For those of you who are a bit frustrated with following and trying to post comments through Blogger, I'm pleased to announce that I'm now on Facebook at the Utahcondolaw page. It appears it will be easier to post there.
And for my Facebook friends who don't care about community association law, I will soon be pulling my Utahcondolaw feed from my personal page. (As soon as I figure out how it is feeding.)
So, condo and other community association friends, if you want to follow this blog on Facebook, be sure to become a fan of the Uthacondolaw page. Other Facebook friends, please accept my apology for this and past boring posts on community association law. You can continue to look forward to my witty[?], inspiring[?], thoughful and always humble posts on Facebook.
Thursday, October 29, 2009
Posting Comments...
I've received a few emails, from a few of you, expressing your frustration and confusion in connection with attempts to comment. The publisher of another blog that I follow set forth the following instructions, which I think will help. (Note: you will need a Google account.
Thanks to Sara Pearson, for the instructions.
Step 1: Open blog, read post and find a small underlined link directly under the post on the right side. It will say '0 comments' or '12 comments' or however many comments there are.
Step 2: Click on that link and it will bring you to the comments page.
Step 3: Write your comment in the box on the right (anyone who has access to the blog will be able to see your comment, so keep that in mind)
(From here, follow whichever step 4 relates to you...)
Step 4a: If you are already 'logged in' to your google account, you will be able to publish your comment immediately by clicking on the button that says Publish.
Step 4b: If you are not already logged in, you will need to do that (sign in boxes will be below the comment box) and then you can publish the comment.
Step 4c: If you don't have an account, you will need to create one before you can publish. Once you log in, follow steps above.
I'm guessing most people hit a snag if they don't have a google/blogger account so watch for that step.
Thanks to Sara Pearson, for the instructions.
Wednesday, October 28, 2009
Directors and Officers Coverage is Not the Same as Fidelity Coverage
I was in court today, involved in a dispute about (among other things) inadequate unit owner access to association records and inadequate insurance. In response to my claim that the Association had no fidelity bond (as the Declaration required), the opposing counsel waived the Association's Directors and Officers policy, arguing that its coverage was "the same" as that provided by a fidelity bond.
He's wrong. I may need to hire an expert to testify to that, but you don't need to. Ask your Association's competent community association insurance agent, and they'll tell you that the two policies are entirely different, and that your Association needs both.
A fidelity bond (sometimes called fidelity insurance, but often referred to in governing documents as a bond) provides coverage for "loss of money, securities, or any other property due to acts of dishonesty committed by an employee acting alone or in collusion with other persons..." Directors and Officers coverage, on the other hand, provides coverage for "mismanagement or [intentionally] wrongful acts." The covered wrongful acts may have been intended, but if the intent was to steal from the Association, the Directors and Officers will not be there to help.
Lesson for today: Your Association should have Directors and Officers and fidelity coverage. If your insurance agent tells you otherwise, it's time to find a new insurance agent. Look at the resource directory at the UCCAI web page for a list of agents specializing in community association insurance.
And if your attorney tells you otherwise, you know where to find a new attorney. ;)
Sunday, October 25, 2009
Golf Photos are Posted, at Last
All of those who attended the UCCAI Golf Tournament had a great time; I shot photos for several hours on the fourteenth hole; after taking a short trip out of town for a deposition, and a few days catching up, the photos are finally posted.
There are a couple of options to track them down; here's the link to the Utahcondolaw Facebook page, where you can tag yourself and others; for those of you who refuse facebook, here's a link to my Picassa page.
There are a couple of options to track them down; here's the link to the Utahcondolaw Facebook page, where you can tag yourself and others; for those of you who refuse facebook, here's a link to my Picassa page.
Justice Department Files Lawsuit Alleging Disability-Based Housing Discrimination Against Idaho Condominium Developer
Justice Department Files Lawsuit Alleging Disability-Based Housing Discrimination Against Idaho Condominium Developer
This post was actually intended for the sister site, Idahocondolaw but since it's here, and may be of interest to some of my readers, I'll leave it...
This post was actually intended for the sister site, Idahocondolaw but since it's here, and may be of interest to some of my readers, I'll leave it...
Saturday, October 17, 2009
Davencourt -- The Economic Loss Portion
Section 1: The Economic Loss Rule
The Davencourt opinion begins with the analysis of the most eagerly anticipated portion of the opinion; how the Court would deal with the economic loss rule.
Background on the Economic Loss Rule
The economic loss rule, as it applies to construction disputes in Utah and more particularly with community associations, began with the 1996 ruling in the case of American Towers Owners Ass’n v. CCI Mechanical. In that case, the Court held that in the absence of physical property damage to “other property,” or personal injury, economic losses could not be recovered through a negligence claim. (Simply stated, a negligence claim involves an assertion that one party failed to comply with duties involved to another – in building, for example, to meet the “standard of care” expected of a contractor.) Because of the American Towers ruling, it has been difficult for community associations to pursue claims against developers.
