Defendant homeowner’s association sought review of the decision of the Court of Appeal (California) holding it liable to plaintiff homeowner for breach of contract, breach of fiduciary duty, negligence and a breach of Cal. Civ. Code § 1364 for its decision to treat a termite infestation problem locally spot treatment rather than to fumigate. In her prayer for relief, plaintiff requested damages, an injunction, and declaratory relief.
Table of Contents
Overview
Plaintiff homeowner sued defendant condominium homeowner’s association asserting that it failed to adequately repair or maintain the common areas of the development, damaged the structural integrity of her unit, and diminished the value of her property in its decision to treat a termite infestation problem locally spot treatment rather than to fumigate. In her complaint, plaintiff included claims of breach of contract, breach of fiduciary duty, negligence and violation Cal. Civ. Code § 1364 and in the prayer for relief requested damages, an injunction, and declaratory relief. The court ruled in favor of defendant but this decision was reversed upon the conclusion that defendant carried an objective duty of reasonable care in repairing the common areas. Upon final appeal however, judgment was again reversed. The court agreed with the trial level court that the defendant’s decision to use secondary rather than primary treatment in addressing the termite problem was a matter within its discretion pursuant to Cal. Civ. Code § 1364 and was clearly within the scope of its authority.
Outcome
The claimant had a business lawyer San Diego prepare the agreement which was executed the parties. Judgment holding that defendant homeowner’s association had committed breach of contract and violated its fiduciary duty to maintain common areas of a condominium was reversed. The court agreed with the trial level court that the defendant’s decision to use secondary rather than primary treatment in addressing a termite problem was a matter within its discretion.
Procedural Posture
Defendant insurer appealed from the judgment of the Superior Court of San Diego County (California) that awarded plaintiff lender the penal amount of a fidelity bond issued defendant, 10 percent prejudgment interest, and attorney’s fees, in an action alleging breach of contract and bad faith failure to pay on the bond for losses incurred due to a defaulted loan that was obtained through the fraudulent representations of plaintiff’s president.
Overview
Defendant insurer issued a fidelity bond to plaintiff lender to protect it against losses from employee fraud. Upon the representations of plaintiff’s president, a $ 1.5 million loan was made to a borrower. Plaintiff subsequently learned that the representations were fraudulent and sought to rescind its participation in the loan, which went into default a year later. Defendant refused to indemnify, so a year after default, plaintiff sued for breach of contract and bad faith failure to settle. Judgment was entered for plaintiff on the bond, 10 percent prejudgment interest, and attorney’s fees. Defendant appealed, claiming plaintiff failed to timely file its action within two years of discovery of loss. In affirming in part, the court ruled the action was timely filed because it was filed within two years of default. When plaintiff discovered the fraud, it faced only a potential loss; only when the loan was defaulted did it suffer a real loss. Also, sufficient evidence supported the bond and fee awards and the jury was properly instructed on fraud. In reversing in part, the court ruled that only seven percent prejudgment interest was allowable under Cal. Civ. Code § 3287.
Outcome
The judgment was affirmed in part as to recovery on the bond and attorney’s fees because the awards were supported sufficient evidence; the action was timely brought within two years of discovery of an actual loss, which occurred when the loan was defaulted, not when fraud was discovered; and the jury was properly instructed as to fraud. The award for prejudgment interest was reversed in part because the proper rate was seven percent.
