¶1 Eighteen condominium owners (collec-
tively Homeowners) filed suit against Gary Sanford, Paul Burckhard, James Sansburn, Richard Peter, Shana Holley, Brett Backues, Joseph Cusimano, Jason Farnsworth, Patricia Hovda, Alexander Philip, Huckleberry Circle, LLC, Lozier Homes Corporation, Diane Glenn, and Construction Consultants of Washington, LLC,
¶2 Contrary to the trial court’s ruling, we hold that Washington law does not provide that a cause of action necessarily accrues against a corporate board member no later than upon the board member’s resignation. We hold, instead, that the doctrine of adverse domination applies in Washington. The application of that doctrine to the pleadings in this case demonstrates that several of Homeowners’ claims should not have been dismissed on the face of the complaint as untimely filed. However, given that we also hold both that directors of a homeowners’ association do not owe fiduciary-like duties to future purchasers and that Homeowners failed to plead all of the elements of a CPA claim, various Homeowners claims were properly dismissed. Accordingly, we affirm in part and reverse in pаrt.
I
¶3 A trial court’s ruling on a motion to dismiss under CR 12(b)(6) presents a question of law, which we review de novo. Cutler v. Phillips Petrol. Co.,
Under CR 12(b)(6), dismissal is appropriate only if “it appears beyond doubt that the plaintiff cannot prove any set of facts which would justify recovery.” [Tenore v. AT&T Wireless Servs.,136 Wn.2d 322 , 330,962 P.2d 104 (1998)]. In undertaking such an analysis, “a plaintiff’s allegations are presumed to be true and a court may consider hypothetical facts not included in the record.” Id.
Burton v. Lehman,
II
¶4 Homeowners all own residential units at Huckleberry Circle condominium complex in Issaquah.
¶5 The Association’s first board consisted of Sanford, Burckhard, and Sansburn. In their complaint, Homeowners allege that at the time of development, Declarant, Lozier Homes, Sanford, Burckhard, and Sansburn were aware, or should have been aware, that the complex “was not being designed or constructed in a manner consistent with minimum requirements of building code [sic] with respect to weatherproofing.” Homeowners further allege that insufficient weatherproofing was a pervasive problem throughout this region and that Declarant, Lozier Homes, Sanford, Burckhard, and Sansburn were aware of this fact at that time.
¶6 Declarant, Lozier Homes, Sanford, Burckhard, and Sansburn prepared a limited warranty, developed a “maintenance program,” and hired a “licensed inspector” for the complex. Homeowners allege that the purpose of these actions “was to give the appearance of due diligent inspection of the construction quality of the building envelope, while not in fact undertaking an intrusive investigation of building components which would have revealed water intrusion.” Declarant, Lozier Homes, Sanford, Burckhard, and Sansburn retained Glenn, d/b/a The Construction Consultants, as the complex’s inspector. Glenn was not a licensed inspector but, rather, was a political activist for the building industry.
¶7 Homeowners further allege that, in order to protect themselves from liability, Declarant, Lozier Homes, Sanford, Burckhard, and Sansburn included provisions in the project declaration that allowed Declarant to appoint a fourth nonvoting member to the board and that limited “the power of the Association’s Board and the Association to engage in litigation against the Declarant for violation of the implied warranties of quality under the Washington Condominium Act.”
¶8 Burckhard resigned from the board on May 15, 2001, at which time he was replaced by Holley. Between May and November 2001, Glenn performed multiple nonintrusive inspections of the complex, which revealed only minor repair issues. On May 9, 2002, Sansburn and Holley resigned from the board, and the Association elected Backues, Cusimano, and Peter in their place. On thаt same date, Declarant exercised its right to add a nonvoting member to the board. Declarant appointed Sanford to this position.
¶9 On August 13,2002, the board hired Glenn to perform another inspection of the complex. Homeowners allege that “Sanford did not advise the Board that Glenn had no experience in helping condominium associations identify concealed defects and damage.” Glenn’s inspection again did not find any serious issues or defects.
¶10 In March 2003, Ken Harer, a construction defect attorney and architect, contacted the board in order to inform it that the complex showed signs of potentially serious hidden construction defects and that the statutory limitation period on any warranty claims would soon expire. Peter met with Harer, who explained his concerns. Shortly thereafter, Peter e-mailed Backues and Cusimano regarding the meeting and expressed concern that he might have a conflict of interest because he was employed by an affiliate of Lozier Homes. The board took no action based on Harer’s advice.
¶11 Peter notified the board in April 2003 that he intended to resign, but the board instead had him switch terms with another member so that someone could be elected to replace him in May. Also that April, the board received its first complaint of water leaking through a window in one of the units. None of this information appeared in any of the board’s minutes. Homeowners allege that “the decision to omit these facts from the minutes was part of a deliberate effort on the part of Defendant Peter and/or the other Board members to conceal material information from unit owners.”
¶12 Peter resigned from the board on May 29, 2003, and Farnsworth was elected to replace him. On August 20,2003, the property manager contacted contractor Mark Jobe regarding bids for deck maintenance and deck drainage issues. Jobe stated:
Yes, that is a project I am familiar with. There appears to be a serious problem with deck slope. Ponded water is present under the sleeper. Also while I was there I noted the flashing above the brick veneer has been caulked closed. Closed flashing is a serious problem that generally leads to big issues. Also it is often used to mask other problems. This should be looked into. Would be glad to assist.
The board took no action upon receiving Jobe’s warnings.
¶13 On September 22, 2003, the board received its second complaint of water leaking into a unit. On October 17, 2003, the board met to consider hiring a structural engineer to inspect the decks at the complex; however, no further action to hire an engineer was taken. The board thereafter received a third complaint about water leaking into a unit. Following the receipt of this complaint, “Sanford volunteered Lozier and the Declarant” to perform deck inspections. On January 18, 2004, Backues resigned from the board.
