Lamden standard of judicial deference to homeowners association maintenance decisions does not apply to 10-year failure to maintain common area main plumbing lines, particularly when both homeowners association and managing agent knew of recurring problems.

Affan v Portofino Cove Homeowners Ass’n (2010) 189 CA4th 930, 117 CR3d 481

Homeowners bought a vacation condominium in 1986. Nine times, between 1999 to 2005, they experienced sewer back-up problems, which they timely reported to the property manager and directly to various individual homeowners association board members. In 2001, board minutes reflected a suggestion that the Association obtain a bid to hydro-jet the main plumbing line, but nothing was done. In a 2003 letter, Homeowners told the board that the plumber who had responded to the most recent sewage damage call had suggested that the drain lines be maintained annually. In early 2005, one of the Homeowners attended a board meeting at which the board decided to retain a plumbing contractor to perform annual, routine maintenance on the main plumbing lines. In mid-2005, after the plumbing contractor hydro-jetted the main lines, Homeowners suffered the worst sewage spillage ever, resulting in damage to their condominium. An insurance coverage dispute ensued. Homeowners were not compensated for their loss; they filed suit against the managing agent and the Association in October 2005. The parties stipulated to a bench trial and that the 2005 sewage disaster arose out of the negligent performance of the plumbing contractor.

The trial judge dismissed all but one cause of action brought by Homeowners, declining to review the evidence presented. (The court awarded minimal damages to repair the condominium under an equitable servitude cause of action, discussed in the unpublished portion of the opinion.) The trial judge found all other causes of action barred by the judicial deference standard established under Lamden v La Jolla Shores Clubdominium Homeowners Ass’n (1999) 21 C4th 249, 260, 87 CR2d 237 (reported at 22 CEB RPLR 173 (Aug. 1999)).

The court of appeal reversed, finding the Lamden standard inapplicable on these facts. The Lamden judicial deference standard is an affirmative defense, analogous to the business judgment rule, but it “applies only in limited circumstances” to give judicial deference to the maintenance decisions of a homeowners association. 189 CA4th at 939. On this basis alone, the court found that Homeowners’ causes of action against the managing agent survived the Lamden standard because the managing agent is not a homeowners association.

In Lamden, the supreme court stated (21 C4th at 253):

Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development’s common areas, courts should defer to the board’s authority and presumed expertise.

Those parameters, however, were not in evidence here. Defendants failed to meet the burden of proof required for an affirmative defense. The board exhibited no regard for the best interests of Homeowners or the community. The board did not investigate the repeated problems or act in good faith. Nor did the board truly “select among means” of available options to stop the 6-year trend of sewage back-ups. “The judicial deference doctrine does not shield an association from liability for ignoring problems” (21 C4th at 942), which was the circumstance here. The board simply failed to act; action generally is a prerequisite to relief. Nor did the board deliberate over its decision to do nothing, which at minimum would be necessary to trigger the defense. Thus, the court of appeal found prejudicial error and remanded the case to the trial court, instructing the court to weigh the evidence in light of the Lamden factors quoted above.

The Editor’s Take: To a cynic, the outcome here seems to say that an appellate court will defer to a trial court’s duty of deference to a homeowner association’s decisions only to the extent that it agrees with those decisions. The HOA’s decision here to do only annual maintenance and hydro-jetting of the plumbing lines in this condominium does not look that different to me from the Lamden board’s decision to spot treat, rather than fumigate, in that condominium.

There is one difference, however, that is interesting: Lamden sued strategically earlier in the game than Affan did. Although the Lamden action was filed after the HOA decision was made, it was done before any significant property damage occurred to demonstrate that the decision was a good or bad one, whereas the Affans’ unit suffered real harm after and because of the HOA decision that was made. Injury may not prove fault as a matter of logic, but it does go a long way in that direction emotionally.

Since plaintiffs’ harm arose from a condition that existed in the common area, the association probably had occupier liability in tort in any event, with or without negligence in its repair decisions, and regardless of the CC&Rs. But those CC&Rs appear to have had the effect of restricting the extent of the board’s liability for common area defect issues, forcing the plaintiffs to find a broader theory. The court’s ruling of negligent decision making certainly gave them that theory, although by virtue of much weakening the force of the former deference rule. I expect that other sympathetic courts wanting to reach the same outcome will do so by reinterpreting the limitations of liability in the CC&Rs, rather than by so dramatically restating the judicial deference doctrine.+—Roger Bernhardt