This originally appeared on the SGR blog.
In 2016 John and Joanne Rhodes purchased a townhouse unit in the Lagoon Manor Development on the shores of Lake George in the Town of Bolton Landing, Warren County. All common property within the Manor is owned by Lagoon Manor Home Owner’s Association, Inc. Anne Swope also owns a townhouse in the Manor and was a Board member of the HOA from October 2014 to July 31, 2018.
The Rhodes alleged that, on or about August 7, 2017, the Adirondack Park Agency granted permits which authorized view plans to be implemented on HOA property. The view plans — intended to create a “filtered view of Lake George” — provided that certain trees would be removed or trimmed while other trees would remain. The HOA hired a contractor to complete the approved tree trimming.
The basis of the Rhodes’ allegations against Swope stemmed from the 2017 trimming and subsequent removal of a tree that was located beside their townhouse and not authorized to be removed by the terms of the APA permits. They alleged that the “removal of the tree next to [their] deck reduced the value of [their] purchase”[.] And that the “removal of the tree was significantly damaging to [their] interest.”
The Rhodes also alleged that the HOA engaged in wasteful practices, including (i) incurring expenses pertaining to the view cutting and trimming of trees on HOA land that “would have been paid for by the seller [of their unit]”; (ii) misrepresenting the status of the septic system to “extract more money from the HOA [m]embers”; (iii) hiding an engineer’s opinion as to the condition of a bridge from the HOA [m]embers, resulting “in a waste of HOA resources”; (iv) “maliciously” passing an amendment to the governing covenants “in order to punish one HOA member; (v) “destroying” a historically significant entranceway at an unnecessary expense; and (vi) passing a budget that included $11,000.00 for legal fees “to sue the seller’s representative for past assessments on property being developed.”
The Rhodes further alleged that the HOA engaged in prohibited practices such as: (i) improper and secretive meetings without notice to the HOA members; (ii) refusing, through Swope, to provide them with a copy of the HOA’s view plan; (iii) refusing to provide the Rhodes with a copy of an “engineer’s opinion” concerning the bridge; and (iv) failing to release draft reports to HOA members concerning the septic system.
Finally, the Rhodes sought to hold Swope “personally liable for her independent, intentional misconduct” and “her active participation in the malfeasance by the HOA.” And sought a money judgment against Swope, together with punitive damages, and an Order enjoining and restraining her from interfering with the affairs of the HOA.
The Court addressed a motion to dismiss all causes of action against Swope, in her individual capacity.
A motion to dismiss required a determination as to whether the Rhodes had a cause of action, not whether they stated one. On a motion to dismiss for failure to state a cause of action, the Court afforded the pleadings a liberal construction, accepted the facts alleged as true, accorded the Rhodes the benefit of every possible inference and determined whether the facts alleged fit within any cognizable legal theory. But such favorable treatment was not limitless and, notwithstanding the broad pleading standard, bare legal conclusions with no factual specificity did not suffice to withstand a motion to dismiss.
A corporation can only act through an individual. And a corporate officer is not subject to personal liability for actions taken in furtherance of the corporation’s business. Personal liability will be imposed on corporate officers who commit or participate in the commission of a tort, even if the commission or participation is for the corporation’s benefit. In this case, the alleged tort was rather more amorphous — especially when examined in light of the well-settled principle that a corporate officer is not normally liable in his or her personal capacity unless the officer expresses some intention to be personally bound.
Turning to the Rhodes’ first cause of action, which alleged intertwined claims sounding in breach of fiduciary duty, trespass and malfeasance against Swope for purportedly directing the removal of the tree, the Court observed that a claim for breach of fiduciary duty required the Rhodes to establish: (1) the existence of a fiduciary relationship, (2) misconduct by Swope, and (3) damages directly caused by such misconduct. And, a cause of action sounding in breach of fiduciary duty must be stated with the particularity.
The Court found that, notwithstanding the Rhodes’ allegation that Swope acted “without authorization from the HOA” when allegedly directing a contractor to cut down a tree directly behind their unit, they failed to delineate, with the requisite factual specificity, any conduct by Swope outside that of her position as a member of the HOA Board. A breach of fiduciary duty claim does not lie against individual coop board members where there is no allegation of individual wrongdoing by the members separate and apart from their collective actions taken on behalf of the cooperative.
The allegations of trespass, malfeasance, and intentional misconduct against Swope were also unsupported by factual allegations. Trespass involves an intentional entry onto the land of another without justification or permission. The Rhodes did not allege that Swope entered their property or that they owned the land upon which the tree existed. As such, the claim of trespass could not stand.
Claims of malfeasance are typically reserved for public officials for intentionally doing something criminal or illegal. In order to be guilty of official misconduct for malfeasance a defendant (1) must commit an act that constitutes an unauthorized exercise of his or her official functions, (2) knowing that the act is unauthorized, (3) with the intent to obtain a benefit or deprive another of a benefit. Swope, as a member of the HOA Board, was clearly not a public official and a claim for malfeasance could not stand as against her.
Members of a board, acting in their capacity as board members, who cause the performance of an affirmative tortious act of malfeasance, may be subject to personal liability. But members who are responsible for mere nonfeasance by the entity, without causing the commission of any affirmatively tortious acts, are not subject to personal liability for such nonfeasance.
Here, the Rhodes merely alleged that the board did not honor her inspection rights and failed to respond adequately to her complaints of noise emanating from an adjacent apartment. These allegations amounted only to mere nonfeasance for which the board members could not be held individually liable. The Rhodes’ conclusory allegation that the board ignored her noise complaints to retaliate against her for other disputes did not suffice to transform the claim into one for affirmative tortious misconduct.
With respect to the intentional conduct allegations, the Rhodes failed to allege that Swope acted tortiously other than within the scope of her authority as an HOA Board member.
The Court dismissed all claims against Swope in her individual capacity.