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Docket Number

No. 4D09-383.

Attorney(S)

Ronald P. Gossett of Gossett Gossett, P.A., Hollywood, for appellant. Jack R. Reiter, Wesley R. Parsons and Jordan S. Kosches of Adorno Yoss LLP, Miami, for appellee.

Judges

Dorian K. Damoorgian

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Smart Summary

Case Summary: Hollywood Towers Condominium Association, Inc. v. Sharon Hampton, No. 4D09-383 (Fla. 4th DCA June 23, 2010)

Factual and Procedural Background

Hollywood Towers Condominium Association (the association) sought a permanent injunction requiring unit owner Sharon Hampton to permit access to her condominium unit so the association could perform repair work on her balcony. The association had inspected balconies after concerns about concrete balcony structural integrity and retained Stanley Swaysland, who reported Hampton's balcony suffered moderate corrosion and recommended interior demolition continue four inches beyond the corrosion point, with a dust wall separating the work area when working from inside a unit. Hampton retained engineer David Hustad, who opined that no interior demolition was necessary because exterior restoration made the balcony structurally sound. The association presented evidence that other units also required interior repairs and that Hampton had not been allowed to opt out.

The association relies on its declaration of condominium (Article XIII) which grants the board and its agents the right to enter units for maintenance, inspection, repair, or replacement of improvements, and authorizes equitable relief when an owner fails to allow required maintenance. The declaration classifies the concrete floor of each balcony as a common element, which the association is responsible for maintaining.

After an evidentiary hearing, the trial court denied the association's request for injunctive relief, finding the association failed to show irreparable harm because there was a "clear question" whether the excavation and rebar work was necessary and whether failure to perform it would cause immediate harm. The association appealed. The District Court of Appeal reversed the partial final judgment and remanded for further proceedings.

Legal Issues Presented

What standard of review should a trial court apply to decisions made by a condominium association's board of directors (i.e., whether to defer under the business judgment rule or employ a different standard)?
Whether the association had the authority to access Hampton's unit to repair the balcony and, if so, whether the association's decision to perform the repairs from inside the unit was reasonable (not arbitrary, capricious, or in bad faith).
Whether the association established that it would suffer irreparable harm absent injunctive relief, such that an injunction was appropriate.

Arguments of the Parties

Appellant's (Association's) Arguments

The association argued that the business judgment rule requires judicial deference to the board's decision unless there is proof of fraud, self-dealing, dishonesty, or incompetence in arriving at the decision.
The association asserted it had authority under the declaration and the Condominium Act to repair common elements and to access units when necessary to perform such repairs.

Appellee's (Hampton's) Arguments

Hampton contended the business judgment rule applies only in suits against directors for personal liability and is not the standard for evaluating the association's request to access her unit.
Hampton argued the court was required to determine whether the interior repair work was necessary before ordering access or injunctive relief.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
K.W. Brmwn Co. v. McCutchen, 819 So.2d 977 (Fla. 4th DCA 2002)	Elements required to obtain a permanent injunction: clear legal right, inadequate remedy at law, and irreparable harm absent injunctive relief.	Cited as the standard for establishing entitlement to permanent injunctive relief.
Gulf Bay Land Invs., Inc. v. Tracker, 955 So.2d 1157 (Fla. 2d DCA 2007)	Standard of review for the denial of a permanent injunction (abuse of discretion).	Cited to state the appellate standard for reviewing denials of permanent injunctions.
Nical of Palm Beach, Inc. v. Lewis, 981 So.2d 502 (Fla. 4th DCA 2008)	Purely legal issues are reviewed de novo.	Cited to explain that the trial court's purely legal decisions receive de novo review.
Garcia v. Crescent Plaza Condo. Ass'n, 813 So.2d 975 (Fla. 2d DCA 2002)	Application of an adaptation of the business judgment rule to condominium association decisions (example: leasing common element parking spots).	Used as an example of courts applying the business judgment rule to association decisions and as support for limiting review to authority and reasonableness.
P.S. Farrington v. Casa Solaria Condo. Ass'n, 517 So.2d 70 (Fla. 3d DCA 1987)	Applied the business judgment rule to a board decision approving a special assessment.	Referenced as precedent for applying an adapted business judgment rule to condominium board decisions.
Tiffany Plaza Coyido. Ass'n v. Spencer, 416 So.2d 823 (Fla. 2d DCA 1982)	Courts will not interfere with an association's reasonable exercise of authority.	Cited to support deference to reasonable association decisions.
Cedar Cove Efficiency Condo. Ass'n v. Cedar Cove Props. Inc., 558 So.2d 475 (Fla. 1st DCA 1990)	Noting that an association's exercise of authority is reasonable when it accomplishes its purposes.	Referenced as further support for evaluating reasonableness when reviewing association actions.
Kaung v. Bd. of Managers of Biltmore Toivers Condo. Ass'n, 70 A.D.3d 1004, 895 N.Y.S.2d 505 (N.Y.App.Div. 2010)	Two-prong test: whether action was authorized and whether it was taken in good faith and in furtherance of the condominium's legitimate interest.	Cited as an out-of-state example of a two-prong test similar to tests applied in Florida cases.
Lamden v. La Jolla, Shores Clubdominium Homeowners Ass'n, 21 Cal.4th 249, 87 Cal.Rptr.2d 237, 980 P.2d 940 (1999)	Articulated test: defer to a board's discretionary maintenance/repair decisions when based on reasonable investigation, in good faith, and within authority under statutes and governing documents.	The court expressly adopted Lamden's test and held courts must give deference to an association's decision when it is within the association's authority and is reasonable (not arbitrary, capricious, or in bad faith).
Ocean Trail Unit Owners Ass'n v. Mead, 650 So.2d 4 (Fla. 1994) (concurring in part and dissenting in pari)	Powers granted in condominium documents must be consistent with the Condominium Act.	Quoted in a note to emphasize that condominium documents cannot grant powers inconsistent with the Condominium Act, relevant to limits on association authority.
Mitchell v. Beach Club of Hallandale Condo. Ass'n, 17 So.3d 1265 (Fla. 4th DCA 2009)	A violation of chapter 718 constitutes a harm for which § 718.303 authorizes injunctive relief.	Cited to support that alleged violations of chapter 718 can constitute irreparable harm warranting injunctive relief; the opinion reasons the same applies when an association seeks injunctive relief against a unit owner.
Hobbs v. Weinkauf, 940 So.2d 1151 (Fla. 2d DCA 2006)	Related authority on injunctive relief under chapter 718 (cited by Mitchell).	Cited within the Mitchell discussion to support that chapter 718 violations are cognizable harms for injunctive relief.

Court's Reasoning and Analysis

The court's analysis proceeded in discrete steps, adhering closely to authority cited in the opinion:

The court recognized that the central dispute concerned the proper standard of review for a condominium association's board decision: whether courts must defer under the business judgment rule or assess necessity and correctness of the board's substantive decision.
The opinion observed that the business judgment rule traditionally protects corporate directors from personal liability (citing § 607.0831, Fla. Stat.). The court noted courts in Florida have applied an adaptation of the business judgment rule to association decisions in certain contexts, citing several Florida cases (Garcia, P.S. Farrington, Tiffany Plaza, Cedar Cove) as examples where courts limited review.
The court adopted the two-prong, articulated test from Lamden (a California Supreme Court decision), stating that courts must defer to a condominium association's decision if: (a) the decision is within the scope of the association's authority, and (b) the decision is reasonable — i.e., not arbitrary, capricious, or in bad faith. The Lamden passage emphasized deference when a board acts after reasonable investigation, in good faith, and with regard for the association's best interests.
Applying that framework to the present case, the court found there was no dispute that the association had authority to repair the concrete balcony (a common element) under the declaration and § 718.113(1), Fla. Stat. Because authority existed, the trial court should have focused on whether the association's decision to perform the repair from inside Hampton's unit was reasonable, rather than on whether the work was necessary in an abstract sense.
The court also noted that, even where the declaration grants broad access rights, state statute § 718.111(5) limits association access to instances when access is "necessary" for maintenance, repair, or to prevent damage. Thus, on remand the trial court must apply the Lamden test and determine both (1) whether the association had the authority to access the unit and (2) whether the board acted reasonably (not arbitrarily, capriciously, or in bad faith) in electing to perform the repair work from inside Hampton's unit.
Regarding irreparable harm, the court explained that an alleged violation of chapter 718 constitutes a harm for which § 718.303 authorizes injunctive relief (citing Mitchell, which in turn relies on Hobbs). The court concluded that the same rule applies when an association brings an action against a unit owner.
Because the trial court's denial of injunctive relief focused on whether the excavation was necessary rather than on the proper deferential review of the board's decision, the appellate court determined the trial court had applied the wrong focus and remanded for application of the Lamden standard and determination of necessity of access and irreparable harm.

Holding and Implications

Holding: The District Court of Appeal reversed the trial court's partial final judgment denying the association's request for an injunction and remanded for further proceedings. The court adopted the Lamden test and directed the trial court on remand to apply that test.

Implications:

The appellate court formally adopted the Lamden framework for reviewing condominium association board decisions in Florida: courts must defer to an association's decision when it is within the association's authority and is reasonable — that is, not arbitrary, capricious, or in bad faith.
On remand, the trial court must (a) determine whether the association had authority to access Hampton's unit to repair the balcony (the court noted the association's declaration and § 718.113(1) identify balcony floors as common elements), and (b) if authority exists, determine whether the board acted reasonably in choosing to perform the repairs from inside the unit (including whether access was necessary under § 718.111(5)).
The opinion clarifies that when an association brings an action for injunctive relief, an alleged violation of chapter 718 may constitute irreparable harm for which § 718.303 authorizes injunctive relief — a principle the court applied in evaluating whether injunctive relief may be appropriate.
The direct effect is reversal of the trial court's partial final judgment and remand for application of the adopted standard; the court did not resolve the factual disputes (e.g., whether interior work was necessary) but required the trial court to evaluate them under the Lamden test and applicable statutory limits on access.

Disposition: Reversed and remanded. (FARMER and HAZOURI, JJ., concur.)

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HOLLYWOOD TOWERS CONDOMINIUM ASSOCIATION, INC., a Florida corporation not-for-profit, Appellant v. Sharon HAMPTON, Appellee.

DAMOORGIAN, J.

Hollywood Towers Condominium Association, Inc. ("the association") appeals the trial court's partial final judgment denying its request for an injunction. This appeal arises out of a complaint filed by the association requesting, among other things, a permanent injunction requiring Sharon Hampton to allow the association to access her condominium unit to perform repair work on her balcony. We reverse the judgment and remand for further proceedings.

The trial court conducted an evidentiary hearing on the association's request for injunctive relief. At the hearing, the evidence established the following facts. The association is the condominium association for the Hollywood Towers. Sharon Hampton owns a unit in Hollywood Towers. Hollywood Towers became concerned with the structural integrity of the concrete balconies on each unit, so it hired Stanley Swaysland to inspect each balcony. Hampton's balcony was inspected and was found to have suffered moderate corrosion requiring repair. Swaysland's report concluded that demolition should continue from inside Hampton's unit because industry standard is to remove the concrete four inches beyond the point at which the corrosion stops. When it is necessary to work from inside the unit, a dust wall is installed to separate the work area from the rest of the unit.

