[Ritter vs. Churchill Condo Assn 2008 WL 2807618 (Cal.App. 2 Dist.), 08 Cal. Daily Op. Serv. 11,192]
What Criteria is Important As Evidenced in Ritter vs. Churchill Condominium Association?
This recent appellate court decision in California raises some interesting quandaries (unless appealed and some things change) for HOA Boards and HOA members.
(1) Is a Board safe when it acts on experts' advice in any given situation, and there is no malice involved? (It would appear so, at least as it relates to personal individual liability).
(2) Is the HOA safe when the Board relies on experts' advice in any given situation? (Not necessarily if the decision of the Board is found to be harmful to members or for that matter residents, vendors, etc. as well as has been the experience in other serious cases.)
(3) Should all HOA board decisions be given the benefit of the doubt (effecting the "Business Judgment Rule" of deference to Board decisions) when being reviewed by a court? (The answer is "no", not always.)
In Lamden v. LaJolla Clubdominium, which is a leading case in California supporting the premise that courts should give HOA Board decisions on maintenance deference, the question was whether the Board's determination on termite treatment should be upheld, when an owner sued to try and enforce a different treatment scheme that was more invasive (spot treatment vs. tenting remedies). In my view, and extremely simplified, the court essentially found that since the Board had a plan and relied on experts in formulating it, the court would not delve into whether the owner's suggestion was a better plan.
The facts of Churchill have some very distinct differences, and although the court found that the individual board members should not have liability for the decision, the HOA should be required to do some things as demanded by the owners. In other words, the directors were not personally liable for failure to resolve a slab penetration issue, but the HOA as an entity was and would have to resolve the slab penetration issue, at least as to the owners who sued (two separate Ritter individuals).
There was language in Churchill tying in consideration of whether the Board/HOA had the same or similar duties as a landlord would have to maintain the property in a way that did not allow for a hazardous condition or safety issue. The main focus of the Churchill case was from the corporate board perspective, in the context of determining whether it was a contradiction in terms that the board members could be cleared but the HOA could not and whether the Board's decision about the slab penetration issue should be given deference. However, slipped in was discussion of the Frances T. case of years ago, establishing liability for HOAs/Boards for failure to take measures that would enhance the safety of residents, and that is a distinction from the Lamden case. In Lamden, owners' health and safety was not an issue. In Churchill, health, safety, City Code requirements, and quiet enjoyment of property were all issues.
In a nutshell, the HOA was hurt in the first place when, during construction, an important aspect - a building Code requirement- was missed. Slab penetrations created for pipes and wires should have been properly filled and were not. This fact was missed by the City inspectors who issued permits. That left the HOA in a vulnerable position fill after the fact at a considerable cost ($2700 per unit at the time of this case)? or not. The Ritters raised complaints of odors and smoke invading their units, because of these slab penetrations. The Ritters did some remodeling to their units and they made some changes recommended as a possible means of resolving the problem. The work they had done did not solve the problem. Both parties consulted with experts who proposed fixes. The Ritters wanted the HOA to take responsibility to fill the slab penetrations, and the HOA thought the Ritters should have done so when doing their remodeling. The HOA took action to order them to do so, and imposed daily fines when they did not. The whole thing ended up in this litigation.
I felt very much like the court was leaning more toward Francis T than Lamden and a landlord's duty as in Francis T is a higher duty when it comes to safety issues than that of a corporate HOA board as it relates to maintenance only. It seemed to me that the court had determined the owners who were complaining deserved more protection since the HOA had not taken responsibility in the situation. It does not surprise me really that the court found that the HOA could carry some responsibility to remedy a situation even if the Board was not found to be negligent making the management decisions.
What I see as important distinctions between Lamden v. La Jolla Clubdominium and Ritter v Churchill are: safety issues, an identified fire danger issue, and nuisance in penetration of smoking odors, slab penetration filling originally required by city codes (even though overlooked by inspectors), and, I believe the court took offense that the HOA relied too heavily on Lamden by seeking protection for their decision not to repair as opposed to how to repair.
And last but not least, this decision is not too overly surprising given that the appeals court decision in Lamden(which was ultimately overturned the Supreme Court of California, but can be found in the case books) favored court scrutiny and consideration of a Board's decision regarding maintenance to determine if it was reasonable
This case may or may not be appealed. One can certainly understand reluctance of any HOA to appeal such a decision given the reality of facing half a million in attorneys' fees (meaning having to pay the other side's attorney's fees in addition to their own).
Hindsight is clearer than foresight, of course, and this Board should not be condemned as it did what would be expected, i.e., consulted with experts and listened to their advice. However, what can and should be taken away from this case decision, as it stands, is that there is likely a distinction between the way courts analyze decisions of corporate boards when health and safety of people are at stake.
Another thing to take away is that wafting smoke can turn a molehill into a mountain, so do not take it lightly!
My best to you!
Copyright © 2008 Beth A. Grimm, All Rights Reserved
By Beth A. Grimm, Attorney. A "service oriented" attorney and member of ECHO and CAI and various other industry organizations in California and nationally, host of the website www.californiacondoguru.com; two Blogs: California Condominium & HOA Law Blog, and Condolawguru.com Blog, and author of many helpful community association publications which can be found in the webstore on her site.