Case Name: Harp v. The South Bay Spot
Case No.: 17-CV-313764

Defendant The South Bay Spot (“Defendant”) demurs to the complaint/petition filed by plaintiff Roy Thomas Harp (“Plaintiff”).

This action involves a request to the Court by plaintiff/petitioner Roy Thomas Harp (“Plaintiff”) to inspect the corporate books and membership records of Defendant. Per the allegations of the operative petition (the “Petition”), Plaintiff maintains that he is entitled to review the foregoing records pursuant to the Defendant’s bylaws, which he has attached to the Petition. Plaintiff filed the Petition on July 7, 2017. On November 21, 2017, Defendant filed the instant demurrer to the Petition on the grounds of failure to state facts sufficient to constitute a cause of action and uncertainty. (Code Civ. Proc., § 430.10, subds. (e) and (f).) Plaintiff opposes the motion.

As a preliminary procedural matter, Plaintiff filed and served an untimely opposition to the demurrer. Code of Civil Procedure section 1005, subdivision (b), requires all opposing papers to be filed and served at least nine court days before the hearing. No paper may be rejected for filing on the ground that it was untimely submitted for filing. (Cal. Rules of Court, rule 3.1300(d).) If the court, in its discretion, refuses to consider a late filed paper, the minutes or order must so indicate. (Id.)

Here, the hearing on Defendant’s demurrer is scheduled for January 30, 2017. Accordingly, Plaintiff was required to file and serve his opposition papers no later than January 17, 2017 to be considered timely. However, Plaintiff did not file and serve his opposition until January 24, 2017, in violation of court rules. Plaintiff provides no explanation or justification for the untimely filing. Further, the untimely service of the opposition deprived Defendant of the opportunity to prepare and file a substantive reply. Given the untimely service and filing of the opposition papers, the Court will disregard Plaintiff’s opposition and consider the merits of the demurrer. (See Bozzi v. Nordstrom, Inc. (2010 ) 186 Cal.App.4th 755, 765 [stating that a trial court has broad discretion under rule 3.1300(d) of the California Rules of Court to refuse to consider papers served and filed beyond the deadline without a prior court order finding good cause for late submission].)
Turning to the substance of Defendant’s demurrer, it first asserts that he has no right to inspect corporate records because his right to do so has been terminated, as evidenced by the contents of the Petition itself. In the Petition, Plaintiff alleges that he is member of the corporation, and that his right to inspect the corporate records is a right granted to him pursuant to the written bylaws of the corporation based on his status as a member.

While Plaintiff maintains that he is a member in good standing, Defendant insists that the exhibits attached to his Petition, particularly Exhibit 7, demonstrate that this is not the case. Exhibit 7, which Plaintiff authenticates in the Petition, is a letter from Defendant to Plaintiff dated July 20, 2017, in which Defendant’s Board of Directors notified Plaintiff that it had determined that he had “engaged in conduct materially and seriously prejudicial to the interests or purposes of the corporation.” Defendant maintains that with this finding, Plaintiff’s membership terminated as provided by one of the corporate bylaws, particularly that contained in Article 6, Section 9(a)(2), which provides that a member’s membership “shall terminate … upon a determination by the Board of Directors” that the member has “engaged in conduct materially and seriously prejudicial to the interests or purposes of the corporation.” (Petition, Exhibit 2.) The subsequent provision in the bylaws clarifies that “[a]ll rights of a member in the corporation shall cease on termination of the membership, as herein provided.” (Petition, Exhibit 2, Art. 6, Sec. 10.)

Given the fact that where facts appearing in an attached exhibit contradict those expressly pleaded the former are given precedence (see Dodd v. Citizens Bank of Costa Mesa (1990) 222 Cal.App.3d 1624, 1626-1627), Defendant explains, Plaintiff’s membership clearly terminated and he no longer possesses the right to inspect corporate records.

Contrary to Defendant’s argument, at this juncture, the Court is not entirely persuaded that Plaintiff’s membership in Defendant corporation (and all of its attendant rights) was terminated by operation of the July 20, 2017 letter. While it is true that the letter served as notification to Plaintiff that the Board of Directors had determined that he had “engaged in conduct materially and seriously prejudicial to the interests or purposes of the corporation,” it did not advise him that his membership was being terminated as a result. Instead, Plaintiff was advised that his membership was being suspended until July 31, 2017. A suspension and termination are not the same thing (as evidenced by the corporate bylaws themselves), and it is not clear based solely on the letter what Plaintiff’s current status is. Per the same section of the bylaws cited by Defendant, a specified set of procedures is to be followed before a member is “expelled” from the corporation based on a finding that he or she “engaged in conduct materially and seriously prejudicial to the interests or purposes of the corporation.” The member is to be provided with an opportunity to be heard before the Board of Directors, orally or in writing, “at a hearing to be held not less than five (5) days before the effective date of the expulsion,” and after that hearing, the Board of Directors is to decide “whether or not the member should in fact be expelled, suspended, or sanctioned in some way.” (Petition, Exhibit 2, Art. 6, Secs. (b)(2) and (3).) Critically, the letter relied on by Defendant does not state that Plaintiff has been expelled from the corporation, but rather merely suspended, and an end date for the suspension is provided at that, suggesting that Plaintiff’s membership rights would be restored at that point. Because it is not clear that Plaintiff has actually been expelled from Defendant Corporation, the Court cannot sustain Defendant’s demurrer based on its contention that Plaintiff’s membership rights have terminated.

Defendant next argues that Plaintiff’s Petition cannot prevail under any legal theory. Defendant notes that while the Corporations Code provides that a member of a mutual benefit corporation has the right to inspect various corporate records, that right of inspection is “limited to purposes reasonably related to the member’s interests as a member.” (Tract No. 7260 Assn., Inc. v. Parker (2017) 10 Cal.App.5th 24, 31-32, citing Corp. Code, §§ 8330, subd. (b)(1) [membership lists], 8333 [corporate financial records].) The corporation may deny the member access to said information where it “reasonably believes that the information will be used for another purpose, or where it provides a reasonable alternative [pursuant to statute].” (Corp. Code, §§ 8330, subd. (b)(1).) “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 ….” (Corp. Code, § 8330, subd. (b)(1).)

Defendant maintains that because this is a petition brought by Plaintiff alone, it retains the right to show that the purpose of his inspection demand is improper. In this vein, Defendant continues that Plaintiff’s request to inspect is clearly not reasonably related to his “interests as a member” because he is no longer a member, and his demand is therefore improper and must be denied. As articulated above, however, it is not clear that at present this is actually the case. Consequently, the demurrer cannot be sustained on this basis. There are no additional arguments submitted by Defendant in connection with its motion. Accordingly, Defendant’s demurrer to the Petition is OVERRULED in its entirety.