Grand Harbor Community Association, Inc. v. GH Vero Beach Development, LLC, Bahadur
4D2023-1191
| Fla. Dist. Ct. App. | Oct 2, 2024Background
- Grand Harbor Community Association (Association), a homeowner’s association, sued GH Vero Beach Development, LLC (Developer) and Developer-appointed Board members for breach of contract and fiduciary duty.
- The Association alleged the Developer failed to pay its proper share of operating expenses and that the Board (controlled by the Developer) failed to fund capital reserves required by the Declaration of Covenants.
- The Developer gained Class B membership (and Board control) in 2004 and transferred control to homeowners in December 2020.
- The trial court granted summary judgment for the Developer and Board, finding for the defense on all claims, citing lack of standing, statutory time bar, and no evidence of bad faith by the Board members.
- On appeal, the Fourth District reversed in part, finding errors in standing and breach of contract rulings, and affirmed in part, especially as to the statute of limitations and fiduciary duty claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing for Association to Sue | Association could sue post-turnover under Rule 1.221 for common matters | Association lacked standing due to individualized owner circumstances | Plaintiff had standing; trial court erred in dismissing on this ground |
| Breach of Contract – Failure to Fund Reserves | Developer-controlled Board's failure to fund reserves breached contract | Only the Board (not Developer) required by Declaration to fund reserves | No breach by Developer; obligation rested on Board, not on Developer |
| Breach of Contract – Undercounting Developer Units | Developer failed to pay correct deficit amount by undercounting units | Did not move for summary judgment on this; argued lack of proof | Claim stands; Developer can be liable, subject to statute of limitations |
| Breach of Fiduciary Duty | Developer-Directors acted in bad faith regarding reserves/funds | No evidence of bad faith, just negligence; protected by business judgment rule | No evidence of bad faith; summary judgment for Developer-Directors |
| Statute of Limitations Application | Breaches undiscovered pre-turnover; limitations tolled | Each yearly breach accrued separately; no tolling for HOAs | Limitations applies; only claims within 5 years before suit permitted |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (explains burden of proof in summary judgment and shifting burden for specific factual disputes)
- New Horizons Condo. Master Ass’n v. Harding, 336 So. 3d 796 (Fla. 3d DCA 2022) (outlines business judgment rule for directors of non-profit corporations)
- Taylor v. Wellington Station Condo. Ass’n, 633 So. 2d 43 (Fla. 5th DCA 1994) (shareholder/director affiliation insufficient to show bad faith under business judgment rule)
- Homeowner’s Ass’n of Overlook, Inc. v. Seabrooke Homeowner’s Ass’n, Inc., 62 So. 3d 667 (Fla. 2d DCA 2011) (associations have standing to sue regarding matters of common interest)