Court Opinion

ID: 9751895
Source: CourtListenerOpinion
Date Created: 2023-08-28 17:15:11.307862+00
Date Added: 2024-06-11T09:51:04.458656
License: Public Domain

CROSBY, J., Concurring.
Thomas J. Chantiles was a member of the homeowners association’s board of directors when he filed this action. He lost that seat in an election after the trial court entered judgment. As he is no longer a director, he enjoys no inspection rights under Corporations Code section 8334; and for that reason alone I concur in the decision not to award him any relief.
While the appeal is technically moot, in my view, as to Chantiles, the issue is one “of continuing public interest and likely to recur in circumstances where, as here, there is insufficient time to afford full appellate review” (Leeb v. DeLong (1988) 198 Cal.App.3d 47, 51-52 [243 Cal.Rptr. 494]). Accordingly, I agree with my colleagues that it should be addressed. But I disagree with their analysis.
Corporations Code section 8334 was enacted in 1978, years before the election in this case. And the inspection rights it confers on directors of corporations are unconditional: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind ... of the corporation of which such person is a director.” Where, as here, a statute is unambiguous, a court should simply apply it without indulging in interpretation. (See, e.g., Brewer v. Patel (1993) 20 Cal.App.4th 1017, 1021 [25 Cal.Rptr.2d 65].)
My colleagues suggest this absolute right of inspection is nevertheless qualified and may be defeated when the director’s request is animated by an improper motive. (Maj. opn., ante, p. 926.) They also conclude it must yield to the association members’ constitutional right of privacy (Cal. Const., art. I, § 1), i.e., to keep voting decisions confidential. But the members could not have had any expectation—reasonable or otherwise—that proxies could be withheld from the association’s directors, and the majority’s improper motive analysis is at odds with both clear statutory language and case law.
*928The constitutional right to privacy is not absolute (County of Alameda v. Superior Court (1987) 194 Cal.App.3d 254, 260 [239 Cal.Rptr. 400]); it only applies where there is an objectively reasonable expectation of privacy. (Hill v. National Collegiate Athletic Assn. (1994) 7 Cal.4th 1, 36-37 [26 Cal.Rptr.2d 834, 865 P.2d 633].) Although some association members submitted declarations attesting to their belief in the confidentiality of the proxies, they had no objectively reasonable expectation of privacy. Quite the contrary. A director could have no more important duty than assuring the honesty of association elections by carefully monitoring the tally of proxies. This certainly could involve a personal audit of the vote and a challenge to any questionable proxy.
In any event, a proxy is, by definition, not confidential. It is “a written authorization signed by a member or the member’s attorney in fact giving another person or persons power to vote on behalf of such member. ‘Signed’ for the purpose of this section means the placing of the member’s name on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the member or such member’s attorney in fact.” (Corp. Code, § 5069.) Under these circumstances, how homeowners association members could reasonably expect the proxies could not be scrutinized by the association’s directors, with their “absolute” statutory right to inspect, is beyond me.1
Moreover, because the right of inspection under Corporations Code section 8334 has no exceptions, a director’s motive for requesting an inspection is irrelevant. No reported decisions construe Corporations Code section 8334, but cases involving virtually identical provisions elsewhere in the Corporations Code conclude motive is irrelevant. For example, Valtz v. Penta Investment Corp. (1983) 139 Cal.App.3d 803 [188 Cal.Rptr. 922] concerned the “absolute right” under Corporations Code section 1600 of any shareholder with more than 5 percent of a company’s stock to examine the shareholder list. The corporation contended a shareholder’s inspection request was prompted by his desire to form a competing enterprise and refused the demand, asserting an unclean hands defense. (139 Cal.App.3d at p. 806.) Rejecting the argument, the Court of Appeal declared, “The California Legislature chose to allow inspection without any restriction based on the *929shareholder’s purpose and we cannot impose such a restriction via the unclean hands doctrine.” (Id. at p. 810.)
True, Valtz involved a shareholder rather than a director. But a director has a stronger case for unqualified inspection rights than a shareholder. A director is a fiduciary charged with running the corporation in an informed manner. (National Automobile & Cas. Ins. Co. v. Payne (1968) 261 Cal.App.2d 403, 412-413 [67 Cal.Rptr. 784].) Because a director, unlike a shareholder, is potentially liable for failure to exercise appropriate oversight, an unconditional right to inspect is essential. (Hoiles v. Superior Court (1984) 157 Cal.App.3d 1192, 1201 [204 Cal.Rptr. Ill]; see also 1A Ballantine & Sterling, Cal. Corporation Law (4th ed. 1995) § 272.02 at p. 1322 [“A director must be familiar with the affairs of the corporation in order to perform his duties and the absolute right of inspection is to assist him in performing (those) duties in an intelligent and fully informed manner.”].)
Also, in light of a director’s potential exposure, the denial of unconditional access to corporate books and records constitutes poor policy: well-qualified individuals might decline to serve with something less than absolute inspection rights. (Cf. Gould v. American Hawaiian Steamship Company (D.Del. 1972) 351 F.Supp. 853, 859.) As this case illustrates, to allow defenses based on a director’s alleged motive would in many cases result in the right to inspect being buried in litigation before it could ever be exercised, good motive or bad.
Nor does a director’s unfettered access to corporate books and records leave the corporation unprotected. Any number of tort theories may be used to redress a misuse of information gleaned via an improperly motivated inspection. (Hoiles v. Superior Court, supra, 157 Cal.App.3d at p. 1201.) Damages for misapplication of corporate information, rather than a threshold rejection of a director’s inspection rights, is the appropriate remedy.2 (Ibid.)

 The majority notes in passing that article II, section 7 of the California Constitution states, “Voting shall be secret.” But this constitutional provision applies to public elections, not homeowners association balloting. In any event, courts have consistently held that constitutional secrecy provision is not violated by election procedures that identify ballot sources. (See, e.g., Peterson v. City of San Diego (1983) 34 Cal.3d 225, 227, 231 [193 Cal.Rptr. 533, 666 P.2d 975] [use of mail ballot requiring voter’s name and address does not violate article II, section 7’s secrecy provision].)

 I recognize the possibility that the right to inspect could conflict with contractual, statutory, or constitutional protections in certain circumstances, such as medical patient or legal client files (assuming they even qualify as “records and documents ... of the corporation” per section 8334 of the Corporations Code). But no such situation is presented here, and the resolution of those problems is better left to real cases and controversies.