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Court of Appeal of California, Third Appellate District
June 11, 2020, Opinion Filed
RAYE, P. J.—Eskaton, Eskaton Village-Grass Valley (Eskaton Village), and Eskaton Properties Inc. (collectively, the Eskaton entities) are related corporations that develop and support common interest developments for older adults in Northern California. Ronald F. Coley owns a home in one of their [**744] developments, Eskaton Village Grass Valley (the Village). He brought this suit against the Village's homeowners association, two of the directors on the association's board, and the directors' employers (the Eskaton entities), [***2] alleging these directors ran the association for the benefit of the Eskaton entities rather than the association and its members.
The trial court agreed with Coley in part, finding these directors breached their fiduciary duty to the homeowners association and its members in several respects. In particular, the court found one director improperly shared with the Eskaton entities the association's privileged communications with its counsel, and both directors, in violation of the association's governing documents, approved certain assessments that benefited the Eskaton entities and harmed many of the association's members. Based on this conduct, the court found the directors' employers, the Eskaton entities, were liable for any [*948] damages Coley suffered as a result, though it declined to find the directors liable in their personal capacities. It awarded Coley damages of $2,328.51 and attorney fees of $654,242.53.
Both parties appealed. The Eskaton entities and the two director defendants (collectively, the defendants) contend the court should have afforded the directors more deference under the business judgment rule—a rule under which courts tend to defer to the decisions of corporate directors. [***3] They also claim the court misread the association's governing documents, miscalculated appropriate damages, and misapplied vicarious liability principles in finding the Eskaton entities liable for their employees' conduct even though their employees were not liable themselves. Finally, they assert the court awarded an excessive amount of attorney fees. Coley, in his cross-appeal, raises several additional issues. He contends the court should have found the two directors personally liable for their conduct, and alleges the court wrongly rejected several of his claims against the defendants.
We agree in part with both of the parties. We find, as the defendants contend, that the court miscalculated the damages on certain claims and should, after reducing the damages award on remand, reconsider the awarded attorney fees in light of this reduction. We also agree, as Coley asserts, that the court should have found the two directors personally liable for their actions. In all other respects, we affirm the judgment.
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51 Cal. App. 5th 943 *; 264 Cal. Rptr. 3d 740 **; 2020 Cal. App. LEXIS 629 ***
RONALD F. COLEY, Plaintiff and Appellant, v. ESKATON et al., Defendants and Appellants.
Notice: CERTIFIED FOR PARTIAL PUBLICATION1
Subsequent History: [***1] The Publication Status of this Document has been Changed by the Court from Unpublished to Published July 8, 2020.
Prior History: APPEAL from a judgment of the Superior Court of Sacramento County, Ct. No. 34-2014-00171851-CU-MC-GDS, David W. Abbott, Judge.
Coley v. Eskaton, 2020 Cal. App. Unpub. LEXIS 3612 (Cal. App. 3d Dist., June 11, 2020)
Disposition: Reversed in part and affirmed in part.
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Business & Corporate Law, Management Duties & Liabilities, Fiduciary Duties, Business Judgment Rule, Nonprofit Corporations & Organizations, Management Duties & Liabilities, Duty of Loyalty, Causes of Action & Remedies, Breach of Fiduciary Duty, Elements, Directors & Officers, Fiduciary Duties, Remedies, Duty of Good Faith, Duties & Liabilities, Breach of Fiduciary Duty