THOMAS J. CHANTILES, Plaintiff and Appellant, v. LAKE FOREST II MASTER HOMEOWNERS ASSOCIATION, Defendant and Respondent.
No. G014505
Fourth Dist., Div. Three.
Aug. 7, 1995
37 Cal. App. 4th 914
COUNSEL
John F. Kunath, Jr., for Plaintiff and Appellant.
Richard A. Tinnelly and Anthony M. Garcia for Defendant and Respondent.
OPINION
WALLIN, J.—In this case we are asked to consider the extent of a homeowner association director‘s rights to inspect the records of the association under
Thomas J. Chantiles was an elected member of the board of directors of the Lake Forest II Master Homeowners Association (the Association). The Association elects its seven directors annually. Voting is cumulative, meaning that each homeowner member has seven votes per election which may be divided however he or she wishes among the candidates, for example, the member may cast one vote for each of seven candidates or all seven votes for one candidate.
As required by law, voting is done by a proxy ballot, rather than by direct written ballot. The proxy ballots are mailed to each member. The ballot
The member may either mail the proxy back to the Association or hand deliver it and place it in the ballot box. The chair of the election committee holds the ballots for tabulation. As an alternative, candidates may directly solicit proxies from members which the candidate hand delivers at the annual meeting for tabulation. The proxy ballot form which a candidate might directly solicit is slightly different from the form which is mailed to members, but contains the same options and information.
Chantiles had served as a director of the Association for many years. He ran for a 10th term in 1992 and was reelected, apparently as a member of a minority faction. Believing that he had been shorted by 800 to 1,300 proxy votes, which he presumably would have cast for other candidates from his faction, Chantiles demanded the Association allow him to inspect and copy all of the ballots cast in the 1992 annual election. Citing its concern for preserving the privacy of individual voting members, the Association refused.
In July 1992 Chantiles filed a complaint Orange County Superior Court case No. 693389, seeking a judicial determination of the validity of the election under
On December 18, 1992, Chantiles filed this petition for writ of mandate (
The trial court concluded the ballots were the type of record to which a director had a right of inspection pursuant to
I
The Association contends the appeal is moot because Chantiles is no longer on its board of directors and therefore cannot assert a director‘s inspection rights. At the annual meeting on June 3, 1993, Chantiles was not reelected to the board of directors.2 Although we have located no California case addressing the effect of a director‘s defeat, other states have held “the right of a director [of a nonprofit corporation] to inspect the books and records of the corporation ceases on his removal as a director, by whatever lawful means[.]” (State v. Soc. for Pres. of Common Prayer (Tenn. 1985) 693 S.W.2d 340, 343.) Chantiles essentially concedes he no longer has a director‘s inspection rights, but asserts the appeal is not moot for several reasons. First, the trial court specifically reserved the issues of costs and attorney fees (see
It is this court‘s duty “to decide actual controversies by a judgment which can be carried into effect, and not to give opinions upon moot questions or abstract propositions, or to declare principles or rules of law which cannot affect the matter in issue in the case before it. It necessarily follows that when, pending an appeal from the judgment of a lower court, and without any fault of the defendant, an event occurs which renders it impossible for this court, if it should decide the case in favor of plaintiff, to grant him any effectual relief whatever, the court will not proceed to a formal judgment, but will dismiss the appeal.” (Consol. etc. Corp. v. United A. etc. Workers (1946) 27 Cal.2d 859, 863 [167 P.2d 725]; see also Eye Dog Foundation v. State Board of Guide Dogs for the Blind (1967) 67 Cal.2d 536, 541 [63 Cal.Rptr. 21, 432 P.2d 717]; Finnie v. Town of Tiburon (1988) 199 Cal.App.3d 1, 10 [244 Cal.Rptr. 581].)
We may, in appropriate circumstances, exercise our discretion to retain and decide an issue which is technically moot. (Davies v. Superior Court (1984) 36 Cal.3d 291, 294 [204 Cal.Rptr. 154, 682 P.2d 349].) We do so when the issue is of substantial and continuing public interest. (DeRonde v. Regents of University of California (1981) 28 Cal.3d 875, 880 [172 Cal.Rptr. 677, 625 P.2d 220].) Such a resolution is particularly appropriate when the issue is “presented in the context of a controversy so short-lived as to evade normal appellate review” (Evans Products Co. v. Millmen‘s Union No. 550 (1984) 159 Cal.App.3d 815, 820, fn. 5 [205 Cal.Rptr. 731]; see also San Jose Mercury-News v. Municipal Court (1982) 30 Cal.3d 498 [179 Cal.Rptr. 772, 638 P.2d 655]; Hardie v. Eu (1976) 18 Cal.3d 371, 379 [134 Cal.Rptr. 201, 556 P.2d 301]), or when it is likely to affect the future rights of the parties (Evans Products Co. v. Millmen‘s Union No. 550, supra, 159 Cal.App.3d at p. 820, fn. 5).