In 2002, the Court limited the Economic Loss Doctrine somewhat in the case of Hermansen v. Tasulis; in that case, the court held that the doctrine did not bar claims where one party owed an “independent duty” to the other party. The Hermansen case, which we filed and argued, involved claims against real estate agents.
Davencourt’s Holdings Respecting the Economic Loss Rule
The plaintiff homeowners association, and I acting as amicus counsel for the Community Associations Institute, had hoped that the Court would further limit, or even overrule the American Towers case, because of its adverse consequences to community associations. The ultimate goal would have been the elimination of the doctrine, at least as it related to construction defect claims asserted by community associations which, by their nature, do not have contractual relations with the builders. A lesser, but still desirable result, would have been the establishment of an independent duty to be owed from builders to the purchasers in community associations.
In Section I.A. of the opinion, the Court rejected an outright reversal of American Towers, stating that the doctrine was “particularly applicable to claims of negligent construction.” Furthermore, the opinion expressed an inability to overrule the doctrine based upon the “codification” of the doctrine in Utah Code Ann. 78B-4-513. (That section of the code arose from the Legislature's passage of Senate Bill 220, in 2008.
In Section I.B., the Court next refused the Association’s request that the Court recognized that the unique status of community associations warranted that the doctrine not be applicable to associations. The Court declined, asserting that contractual expectations created in the contracts among the Unit Owners, the Developer and the Builder” could not be ignored. Under the ruling, then, neither an individual owner nor an association can pursue a claim, in negligence, against the Builder.
The third argument rejected by the Court was a contention that various components of the structures had been damaged by defects in other components, triggering the “other physical damage” exception to the doctrine. Again, the Court rejected this argument, finding that Unit Owners had not bargained for individual components, but rather for “a finished product, which included the integral components of the roof, the foundation and the siding.”
Turning to the review of “independent duties,” the Court rejected a request to extend the independent duty between a contractor-seller and a home purchaser to a similar duty between a contractor-seller and the Association. Interestingly, however, the Court appears to have clearly established that a contractor-seller’s duty “to disclose known material information” to a buyer. If the Developer of a condominium project was also the contractor-seller, that developer/contractor-seller would owe each unit owner a duty to disclose known defects in the units and the common areas, an interest in which was also being sold.
Next, the Court held, to a limited degree, that the developer’s limited fiduciary duty to the Association does fall outside of the doctrine. The Court expressly recognized and acknowledged “the inherent conflict that a developer faces in promoting and marketing property for a profit, while simultaneously ensuring the interests of a homeowners association and its members…” In light of the conflict, the Court expressly adopted Section 6.20 of the Restatement (Third) of Property, which establishes several clear and important duties owed by a developer to an association. These duties, set out in full here, include 1) “reasonable care and prudence in managing and maintaining the common property;” 2) establishment of a sound fiscal basis for the association; 3) disclosure of developer subsidies, if any; 4) records and an accounting; 5) compliance with governing documents; 6) disclosure of “material facts and circumstances affecting the condition of the property that the association is responsible for maintaining; and 7) disclosure of “all material facts and circumstances affecting the financial condition of the association…”
The Court’s opinion stated: “In adopting this limited fiduciary duty, we recognize that it constitutes a newly-recognized independent duty of care in Utah.” These types of claims, the Court stated, “lie outside of the economic loss rule.” Recovery under this independent duty, however, is restricted to the common areas. The Court indicated that the association could “bring its claims for negligence and negligent misrepresentation against the [developer] insofar as the claims stem from the limited fiduciary duty owed.”
In the next successive sections of its opinion, the Court declined to find an independent duty to comply with the building code, and declined an independent duty to build without negligence in the construction of a home. The Court’s opinion seems to intentionally leave open the possibility, however , that the Court could find such a duty in a sale between a contractor/seller of a new home, and a buyer.
The Davencourt opinion begins with the analysis of the most eagerly anticipated portion of the opinion; how the Court would deal with the economic loss rule.
Background on the Economic Loss Rule
The economic loss rule, as it applies to construction disputes in Utah and more particularly with community associations, began with the 1996 ruling in the case of American Towers Owners Ass’n v. CCI Mechanical. In that case, the Court held that in the absence of physical property damage to “other property,” or personal injury, economic losses could not be recovered through a negligence claim. (Simply stated, a negligence claim involves an assertion that one party failed to comply with duties involved to another – in building, for example, to meet the “standard of care” expected of a contractor.) Because of the American Towers ruling, it has been difficult for community associations to pursue claims against developers.