Hampton hired engineer David Hustad, who performed several procedures to determine whether Hampton's unit needed additional concrete repairs. Hustad concluded that there was no reason to do any interior demolition in Hampton's unit. It was his opinion that the restoration work that had been done on Hampton's balcony from the exterior was sufficient to make the balcony structurally sound. The association presented evidence that Hampton was not the only unit owner whose balcony needed to be repaired from inside the unit. Additionally, the association offered evidence that refuted Hampton's claim that the association allowed other unit owners to opt out of the concrete repair work.

Article XIII of the association's declaration of condominium, entitled "Maintenance and Alterations," states in pertinent part that each owner shall:

4. Allow the Board . . . the agents or employees . . . to enter into his Unit for the purpose of maintenance, inspection, repair, or replacement of the improvements within the Unit, Common Elements or Limited Common Elements, to determine in case of emergency, circumstances threatening Units . . . or Common Elements, or to determine compliance with the provisions of this Declaration.

D. In the event an Owner fails to maintain his Unit and Limited Common Elements, as required herein, or makes any alterations or additions without obtaining the required written consent, or otherwise violates or threatens to violate the provisions hereof, Corporation, or the Management Firm on behalf of Corporation, shall have the right to proceed in a Court of equity for an injunction to seek compliance with the provisions hereof.

Under the terms of the declaration, the concrete floor of each balcony is a common element, which the association is responsible to maintain.

At the conclusion of the hearing, the trial court found that the association did not meet its burden of showing irreparable harm because "[t]here is clear question not only as to whether the [excavation] and rebar work is necessary, but whether the failure to perform it will cause immediate harm." Thereafter, the trial court denied the association's request for injunctive relief and issued a partial final judgment in favor of Hampton.

To obtain a permanent injunction, the petitioner must "establish a clear legal right, an inadequate remedy at law and that irreparable harm will arise absent injunctive relief." K.W. Brmvn Co. v. McCutchen, 819 So.2d 977, 979 (Fla. 4th DCA 2002). The standard for reviewing the denial of a permanent injunction is abuse of discretion. Gulf Bay Land Invs., Inc. v. Tracker, 955 So.2d 1157, 1159 (Fla. 2d DCA 2007). The trial court's decisions on purely legal issues, however, are reviewed de novo. Nical of Palm Beach, Inc. v. Lewis, 981 So.2d 502, 504 (Fla. 4th DCA 2008).

The dispute in this appeal is over the standard by which a trial court should review the decision of a condominium association's board of directors. The association asserts that, under the business judgment rule, a trial court is required to defer to the association unless there is proof of fraud, self-dealing, dishonesty or incompetency in arriving at the decision. Hampton argues that the business judgment rule applies only in suits against directors for personal liability, and that the trial court was required to determine whether the repair work on the interior of her unit was necessary.

The business judgment rule has traditionally been applied to protect corporate directors from personal liability. See § 607.0831, Fla. Stat. (2009). In an apparent effort not to second-guess management decisions, courts have applied an adaptation of the business judgment rule to decisions made by condominium associations. See, e.g., Garcia v. Crescent Plaza Condo. Ass'n, 813 So.2d 975 (Fla. 2d DC A 2002) (applying the business judgment rule to the association's decision to lease a portion of the common element parking spots); P.S. Farrington v. Casa Solaria Condo. Ass'n, 517 So.2d 70, 72 (Fla. 3d DCA 1987) (applying the business judgment rule to the condominium association board's decision to approve a special assessment); see Tiffany Plaza Coyido. Ass'n v. Spencer, 416 So.2d 823, 826 (Fla. 2d DCA 1982) (stating that courts will not interfere with an association's decision to exercise its authority in a reasonable manner).

In applying the business judgment rule to condominium association decisions, courts have generally limited their review to two issues: (1) whether the association has the contractual or statutory authority to perform the relevant act, and (2) if the authority exists, whether the board's actions are reasonable. See, e.g., Garcia, 813 So.2d at 977-78 (where the court first determined that the association had the authority to lease common element parking spots, and then stated that the association was required to act in a reasonable manner in exercising that authority); Cedar Cove Efficiency Condo. Ass'n v. Cedar Cove Props. Inc., 558 So.2d 475, 479 (Fla. 1st DCA 1990) (noting that "[t]he association's exercise of authority in this case is reasonable to accomplish such purposes."). However, no court in this state has expressly set forth a test for review of association decisions.