¶14 In March 2004, a unit owner complained directly to Lozier Homes of a leak in the owner’s unit. Sanford, who was still the board’s nonvoting member, wrote a letter to the property manager, blaming the leak on “gaps in caulking in the siding and wood trim around the decks .. . and clogged weepholes in window frames.” Sanford wrote a second letter to the property manager in April, alleging that the same conditions had caused a leak in another unit. Homeowners allege that Sanford wrote these letters in order to discourage prosecution of a warranty claim.
¶15 In June 2004, Glenn performed another exterior visual inspection at the complex. Homeowners allege that this inspection “was not reasonably calculated to determine the actual source of water leaks.” Glenn recommended maintenance in the form of caulking and painting, but again found no major problems. Glenn performed another similar inspection in November 2004 and again recommended caulking and painting.
¶16 On November 6, 2004, the statutory limitation period applicable to a claim for breach of implied warranties on common elements under the Washington Condominium Act (WCA) expired.
¶18 By March 24,2006, Sanford resigned from the board. On June 27, 2006, Cusimano announced his resignation from the board. On July 20, 2006, Philip resigned from the board.
¶19 In July 2008, the board finally approved an intrusive inspection of the building envelope. However, the board told the unit owners that the purpose of the inspection was “to provide your association with a preliminary assessment and a list of priorities pertaining to future building maintenance and repair issues.” In October 2008, Peter
¶20 The inspection performed by Improcon and Grace Architects revealed that
“every major component of the building envelope is suffering from poor or deficient construction and waterproofing detailing throughout, resulting in varying degrees of failure around the property ... the pace of this intrusion and related damage will continue to accelerate until comprehensive and proper repairs are made to the building envelope.”
(Alteration in original.) The board did not share the results of the inspection with the unit owners.
¶21 Homeowners allege that “[a]t an October 27, 2009 HOA [homeowners’ association] meeting, homeowners presented questions about the details of water intrusion repairs. The Board replied that the answers were not known, and individuals with specific complaints were directed to the Project property manager.” In January 2010, the board hired J2 Engineers to create a repair plan for the defects revealed by the inspection. On March 3, 2011, the board received a partial estimate for the cost of repair, which totaled approximately $2.4 million. At a homeowners meeting on April 24, 2011, the board declared a budget that included a special assessment for the cost of repair. That May, the Association imposed a special assessment on the unit owners in excess of $2.5 million to fund the repairs.
¶22 In September 2011, Homeowners filed suit against all of the prior board members,
¶23 The trial court ruled that the statutory limitation period applicable to Homeowners’ claims was three years and that “the statute of limitation for actions against the
¶24 Lozier Homes, Sanford, Sansburn, and Burckhard thereafter moved for an award of attorney fees, asserting that Homeowners’ claim against them was frivolous. In response, counsel for Homeowners submitted extensive documentation of the research he had conducted prior to drafting the complaint.
¶25 Homeowners stipulated that all individually named board members had resigned at some unidentified time
before September 2008.
¶26 Homeowners appeal the trial court’s rulings on the motions to dismiss. Lozier Homes, Sanford, Burckhard, and Sansburn cross appeal the trial court’s order denying their claim for an award of attorney fees.
Ill
¶27 Respondents contend that the trial court’s dismissal of Homeowners’ claim was proper because Homeowners lacked standing to file suit. This is so, Respondents assert, because the Washington Nonprofit Corporation Act
¶28 “Standing is a threshold issue, which we review de novo.” In re Estate of Becker,
¶29 Homeowners asserted that they sustained damages to their individual property.
IV
A
¶30 Homeowners contend that the discovery rule delayed the accrual of the causes of action as to all defendants on all claims, regardless of when various board members resigned from the board.
¶31 The discovery rule is an exception to the normal rules governing when a cause of action accrues. In re Estates of Hibbard,
Application of the rule is limited to claims in which the plaintiffs could not have immediately known of their injuries due to professional malpractice, occupational diseases, self-reporting or concealment of information by the defendant. Application of the rule is extended to claims in which plaintiffs could not immediately know of the cause of their injuries.
Hibbard,
¶32 Here, the trial court ruled that the relevant statutory limitation period is three years.
¶34 In Quinn, we held that any fraudulent concealment by an attorney that might serve to toll the commencement of a statutory limitation period ends when the attorney-client relatiоnship ends, unless the attorney takes further steps to extend the concealment.
B
¶35 Contrary to respondents’ assertion, Washington has no current “black-letter law” directly on point.
¶36 The doctrine of adverse domination is a corollary of the discovery rule. Hecht,
C
¶37 Having concluded that Washington recognizes the doctrine of adverse domination, we must now decide which version of the doctrine best comports with Washington law. This inquiry requires us to answer two questions: (1) What is the level of culpability that the board members must exhibit in order for the doctrine to apply? and (2) Must the plaintiff implicate all board members or only a majority thereof?
¶38 There exists disagreement among jurisdictions as to the level of culpability required in order for the doctrine of adverse domination to apply.
Three theories have emerged. One theоry holds that negligent conduct, without more, is sufficient to toll the statute of limitations. See Federal Deposit Ins. Corp. v. Carlson,698 F.Supp. 178 , 180 (D.Minn.1988). More recently, courts have held that negligent conduct is not enough to warrant the application of adverse domination. See [Fed. Deposit Ins. Corp. v.] Dawson, 4 F.3d [1303,] 1313 [(5th Cir. 1993)]; Resolution Tr. Corp. v. Acton,49 F.3d 1086 (5th Cir.1995); Farmer,865 F.Supp. at 1157 . These courts, however, have not defined exactly what level of culpability is required. Lastly, at least one court has held that the degree of culpability was irrelevant; because the reason for tolling the statute of limitations is that the plaintiffs cannot discover the cause of action. Clark,452 S.E.2d at 719 .