In 2002, the Court limited the Economic Loss Doctrine somewhat in the case of Hermansen v. Tasulis; in that case, the court held that the doctrine did not bar claims where one party owed an “independent duty” to the other party. The Hermansen case, which we filed and argued, involved claims against real estate agents.
Davencourt’s Holdings Respecting the Economic Loss Rule
The plaintiff homeowners association, and I acting as amicus counsel for the Community Associations Institute, had hoped that the Court would further limit, or even overrule the American Towers case, because of its adverse consequences to community associations. The ultimate goal would have been the elimination of the doctrine, at least as it related to construction defect claims asserted by community associations which, by their nature, do not have contractual relations with the builders. A lesser, but still desirable result, would have been the establishment of an independent duty to be owed from builders to the purchasers in community associations.
In Section I.A. of the opinion, the Court rejected an outright reversal of American Towers, stating that the doctrine was “particularly applicable to claims of negligent construction.” Furthermore, the opinion expressed an inability to overrule the doctrine based upon the “codification” of the doctrine in Utah Code Ann. 78B-4-513. (That section of the code arose from the Legislature's passage of Senate Bill 220, in 2008.
In Section I.B., the Court next refused the Association’s request that the Court recognized that the unique status of community associations warranted that the doctrine not be applicable to associations. The Court declined, asserting that contractual expectations created in the contracts among the Unit Owners, the Developer and the Builder” could not be ignored. Under the ruling, then, neither an individual owner nor an association can pursue a claim, in negligence, against the Builder.
The third argument rejected by the Court was a contention that various components of the structures had been damaged by defects in other components, triggering the “other physical damage” exception to the doctrine. Again, the Court rejected this argument, finding that Unit Owners had not bargained for individual components, but rather for “a finished product, which included the integral components of the roof, the foundation and the siding.”
Turning to the review of “independent duties,” the Court rejected a request to extend the independent duty between a contractor-seller and a home purchaser to a similar duty between a contractor-seller and the Association. Interestingly, however, the Court appears to have clearly established that a contractor-seller’s duty “to disclose known material information” to a buyer. If the Developer of a condominium project was also the contractor-seller, that developer/contractor-seller would owe each unit owner a duty to disclose known defects in the units and the common areas, an interest in which was also being sold.
Next, the Court held, to a limited degree, that the developer’s limited fiduciary duty to the Association does fall outside of the doctrine. The Court expressly recognized and acknowledged “the inherent conflict that a developer faces in promoting and marketing property for a profit, while simultaneously ensuring the interests of a homeowners association and its members…” In light of the conflict, the Court expressly adopted Section 6.20 of the Restatement (Third) of Property, which establishes several clear and important duties owed by a developer to an association. These duties, set out in full here, include 1) “reasonable care and prudence in managing and maintaining the common property;” 2) establishment of a sound fiscal basis for the association; 3) disclosure of developer subsidies, if any; 4) records and an accounting; 5) compliance with governing documents; 6) disclosure of “material facts and circumstances affecting the condition of the property that the association is responsible for maintaining; and 7) disclosure of “all material facts and circumstances affecting the financial condition of the association…”
The Court’s opinion stated: “In adopting this limited fiduciary duty, we recognize that it constitutes a newly-recognized independent duty of care in Utah.” These types of claims, the Court stated, “lie outside of the economic loss rule.” Recovery under this independent duty, however, is restricted to the common areas. The Court indicated that the association could “bring its claims for negligence and negligent misrepresentation against the [developer] insofar as the claims stem from the limited fiduciary duty owed.”
In the next successive sections of its opinion, the Court declined to find an independent duty to comply with the building code, and declined an independent duty to build without negligence in the construction of a home. The Court’s opinion seems to intentionally leave open the possibility, however , that the Court could find such a duty in a sale between a contractor/seller of a new home, and a buyer.
Tuesday, October 13, 2009
An Outline of the Davencourt Opinion
As promised, I'm trying to figure out, and to help others to figure out, what the new Davencourt v. Davencourt opionion means; I plan on spending a few hours reviewing the case while I'm on a plane tomorrow, continuing that quest. In anticipation of that, and to help make this more manageable, I've typed out the case outline, as set forth in the opinion. In the next several posts, I'll comment on each of these sections, and I'll update each of them with a link, when I do. Hopefully, that will be helpful.
