Filed 3/24/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
TRACT NO. 7260 ASSOCIATION, B271111
INC.,
(Los Angeles County
Defendant and Appellant, Super. Ct. No. BS155027)
v.
DON PARKER,
Plaintiff and Appellant.
APPEAL from a judgment of the Superior Court of Los
Angeles County. James C. Chalfant, Judge. Affirmed in part
and reversed in part.
Wheeler & Associates and David C. Wheeler for Defendant
and Appellant.
Wilson Keadjian Browndorf, Marc Y Lazo and Charles K.
Stec for Plaintiff and Appellant.
__________________________
A member of a nonprofit mutual benefit corporation
requested inspection of the corporation’s membership list, and
other books and records. The corporation refused, and the
member brought a petition for writ of mandate to compel
inspection. The trial court agreed with the corporation that the
member sought the inspection for an improper purpose, unrelated
to his interest as a member of the corporation. As a result, the
court denied the petition with respect to the books and records.
However, the court concluded the corporation did not timely
challenge the request for the membership list as required by
statute, and therefore ordered the list disclosed. Both parties
appeal. We conclude: (1) substantial evidence supports the trial
court’s finding that the member sought the information for an
improper purpose; and (2) the corporation’s challenge to
disclosing the membership list was not barred by statute. We
therefore reverse that part of the court’s judgment requiring
disclosure of the membership list, and otherwise affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Don Parker is a member of Tract No. 7260 Association,
Inc., a nonprofit homeowner’s association (the “HOA”). This
action arises out of his request for inspection of the HOA’s
membership list and other records. As far as the HOA is
concerned, though, the action also arises out of a dispute the
HOA has with another entity known as Fix the City.
2
Parker used to be the treasurer of the HOA. When Parker
was treasurer, a man named Michael Eveloff was the President.
Eveloff created Fix the City. According to the HOA, it had been
granted the right to control a substantial amount of money.
However, Eveloff convinced the HOA board to transfer that
money to Fix the City, which used it for purposes which were of
no use to the HOA. The HOA is now suing Fix the City for
usurping its corporate opportunity. The HOA believes that
Parker is aligned with Eveloff and Fix the City, and that he
sought access to the membership list and other HOA records to
use them against the HOA in the dispute with Fix the City.
A. Parker’s Request
On January 29, 2015, the same day that the HOA filed suit
against Fix the City (the “HOA/Fix the City” action), Parker
requested seven categories of corporate information from the
HOA, including its membership list. He stated legitimate
reasons for which he sought the information. For example, he
stated that he wanted to inspect the HOA’s books to make certain
the HOA was following generally accepted accounting principles.
He explained that he sought the membership list for possible
communications with the members to ascertain whether there
have been corporate misdeeds.
3
Parker sought the information under Corporations Code
sections 8330 et seq.1 Requests under those sections may be
made by “[a]ny member” of the corporation (§ 8330, subd. (b)(1))
or by the “authorized number of members” (§ 8330, subd. (b)(2)).
When the corporation has less than 1000 voting members, the
“authorized number” is five percent of voting power. (§ 5036.) As
we shall discuss, different procedures apply depending on
whether a single member, or the authorized number of members,
is making the request. Parker made his request as “the
undersigned member,” and signed it as “Homeowner – Tract
7260.” He did not state that he was acting for the authorized
number of members, nor did he suggest that he had written
authorizations from members holding sufficient voting power.
B. The HOA Largely Denies the Request
There is no serious dispute that the HOA did not fully
comply with Parker’s request. A representative of the HOA met
with Parker briefly and let him review certain of the documents
he had sought – but not all of them, and not the membership list.
C. Parker Files his Petition
On April 6, 2015, Parker filed a petition for writ of
mandate, seeking an order compelling the HOA to allow him to
inspect and copy the membership list and the other books and
1 All undesignated statutory references are to the
Corporations Code.
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records he had sought. As in his written request for inspection,
Parker asserted he had a right to inspect “in his capacity as a
member” of the HOA. The HOA answered the petition, arguing
that Parker has no right to inspect, because he sought the
information for an improper purpose.
D. The HOA Fails to Have the Cases Related
On May 27, 2015, the HOA filed a Notice of Related Case,
in order to relate this case (Parker’s writ petition) to the HOA/Fix
the City action. In its notice, the HOA argued that Parker was
seeking inspection in this case in order to give Fix the City an
unfair advantage in the HOA/Fix the City case. Parker opposed
relation on both procedural and substantive grounds. On
June 24, 2015, the court in the HOA/Fix the City case denied
relation, stating that the writ petition must be decided in a writ
and receivers department, and would not be moved to the civil
department in which the HOA/Fix the City case was pending.