Wilson,
¶39 The Kentucky Supreme Court held that the doctrine of adverse domination may be invoked only where intentional wrongdoing is alleged. Its reason for so holding, the court stated, was that
[t]he doctrine is founded on the presumption that those who engage in fraudulent activity likely will make it difficult for others to discover their misconduct. “[T]he danger of fraudulent concealment by a culpable majority of a corporation’s board seems small indeed when the culpable directors’ behavior consists only of negligence . . . . ” [Dawson, 4 F.3d] at 1312-13 (emphasis added).
¶40 The West Virginia Supreme Court of Appeals, on the other hand, held that the doctrine of adverse domination could apply regardless of the directors’ degree of culpability. That court determined that “regardless of whether the alleged wrongdoing was intentional or merely negligent, the knowledge of officers’ and directors’ wrongdoing cannot be imputed to the corporation because those officers’ and directors’ control over the corporation prevents it from learning of the misconduct that is injuring it.” Clark,
¶41 In our view, a standard similar to that applied by Kentucky courts better accounts for the reality of the modern corporate structure. In order for the discovery rule to apply, the situation must be one “in which plaintiffs could not immediately know of the cause of their injuries.” Hibbard,
D
¶42 This leads us to our second question: Must the plaintiff implicate all board members in the concealment or only a majority? Among other courts, two different approaches have emerged:
The more difficult test is the “complete domination” test, under which a plaintiff who seeks to toll the statute under adverse domination must show “full, complete and exclusive control in the directors or officers charged.” Mosesian v. Peat, Marwick, Mitchell & Co.,727 F.2d 873 , 879 (9th Cir. [1984]) (quoting International Rys. of Cent. Am. v. United Fruit Co.,373 F.2d 408 , 414 (2d Cir.), cert. denied,387 U.S. 921 ,87 S.Ct. 2031 ,18 L.Ed.2d 975 (1967)), cert. denied,469 U.S. 932 ,105 S.Ct. 329 ,83 L.Ed.2d 265 (1984). Once the facts giving rise to possible liability are known, the plaintiff must effectively negate the possibility that an infоrmed stockholder or director could have induced the corporation to sue. Id.
Other courts have taken a more prophylactic approach known as the “majority test.” Under this approach, the plaintiff need not show that the wrongdoers completely dominated the corporation, but rather must show only that a majority of the board members were wrongdoers during period the plaintiff seeks to toll the statute. [Fed. Deposit Ins. Corp. v. ]Howse, 736 F.Supp. [1437,] 1441-42 [(S.D. Tex. 1990)]; Federal Sav. and Loan Ass’n v. Williams,599 F.Supp. 1184 , 1193-94 (D.Md. 1984). These cases reason that the mere existence of a culpable majority on the board is so likely to preclude the corporation from filing suit against the wrongdoers that tolling is thereby justified. See, e.g., Williams,599 F.Supp. at 1194 .
Dawson,
¶43 Many states adopt the “majority test” for policy reasons. In Smith, the Oregon
¶44 On the other hand, states that adopt the “complete domination” test also typically do so for policy reasons. In Aiello v. Aiello,
¶45 We deem the “majority test” more consonant with Washington law. We agree with the Oregon Supreme Court that “ ‘[w]hile [culpable board members] retain control they can dominate the non-culpable directors and control the most likely sources of information.’ ” Smith, 328 Or. at 432 (quoting Williams,
E
¶46 Typically the doctrine of adverse domination applies to derivative actions brought by shareholders on behalf of thе corporation. In this case, however, the claims were brought by the unit owners in their individual capacity, not on behalf of the Association. Thus, the question is whether the doctrine of adverse domination can apply to claims brought by individuals. We hold that it can, at least in lawsuits premised on duties or obligations stemming from the WCA.
¶47 The doctrine of adverse domination stems from the same or similar principles that underlie other equitable tolling doctrines. The West Virginia Supreme Court of Appeals has recognized that the doctrine of adverse domination is similar to the doctrine of continuous representation. Smith v. Stacy,
¶48 We, likewise, find these two doctrines similar. Washington law recognizes the doctrine of continuous representation in legal malpractice litigation. Janicki Logging & Constr. Co. v. Schwabe, Williamson & Wyatt, PC,
¶49 The doctrine of adverse domination functions in a similar manner. The doctrine prevents corporate board members from defeating claims by continuing to dominate the board. See Hecht,
¶50 The two doctrines are based on similar rationales. One of the policy reasons underlying Washington’s adoption of the continuing representation doctrine was that “ ‘[t]he attorney has the opportunity to remedy, avoid or establish that there was no error or attempt to mitigate the damages.’ ” Janicki,
¶51 As one federal court noted, decisions adopting the doctrine of adverse domination “reflect an implicit appreciation of the realities of the shareholders’ position, that, without knowledge of wrongful activities committed by directors, shareholders have no meaningful opportunity to bring suit.” Fed. Deposit Ins. Corp. v. Bird,
duties of board members in their governance of the association.
¶52 In this case, some of the board member defendants owed a duty of “care required of fiduciaries,” while others owed a duty of “ordinary and reasonable care.” Regardless of the degree of care owed, the role of the board members is the same — to govern the homeowners’ association. See RCW 64.34.300. It would make little sense to apply the doctrine of adverse domination to claims against some of the complicit board members but not to others where the allegations are that a series of directors acted in concert to the detriment of the unit owners. The doctrine of adverse domination concerns itself with directors’ concealment of information from the corporation and its constituents. The degree of care owed to a corporate shareholder or association unit owner is unrelated to the danger of concealing their wrongdoing to the detriment of those to whom the duties are owed.
¶53 The doctrine of adverse domination applies to claims brought by the individual plaintiffs herein.
