Judge Maurice A. Leiter, Case Number: 24STCV01641, Date: 2024-05-30 Tentative Ruling

Judge: Maurice A. Leiter, Case: 24STCV01641, Date: 2024-05-30 Tentative Ruling

Case Number: 24STCV01641 Hearing Date: May 30, 2024 Dept: 54

*Superior Court of California* *County of Los Angeles*
Frank R. Delli Santi, et al.,	Plaintiffs,	Case No.:	24STCV01641
vs.		Tentative Ruling
Zuma Bay Villas Association, et al.	Defendants.

Hearing Date: May 30, 2024

Department 54, Judge Maurice Leiter

(2) Demurrers to Complaint

Moving Party: Defendants Zuma Bay Villas Association, Lonnie Gordon, Dennis Torres, Rachel Nielson, Marty Ordman, Gina Eckstein, Jill Van Zeebroeck and Malibu Management Services LLC

Responding Party: Plaintiffs Frank R. Delli Santi and Tori R. Delli Santi

T/R: DEFENDANTS’ DEMURRER IS OVERRULED.

DEFENDANTS TO FILE AND SERVE ANSWERS TO THE COMPLAINT WITHIN 30 DAYS OF NOTICE OF RULING.

DEFENDANTS TO NOTICE

If the parties wish to submit on the tentative, please email the courtroom at SMCdept54@lacourt.org with notice to opposing counsel (or self-represented party) before 8:00 am on the day of the hearing.

The Court considers the moving papers, opposition, and reply.

BACKGROUND

On January 22, 2024, Plaintiffs Frank R. Delli Santi and Tori R. Delli Santi sued Defendants Zuma Bay Villas Association, Lonnie Gordon, Dennis Torres, Rachel Nielson, Marty Ordman, Gina Eckstein, Jill Van Zeebroeck and Malibu Management Services LLC, asserting causes of action for (1) negligence; (2) breach of fiduciary duty; (3) breach of covenants, conditions and restrictions; (4) violation of Civil Code § 4775; and (5) violation of Civil Code § 5810.

Plaintiffs allege they suffered a catastrophic water loss to their condominium building from water leaking through the open roof of their building, making their condominium uninhabitable. Plaintiffs allege Defendants (1) failed to properly oversee and manage the maintenance of the development; (2) failed to select proper insurance limits (including deductibles) for the development insurance policy; (3) refused and failed to pay the deductible when damage sustained to the Plaintiffs' building fell below the selected deductible amount; and (4) refused and failed to assess the other Association members to pay the deductible that was owed. The CC&Rs require the HOA to maintain the roofs of the condominiums.

ANALYSIS

A demurrer to a complaint may be taken to the whole complaint or to any of the causes of action in it. (CCP § 430.50(a).) A demurrer challenges only the legal sufficiency of the complaint, not the truth of its factual allegations or the plaintiff's ability to prove those allegations. (Picton v. Anderson Union High Sch. Dist. (1996) 50 Cal. App. 4th 726, 732.) The court must treat as true the complaint's material factual allegations, but not contentions, deductions or conclusions of fact or law. (Id. at 732-33.) The complaint is to be construed liberally to determine whether a cause of action has been stated. (Id. at 733.)

A. First Cause of Action for Negligence

To plead a cause of action for negligence, one must allege (1) a legal duty owed to plaintiffs to use due care; (2) breach of duty; (3) causation; and (4) damage to plaintiff. (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal. App. 4th 292, 318.)

The individual Defendants assert that they cannot be held liable for negligence because there is no independent tort duty and because Plaintiff did not suffer physical injury, only economic losses. Under the CC&Rs, the HOA, through its directors, is responsible for maintaining the roofs of the condominiums and to obtain adequate insurance. Plaintiffs allege Defendants had a duty to maintain the roofs with due care and to obtain insurance with due care. Plaintiffs allege Defendants failed to do so, resulting in severe damage to Plaintiffs’ unit. Defendants then failed to remedy the damage by failing to pay for its remediation. This is sufficient to allege a cause of action for negligence. Plaintiffs have pleaded that Defendants did not act with sound business judgment.

Plaintiffs allege property damage, which is more than just “economic loss.”

The demurrer to the first cause of action is OVERRULED.

B. Second Cause of Action for Breach of Fiduciary Duty

The elements for a breach of fiduciary duty cause of action are “the existence of a fiduciary relationship, its breach, and damage proximately caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594, 604.)

The individual Defendants assert the second cause of action fails because HOA directors owe fiduciary duties to the HOA only and not to “third parties.” Plaintiffs, however, are not “third parties.” At the time of the damage, they allege they were members of the HOA. Courts have held that the directors of HOAs owe fiduciary duties to the HOA and its members. (See Coley v. Eskaton (2020) 51 Cal.App.5th 943, 958 [“...the directors of a nonprofit mutual benefit corporation, like the Association here, are fiduciaries who must act for the benefit of the corporation and its members.”])

The demurrer to the second cause of action is OVERRULED.

