeowners to use the attic space, which is considered common area, for storage?

Harvey contends the trial court erred when it granted summary judgment for defendants because: (a) the Board acted outside the scope of its authority when it determined fourth floor homeowners could exclusively use up to 120 square feet of inaccessible common area attic space, appurtenant to their units, for rough storage; (b) the Board lacked the power to make a material change in the restated declaration of restrictions (CC & R's) for The Landing by allowing fourth floor homeowners to use the attic space common area for storage; and (c) the various resolutions passed by the Board, permitting use of that space for storage, were invalid because the Board vote lacked a disinterested majority.

Rule

The board of directors of a homeowners' association has the authority to manage common areas and can allow exclusive use of portions of the common area provided such use is nominal in area and does not unreasonably interfere with other owners' use or enjoyment of the project.

The CC & R's make clear the Board has the “sole and exclusive” right to “manage” the common area (Art. II, § 2); to “adopt reasonable rules and regulations not inconsistent with the provisions contained in [the CC & R's]” relating to that use (Art. II, § 3); to designate portions of the common area as “storage areas” (Art. IV, § 11); and to authorize it to allow an owner to use exclusively portions of the common area “nominal in area” adjacent to the owner's unit, provided such use “does not unreasonably interfere with any other owner's use or enjoyment of the project” (Art. IV, § 12).

Analysis

The court applied the rule by examining the board's authority under the CC & R's, which allowed for the designation of common areas for exclusive use under certain conditions. The board conducted a reasonable investigation into the use of the attic space, consulted with legal and insurance experts, and ensured compliance with local building codes. The court found that the board acted in good faith and with regard for the community's interests, thus affirming its decision to allow limited use of the attic space.

The undisputed evidence in the record shows the Board conducted an investigation in 2002 regarding homeowners' use of the fourth floor attic space, which had been ongoing for approximately 15 years; met with officials from the City to ensure the use of the attic space complied with building codes; consulted its insurance broker, who determined the “use of the fourth floor common area attic space in The Landing for storage purposes has not impacted The Landing insurance coverage, has not increased the premiums for The Landing condominium policy, and has not jeopardized the insurability of The Landing premises”; agreed to conduct a “workshop” for homeowners to “discuss ideas to organize the restoration of the units that have violations”; prepared and revised a standard “permission form” signed by each fourth floor homeowner to ensure compliance with all provisions of The Landing Bylaws, the CC & R's and governmental laws, rules and regulations; required each fourth floor homeowner seeking to use the attic space to obtain liability insurance coverage of $1 million; took steps to correct some minor noncompliance items discovered by the City in 2005 during the City's annual inspection of the subject units to ensure Fire Code compliance; called a special election of all owners of The Landing to determine whether the Board should permit homeowners to use the fourth floor attic space common area for rough storage; and passed a resolution in 2006 transferring to the fourth floor owners the “exclusive right to use the common area attic space in that owner's unit,” as purportedly allowed under newly-enacted Civil Code section 1363.07(a)(3)(E).

Conclusion

The Court of Appeal affirmed the trial court's summary judgment in favor of the defendants, concluding that the board acted within its authority and did not breach its fiduciary duty.

The court found the Board acted within the scope of authority given to it under Article II, Section 2 of the CC & R's “when it exercised its discretion in interpreting … [Section] 12 of the CC & R's and its application to requests from homeowners to use their attic space.”

Who won?

The Landing Homeowners Association and its board members prevailed because the court found their actions were within the scope of their authority and conducted in good faith.

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