F
¶54 We must next determine whether the doctrine of adverse domination applies to all of Homeowners’ claims or to only some of those claims. There is a split of authority as to whether there is a limit to the types of claims to which the doctrine of adverse domination can apply. For instance, Oklahoma limits the doctrine of adverse domination to fraud claims. Grant,
We find persuasive the reasoning of those courts which hold that to extend the doctrine to cases involving conduct less culpable than fraud would be to eliminate the statute of limitations in director-liability actions. Furthermore, this reasoning is supported by recent legislative enactments allowing the insertion of liability-limiting clauses in bylaws and certificates of incorporation. Therefore, we find that application of the doctrine of adverse domination to delay accrual or toll the statute of limitations is limited to situations involving fraudulent conduct.
Grant,
¶55 For its holding, the Oklahoma Supreme Cоurt relied heavily on a federal court decision explaining that, in Texas, the doctrine of adverse domination “must be limited to those cases in which the culpable directors have been active participants in wrongdoing or fraud, rather than simply negligent.” Dawson,
The facts of the instant case demonstrate that the adverse domination theory is inappropriate when the majority of the board is merely negligent. The FDIC’s [Federal Deposit Insurance Corporation] own evidence tended to show that most of TIB’s [Texas Investment Bank] directors may have been negligent in failing to supervise the lending functions. Yet, at the same time, the board never concealed its “serious deficiencies” from examination by the OCC [United States Office of the Comptroller of the Currency] or anyone else. Even after the OCC notified TIB’s board of its shortcomings in supervising TIB’s lending function, there is no evidence to suggest that an organized majority coalesced to prevent any other parties from discovering the problems. Thus, the danger of fraudulent concealment by a culpable majority of a corporation’s board seems small indeed when the culpable directors’ behavior consists only of negligence, and the presumption of such concealment that underlies the adverse domination theory is unwarranted.
¶56 In contrast, in Oregon and Kansas, the doctrine of adverse domination can apply to all types of claims. The Oregon Supreme Court determined that because the doctrine of adverse domination is a corollary to the discovery rule, the doctrine of adverse domination applies to the same claims that the discovery rule applies to. Smith,
¶57 The view espoused by the Oregon and Kansas courts best comports with Washington law. Washington’s discovery rule is not limited to fraud claims. See, e.g. Cox v. Oasis Physical Therapy, PLLC,
G
¶58 This general rule being established, we turn now to the specific claims asserted in Homeowners’ complaint. Homeowners assert the following claims: breach of board member duty of care, negligence, violation of the CPA, negligent misrepresentation, fraud by omission and misreprеsentation, and civil conspiracy. As pleaded, the doctrine of adverse domination applies to four of those types of claims.
¶59 The doctrine of adverse domination most clearly applies to the claims for breach of board member duty of care. The doctrine of adverse domination is frequently applied to claims for breach of corporate duties. Wilson,
¶60 Homeowners adequately plead concealment with respect to the board member duty of care claims. Homeowners allege that the board member defendants “fail[ed] to advise the plaintiffs and others of consistently reported construction problems and other material information, [and] misrepresent [ed] the nature of investigations to plaintiffs.” Homeowners allege that the board remained culpable until April 24, 2011, when they declared a budget that included the special assessment. Thus, the Homeowners sufficiently allege that the board continued until that time to conceal the facts that established the basis for these claims. The doctrine of adverse domination therefore applies to these
¶61 We next analyze Homeowners’ negligence claims against Lozier Homes. Homeowners allege that Lozier Homes breached its duty of reasonable care “in undertaking the constructiоn, inspection, condition reporting, and repair of the Project.”
¶62 Homeowners’ attempt to assert CPA claims against Sanford, Burckhard, Sansburn, and Lozier Homes. The discovery rule can apply to CPA claims. Mayer v. Sto Indus. Inc.,
¶63 Homeowners assert negligent misrepresentation claims against Lozier Homes, Sanford, Burckhard, and Sansburn. Generally, the discovery rule can apply to negligent misrepresentation claims. First Md. Leasecorp v. Rothstein,
¶64 Homeowners sufficiently plead concealment with respect to these claims. Homeowners allege that the board members continually ignored the advice of experts and failed to disclose to the unit owners that they had received such advice. Homeowners also allege that the board members mischaracterized the resealing and caulking efforts as “preventative measures” and that the board members “continued to conceal the severity of the problem from the ownership at large.” In fact, Homeowners specifically allege that Philip and “[t]he other Board members [in 2006] cooperated or agreed that the scope of the problem should be concealed.” Further, the Homeowners allege that the boаrd purposely kept themselves in the dark about the results of an inspection and thereafter withheld the results of the inspection from the Homeowners. As pleaded, the board members continued their concealment until April 24, 2011, when they declared a budget which included the special assessment. Thus, the Homeowners sufficiently allege that the board continued to conceal the facts that established the basis for these claims. As such, the doctrine of adverse domination applies to Homeowners’ negligent misrepresentation claims.
¶65 Homeowners assert fraud claims against Lozier Homes, Sanford, Burckhard, Sansburn, and Peter. The discovery rule can apply to fraud claims. RCW 4.16.080(4). It is also widely accepted that the doctrine of adverse domination can apply to fraud claims. See, e.g., Grant,
¶66 Homeowners allege that these defendants acted fraudulently in two respects. Homeowners allege that these defendants “breached their duties to plaintiffs to disclose” and “made material misrepresentations ... of existing facts regarding the presence of defective construction, the cause of water intrusion, the advice of counsel regarding prosecution of a Washington Condominium Act warranty claim, the actual purpose of the ‘maintenance’ program developed by Lozier, and Glenn’s and [Construction Consultants of Washington’s] lack of qualifications and conflict of interest.” Homeowners allege that “the decision to omit these facts [regarding the advice of counsel] from the minutes was part of a deliberate effort on the part of Defendant Peter and/or
¶67 Finally, Homeowners assert civil conspiracy claims against Lozier Homes and Sanford. As Homeowners implicate only one board member, not a majority, the doctrine of adverse domination does not apply to these claims.
¶68 Therefore, with respect to the breach of board member duty of care claims, CPA claims, negligent misrepresentation claims, and fraud by omission and misrepresentation claims, the statute of limitations was presumptively tolled until April 24, 2011. On the face of the complaint, these claims were timely and the trial court erred by dismissing them as a matter of law.
H
¶69 For those claims to which the doctrine of adverse domination does not apply, i.e., Homeowners’ negligence and civil conspiracy claims, the discovery rule may still apply.
¶70 Pursuant to Homeowners’ complaint, it is plausible that Homeowners did not know and could not reasonably have known of the facts underlying their causes of action until April 24, 2011, the date that the Association’s board declared a budget that included the repair assessment. The trial court erred by determining that all causes of action accrued against each board member no later than upon the board member’s resignation from the board and thus by dismissing all of Homeowners’ claims. Whether the discovery rule serves to toll the accrual of Homeowners’ negligence and civil conspiracy causes of action presents a question of fact to be decided on remand.
V
A
¶71 In the alternative, Respondents contend that Homeowners’ claims fail as a matter of law because the board members did not owe a duty to Homeowners. This is so, Respondents assert, because board members owe a duty only to the Association. Respondents further assert that in the event that the board members do owe a duty to unit owners, the duty does not apply to future purchasers.
¶72 In order to establish liability under a tort theory, the plaintiff must prove duty, breach, causation, and damages. Xiao Ping Chen v. City of Seattle,
Except as provided in the declaration, the bylaws, subsection (2) of this section, or other provisions of this chapter, the board of directors shall act in all instances on behalf of the association. In the performance of their duties, the officers and members of the board of directors are required to exercise: (a) If appointed by the declarant, the care required of fiduciaries of the unit owners; or (b) if elected by the unit owners, ordinary and reasonable care.
RCW 64.34.308(1). The statute clearly dictates that the members of the board of directors owe duties to the unit owners when appointed by the declarant. RCW 64.34-.308(l)(a); see also Kelsey Lane Homeowners Ass’n v. Kelsey Lane Co.,
¶74 The statute further provides that elected board members owe to unit owners a duty premised on a lesser standard of care than that applied to those board members who were appointed by the declarant. The statute does not indicate, however, that elected board members owe no duties to unit owners. A homeowners’ association “has no life independent of the individual homeowners who are by statute . . . required to be members of the Association.” Stuart v. Coldwell Banker Commercial Grp., Inc.,
¶75 Indeed, it would make little sense if the board members owed duties to unit owners if appointed but no duties to the unit owners if elected. Both sets of directors are tasked with оperating the homeowners’ association.
B
¶76 Each of the plaintiffs purchased their units on the following dates:
Cindy Alexander
July 19, 2006
Blocker Ventures, LLC
February 7, 2003
Chris Clark
November 3, 2005
R. Bmce Edgington
April 19, 2006
Kipp and Jennifer Johnson
March 19, 2008
Gopikrishna and Himabindu Kanuri
August 8, 2006
Chris and Elizabeth Kasprzak
September 19, 2002
Paul and Joyce Hyojung Larkins
August 1, 2006
Kristine Magnussen
January 11, 2008
Scott McKillop
September 1, 2005
Caine and Dana Ott
July 14, 2006
Mara Patton
August 15, 2007
Peter Richards
September 2, 2009
Dante Schultz
December 14, 2005
Winifred Smith
July 24, 2002
Robert and Colette Stoddard
August 12, 2005
Neil West
May 27, 2004
Liang Xu and Jia Lu Duan
February 6, 2007
¶77 Each of the defendant-board members left the board on the following dates:
March 24, 2006
Paul Burckhard
May 15, 2001
James Sansburn
May 9, 2002
Richard Peter
May 29, 2003
Shana Holley
May 9, 2002
Brett Backues
January 18, 2004
Joseph Cusimano
June 27, 2006
Patricia Hovda
Unknown date before September 2008
Alexander Philip
July 20, 2006
¶78 As the above tables demonstrate, a significant number of Homeowners’ claims are asserted against board members who resigned before certain of the plaintiffs purchased their respective units. Thus, Homeowners insist that the board members’ duties extend not only to current owners but to future owners as well. Although board members owe duties to current unit owners, it does not necessarily follow that those duties extend to future owners. Homeowners’ contention raises two separate questions: (1) Do the appointed board members owe a fiduciary duty to future owners? (2) Do any of the board members owe a freestanding duty of care to future owners independent of their WCA-defined duties to current owners?
¶79 A fiduciary relationship can arise either in law or in fact. Liebergesell v. Evans,
¶80 Homeowners contend that the appointed board members owe a fiduciary duty to future unit owners because it is foreseeable that the units will be sold. However, while foreseeability might be sufficient to establish a general tort duty, it is not sufficient to establish a fiduciary duty. Cf. Chau Ngoc Nguyen v. Doak Homes, Inc.,
¶81 Accordingly, Homeowners’ claims against board members who resigned before certain plaintiffs’ units were purchased can survive Respondents’ CR 12(b)(6) motions to dismiss only if those board members owe a freestanding duty of care to future owners independent of their WCA-defined duties. On this question, one California case,
[D]irectors are not personally liable to third persons for negligence amounting merely to a breach of duty the officer owes to the corporation alone. “[T]he act must also constitute a breach of duty owed to the third person.... More must be shown than breach of the officer’s duty to his corporation to impose personal liability to a third person upon him.” ([U.S. Liab. Ins. Co. v. Haidinger-Hayes, Inc.,] 1 Cal.3d [586,] 595[,463 P.2d 770 ,83 Cal. Rptr. 418 (1970)], italics in original.) In other words, a distinction must be made between the director’s fiduciary duty to the corporation (and its beneficiaries) and the director’s ordinary duty to take care not to injure third parties. The former duty is defined by statute, the latter by common law tort principles.