Membership in condominiums, cooperatives and planned unit developments, known as “common interest” developments, is increasingly common. (Nahrstedt v. Lakeside Village Condominium Assn. (1994) 8 Cal.4th 361, 370 [33 Cal.Rptr.2d 63, 878 P.2d 1275].) Common interest developments number in the tens of thousands. (See Sproul & Rosenberry, Advising California Condominium and Homeowners Associations (Cont.Ed.Bar 1991) § 1.1, p. 2 (Sproul & Rosenberry) [by 1986 there were 13,000 to 16,000 common interest developments in California.].) Such developments are usually governed by a homeowners association which is incorporated as a nonprofit mutual benefit corporation under
We agree with Chantiles that the issue presented here, the extent of an elected director‘s rights to inspect election ballots, is of significant public interest concerning a large number of citizens. For many Californians, the homeowners association functions as a second municipal government, regulating many aspects of their daily lives. The court in Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642 [191 Cal.Rptr. 209], noted the “quasi-governmental” nature of homeowners associations. “[U]pon analysis of the association‘s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a “mini-government,” the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal. In many cases, it also provides security services and various forms of communication within the community. There is, moreover, a clear analogy to the municipal police and public safety functions. All of these functions are financed through assessments or taxes levied upon the members of the community, with powers vested in the board of directors . . . clearly analogous to the governing body of a municipality.” (Id. at p. 651, italics added.)
We also agree that the controversy would often be so short-lived as to escape appellate review. The Association‘s directors serve only for one-year terms. That is often the case with homeowners’ associations. Therefore, we exercise our discretion to retain the matter and decide the issue.3
II
Although the writ of mandate was ostensibly in Chantiles‘s favor, he contends the restrictions the trial court placed upon inspection of the ballots effectively wiped out any inspection rights he had. He argues
Chantiles begins by asserting that the homeowner members of the Association have no legitimate expectation of privacy in their voting decisions because the voting is done by proxy. A proxy by its very nature connotes revealing to another person one‘s voting choice. Furthermore, he argues, the homeowners must certainly realize that their votes will be revealed to the inspector of elections who is charged with tabulating the proxy votes, again negating any expectation of privacy.4
Certainly in the case of direct written ballots cast by a member for a candidate, “. . . the reasonable expectation of members is that their personal voting decision will not be known to other members, as it would be in a vote conducted by a show of hands.” (Sproul & Rosenberry, supra, § 2.44, pp. 92-93.) We reject Chantiles‘s assertion that there is no similar expectation of privacy in a written proxy ballot. A member has three choices in casting a proxy vote. He or she may give a proxy to a specific person, or the inspector of elections if no one is designated, to vote as that member directs. The member may give a proxy to a person to vote the member‘s vote as the proxy holder desires. The member may give a proxy to a person or the inspector of elections for the sole purpose of establishing a quorum so the annual meeting may go forward. In choosing any of those options, a member has an expectation of privacy. “And, of course, the custodian of such private information may not waive the privacy rights of persons who are constitutionally guaranteed their protection.” (Board of Trustees v. Superior Court (1981) 119 Cal.App.3d 516, 526 [174 Cal.Rptr. 160].)
The trial court correctly concluded homeowners association voting was a class of information in which members have a reasonable expectation of privacy. The Association submitted declarations of 120 members stating they believed their ballots were private and they did not want them divulged. In its written tentative ruling, after noting the increasing power homeowners associations wield in their members’ everyday lives (see also Cohen v. Kite Hill Community Assn., supra, 142 Cal.App.3d at p. 651), the trial court stated, “Homeowner association elections may raise emotions as high or higher than those involved in political elections. Under these circumstances a degree of privacy afforded to the electors in such elections appears to be desirable. Neighbors may cease to speak to each other if it became publicly
We consider next the extent of a director‘s inspection rights.
We reject Chantiles‘s assertion because
The need for balancing privacy rights against other statutory rights is well recognized. In Board of Trustees v. Superior Court, supra, 119 Cal.App.3d 516, the court conducted a “‘careful balancing’ of the ‘compelling public need’ for discovery against the ‘fundamental right of privacy‘” when it denied a plaintiff‘s request for discovery of confidential personnel records. (Id. at p. 525.) In Heda v. Superior Court, supra, 225 Cal.App.3d 525, the court concluded a plaintiff‘s statutory right to trial preference based on the defendant‘s ill health was outweighed by the defendant‘s right of privacy when it denied the plaintiff discovery of the defendant‘s medical records.
We consider finally, whether the trial court‘s order properly balanced these competing interests. Chantiles states his purpose in inspecting the ballots was to determine whether he had been shorted proxy votes. It was his intention to compare the ballots with his own list of homeowners on which he monitored the proxies promised him. He would later determine whether a judicial challenge would be brought. Chantiles wanted to compare the votes he believed he had been promised to the votes he actually received. We can conceive of no greater violation of the privacy of the Association‘s members. Any neighbor may well have told Chantiles he would receive his or her proxy votes, but actually cast his or her votes otherwise. To now give Chantiles personal access to the names of those voting and how they voted certainly violates well-established social norms.
The trial court offered a reasonable resolution. It appointed Chantiles‘s own attorney to review and tally the ballots, provided he not disclose the name of any individual voter, or how he or she voted, without further order of the court. Chantiles refused this resolution, which strongly suggests his motive was not simply to check the math, but to find out how his neighbors actually voted. He cannot now complain that he was denied such an opportunity. The trial court‘s order was appropriate.6
III
The trial court specifically reserved the issues of attorney fees and costs.
We need not remand the matter. The trial court may only exercise its discretion to award costs and attorney fees if it finds the Association acted
The judgment is affirmed. Respondent is entitled to its costs on appeal.
Sills, P. J., concurred.
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
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.
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 (
The 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.” (
Moreover, because the right of inspection under
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. 111]; 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.)
provides: “Every director shall have the absolute right at any reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director.” All further statutory references are to the Corporations Code unless otherwise indicated.