Courts outside our state have adopted a two-prong test to review condominium board decisions, which closely resembles the test that has been applied, but not articulated, by courts in this state. See Kaung v. Bd. of Managers of Biltmore Toivers Condo. Ass'n, 70 A.D.3d 1004, 895 N.Y.S.2d 505, 507 (N.Y.App.Div. 2010) (stating that judicial review of a condominium board's decision is limited to whether the action was authorized and whether it was taken in good faith and in furtherance of the condominium's legitimate interest). The California Supreme Court has articulated the test in the following way:

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.

Lamden v. La Jolla, Shores Clubdominium Homeowners Ass'n, 21 Cal.4th 249, 87 Cal.Rptr.2d 237, 980 P.2d 940, 942 (1999). We adopt the test set forth in Lamden, and hold that courts must give deference to a condominium association's decision if that decision is within the scope of the association's authority and is reasonable — that is, not arbitrary, capricious, or in bad faith.

In the instant case, there was no dispute that the association had the authority to repair the concrete on Hampton's balcony, which is a common element under the declaration of condominium. See § 718.113(1), Fla. Stat. (2009) ("Maintenance of the common elements is the responsibility of the association.") The association may repair and maintain common elements as long as its decision to do so is reasonable. Thus, the trial court's focus was misplaced when it denied the injunction because there was a question as to whether the excavation and rebar work was necessary.

However, in order to access Hampton's unit to perform the repairs, Hollywood Towers was obligated to show that such access was necessary. See § 718.111(5), Fla. Stat. (2009) ("The association has the irrevocable right of access to each unit during reasonable hours, when necessary for the maintenance, repair, or replacement of any common elements or of any portion of a unit to be maintained by the association pursuant to the declaration or as necessary to prevent damage to the common elements or to a unit or units."). The trial court, on remand, must perform the Lamden test and determine whether the association had the authority to access Hampton's unit to repair her balcony, and, if so, whether it acted reasonably — that is, not arbitrarily, capriciously, or in bad faith — in choosing to perform the repair work from inside Hampton's unit.

Although the association's declaration of condominium does not restrict access to those occasions when it is necessary for maintenance, repair, or replacement of a common element, section 718.111(5) expressly limits the association's access to that which is necessary. See § 718.111(2), Fla. Stat. (2009) ("The powers and duties of the association include those set forth in this section and, except as expressly limited or restricted in this chapter, those set forth in the declaration and by-laws and chapters 607 and 617, as applicable."); see also Ocean Trail Unit Owners Ass'n v. Mead, 650 So.2d 4, 8 (Fla. 1994) (Kogan, J., concurring in part and dissenting in pari) ("[P]owers granted a condominium association in the condominium documents must be consistent with the Condominium Act.").

The next question is whether the association established that it would suffer irreparable harm if the court did not enter the injunction. "When bringing an action for injunctive relief against an association, an alleged violation of chapter 718 is itself a harm for which section 718.303 authorizes injunctive relief." Mitchell v. Beach Club of Hallandale Condo. Ass'n, 17 So.3d 1265, 1267 (Fla. 4th DCA 2009) (citing Hobbs v. Weinkauf, 940 So.2d 1151, 1153 (Fla. 2d DCA 2006)). Section 718.303(1), Florida Statutes (2009), "permits a unit owner to seek injunctive relief for failure of a condominium association to comply with its rules or the Condominium Act." Id. It follows that the same rule applies when an association brings an action for injunctive relief against a unit owner.

Reversed and Remanded.

FARMER and HAZOURI, JJ., concur.

HLWD TWRS CONDO ASC v. HAMPTON