Frances T.,
¶82 In Frances T., the plaintiff alleged in her complaint that the board members, who possessed knowledge of a recent increase in crime at the complex, created an unreasonably dangerous condition by failing to repair a hazardous lighting condition within a reasonable period of time and by ordering her to disconnect her exteriоr lighting. Frances T.,
¶83 We find the
¶84 With respect to their claims for breach of board member duty of care, Homeowners allege that the board members “owed plaintiffs a duty of due care in the management and governance of the Association.” As this duty is exactly the duty the board members owe under the WCA, Homeowners have not pleaded an independent duty. All board member duty of care claims asserted against board members who left the board before the date of purchase of a particular plaintiff’s unit
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¶85 With respect to these claims, Lozier Homes was not a member of the board and could not have owed an independent duty to the plaintiffs. Thus, the board member duty of care claims are cognizable against Lozier Homes only pursuant to a theory of vicarious liability for the actions taken by Sanford, Burckhard, and Sansburn. Claims against Lozier Homes were thus properly dismissed where claims against all three of these individuals were properly dismissed.
¶86 With respect to their claims fоr negligent misrepresentation, Homeowners allege that Lozier Homes, Sanford, Burckhard, and Sansburn breached their duties to “disclose existing material facts” regarding the construction defects, Glenn’s lack of credentials, and the advice received from Harer and Jobe. In order to state a claim for negligent misrepresentation, a plaintiff must allege that
“(1) the defendant supplied information for the guidance of others in their business transactions that was false, (2) the defendant knew or should have known that the information was supplied to guide the plaintiff in his business transactions, (3) the defendant was negligent in obtaining or communicating the false information, (4) the plaintiff relied on the false information, (5) the plaintiff’s reliance was reasonable, and (6) the false information proximately caused the plaintiff damages.”
Austin v. Ettl,
¶87 “Ordinarily, the duty to disclose a material fact exists only where there is a fiduciary relationship.” Tokarz v. Frontier Fed. Sav. & Loan Ass’n,
where the court can conclude there is a quasi-fiduciary relationship, where a special relationship of trust and confidence has been developed between the parties, where one party is relying upon the superiorspecialized knowledge and experience of the other, where a seller has knowledge of a materiаl fact not easily discoverable by the buyer, and where there exists a statutory duty to disclose.
Favors v. Matzke,
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¶88 In addition to their negligent misrepresentation claims, Homeowners also plead claims for fraud by omission and misrepresentation. In order to state a claim for fraud, the plaintiff must establish “(1) representation of an existing fact; (2) materiality; (3) falsity; (4) the speaker’s knowledge of its falsity; (5) intent of the speaker that it should be acted upon by the plaintiff; (6) plaintiff’s ignorance of its falsity; (7) plaintiff’s reliance on the truth of the representation; (8) plaintiff’s right to rely upon it; and (9) damages.” Stiley v. Block,
¶89 This expectation, however, is informed by our decision in Nguyen, wherein we held that the original seller of a home has no duty to disclose a concealed defect to the second purchaser.
¶90 Finally, Homeowners assert a civil conspiracy claim against Lozier Homes and Sanford. In order to establish a civil conspiracy, a plaintiff
must prove by clear, cogent, and convincing evidence that (1) two or more people combined to accomplish an unlawful purpose, or combined to accomplish a lawful purpose by unlawful means; and (2) the conspirators entered into an agreement to accomplish the conspiracy. Wilson v. State,84 Wn. App. 332 , 350-51,929 P.2d 448 (1996), cert. denied,522 U.S. 949 (1997).
All Star Gas, Inc., of Wash. v. Bechard,
breach [ ] their fiduciary duties to unit purchasers, fraudulently conceal[ ] the existence of defective construction, pretend! ] to do comprehensive investigation and repair of conditions with knowledge that the investigations and repairs were not adequate, misrepresent! ] the nature and cause of the leaks being experienced by unit owners, plac[e] Sanford on the Board when he had no legal right under the Washington Condominium Act to remain, and other actions.
Homeowners allege, in other words, that Lozier Homes and Sanford conspired to commit the torts that formed the basis for their other claims. Homeowners’ civil conspiracy claims thus incorporate all of Homeowners’ other claims. As previously noted, a duty can arise to third persons where the defendant fraudulently misrepresents a material fact. Because the civil conspiracy claims incorporate Homeowners’ fraud claims, Homeowners
C
¶91 Homeowners fail to properly plead their CPA claims. In order to prevail on a claim for violation of the CPA, the plaintiff must establish “(1) an unfair or deceptive act or practice (2) occurring in trade or commerce (3) with a public interest impact (4) that proximately causes (5) injury to a plaintiff in his or her business or property.” Douglas v. Visser,
¶92 Homeowners allege that Lozier Homes, Sanford, Burckhard, and Sansburn, took various actions “[i]n order to protect themselves from potential liability under the implied warranties of quality of the Washington Condominium Act for selling seriously defective construction at the Project.” However, none of the plaintiffs purchased their units from Lozier Homes, Sanford, Burckhard, or Sans-burn.
VI
¶93 Although not addressed by the trial court, Respondents contend that the naming of spouses as codefendants is not necessary to create community liability and, therefore, the spouses of the individual board members are not proper parties to the suit.
