I am a member of Malibu La Costa Owners Association (MLCOA) and La Costa resident, and for over 30 years, I have been an attorney dealing in corporate matters. Most members of the LRPROA (Lower Rambla Pacifcio Road Owner’s Association) are also members and stockholders of MLCOA. As of November 15, 2005 there were 57 members of the LRPROA. They represent approximately 17% of the total 332 MLCOA stockholders.
Both the articles of incorporation and the by-laws of MLCOA state that it requires “a vote or written consent of over 90% of the stockholders to acquire, hold, manage, improve, sell, convey, transfer or lease, or otherwise dispose of, mortgage, or otherwise encumber, plant, improve, develop, construct, maintain, or equip MLCOA property.” The intent of this is to prevent MLCOA’s property from being altered, or becoming a target for any liability action, or exposed to a loss of value with anything less than a 90% agreement of the stockholders. These documents address the mutual benefit and enjoyment of the stockholders to “promote the health, comfort, and safety and general welfare of the stockholders,” but do not speak about a minority of stockholders unilaterally committing the use of MLCOA property for any purpose, particularly one that might put the stockholders at financial risk.
LRPROA’s methods, and the transfer of liability to MLCOA members is unacceptable. Despite the supposed existence of an insurance policy provided by LRPROA to satisfy the City of Malibu’s indemnity requirement against liability associated with the road. MLCOA members have no idea as to how or if the premiums on the policy will be paid. In addition, LRPROA geologist of record, Geokinetics, has stated that the road will require maintenance and regular monitoring. Again, MLCOA has no idea whether or how LRPROA will do this, or if they will have sufficient funds to do so. MLCOA does not want to inherit this obligation or related liability.
MLCOA’s current General Liability and umbrella policies would not cover loss due to the collapse of the hill on which LRPROA would like to build the road. MLCOA also cannot obtain landslide insurance on the proposed roadway that fronts our property. And there is no assurance that the indemnification LRPROA has provided to the City will indemnify MLCOA as a corporation with stockholders, or the members separately as individual property owners who are stockholders in this corporation.
For these reasons, MLCOA cannot put its assets or its shareholders at risk for the benefit of a few members who do not see the implications of their actions. In addition, LRPROA’s pattern of behavior has already shown them to be a bad faith partner. In their dealings with the City, they implied that they had control over MLCOA property, when they had long been on notice that they did not enjoy these rights. Subsequently, they illegally entered and graded on MLCOA property after being noticed repeatedly over a period of years that they had no right to do so.
Since work was stopped on the roadway on September 18, LRPROA is now talking about trading and/or purchasing property from MLCOA to proceed with the road. They have also notified MLCOA that their own consultants have prepared a plan in which they could build the road within the roadway easement they already control. Building the road on MLCOA property is not their only option. In light of this, other than putting back the illegal grading that damaged MLCOA property, there should be no reason for LRPROA to perform work on MLCOA property. In addition, there should be serious discussion within MLCOA about whether or not MLCOA has been damaged by LRPROA’s actions.
If LRPROA elects to approach MLCOA shareholders to obtain 90% consent to their efforts to acquire, trade, transfer or otherwise purchase MLCOA property to be used for this road, MLCOA needs to be on notice that it is unclear whether this could be done without risk of liability to MLCOA or its members. In my experience, when tragedy occurs, plaintiffs’ lawyers look far and wide for deep pockets to sue. In my opinion, LRPROA should work in the right of way that they already control, restore MLCOA property, and indemnify MLCOA for the eventual “distress” and geological movement mentioned by their geologist once the roadway is in place. LRPROA should also indemnify MLCOA and be responsible for fixing any impact the roadway and their illegal grading has had on MLCOA property.
Frank J. Iannacone