SMITH v. SUPERIOR COURT
(1990) 217 Cal.App.3d 950
Robie & Matthai, James R. Robie, Michael J. O'Neill and Pamela E. Dunn for Petitioner.
No appearance for Respondent.
Thorsnes, Bartolotta, McGuire & Padilla and Neal H. Rockwood for Real Party in Interest.
Bonita Park Homeowners Association (Association), a nonprofit
corporation, filed an action on January 21, 1986, against Bonita Park
developer McMillin Construction Company. The Association sought damages
for latent construction defects in the condominium homes. Upon a motion
for summary adjudication the court found the Association failed to
timely file suit before 10 years after recordation of valid notices of
completion, as required by Code of Civil Procedure section 337.15,
subdivision (g) (2). fn. 1
All causes of action except the fraud cause of action were time-barred.
McMillin recorded the notices of completion on February 25, 1974, for
buildings one through eight and on April 4, 1974, for buildings nine
through twelve. [217 Cal.App.3d 953]
On April 27, 1987, the Association then filed an action for breach of
fiduciary duty and negligence against its board of directors and
individual directors, including former board president Don Smith
(Smith). The Association alleged the board allowed the statute of
limitations to run, barring recovery for damages to the common areas.
Smith moved to adjudicate the issue "[the Association's] action for
damage to buildings 1-12 of the Bonita Park Condominium Project is
conclusively barred by the controlling three-year statute of limitations
provided in the Code of Civil Procedure section 359. fn. 2
" Smith argued the Association admitted in the complaint the 10-year
statutory limitations period expired on April 4, 1984, thus the
liability was "created" on that date, and any action against him must
have been brought by April 4, 1987. The court denied the motion finding
section 359 does not apply to actions for breach of a duty or negligence
against directors of a corporation.
 A "liability created by law" is one which exists by virtue of an
express statute but does not extend to actions arising under the common
law. (Coombes v. Getz (1933) 217 Cal. 320, 333 [18 P.2d 939].) By its
plain language, the three-year statute of limitations in section 359
applies where there is a statutory basis for actions against directors,
shareholders, or members of a corporation.
In 1975 the Legislature enacted section 309 of the Corporations Code
which codified the standard of care for corporate directors. Subdivision
(c) of Corporations Code section 309 fn. 3
precludes liability if the standard is met: "A person who performs the
duties of a director in accordance with subdivisions (a) [the standard]
and (b) [information relied upon] shall have no liability based upon any
alleged failure to discharge the person's obligations as a director."
 "The purpose ... is to relieve a person from any liability by reason
of being or having been a director of a corporation, if that person has
exercised his duties in the manner contemplated by this section."
(Legis. committee com., 24 West's Ann. Corp. Code (1990 pocket supp.) p.
34.) By codifying the standard of care and precluding further
liability, the statute conveys the Legislature's intent that any action
by a beneficiary of the fiduciary relationship must necessarily flow
from the statute. The [217 Cal.App.3d 954] fiduciary duty is distinguished from common law duty to third parties. (See Frances T. v. Village Green Owners Assn., supra, 42 Cal.3d 490,
506.) As Mosk, J., in his concurring and dissenting opinion in Frances
T. observes, "the potential liability of the directors here - which is
created by the duty imposed on them and the standard of care to which
they are held - is governed not by the common law but rather by statute.
[Citations, including Corp. Code, §§ 309, 7231.]" (42 Cal.3d at p.
 Here the Association alleges Smith failed to "reasonably inquire and
properly investigate the cause of the distress and damage to the common
area" and timely file suit. The Association stands as a corporate
beneficiary to Smith, and his alleged failure to act was in his capacity
as a voting director. Even though Corporations Code section 309 is not
specifically mentioned in the complaint, the action is based on the
statutory standard. We conclude a breach of the statutory standard is a
"liability created by law" and thus is governed by the three-year time
limitation of section 359.
 The Association argues the statute of limitations was tolled during
Smith's "adverse domination and control" of the board. A statute of
limitations tolls when a claim arises from a director's or employee's
defalcation and the wrongdoers' control makes discovery impossible. (San
Leandro Canning Co., Inc. v. Perillo (1931) 211 Cal. 482, 487 [295 P.2d
1126]; Admiralty Fund v. Peerless Ins. Co. (1983) 143 Cal.App.3d 379,
387 [191 Cal.Rptr. 753].) In the record before us the only evidence
offered in support of tolling is that Smith remained on the board until
December 31, 1985. There is no showing Smith dominated the board, or any
control he asserted was "adverse" or fraudulent. Nor is there evidence
the Association or any member made a demand Smith institute an action
against McMillin, or evidence a demand would have been futile. A demand
is necessary unless conspiracy, fraud, or criminal conduct is charged.
(See Reed v. Norman (1957) 152 Cal.App.2d 892,
898 [314 P.2d 204].) Furthermore, by the Association's evidence, Smith
was off the board for over 15 months before the statute of limitations
expired. We find no basis for equitable tolling of the statute.
An alternative writ or order to show cause would add nothing to the
presentation. A peremptory writ is proper. (Code Civ. Proc., § 1088;
United Nuclear Corp. v. Superior Court (1980) 113 Cal.App.3d 359 [169 Cal.Rptr. 827]; Goodenough v. Superior Court (1971) 18 Cal.App.3d 692, 697 [96 Cal.Rptr. 165].) [217 Cal.App.3d 955]
Let a peremptory writ of mandate issue directing the superior court to
vacate its order denying the motion for summary adjudication of issue
and enter a new order granting the motion.
Work, Acting P. J., and Nares, J., concurred.
FN 1. All statutory references are to the Code of Civil Procedure unless otherwise specified.
Section 359 provides "This title does not affect actions against
directors, shareholders, or members of a corporation, to recover a
penalty or forfeiture imposed, or to enforce a liability created by law;
but such actions must be brought within three years after the discovery
by the aggrieved party of the facts upon which the penalty or
forfeiture attached, or the liability was created."
Corporations Code section 7231, applicable to nonprofit mutual benefit
corporations, incorporates the standard of care defined in Corporations
Code section 309. (See Frances T. v. Village Green Owners Assn. (1986) 42 Cal.3d 490, 506, fn. 13 [229 Cal.Rptr. 456, 723 S.Ct. 573, 59 A.L.R.4th 447].)