A
¶94 In their cross appeal, Sanford, Burckhard, Sans-burn, and Lozier Homes contend that the trial court erred by denying their request for attorney fees pursuant to RCW 4.84.185. This is so, they assert, because Homeowners’ complaint was clearly frivolous, as Homeowners knew that the statutory limitation periods on their claims had long since expired. Our resolution of the issues in this appeal belies that assertion.
¶95 RCW 4.84.185 reads, in pertinent part, “In any civil action, the court... may, upon written findings by the judge that the action . . . was frivolous and advanced without reasonable cause, require the nonprevailing party to pay the prevailing party the reasonable expenses, including fees of attorneys, incurred in opposing such action.” We review a trial court’s decision under RCW 4.84.185 for an abuse of discretion. Rhinehart v. Seattle Times, Inc.,
B
¶96 Sanford, Burckhard, Sansburn, and Lozier Homes also request attorney fees on appeal pursuant to RAP 18.9(a).
VIII
¶97 The decision of the trial court is reversed and remanded for further proceedings with respect to the following claims: all negligence claims against Lozier Homes; all civil conspiracy claims against Lozier Homes and Sanford; all fraud claims against Lozier Homes, Sanford, Burckhard, Sansburn, and Peter; all board member duty of care claims marked in the following chart,
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and all negligent misrepresentation claims marked in the following chart.
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¶98 The decision of the trial court is affirmed in all other respects.
¶99 Affirmed in part, reversed in part.
Reconsideration denied July 16, 2014.
Review granted at
Case dismissed by order of the Supreme Court May 8, 2015.
Notes
Huckleberry Circle, LLC, Farnsworth, Glenn, and Constructions Consultants of Washington, LLC, are not party to this appeal. All of the defendants who are party to this appeal are hereinafter referred to collectively as “Respondents.”
Ch. 19.86 RCW.
Glenn and Construction Consultants filed similar motions, but the trial court declined to dismiss the claims against them. Homeowners’ claims against Glenn and Construction Consultants were dismissed without prejudice upon stipulation of the parties on November 26, 2012.
The substantive facts set forth herein are as presented in Homeowners’ complaint, consistent with the CR 12(b)(6) standard of review. Burton,
Ch. 64.34 RCW.
The complaint lists only Sansburn as resigning from the board on May 9. However, it asserts that Backues, Cusimano, and Peter were elected at this time as the new three-member board, with Sanford assuming the fourth, nonvoting, position.
While it is unclear from the complaint when Peter rejoined the board, Homeowners stipulated that "no conduct during his later term as member of the Association’s Board of Directors was a cause of any additional injury to Plaintiffs for which Plaintiffs seek to recover in this matter.”
The complaint also named the spouses of the individual board members, alleging that all acts and omissions committed by the board members had been done on behalf of their marital communities.
Counsel attached a total of 94 exhibits to his opposition to the request for attorney fees.
As alleged in the complaint, the terms served by the board members are as follows:
Sanford — June 29, 2000 to March 24, 2006
Burckhard — June 29, 2000 to May 15, 2001
Sanshum — June 29, 2000 to May 9, 2002
Holley — May 15, 2001 to May 9, 2002
Backues — May 9, 2002 to January 18, 2004
Cusimano — May 9, 2002 to June 27, 2006
Peter — May 9, 2002 to May 29, 2003
Philip — March 21, 2005 to July 20, 2006
Hovda — March 21, 2005 to unknown date before September 2008
Huckleberry Circle, LLC, and Richard Holley (spouse of Shana Holley) failed to answer Homeowners’ complaint, and the trial court granted default judgments against them. Farnsworth was never served with a copy of the complaint.
Ch. 24.03 RCW.
Homeowners’ complaint seeks the following remedies: “Such damages include, but are not limited to: plaintiffs’ proportional responsibility to pay for the cost to correct defective conditions and repair resulting property damage at the Project (including investigative costs, scope of repair development costs, design costs, inspection costs, contractor costs, project management costs, repair financing costs, and all other costs associated with such repairs); increased costs to correct defective conditions and repair resulting property damage as a consequеnce of inaction; loss of marketability, use and value of plaintiffs’ property; increased reserve expenses; relocation costs; and attorney fees and other costs incurred in prosecuting this action.”
This is the case even when the alleged damages include the cost of repairs throughout the condominium complex. In Satomi Owners Ass’n v. Satomi, LLC, the association alleged damages including “ ‘the cost of repairing the project . . . and resulting monetary and material harm.’ ”
As Homeowners’ claims are not derivative, we need not decide whether unit owners may bring a derivative suit on behalf of a homeowners’ association.
Respondents contend that because Homeowners’ claims are essentially for loss of a chance to sue Declarant under the WCA for defective construction, their claims are time barred by the WCA’s statute of limitations. This is a mischaracterization of Homeowners’ claims, which are based on аlleged occurrences taking place after construction was completed. No claim for defective construction is asserted.
Homeowners claim that there exists inconsistency in our case law concerning which party bears the burden of proving when a plaintiff knew or should have known of the essential elements of a cause of action. This case was decided on a CR 12(b)(6) motion to dismiss, which does not impose a proof burden on either party. To the contrary, any fact alleged by plaintiffs is taken as true. Thus, we need not herein resolve the perceived lack of clarity, if any.
Neither party disputes this ruling. However, the limitation period for a CPA claim is four years, not three. RCW 19.86.120.
The closest Washington has come to deciding the issue presented here was in Interlake Porsche + Audi, Inc. v. Bucholz,
In addition, some jurisdictions follow the doctrine of adverse domination without referring to it as such. E.g., United Park City Mines Co. v. Greater Park City Co.,
The doctrine has also been applied to claims against third parties who act as board members’ coconspirators. Larney,
This is not necessarily to say that the plaintiffs must plead a separate claim of concealment. Nor must the alleged concealment necessarily be fraudulent. Washington law does not require that concealment be fraudulent in order for the discovery rule to apply. See Doe,
Respondents contend that concealment by a board member tolls the statute of limitation against that particular board member only and not as to any other board member. Respondents rely on United States v. Read,
As discussed in Part V, infra, the board members’ duties extend to the unit owners as well as to the Association.
