Advocaat v. Community Services Associates

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Dana Advocaat, both individually and as Trustee of the
Advocaat Living Trust dated March 7, 2019, Respondent,

v.

Community Services Associates, Inc., Appellant.

Appellate Case No. 2020-001500

Appeal From Beaufort County
Brooks P. Goldsmith, Circuit Court Judge

Unpublished Opinion No. 2024-UP-082
Submitted February 1, 2024 – Filed March 20, 2024
Withdrawn, Substituted, and Refiled May 22, 2024

AFFIRMED

Benjamin Edward Nicholson, V, of Burr & Forman,
LLP, of Columbia; Douglas Walker MacKelcan, III, and
Skyler Cole Wilson, both of Copeland, Stair, Valz &
Lovell, LLP, of Charleston, and Michael Christopher
Masciale, of O'Reilly Law Firm, LLC, of Charleston, for
Appellant.

Ian S. Ford and Ainsley Fisher Tillman, both of Ford
Wallace Thomson, LLC, of Charleston, for Respondent.
PER CURIAM: Community Services Associates, Inc. (CSA), appeals the circuit
court's order granting the motion of Dana Advocaat, a resident of Sea Pines
Plantation (Sea Pines) on Hilton Head Island, individually, and as Trustee of the
Advocaat Living Trust dated March 7, 2019 (Advocaat), requesting to inspect
CSA's corporate records. We affirm.

FACTS

CSA is a nonprofit corporation, organized pursuant to the South Carolina
Nonprofit Corporation Act (the Act), for the purpose of managing and maintaining
the common areas within Sea Pines. The common areas include roads, as well as
gates for entrance and exit into the development. One of CSA's responsibilities is
to run and control the gates into the community, pursuant to the Sea Pines
Plantation Gate Policy (the Policy). Outside visitors are charged fees at the gate,
and the gate fees are a significant source of revenue for the community. The
administration of the Policy, and the use of gate fees, are governed by the CSA
governing documents, which included covenants, declarations, articles of
incorporation, and bylaws. The governing documents expressly state that "[a]ll
gate fees collected . . . shall be contributed to and used for community services."

Advocaat filed this action against CSA, alleging CSA violated the South Carolina
Homeowners' Association Act by failing to record the Gate Pass Agreement (the
Agreement) with the Register of Mesne Conveyance and further alleged
entitlement to inspect and copy CSA's corporate records, including the Agreement,
its amendments, and other related material. The Agreement controls the amount of
the fees and dictates the manner in which those fees are to be spent. The
Agreement, referenced and incorporated into the 1988 Declaration for Sea Pines, is
an agreement between CSA and two of its commercial members, the Sea Pines
Resort, LLC, and the Sea Pines Center Associates, LLC. The Agreement had
previously been disclosed by CSA to its members; however, in 2018, CSA entered
into an Amendment to the Agreement. The 2018 Amendment pertained to the
prices of gate entry fees from 2018 through 2021. CSA refused to allow its
members to inspect the 2018 Amendment to the Agreement; thus, Advocaat filed
this action.

In her discovery requests, Advocaat requested the Policy, the Agreement, and any
amendments to the Agreement. CSA refused to produce the Amendment,
claiming, inter alia, executive privilege. Advocaat moved to inspect the corporate
records, alleging entitlement to inspection based on the Act. At a hearing on the
motion, Advocaat argued the gates fees totaled approximately $3 million per year
and could not "just be spent for anything." She argued CSA disagreed with her
interpretation of how the money could be spent, but the parties did not need for
that to be "decide[d] . . . today." Advocaat further argued prior gate agreements
were always disclosed; a board member recused himself from voting on the 2018
Amendment, which indicated a problem; a draft of the Amendment was leaked;
and the draft indicated problems such as diverting funds to a marketing fund and
other allegedly improper actions. In addition, CSA communicated portions of the
Amendment to Sea Pines owners, including announcing and explaining the gate
fee increases as the "largest ongoing revenue increase to any CSA revenue source
ever made." The communication also provided a history of the agreements, a
summary of the revenue, and answered "Frequently Asked Questions" regarding
the Agreement. Advocaat argued she was entitled to review the Amendment under
the Act. In addition, she argued she had common law property rights entitling her
to review the document.

CSA argued Advocaat misinterpreted the Amendment by arguing it was "somehow
improper because it expand[ed] the scope of services for which gate fees [could] be
used . . . ." CSA next argued the Amendment was not a bylaw subject to the Act.
CSA argued the Amendment was merely a contract between CSA, the Sea Pines
Resort, and the Sea Pines Center and not part of Sea Pines' governing documents.
CSA also maintained the contract was not part of its accounting records; thus, not
controlled by the Act. Finally, CSA argued the board member's recusal was proper
under the Act and not indicative of any impropriety.

The circuit court granted the motion and denied CSA's motion to alter or amend.
In its order, the circuit court found Advocaat was entitled to inspect the Agreement
and any amendments under the Act because they were bylaws as defined by the
Act. Relying in part on an opinion of the South Carolina Attorney General, the
court also found the documents constituted accounting records under the Act; thus,
Advocaat was entitled to inspect them. Next, the court found Advocaat had a right
to inspect the documents under the common law because they impacted her
property rights. Finally, the court found the documents were not covered by CSA's
purported executive privilege and they were discoverable under Rule 34 of the
South Carolina Rules of Civil Procedure. The court denied CSA's motion to
reconsider. This appeal followed.

STANDARD OF REVIEW
The parties disagree on the standard of review. CSA cites the standard of review
governing the interpretation of a statute, which this court reviews de novo. See
Town of Summerville v. City of N. Charleston, 378 S.C. 107, 110, 662 S.E.2d 40,
41 (2008) ("Determining the proper interpretation of a statute is a question of law,
and th[e appellate c]ourt reviews questions of law de novo."). Advocaat argues the
order on appeal is in the nature of a writ of mandamus, which is to be reviewed by
this court for abuse of discretion. However, "[a] writ of mandamus is a coercive
writ that orders a public official to perform a ministerial duty." Ex parte Littlefield,
343 S.C. 212, 222, 540 S.E.2d 81, 86 (2000). Here, there is no public official
involved and we find the order is injunctive in nature; thus, we agree with
Advocaat that the standard of review is abuse of discretion. See Hook Point, LLC
v. Branch Banking & Tr. Co., 397 S.C. 507, 510, 725 S.E.2d 681, 683 (2012)
("The grant of an injunction is reviewed for abuse of discretion.").

LAW/ANALYSIS

CSA first argues the circuit court erred in finding the Agreement was a bylaw or an
accounting record under the Act. We disagree.

Section 33-31-1601 of the Act provides as follows:

(a) A corporation shall keep as permanent records
minutes of all meetings of its members and board of
directors, a record of all actions taken by the members or
directors without a meeting, and a record of all actions
taken by committees of the board of directors . . . .
(b) A corporation shall maintain appropriate accounting
records.
(c) A corporation or its agent shall maintain a record of
its members in a form that permits preparation of a list of
the name and address of all members, in alphabetical
order by class, showing the number of votes each
member is entitled to cast.
(d) A corporation shall maintain its records in written
form or in another form capable of conversion into
written form within a reasonable time.
(e) A corporation shall keep a copy of the following
records at its principal office:
(1) its articles or restated articles of
incorporation and all amendments to them
currently in effect;
(2) its bylaws or restated bylaws and all
amendments to them currently in effect;
(3) resolutions adopted by its board of
directors relating to the characteristics,
qualifications, rights, limitations, and
obligations of members or any class or
category of members;
(4) the minutes of all meetings of members
and records of all actions approved by the
members for the past three years;
(5) all written communications to members
generally within the past three years,
including the financial statements furnished
for the past three years under Section 33-31-
1620;
(6) a list of the names and business or home
addresses of its current directors and
officers; and
(7) its most recent report of each type
required to be filed by it with the Secretary
of State under this chapter.

