QUESTION: I live in a PUD with homes perched atop a steep bluff. There have been mudslides and some homes are threatened. Against the advice of the soils engineer, the board voted to follow the advice of lay persons who claim the soils engineer is lying. Many of us stressed to the board that a second opinion from another soils engineer should be obtained but the board refused. If the “remedy” recommended by the lay people doesn’t hold up and damages are exacerbated, can the board be held personally liable?

ANSWER: Your board has its head in the sand. When it comes to geotechnical issues, they need a soils engineer to advise them not lay people.

Business Judgment Rule. If the unstable slope injures persons or property, your directors could face personal liability. To avoid this, directors must perform their duties:

1. In good faith,
2. In a manner which the director believes to be in the best interests of the association, and
3. With such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Corp. Code 7231(c).

The Davis-Stirling Act additionally provides:

1. The act or omission was performed within the scope of the officer’s or director’s duties;
2. The act or omission was performed in good faith;
3. The act or omission was not willful, wanton, or grossly negligent;
4. The association carries insurance as defined by Civil Code 1365.7(a).

Risky Business. I suspect a jury would find that ignoring the recommendations of a qualified soils engineer in favor of unqualified owners was imprudent and, depending on the extent of the damage and injuries, grossly negligent, thereby triggering personal liability by the directors. If the board has reason to doubt the advice of its engineer, it should get the opinion of second soils engineer. If the two engineers agree, follow their advice. If they disagree, get the opinion of a third qualified engineer to break the tie.

Sincerely yours,

Adrian Adams, Esq.
Adams Kessler PLC