Moreover, Texas did not have a general discovery rule at that time. Rather, the general rule was “that the tort statute of limitations begins to run when the tort is committed, absent a statute to the contrary or fraudulent concealment.” Dawson,
The doctrine applies not only to claims against the individual board members, but also to claims against Lozier Homes. Homeowners allege that Lozier Homes is the sole member of Declarant. Pursuant to this allegation, we can envision a hypothetical set of facts, consistent with Hоmeowners’ contention, establishing that Lozier Homes is the alter ego of Declarant. Homeowners also allege that Sanford, Burckhard, and Sansburn were appointed by Declarant. From this allegation, we can envision a hypothetical set of facts, consistent with Homeowners’ contention, establishing that Sanford, Burckhard, and Sansburn were agents of Declarant and, thereby, agents of Lozier Homes. If Sanford, Burckhard, and Sansburn are indeed agents of Lozier Homes, then Lozier Homes could be vicariously liable for the actions of these three board members. Accordingly, the doctrine of adverse domination applies to Lozier Homes to the extent that it is implicated as vicariously liable for the actions of Sanford, Burckhard, and Sansburn.
Specifically, these claims derive from the allegations that Lozier Homes hired Glenn and instructed her not to perform an intrusive inspection and that Lozier Homes volunteered to conduct a deck inspection.
The discovery rule may also apply to claims against Lozier Homes to the extent that it is separately liable for Homeowners’ fraud claims.
The trial court properly took judicial notice of Homeowners’ deeds, which establish the dates on which each plaintiff purchased his or her unit. Rodriguez v. Loudeye Corp.,
Moreover, elected board members can, and in this case did, serve on the board with appointed members.
The dates set forth in the following two tables are garnered from the complaint, the stipulation, and the uncontested public records submitted to the trial court.
We use the term “future unit owner” to refer to a plaintiff who purchased a unit after a particular defendant-board member left the board. Thus, certain plaintiffs are “future unit owners” with respect to certain defendants but not as to others. Other plaintiffs are “future unit owners” with respect to all defendant-board members.
Homeowners do not allege that Lozier Homes was ever a member of the board. Homeowners also do not allege that they purchased their units from Lozier Homes. In fact, Homeowners fail to allege any facts establishing that they were in a fiduciary relationship with Lozier Homes or that their relationship to Lozier Homes resembled any one of the relationships listed in Favors. This is true with respect to unit owners as well as future emit owners. Thus, Homeowners fail to plead any negligent misrepresentation claims against Lozier Homes in its individual capacity.
Homeowners do sufficiently allege facts from which we can envision a hypothetical set of facts, consistent with the complaint, establishing that Sanford, Burckhard, and Sansburn were agents of Lozier Homes. Accordingly, Homeowners state negligent misrepresentation claims with respect to Lozier Homes only to the extent that it is vicariously liable for the actions of Sanford, Burckhard, and Sansburn. Negligent misrepresentation claims against Lozier Homes were properly dismissed where claims against all three of these individuals were properly dismissed.
Homeowners also sufficiently allege facts from which we can envision a hypothetical set of facts, consistent with the complaint, establishing that Lozier Homes is the alter ego of Declarant. These claims have been reduced to default judgment against Dеclarant. Whether Lozier Homes is responsible for liability assigned to Declarant in that judgment is a question beyond the scope of the briefing and argument herein and will need to be addressed upon remand.
Lozier Homes and Sanford further contend that Homeowners’ civil conspiracy claims fail because an agent cannot conspire with its principal. However, from Homeowners’ complaint, we can hypothesize a set of facts in which Sanford was not acting as the agent of Lozier Homes during the conspiracy. Conflicting theories of liability can be resolved on remand by the application of actual evidentiary facts, as opposed to our application of the CR 12(b)(6) standard of review.
Smith and Kasprzak purchased their units from Declarant. Thus, Smith and Kasprzak stated a CPA claim against Declarant. These claims were reduced to default judgment against Declarant. These plaintiffs set forth no facts establishing Lozier Homes’ individual liability on this claim. Whether Lozier Homes is the alter ego of Declarant, and thus responsible for the judgment entered against it, presents a separate question.
Lozier Homes makes two brief contentions as to why Homeowners’ negligence claims fail, neither of which is availing. First, Lozier Homes contends that the allegations that it offered to perform deck inspections and that it recoated the decks is not sufficient to establish a duty. “[I]f someone gratuitously undertakes to perform a duty, they can be held liable for performing it negligently.” Burg v. Shannon & Wilson, Inc.,
Second, Lozier Homes contends that Homeowners’ negligence claims fail because there is no such thing as a claim for negligent construction. This contention fails regardless of the accuracy of Lozier Homes’ characterization of the law. Homeowners’ claims are for negligence “in undertaking the construction, inspection, condition reporting, and repair of the Project.” (Emphasis added.) Homeowners’ negligence claims thus are not merely for negligent construction.
The only case cited by respondents, deElche v. Jacobsen,
RAP 18.9(a) states:
The appellate court on its own initiative or on motion of a party may order a party or counsel, or a court reporter or other authorized person preparing a verbatim report of proceedings, who uses these rules for the purpose of delay, files a frivolous appeal, or fails to comply with these rules to pay terms or compensatory damages to any other party who has been harmed by the delay or the failure to comply or to pay sanctions to the court. The appellate court may condition a party’s right to participate further in the review on compliance with terms of an order or ruling including payment of an award which is ordered paid by the party. If an award is not paid within the time specified by the court, the appellate court will transmit the award to the superior court of the county where the case arose and direct the entry of a judgment in accordance with the award.