The Davencourt Opinion -- An Outline
I. THE DISTRICT COURT ERRED, IN PART, IN APPLYING THE ECONOMIC LOSS RULE
A. The Economic Loss Rule Remains in Force
B. The Economic Loss Rule Applies Despite Whatever Unique Relationship Exists Among the Association, Developer, Builder and Unit Owners
C. Construction Components Integrated into a Finished Product Do Not Constitute “Other Property”
D. The Existence and Scope of Independent Duties
1. Neither the Builder, the Developer, Nor Woolstenhume, in Their Respective Expertise and Relationships, Owe the Nonpurchasing Association an Independent Duty
2. The Limited Fiduciary Duty Owed by a Developer in Control of a Homeowner’s Association Falls Outside the Scope of the Economic Loss Rule
3. Utah Does Not Recognize an Independent Duty to Conform to the Building Code
4. Utah Does Not Recognize an Independent Duty to Act Without Negligence in the Construction of a Home
II. UTAH RECOGNIZES A CAUSE OF ACTION FOR BREACH OF THE IMPLIED WARRANTY OF WORKMANLIKE MANNER AND HABITABILITY
III. THE DISTRICT COURT MISAPPLIED THE COLLATERAL RIGHTS EXCEPTION OF THE MERGER DOCTRINE TO DISMISS THE CONTRACT AND EXPRESS WARRANTY CLAIMS
A. Contract and Warranty Claims Regarding the Quality of Construction Are Collateral to the Conveyance of Title
B. The Absence of an Act After the Delivery of the Deed Is Not Conclusive Evidence of the Parties’ Intent
IV. THE DISTRICT COURT ABUSED ITS DISCRETION IN DENYING THE ASSOCIATION’S MOTION TO AMEND THE COMPLAINT AND REINSTATE DISMISSED CLAIMS
The Davencourt Opinion -- An Outline
I. THE DISTRICT COURT ERRED, IN PART, IN APPLYING THE ECONOMIC LOSS RULE
A. The Economic Loss Rule Remains in Force
B. The Economic Loss Rule Applies Despite Whatever Unique Relationship Exists Among the Association, Developer, Builder and Unit Owners
C. Construction Components Integrated into a Finished Product Do Not Constitute “Other Property”
D. The Existence and Scope of Independent Duties
1. Neither the Builder, the Developer, Nor Woolstenhume, in Their Respective Expertise and Relationships, Owe the Nonpurchasing Association an Independent Duty
2. The Limited Fiduciary Duty Owed by a Developer in Control of a Homeowner’s Association Falls Outside the Scope of the Economic Loss Rule
3. Utah Does Not Recognize an Independent Duty to Conform to the Building Code
4. Utah Does Not Recognize an Independent Duty to Act Without Negligence in the Construction of a Home
II. UTAH RECOGNIZES A CAUSE OF ACTION FOR BREACH OF THE IMPLIED WARRANTY OF WORKMANLIKE MANNER AND HABITABILITY
III. THE DISTRICT COURT MISAPPLIED THE COLLATERAL RIGHTS EXCEPTION OF THE MERGER DOCTRINE TO DISMISS THE CONTRACT AND EXPRESS WARRANTY CLAIMS
A. Contract and Warranty Claims Regarding the Quality of Construction Are Collateral to the Conveyance of Title
B. The Absence of an Act After the Delivery of the Deed Is Not Conclusive Evidence of the Parties’ Intent
IV. THE DISTRICT COURT ABUSED ITS DISCRETION IN DENYING THE ASSOCIATION’S MOTION TO AMEND THE COMPLAINT AND REINSTATE DISMISSED CLAIMS
Friday, October 02, 2009
A Quick Read of the Davencourt Opinion...
and it looks like a mixed bag. The Court refused to overrule the American Towers case (I think a bad thing, but ameliorated by the rest of the opinion), expressly adopted Section 6.20 of the Restatement, Third of Property (I think a very good thing), and adopted an implied warranty of habitability on the sale of new property (also a very good thing).
They also made some really interesting rulings and made some interesting comments on the independent duties that will result in allowable negligence claims, even despite the economic loss doctrine. It will take some time, and probably more rulings, to clarify this area of the law.
I'll post some more details, which will presumably be more meaningful to non-followers of the law, in the next few days.
They also made some really interesting rulings and made some interesting comments on the independent duties that will result in allowable negligence claims, even despite the economic loss doctrine. It will take some time, and probably more rulings, to clarify this area of the law.
I'll post some more details, which will presumably be more meaningful to non-followers of the law, in the next few days.
Thursday, October 01, 2009
Davencourt, at last!
I'm wrapping up a jury trial (hence the hour of this post), but have been informed by a reliable source that the Utah Supreme Court's opinion in the Davencourt opinion (dealing with the "economic loss doctrine") will be issued to the public at 10 a.m. tomorrow.
That's all for now; check back tomorrow for updates. (It won't be at 10 a.m., that's the scheduled time for arguments to the jury.) I will, however, post an update and a link to the opinion at my earliest opportunity; that will be followed by a summary, sometime tomorrow or this weekend.
That's all for now; check back tomorrow for updates. (It won't be at 10 a.m., that's the scheduled time for arguments to the jury.) I will, however, post an update and a link to the opinion at my earliest opportunity; that will be followed by a summary, sometime tomorrow or this weekend.
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