HOA Ordered to Impose Emergency Special Assessment on Members to Raise Funds to Satisfy Owners’ Judgment for Breach of Fiduciary Duties

This case involved a dispute between two homeowners/association members (“Owners”) and their homeowners association (“Association”) over Association’s refusal to approve Owners’ home improvement project.

Owners undertook the home improvement project after obtaining necessary approvals from both Association’s Architectural Review Committee (“ARC”) and the City of Escondido. During construction, the Association issued a cease and desist order (CDO) against Owners alleging unapproved work, particularly concerning a concrete trail and a water containment structure. Despite the City’s subsequent approval of the revised plans and confirmation that no further safety measures were required, the Association refused to lift the CDO, imposed fines, and took disciplinary action against Owners. Owners then sued the Association and two board members individually for breach of fiduciary duty, among other claims.

The trial court jury found the Association and both board members breached their fiduciary duties by failing to lift the CDO and by not approving the revised plans in a timely manner, and awarded damages to Owners, which included $100,000 in emotional distress damages to each Owner (against Association), and additional damages against the individual board members for the personal breaches of fiduciary duty. One of the individual directors was also found liable for civil assault. After the entry of judgment, the trial court awarded the homeowners: