Adams Stirling PLC


An "ultra vires" act is one performed without legal authority; something done that is beyond the scope of a corporation's authority.

Board Actions. Associations that act outside their authority may have their actions reversed by the courts.

Where the association exceeds it scope of authority, any rule or decision resulting from such an ultra vires act is invalid whether or not it is a "reasonable" response to a particular circumstance. Where a circumstance arises which is not adequately covered by the CC&Rs, the remedy is to amend the CC&Rs. (Major v. Miraverde HOA.)

Ultra vires conduct is conduct that is beyond the power of the corporation, not an individual director. (See McDermott v. Bear Film Co. (1963) 219 Cal.App.2d 607, 610-611 [“In its true sense the phrase ultra vires describes action which is beyond the purpose or power of the corporation.”]; Sammis v. Stafford (1996) 48 Cal.App.4th 1935, 1942 [“If, however, the director’s act was within the corporate powers, but was performed without authority or in an unauthorized manner, the act is not ultra vires.”].) (Palm Springs Villas v. Parth.)

Association decisions should be upheld so long as they are, among other things, “consistent with the governing documents.”  See, e.g., Lamden v. La Jolla Shores Clubdominium Homeowners Assn., 21 Cal. 4th 249, 264 (1999)  (“Nevertheless, we stated, ‘Generally, courts will uphold decisions made by the governing board of an owners association so long as they represent good faith efforts to further the purposes of the common interest development, are consistent with the development's governing documents, and comply with public policy.’ (Nahrstedt, supra, at p. 374, 33 Cal.Rptr.2d 63, 878 P.2d 1275, citing Natelson, Consent, Coercion, and “Reasonableness” in Private Law: The Special Case of the Property Owners Association (1990) 51 Ohio State L.J. 41, 43.)”; see also MaJor v. Miraverde Homeowners Assn., 7 Cal. App. 4th 618, 627 (1992) (“When disputes arise between the homeowners and the homeowners' association, the courts will look to the governing instruments for guidance in determining whether the Association has acted within its authority. (Thomas & Grogan, Cal. Condominium and Planned Development Practice (Cont.Ed.Bar 1984) State Regulation of Common Interest Subdivision Sales, p. 236.) Actions taken in excess of the association's power are unenforceable and courts have granted injunctive relief against associations which have exceeded the scope of their authority.”)

Director Liability. Individual directors who act without authority may become personally liable for those actions. For example, when the board decides against hiring a particular landscape company and the president signs the contract anyway, the president may lose the protections of the Business Judgment Rule and be personally liable for his acts. Although the contract may be voidable by the association, the president may be personally liable for any damages suffered by the association.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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