THE FOLLOWING STUDY ARTICLE IS INTENDED FOR BASIC AWARENESS AND NOT FOR LEGAL ADVICE. IF THE READER SEEKS LEGAL ADVICE CONCERNING HIS OR HER PARTICULAR SITUATION, HE OR SHE SHOULD SEEK OUT AN ATTORNEY IN A LAWYER CLIENT RELATIONSHIP.
Board members and officers of both incorporated and unincorporated associations are fiduciaries of their respective associations.
Such board members and officers must perform their duties, including their duty of reasonable inquiry, in good faith and with the care that a person of ordinary prudence would use under similar circumstances.
In performing their duty of reasonable inquiry in good faith and with care, such a board member or officer is entitled to rely on information, opinions, reports or statements prepared or presented by officers, employees, counsel, public accountants, committees, and others that he reasonably believes to be either persons who are reliable and competent , or committees that merit confidence, concerning the matter in question.
However, in performing the duty of reasonable inquiry in good faith and with care , an officer or executive board member is not entitled to rely on information, opinions, reports or statements prepared or presented by officers, employees, counsel, public accountants, committees, and others , if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted .
Board members or officers owe a duty of care and of loyalty in fulfilling their duties. They must conduct reasonable investigations in good faith and without any self dealing.
Board members or officers must fulfill their duties intelligently, impartially and with sound discretion. They must investigate, inquire, study, ponder and then finally decide the question in order to properly exercise their lawfully mandated discretion.
Board members or officers act outside the limit of their authorized discretion when they make decisions in ignorance due to lack of inquiry into the facts necessary to make an intelligent judgment.
To investigate a matter is to make a systematic or searching inquiry, a detailed examination, or an official probe into that matter
The process leading up to the actual exercise of discretion by a school board cannot be unending. So long as there is a long and deliberative process before arriving at a decision, there is no requirement that the process be further drawn out until every scrap of data of any possible relevance has been fully considered.
A. Board members and officers of homeowner and condominium associations are fiduciaries of their respective associations. As such, they must perform their duties, including the duty of reasonable inquiry, in good faith and with the care that a person of ordinary prudence would use under similar circumstances.
68 Pa. C.S.A. § 3303 and § 5303 Executive board members and officers.
(a) Powers and fiduciary status.–…in the performance of their duties, the officers and members of the executive board shall stand in a fiduciary relation to the association and shall perform their duties, …in good faith;….and with care, including reasonable inquiry, ….. as a person of ordinary prudence would use under similar circumstances……
See also Burgoyne , Jr. v. Pinecrest Community Ass’n 924 A.2d 675 (2007);
Coronado Condominium Association, Inc. v. Iron Stone Coronado , LP No. 2265 C.D. 2007
B. In performing the duty of reasonable inquiry in good faith and with care, an officer or executive board member of an association is entitled to rely on information, opinions, reports or statements prepared or presented by officers, employees, counsel, public accountants, committees, and others that he reasonably believes to be either persons who are reliable and competent , or committees that merit confidence, concerning the matter in question.
68 Pa. C.S.A. § 3303 and § 5303 Executive board members and officers
(a) ……In performing any duties, an officer or executive board member shall be entitled to rely in good faith on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:
(1) One or more other officers or employees of the association whom the officer or executive board member reasonably believes to be reliable and competent in the matters presented.
(2) Counsel, public accountants or other persons as to matters which the officer or executive board member reasonably believes to be within the professional or expert competence of that person.
(3) A committee of the executive board upon which the officer or executive board member does not serve, designated in accordance with law, as to matters within its designated authority, which committee the officer or executive board member reasonably believes to merit confidence.
See also Burgoyne , Jr. v. Pinecrest Community Ass’n 924 A.2d 675 (2007);
Coronodo Condominium Association, Inc. v. Iron Stone Coronado , LP No. 2265 C.D. 2007
C. However, in performing the duty of reasonable inquiry in good faith and with care , an officer or executive board member of an association is not entitled to rely on information, opinions, reports or statements prepared or presented by officers, employees, counsel, public accountants, committees, and others , if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted .
68 Pa. C.S.A. § 3303 and § 5303 Executive board members and officers
(a)……..An officer or executive board member shall not be considered to be acting in good faith if he has knowledge concerning the matter in question that would cause his reliance to be unwarranted……
See also Burgoyne , Jr. v. Pinecrest Community Ass’n 924 A.2d 675 (2007);
Coronodo Condominium Association, Inc. v. Iron Stone Coronado , LP No. 2265 C.D. 2007
D. Similar legal principles can supplement our understanding of the duty of a good faith, careful and reasonable inquiry by association board members and officers.
68 Pa.C.S. § 5108. Supplemental general principles of law applicable.
The principles of law and equity, including the law of corporations and unincorporated associations, the law of real property and the law relative to capacity to contract, principal and agent, eminent domain, estoppel, fraud, misrepresentation, duress, coercion, mistake, receivership, substantial performance, or other validating or invalidating cause supplement the provisions of this subpart, except to the extent inconsistent with this subpart.
See also Lyman v. Boonin 535 Pa. 397 (1993) (Supreme Court of Pennsylvania)
E. Corporate directors owe a duty of care and of loyalty in fulfilling their duties. They must conduct reasonable investigations in good faith and without any self dealing.
Corporate directors owe a duty of care and of loyalty. Anchel v. Shea,762 A.2d 346, 357 (Pa.Super.2000). The duty of care requires that a director act in “good faith, in a manner he reasonably believes to be in the best interests of the corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances.” 15 Pa.C.S.A. § 1712(a). The duty of loyalty requires that there be no self-dealing. Warehime v. Warehime 860 A.2d 41 (2004) Corporate directors who conduct reasonable investigations and act in good faith … fulfill their duty of care. Warehime, supra. (2004)
F. School board members must fulfill their duties intelligently, impartially and with sound discretion. They must investigate, inquire, study, ponder and then finally decide the question in order to properly exercise their lawfully mandated discretion. School boards act outside the limit of their authorized discretion when they make decisions in ignorance due to lack of inquiry into the facts necessary to make an intelligent judgment.
A board must act intelligently, impartially and with sound discretion Smith v. Darby School District, 388 Pa. 301, 314, 130 A.2d 661, 669 (1957). A board is required to investigate, to inquire, to study, to ponder and to finally decide the question, i.e., to exercise its lawfully mandated discretion. Allen v. Uniontown Area School District,4 Pa.Commw. 183, 188, 285 A.2d 543, 546 (1971). A board transcends the legal limits of its discretion when it makes a decision in ignorance due to lack of inquiry into facts necessary to form an intelligent judgment. Zebra v. Pittsburgh School District, 449 Pa. 432, 296 A.2d 748 (1972).
G. To investigate a matter is to make a systematic or searching inquiry, a detailed examination, or an official probe into that matter.
Black’s Law Dictionary defines the term `investigate’ as follows: `1. To inquire into (a matter) systematically; to make (a suspect) the subject of a criminal inquiry. . . . 2. To make an official inquiry. . . .’ Black’s Law Dictionary 902 (9th ed.2009). Webster’s Third New International Dictionary defines the term `investigation’ as follows: `1: the action or process of investigating: detailed examination. . . 2. a searching inquiry:. . . an official probe. . . .’ Webster’s Third New International Dictionary 1189 (2002). Therefore, we conclude that, as used in Section 708(b)(17), the term `investigation’ means a systematic or searching inquiry, a detailed examination, or an official probe. Department of Health v. Office of Open Records, 4 A.3d 803, 810-811 (Pa.Cmwlth. 2010). See Sherry v. Radnor Tp. School District .20 A.3d 515 (2011).
H. The process leading up to the actual exercise of discretion by a school board cannot be unending. So long as there is a long and deliberative process before arriving at a decision, there is no requirement that the process be further drawn out until every scrap of data of any possible relevance has been fully considered.
This process leading up to the actual exercise of discretion cannot be unending. …There must be a time after which a board is entitled to arrive at a decision and thereafter enter into an executory stage, without being stymied at every turn by the differences of opinions of others. Allen v. Uniontown Area School District,4 Pa.Commw. 183, 188, 285 A.2d 543, 546 (1971). So long as there is a long and deliberative process before arriving at its decision, there is no requirement that the process be further drawn out until every scrap of data of any possible relevance has been fully considered by the Board : Borough of Clifton Heights v. School District of Township of Upper Darby, 31 Pa.Commw. 523, 529, 377 A.2d 836, 839 (1977).
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