E. Briefing on the Writ Petition
The briefing on the merits of the writ petition turned to the
issue of Parker’s reasons for seeking inspection of the
membership list and other documents. Parker filed a declaration
stating that he sought the information for legitimate reasons
reasonably related to his interests as a member. He expressly
represented that he did not make his demand “for any reason
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related to the other lawsuit subsequently filed by [the HOA] after
I made the Demand.”
The HOA presented evidence as to why it believed Parker
was, in fact, aligned with Fix the City, and seeking the inspection
in order to improperly assist Fix the City in the HOA/Fix the City
action. This included evidence of the following facts: (1) Parker
had been aligned with Eveloff in convincing the HOA to transfer
the corporate opportunity to Fix the City, which the HOA alleges
Parker accomplished by misrepresentation; (2) the HOA’s then-
lawyers gave the HOA an opinion that the transfer to Fix the
City was lawful; (3) shortly after the transfer to Fix the City was
approved by the HOA’s board, Parker and Eveloff simultaneously
resigned, effective April 7, 2013; (4) on April 5, 2013, the last
business day prior to his resignation, Parker e-mailed the HOA’s
bank with an emergency request for a cashier’s check for nearly
$49,000 to the attorneys who had opined on the legality of the
transfer; (5) the HOA’s current treasurer can conceive of no
“legitimate reason” why it would be in the HOA’s interest to pay
the attorneys with a cashier’s check or to speed such a payment
through as a treasurer’s last official act; (6) that same law firm
has since represented Fix the City in other cases (but not the
HOA/Fix the City case); and (7) Parker’s counsel in the current
writ case is the same firm that is presently representing Fix the
City in the HOA/Fix the City case.
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In short, the HOA painted the picture of a treasurer who,
by misrepresentations and aided by a possibly biased legal
opinion, convinced the board to transfer an opportunity to Fix the
City; then quit the board, making certain that the lawyers were
paid off; and is now represented by the same firm that is
defending Fix the City against the HOA’s allegation that the
transfer was improper.
F. The Trial Court Grants the Writ in Part
The trial court recognized that the law requires a member
seeking membership lists and other corporate records to have a
purpose related to his interests as a member. The court
considered the facts and concluded that Parker’s purpose was
improper, stating, “Particularly since Parker approved the
transfer to Fix the City and his lawyer is defending Fix the City
in [the] lawsuit, a reasonable conclusion is that Parker is using
his membership status to aid Fix the City in defending the
[HOA/Fix the City] lawsuit.”
Based on this factual finding, the court denied Parker’s
request for corporate books and records under section 8333.
However, the court concluded the membership list must be
disclosed. The court relied on section 8331, subdivision (i), which
provides that, when a demand for membership lists is made by
an authorized number of members, the corporation must seek an
order setting aside the demand. If it does not do so, the
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requesting parties may seek mandamus and “[n]o inquiry may be
made in such proceeding into the use for which the authorized
number seek the list.” As the HOA did not timely seek a set-
aside order, the court concluded, the HOA’s defense of improper
purpose came too late insofar as the request involved the
membership list.
G. Further Proceedings
Each party prepared a proposed judgment; each party
objected to the other’s proposed judgment. Specifically, the HOA
believed the trial court had erred in relying on section 8331,
subdivision (i) to allow Parker to access the membership list, as
that provision applies only when the “authorized number” seeks a
membership list, not when a single member does so. The HOA’s
counsel wrote Parker’s counsel suggesting that the court relied on
this statute due to Parker’s counsel having misrepresented the
law in this regard, and requesting that he inform the court of his
error. Parker believed section 8331, subdivision (i) applied, and,
in any event, it was too late for the HOA to raise the issue, as it
would turn on the factual issue of whether Parker alone
constituted the “authorized number” of members – an issue on
which neither party had introduced evidence.
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H. Judgment, Appeal, and Cross-Appeal
The trial court signed a judgment consistent with its
ruling, granting Parker access to the membership list only. Both
parties timely appealed.
