Protecting HOAs, Addendum A: the California Cohen case

Protecting HOAs and protecting individual liberties: Two state supreme court holdings

Addendum  A.   Cohen v. Kite Hill Community Assn, 191 Cal. Rptr. 209 (1983)

 It is interesting to note that even in California the rights and freedoms of individual owners in associations were placed on a higher level than in the Villa holding (see above post link), some 21 years later.  What changed?  The state laws governing HOAs were not established as a separate set of laws in 1983, and recourse was made to corporate and other civil code statutes.  That changed just 3 years later with the adoption of the Davis-Stirling Act in 1986.

 In reading Cohen, there is only one reference to state laws, and that pertained to contract law, Civ. Code § 1668.  Otherwise, legal doctrine and contract law were applied with respect to the question of the valid enforcement of board duties and obligations under the CC&Rs.   

The homeowner complaint read:

 Plaintiffs’ complaint alleged that the Association and its architectural committee, in approving the [homeowner’s] construction plans, had: (1) breached the covenants contained in the Declaration; (2) breached their fiduciary duty owed to plaintiffs; (3) breached their duty of good faith and fair dealing; (4) been negligent; and (5) committed “willful misconduct or other intentional conduct.”

 The court reasoned,

 It is a settled rule of law that homeowners’ associations must exercise their authority to approve or disapprove an individual homeowner’s construction or improvement plans in conformity with the declaration of covenants and restrictions, and in good faith. . . . [T]he power to approve plans … must not be exercised capriciously or arbitrarily.'”

 In a thoughtful article on Concepts of Liability in the Development and Administration of Condominium and Home Owners Associations (1976) 12 Wake Forest Law Review at page 915, the authors, Hyatt and Rhoads, note the increasingly “quasi-governmental” nature of the responsibilities of such associations. . . . As a ‘mini-government,’ the association provides to its members, in almost every case . . .

 With power, of course, comes the potential for abuse. Therefore, the Association must be held to a high standard of responsibility: “The business and governmental aspects of the association and the association’s relationship to its members clearly give rise to a special sense of responsibility upon the officers and directors…. This special responsibility is manifested in the requirements of fiduciary duties and the requirements of due process, equal protection, and fair dealing.”

 And to the point of the matter,

 Thus, like any government, the Association must balance individual interests against the general welfare. No decision of the Committee could possibly be deemed “arbitrary” as to an individual homeowner if it were based upon a superseding duty to the community at large. The Association’s duty of good faith subsumes an obligation to reconcile in a fair and equitable way the interests of the community with the interests of the individuals residing therein.

 Although the Declaration vests “sole discretion” in the Committee and allows for reasonable variances, their decisions must be “in keeping with the general plan for the improvement and development of the Project,” and of course, must be made in good faith and not be arbitrary.

 And with respect to CC&Rs verbiage to hold the board harmless,

 The law has traditionally viewed with disfavor attempts to secure insulation from one’s own negligence or wilful [sic] misconduct, and such provisions are strictly construed against the person relying on them, particularly where such person is their author.

 Furthermore, it is the express statutory policy of this state that “[a]ll contracts which have for their object, directly or indirectly, to exempt anyone from the responsibility for his own fraud or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.” (Civ. Code, § 1668.)

Once again we see the negative effect on individual liberties within the State of California as a result of pro-HOA statutes. Notice how the tone has changed between Villa and Cohen.

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Published in: on July 31, 2009 at 12:56 pm  Leave a Comment  

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