C. Third Cause of Action for Breach of CC&Rs

“The standard elements of a claim for breach of contract are: ‘(1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) damage to plaintiff therefrom.’” (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.)

The individual Defendants assert the third cause of action fails because there was no breach of the CC&Rs. Defendants hired a contractor to maintain the roofs and obtained insurance as required by the CC&Rs. Plaintiff alleges Defendant failed to maintain the roofs by failing to properly obtain and supervise the roof repair, causing Defendant damage, and then failed to maintain sufficient insurance to remedy their failure to obtain and supervise the repair and payment for the damage. This is sufficient to state a cause of action for breach of the CC&Rs. Defendants also argue that the claim is barred by the business judgment rule. Whether a directors’ decision is protected by the business judgment rule is a question of fact not suitable for determination on demurrer.

The demurrer to the third cause of action is OVERRULED.

D. Fourth Cause of Action for Violation of Civil Code § 4775 and Fifth Cause of Action for Violation of Civil Code § 5810

Under Section 4775(a) of the Civil Code, the HOA has a duty to maintain, repair and replace the common areas. Under Section 5810, the HOA must notify members of changes in insurance. Defendants assert that there is no authority to hold the individual directors liable under these sections. Plaintiffs allege the individual Defendants took on the responsibility of compliance with these sections as directors of the HOA. This is sufficient to state claims for violations of these sections.

The demurrer to the fourth and fifth causes of action is OVERRULED.

*Superior Court of California* *County of Los Angeles*
Frank R. Delli Santi, et al.,	Plaintiffs,	Case No.:	24STCV01641
vs.		Tentative Ruling
Zuma Bay Villas Association, et al.	Defendants.

Hearing Date: May 30, 2024

Department 54, Judge Maurice Leiter

Demurrer to Complaint

Moving Party: Defendant Zuma Bay Villas Association

Responding Party: Plaintiffs Frank R. Delli Santi and Tori R. Delli Santi

T/R: DEFENDANT ZUMA’S DEMURRER IS OVERRULED.

DEFENDANT TO FILE AND SERVE AN ANSWER TO THE COMPLAINT WITHIN 30 DAYS OF NOTICE OF RULING.

DEFENDANT TO NOTICE

The Court considers the moving papers, opposition, and reply.

BACKGROUND

ANALYSIS

A. First Cause of Action for Negligence

Defendant HOA asserts that Plaintiffs cannot state a cause of action for negligence because Defendant did not owe Plaintiffs a tort duty and did not breach any duties to Plaintiffs. Defendant argues that it is only responsible for the duties stated in the CC&Rs and HOA statutes. Under the CC&Rs, the HOA is responsible for maintaining the roofs of the condominiums and to obtain adequate insurance. Plaintiffs allege Defendants had a duty to maintain the roofs with due care and to obtain insurance with due care. Plaintiffs allege Defendants failed to do so, resulting in severe damage to Plaintiffs’ unit. Defendants then failed to remedy the damage by failing to pay for its remediation. This is sufficient to allege a cause of action for negligence.

Defendant also asserts it cannot be held liable for the contractor’s negligence under SeaBright Ins. Co. v. US Airways, Inc. (2011) 52 Cal.4th 590, 598. SeaBright Ins. addressed whether one who hires an independent contractor is liable to the employees of the independent contractor for injuries sustained while performing the contracted work. It does not broadly hold that the HOA can never be liable for a contractor’s negligence.

The demurrer to the first cause of action is OVERRULED.

B. Second Cause of Action for Breach of Fiduciary Duty

Defendant demurs to the second cause of action on the ground that it is duplicative of the cause of action for negligence. The Court declines to sustain the demurrer on these grounds. Plaintiffs may allege different theories of liability under the same facts.

The demurrer to the second cause of action is OVERRULED.

C. Third Cause of Action for Breach of CC&Rs

Defendant asserts the third cause of action fails because Defendant hired a contractor to maintain the roofs and obtained insurance as required by the CC&Rs. Plaintiff alleges Defendant failed to maintain the roofs by failing to properly obtain and supervise the roof repair, causing Defendant damage and then failed to maintain sufficient insurance to remedy their failure to obtain and supervise the repair and pay for the damage. This is sufficient to state a cause of action for breach of the CC&Rs. Defendant also argues that the claim is barred by the business judgment rule. Whether a decision is protected by the business judgment rule is a question of fact not suitable for determination on demurrer.

The demurrer to the third cause of action is OVERRULED.

D. Fourth Cause of Action for Violation of Civil Code § 4775

Under Section 4775(a) of the Civil Code, the HOA has a duty to maintain, repair and replace the common areas. Defendant asserts it did not violate this section because it hired a contractor to replace the roofs. Plaintiff alleges Defendants failed to adequately repair the roofs and failed to remedy the damage caused by the inadequate roof repair. This is sufficient to state a claim for violation of Civil Code § 4775.

The demurrer to the fourth cause of action is OVERRULED.