DISCUSSION
On appeal, the HOA argues that the court erred in
concluding the HOA was procedurally barred from challenging
Parker’s purpose in seeking the membership list and that,
instead, the court’s finding of Parker’s improper purpose should
bar him from inspecting the membership list as well as the other
documents. In his cross-appeal, Parker argues that the evidence
of improper purpose is insufficient as a matter of law, and his
mere assertion of a single proper purpose is sufficient to justify
inspection. Considering the cross-appeal first, we conclude the
evidence is sufficient to support the trial court’s finding of
improper purpose, and that Parker’s assertion of a proper
purpose does not defeat this finding. Turning to the HOA’s
appeal, we conclude that the court erred in applying the
“authorized number” law to Parker’s single member request.
Under the proper authority, the HOA timely raised the issue of
Parker’s improper purpose, and the court therefore should have
also refused Parker’s request to inspect the membership list.
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A. Parker Sought the Information for an Improper Purpose
A member’s right of inspection is limited to purposes
reasonably related to the member’s interests as a member. (§§
8330, subd. (b)(1) [membership lists], 8333 [corporate financial
records].) “This limitation is always subject to judicial review to
determine whether a lawful purpose exists.” (Dandini v.
Superior Court (1940) 38 Cal.App.2d 32, 35.) A corporation has
the burden of proving that the member “will allow use of the
information for purposes unrelated to the person’s interest as a
member.” (WorldMark, The Club v. Wyndham Resort
Development Corp. (2010) 187 Cal.App.4th 1017, 1029.) On
appeal, we review the trial court’s order for substantial evidence.
(Ibid.) Mere speculation that the member will use the
information for an improper purpose is not sufficient to nullify
inspection rights; any suspicion must be based on adequate facts
in order to justify denial of inspection. (Gilmore v. Emsco Derrick
& Equipment Co. (1937) 22 Cal.App.2d 64, 67 [improper to deny
shareholder inspection rights simply because she was employed
by a detective agency, when there was no evidence her inspection
demand was related to her employment].)
Here, Parker contends the court’s finding of improper
purpose is unsupported by the evidence, as it is mere suspicion
based on the fact that Parker’s counsel is currently representing
Fix the City in “unrelated” litigation. In Parker’s briefing, he
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repeatedly characterizes the HOA/Fix the City case as
“unrelated,” because the judge in the HOA/Fix the City matter
refused to relate the two cases. But the court’s order declining to
relate the cases was made on the procedural basis that a writ
petition should remain in the writ department; it did not
conclude that the two cases were factually unrelated. Indeed,
they are factually related. The HOA/Fix the City litigation
challenges a transfer which Parker himself recommended,
allegedly by misrepresentations. That Parker is pursuing his
inspection claim aided by the same counsel defending Fix the
City in the HOA/Fix the City litigation certainly gives rise to the
reasonable inference that Parker seeks the information to aid Fix
the City in defending against that action. Parker argues that
this cannot be the case, in that the HOA/Fix the City complaint
was not filed until the day he served his inspection demand, and
he did not learn of the complaint until it was served on Fix the
City some weeks later. But this does not mean that Parker did
not know that litigation was imminent, and does not undermine
the conclusion that he sought inspection to defend Fix the City
against the complaint that he knew was coming.
Moreover, the fact that Parker’s counsel is representing Fix
the City in the HOA/Fix the City litigation is not the only fact
supporting the trial court’s conclusion. That Parker and Eveloff
simultaneously resigned from the board after pushing through
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the transfer to Fix the City tends to show Parker is aligned with
the HOA’s litigation adversary. That Parker made certain that
the HOA’s former counsel, which now represents Fix the City in
other matters, was paid by a cashier’s check on an emergency
basis confirms the conclusion. The court’s finding that Parker’s
purpose was improper is supported by substantial evidence.
Parker also argues that, even if he did have a “secondary”
improper purpose, the fact that he asserted a proper purpose,
related to his interests as a member, is sufficient to justify his
inspection demand. Parker’s authority for this remarkable
proposition is Private Investors v. Homestake Mining Co. (1936)
11 Cal.App.2d 488. That case does not support the argument. In
Homestake Mining, the trial court overruled a corporation’s
demurrer to a shareholder’s complaint seeking to enforce
inspection rights, and, as the corporation had filed no answer,
issued a writ. The corporation sought a writ of supersedeas to
stay enforcement pending its appeal. The court, therefore, was
tasked with determining whether the appeal presented a
substantial or debatable question. (Id. at p. 496.) One of the
corporation’s arguments in its demurrer was that the
shareholder’s complaint did not allege that the purposes for
which inspection was sought were reasonably related to the
plaintiff’s interests as a shareholder, although the reasons
themselves had been alleged. The appellate court concluded the
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corporation’s argument was utterly meritless, in that two of the
four reasons alleged by the plaintiff shareholder had been held,
in another case, to be reasonably related to shareholders’
interests. The court stated that any one of the four reasons
would have been sufficient for the demand, and concluded, “the
additional allegation that any one of these alleged purposes was
‘reasonably’ related to the shareholder’s interest would have been
but a conclusion of law.” (Id. at p. 497.) In other words, the court
held only that when a plaintiff alleges a purpose reasonably
related to the plaintiff’s interests as a shareholder, the plaintiff
need not also allege the legal conclusion that the purpose was, in
fact, reasonably related to the plaintiff’s interests as a
shareholder. The court did not hold that the mere allegation of a
proper purpose is sufficient to require inspection when the court
has found other, improper purposes are actually motivating the
shareholder.2
As the court’s finding that Parker’s purpose was improper
is supported by substantial evidence, and Parker’s assertion of a
proper purpose does not undermine the conclusion, the trial court
did not err in denying Parker inspection of all books and records
other than the membership list.
2 Indeed, such a holding would entirely undermine the
statutory limitation on inspection rights, as any member with an
improper purpose would surely be capable of asserting a proper
one.
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B. Parker’s Improper Purpose Defeats Inspection of the
Membership List
We now turn to the HOA’s appeal, which requires a
discussion of the procedures that apply when a single member, as
opposed to an “authorized number” of members, seeks inspection
of a nonprofit corporation’s membership list. This is a legal issue
of statutory interpretation, which we review de novo. (Rodriguez
v. Solis (1991) 1 Cal.App.4th 495, 502.)
Section 8330, subdivision (a) provides for a right of
membership list inspection. Subdivision (b) explains that this
right applies to: (1) any member; and (2) the authorized number
of members. Both can inspect only for a purpose reasonably
related to their interest as members. The statutes provide for
different procedures, however, when the corporation believes
inspection is sought for an improper purpose.
If a demand is made by a single member and the
corporation believes the demand is for an improper purpose, the
corporation “may deny the member access to the list. In any
subsequent action brought by the member [to enforce inspection],
the court shall enforce the [inspection right] unless the
corporation proves that the member will allow use of the
information for purposes unrelated to the person’s interest as a
member . . . .” (§ 8330, subd. (b)(1).)
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In contrast, if the demand is made by the authorized
number of members, and the corporation believes the demand is
for an improper purpose, the corporation “may petition the
superior court . . . for an order setting aside the demand.”
(§ 8331, subd. (a).) The corporation has only 10 business days in
which to file its petition; this may be extended to 30 days, upon a
showing of excusable neglect. (§ 8331, subds. (b) & (c).) If the
corporation does not act within that time limit, it “shall comply
with the demand . . . .” (§ 8331, subd. (e).) Where the corporation
has not timely sought an order setting aside the demand, the
“requesting parties” may petition for mandate to compel the
corporation to comply with the demand. At the hearing, the court
shall issue the writ unless it appears “that the demand was not
made by an authorized number,” the demand has been complied
with, or a protective order is in effect. “No inquiry may be made
in such proceeding into the use for which the authorized number
seek the list.” (§ 8331, subd. (i).) By the express terms of section
8331, subdivision (i), these procedures apply only when the
demand is made by the “authorized number” of members.
In short, when the demand is made by a single member,
the burden is on that member to bring court action to enforce the
right – although once the action is brought, the corporation has
the burden of proving the member’s purpose is improper. But
when the demand is made by the authorized number of members,
15
the corporation bears the burden of bringing court action, and
must comply with the demand if it does not.
The two different procedures are intentional. The
comments based on the Legislative Committee Summary to
section 6330, which deals with public benefit nonprofit
corporations and which contains language virtually identical to
section 8330, explain that prior law allowed a single member to
gain access to the membership list, but “a member had to bring
suit to enforce this right if the corporation refused to provide the
list.” The new law adopts this law “as to the rights of a single
member . . . .” (Coms. Based on Legis. Com. Summary, Deering’s
Ann. Corp. Code (2009 ed.) foll. § 6330, p. 209.) However, the
new law provides that upon demand by the “authorized number,”
the corporation must provide the list, and if it fails to do so, the
authorized number may enforce the right in a summary action.
“The committee felt that the above provisions would draw a
proper balance between a member’s need for adequate access to
membership lists and the need of a corporation to protect itself
from wrongful exploitation of an important asset.” (Ibid.)
