Opinion ID: 2593799
Heading Depth: 1
Heading Rank: 16

Heading: Failure to Keep Proper Accounts and Records

Text: The Owners contend that the evidence is overwhelming that KBRS breached its fiduciary duties by failing to keep a budget, communicating with residents, maintaining separate accounts, and preparing financial statements. The trial court found that KBRS kept reasonably formulated budgets, subject to input and discussion of the finance committee and the full Board and resident members, whose views and opinions were solicited. The court found that every fee increase was implemented with the approval of the resident Board members; the Board communicated with the residents by letter, in person, and in town meetings to discuss resident concerns in general and to go over rate information with residents; and answered questions and concerns about the rate. The court determined that as of 1989, when the condominium association was formed, although separate books and records were not kept for the three entities, there was an allocation of costs and expenses among the three corporations. The court noted that neither KBRS nor the Board were always aware that separate books and records are required by the Act, but, acting on advice of counsel, the Board established separate books, separate budgets, and separate bank accounts in March of 1991. The trial court noted that the Board had allowed the corporate charter to lapse temporarily due to a technicality. It observed that the Board took steps to rectify this deficiency and to reinstate the corporate charter. The court concluded that although failure to keep separate books violates the Act, the Owners had failed to show any damages attributable to that failure. The Owners are correct the Board's failure to keep separate accounts and budgets for the Association was a breach of good faith and of its fiduciary duty. However, the Owners have failed to show damages caused by the breach. Without damages, the issue is moot.