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RoundTable Event - September 23, 2017

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By: Scott Eriksen, Esq.

We have all heard, and probably used, the “bad apple” idiom at one point in our lives.  You know, the one that goes something like: “All it takes is one bad apple to spoil the bunch.”  There is literal scientific truth to this statement.  A ripening/decaying apple emits ethylene gas, a naturally occurring plant hormone, the release of which will speed up the ripening (molding/decaying) of nearby apples (or other fruit).  That’s useful trivia, but of course most of the time when we hear about “bad apples” it’s in the metaphorical sense of the word.  Still the principle behind the phrase – that one “bad” member of a group can “spoil” the bunch – is a meaningful one, particularly in the community association context.

“Bad” unit owners can make life miserable for their neighbors, as we have discussed many times in the past, but they aren’t the only ones.  A “bad” Board member can be just as troublesome, if not worse than, a misbehaving unit owner.  Board members stand in a fiduciary role – and owe duties of loyalty and care to the association they serve.  When a member of the Board goes “bad,” the consequences are often worse as result of these obligations.  In addition, the Board often has access to confidential information, association funds and also maintains a degree of power over the enforcement of the governing documents.  In this position, the potential for truly “bad” acts – misappropriation of funds, unauthorized and unlawful dissemination of confidential information, selective enforcement of rules and regulations, etc. – is significant.  On top of that, presumably most Board members have been elected by earning the trust and confidence of their neighbors and peers.  A breach of this trust not only creates resentment, it may create liability and expense for the association as well.

So how does one deal with “bad” Board members before they create real problems for the community?  Well, the first step is to identify them.  Throughout this article I’ve had the word “bad” in quotations.  That’s because I was trying to stay with the metaphor but even though to me it sounds juvenile to call a trustee “bad,” – like something my two-year-old daughter might say for lack of a more descriptive or colorful adjective.  Yet the real reason I’ve highlighted the term throughout is because the word “bad” can mean many different things in the Board member context.  A “bad” trustee may be dishonest, self-dealing, reckless, belligerent, oppressive, apathetic, obdurate or any number of other things.  In our experience, we have had the good fortune of dealing with mostly “good” trustees – those who assume the often thankless position with genuine interest, attention and the community’s best interests at heart.  However, we have seen the opposite as well: those who seek to serve for the wrong reasons, or who have abandoned the right reasons somewhere along the way.  Boards must be vigilant for these individuals, as their actions can taint the ownership’s perception of the entire Board, in addition to causing actual problems for the association.

If you have identified a “bad apple” in your bunch, you have to decide how best to deal with him.  Occasionally, an honest conversation – rather than confrontation – behind closed doors about the offensive behavior may help to right the ship.  Depending on the nature of the bad actor’s conduct, however, more drastic measures may be required. Generally, if there is consensus among the other Board members that it is only one of their number who is “bad,” it may be possible (and less disruptive to the community) to seek his or her resignation.  As counsel, we have made demands upon individuals “requesting” their resignations – lest the association explore more aggressive methods to address their “bad” actions.  This can be a face-saving measure for the individual in question, as well as a more economic and expedient route for the association.

If worse comes to worst, however, the association may have to consider formal removal of the “bad” member pursuant to its governing documents.  Most documents – whether trusts or by-laws – provide a mechanism for removing Board members.  The best of these provisions allow for removal “with or without cause.”  Some provisions require a “due process” hearing before the Board or association prior to removal, and many require a vote of the ownership.  If you find yourself in a position where you have to remove a Board member, it is critical to carefully consult the governing documents to ensure that you follow the correct procedure.  Assuming that you do abide by the terms of the documents, the courts of this Commonwealth have generally upheld removals as proper acts.

One final point comes up in the context of small associations: duplex or triplex style condominiums, where there are two or three trustees and obtaining a “majority” can be difficult if not impossible.  In these situations, one “bad” apple is a particular curse – as the lone “good” trustee may find it impossible to properly administer the association.  Fortunately, even in such circumstances as this, there may be a remedy at hand. In the recent case of Hancock v. Chambers, 85 Mass. App. Ct. 1106 (Mass. App. Ct. 2014), the Appeals Court upheld the removal of a duplex condominium owner as a trustee of the association. The governing document in the Hancock case provided that a trustee could be removed either “(a) with or without cause by the vote of the Holders of the majority in interest of the Beneficial Interests, but such removal shall take effect only when approved by vote of a majority of the Trustees then in office, exclusive of the Trustee or Trustees to be removed; or (b) for cause by vote of a majority of the Trustees then in office.”  The trust also provided that “[a]t any meeting of the Trustees, a majority of the Trustees then in office shall constitute a quorum” and that trustees could act “by a majority vote at any meeting at which a quorum is present. In no event shall a majority consist of fewer than two Trustees…”  The defendants in the case argued that the removal of a trustee was improper because it occurred at a meeting without a quorum.

The Appeals Court didn’t bite.  Instead, they ruled that “[b]ecause the trust at issue has only two trustees, literal application of these provisions would render impossible the removal of Chambers as trustee. Neither method of removal under [the trust] would be feasible.  Pure obstinacy would guarantee that the majority of trustees would never reach the required number of two. By refusing to attend a meeting at which the plaintiffs sought her removal, a trustee could ensure her permanent place as a trustee.”  Rejecting this outcome as contrary to “common sense,” the Court concluded that the plaintiffs properly removed Chambers as trustee…” where the plaintiffs, as the owners of one of the duplex units, were “‘the Holders of the majority in interest of the Beneficial Interests’” and one of the plaintiffs was “a majority of the Trustees then in office, exclusive of the Trustee or Trustees to be removed.”  This ruling offers an important tool for individuals who find themselves stuck in a small condominium with a rotter for a co-trustee.  So don’t let “bad apples” spoil your barrel – whether it’s big or small.

 

RoundTable Event - September 23, 2017

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