Here, Parker sought inspection rights of the membership
list as a single member. As such, the HOA was not required to
seek court involvement, and when Parker brought suit, the HOA
had the right to argue that Parker’s purpose was improper. The
court’s reliance on section 8331, subdivision (i), to conclude that
16
the HOA was barred from relying on Parker’s improper purpose,
was error. As noted above, that subdivision’s provisions apply
only when the inspection demand is made by an authorized
number of members, not a single member. When Parker sought
writ relief, the HOA timely invoked Parker’s improper purpose,
and the court found the purpose to be improper. Inspection of the
membership list should have been denied.
In passing, Parker suggests that courts have eliminated the
distinction between requests by a “member” and requests by the
“authorized number” of members, due to some language in
WorldMark, The Club v. Wyndham Resort Development Corp.,
supra, 187 Cal.App.4th at page 1037. In that case, the inspection
demand was made by a single member acting on behalf of the
authorized number, and the corporation filed a petition under
section 8331 to set aside the demand. (Id. at pp. 1025-1026.) On
appeal, the corporation argued that although the member
claimed he was acting on behalf of the authorized number of
members, his paperwork did not properly establish that the other
members had authorized him to act for them. The court
responded that the membership list inspection rights “may be
exercised either by a single member or by the authorized number
of members. Thus, it was not necessary for [the member] to
obtain authorizations from any other members in order to
exercise his right of inspection and copying.” (Id. at p. 1037.)
17
This was not a holding that the strict procedures applicable to a
corporation refusing a membership list request by an authorized
number also apply to a corporation refusing the same request by
an individual member. Instead, the court was simply
acknowledging the uncontroverted fact that a member alone may,
in fact, request inspection of a membership list. The procedures
for a corporation’s challenge to such a request were not at issue.
Parker also argues that the HOA may not raise this error
for the first time on appeal. He notes that he relied on section
8331, subdivision (i)’s limitations in his briefing in the trial court
in support of his petition, and that the HOA did not argue that
this subdivision applied only to demands by the authorized
number until after the trial court had relied on it to rule in
Parker’s favor. Parker argues that it is too late to raise the issue
now, when neither party has produced evidence as to whether
Parker himself constituted the “authorized number” – that is, if
the HOA was so small that Parker alone had a five percent voting
share.
“ ‘The rule is well settled that the theory upon which a case
is tried must be adhered to on appeal. A party is not permitted to
change his position and adopt a new and different theory on
appeal. To permit him to do so would not only be unfair to the
trial court, but manifestly unjust to the opposing litigant.
[Citation.]’ [Citations.] ‘Application of the doctrine may often be
18
justified on principles of estoppel or waiver.’ [Citation.]”
(Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869,
879.) Whether “the rule is to be applied is largely a question of
an appellate court’s discretion. [Citation.]” (Ibid.) It is generally
unfair to allow a party to raise a new theory which contemplates
a factual situation not put at issue below. (Ibid.)
Here, we exercise our discretion to allow the HOA to raise
on appeal the issue of whether a corporation must seek court
relief against a single member’s improper membership list
request or forever be barred from challenging the member’s
purposes. This is a purely legal issue which raises no new facts.
Moreover, public policy interests suggest we intervene to protect
the innocent HOA members whose privacy rights are implicated.
On the contrary, it is Parker whose new argument raises
factual issues. That is, Parker pursued his request, and his
petition, solely on the theory that he was seeking the
membership list as a single member. It was only when the HOA
suggested that it was not barred from challenging Parker’s
purpose that Parker raised the new legal theory that he, in fact,
constituted the authorized number of members all by himself. He
had not sought the membership list as the authorized number of
members, and had not pursued writ relief on that basis. He
cannot for the first time on appeal change his factual theory, and
argue that he sought the list as the authorized number, when he
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never gave the HOA notice that he made his request in anything
other than “his capacity as a member.”
DISPOSITION
That part of the court’s judgment requiring disclosure of
the HOA’s membership list is reversed. The remainder of the
judgment, denying inspection of all other documents due to
Parker’s improper purpose, is affirmed. Parker is to pay the
HOA’s costs on appeal.
SORTINO, J.*
WE CONCUR:
BIGELOW, P. J.
GRIMES, J.
* Judge of the Los Angeles Superior Court, assigned by the
Chief Justice pursuant to article VI, section 6 of the California
Constitution.
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