781 S.E.2d 903
S.C.2016Background
- Shipyard Village (condominium regime) had longstanding water intrusion around windows/sliding doors in Buildings A–D; leaks known since the 1980s and complaints continued into 2000s.
- Master Deed and Bylaws allocated window/door frames to unit owners while roofs and stucco/exterior were common elements; Bylaws allowed the Board to repair owner-neglect and assess costs to defaulting owners.
- The Board repeatedly treated windows/doors as owners’ responsibility, hired consultants/engineers (MCA, Keystone, Schneider, HICAPS) who identified both unit-level and common-element defects (stucco, flashing, building envelope failures).
- The Board attempted (2006) and later purportedly adopted (2006–2009) amendments to make windows/sliding doors common elements; procedural defects in voting led to disputes and litigation by C & D owners.
- Petitioners (co-owners in C & D) sued claiming negligence, breach of fiduciary duty, and breaches of the governing documents; trial court granted partial summary judgment finding the Board had a duty to investigate and breached that duty and was not entitled to the business judgment rule.
- Court of Appeals reversed on business judgment rule and breach issues; SCOTUS granted certiorari and affirmed in part, modified in part, and remanded for trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Applicability of business judgment rule to HOA Board actions | Board cannot invoke rule because governing documents and the Horizontal Property Act control Board duties and preclude the rule | Business judgment rule applies to intra vires Board decisions absent bad faith, fraud, or ultra vires acts | Court: Business judgment rule may be asserted for intra vires, good-faith acts; trial court erred to bar the defense entirely; jury must decide intra/ultra vires and good faith issues |
| Whether Board breached duty to investigate (summary judgment) | Board had an affirmative duty under Bylaws/Master Deed to investigate owner neglect damaging common elements; breach was proper for summary judgment | Record contains evidence (consultant/engineer reports, Board investigations) creating at least a scintilla of factual dispute whether Board reasonably investigated | Court: Trial court erred granting summary judgment for Petitioners on breach; factual disputes exist and breach is for the jury |
Key Cases Cited
- Kuznik v. Bees Ferry Assocs., 342 S.C. 579 (Ct. App.) (business judgment rule protects boards acting within authority and in good faith)
- Dockside Ass'n v. Detyens, 291 S.C. 214 (Ct. App.) (business judgment rule limits judicial review absent bad faith, fraud, or self-dealing)
- Dockside Ass'n v. Detyens, 294 S.C. 86 (Supreme Court) (same principle regarding board conduct review)
- Goddard v. Fairways Dev. Gen. P'ship, 310 S.C. 408 (Ct. App.) (business judgment rule applies to homeowners association disputes)
- Seabrook Island Prop. Owners Ass'n v. Pelzer, 292 S.C. 343 (Ct. App.) (distinction between intra vires and ultra vires corporate acts)
- Bass v. Gopal, Inc., 395 S.C. 129 (summary judgment standard; mere scintilla rule in negligence cases)
- Fleming v. Rose, 350 S.C. 488 (summary judgment—view evidence in light most favorable to non-movant)
- Turner v. Milliman, 392 S.C. 116 (procedural standard of review on summary judgment)
- Doe ex rel. Doe v. Wal-Mart Stores, Inc., 393 S.C. 240 (negligence as mixed question of law and fact)
- Moore v. Weinberg, 373 S.C. 209 (duty/breach framework in negligence claims)