S.C. Code Ann. § 33-31-1601 (2006). Section 33-31-140 defines "bylaws" as "the
code or codes of rules, other than the articles, adopted pursuant to this chapter for
the regulation or management of the affairs of the corporation irrespective of the
name or names by which the rules are designated." S.C. Code Ann. § 33-31-
140(4) (2006).

We agree with the circuit court that because the documents were "adopted by CSA
to regulate and manage the affairs of the corporation (namely the regulation and
management of the gates to the community, and the fees associated therewith), the
requested records are corporate bylaws." In addition, we agree that Advocaat, as a
member of CSA, has the right to inspect the documents. Section 33-31-1602 of the
Act provides a member of a nonprofit corporation with entitlement to inspect and
copy records of the corporation. S.C. Code Ann. § 33-31-1602(a) (2006). "If a
corporation does not allow a member . . . to inspect and copy any records required .
. . to be available for inspection, the circuit court . . . may summarily order
inspection and copying of the records . . . ." S.C. Code Ann. § 33-31-1604(a)
(2006).

We also agree with the circuit court that the documents are accounting records, "in
that they are documents that underl[ie] the finances of CSA and/or they are
materials used to prepare CSA's financial and accounting statements." As noted by
the court, "CSA has provided its members with a history of the 2018 Amendment,
including a detailed 'description of the various assigned rights, CSA history and
financial impacts of Sea Pines['] gate fee changes over the years.' It is clear from
CSA's own communications to its members that the documents [Advocaat] seeks
to inspect are very much accounting records of the corporation, profoundly
affecting its finances." The Act does not define "accounting records"; thus, the
circuit court relied in part on an opinion of the South Carolina Attorney General's
Office, which provides:

[W]e believe that Legislative intent was for any and all
underlying documents or materials used to prepare a non-
profit corporation's financial statements to be inspected
by a member as long as the member provides written
notice, the member's demand is in good faith and for a
proper purpose, the member specifically describes the
purpose and the records he wants to inspect, and the
records are directly connected with the purpose.

S.C. Atty. Gen. Op. dated Jan. 26, 2016, at 4 (2016 WL 963698).

We find no error by the circuit court in finding the Amendment was either a bylaw
or an accounting record. We also agree Advocaat had the right to inspect the
Amendment. 1

Finally, CSA argues the circuit court erred in relying on Rule 34 of the South
Carolina Rules of Civil Procedure in finding the Amendment was not subject to
privilege. CSA argues the analysis of whether Rule 34 requires production of a

1
CSA also argues the circuit court erred in finding Advocaat had a common law
property right to inspect the Agreement because it infringed on her property rights.
The circuit court cited no authority to support its finding on this issue and we
decline to address it. See Futch v. McAllister Towing of Georgetown, Inc., 335
S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (declining to address an appellant's
remaining issues when the determination of a prior issue was dispositive).
document is distinct from whether the Act requires a party to make a document
available and Advocaat may not use the Act as a "backdoor to a motion to
compel." Finally, CSA argues even if Advocaat had moved to compel under Rule
37, SCRCP, she still is not entitled to an order compelling production of the gate
agreement because the document sought is the ultimate question of the litigation,
not merely a document relevant to the litigation.

Rule 34 of the South Carolina Rules of Civil Procedure provides, inter alia, a
litigant the right to serve requests to produce on another party for the purposes of
inspecting or copying designated documents. Discovery requests must seek
documents that are "relevant to the subject matter involved in the pending action."
Rule 26(b)(1), SCRCP. A party may withhold information "otherwise
discoverable under these rules by claiming that it is privileged or subject to
protection as trial preparation material . . . ." Rule 26(b)(5)(A), SCRCP. "An
evidentiary privilege '. . . allows a specified person to refuse to provide evidence or
to protect the evidence from being used or disclosed in a proceeding.'" Hartsock v.
Goodyear Dunlop Tires N. Am. Ltd., 422 S.C. 643, 647, 813 S.E.2d 696, 698-99
(2018) (quoting Evidentiary Privilege, Black's Law Dictionary (10th ed. 2014)).
Rule 37 provides "[a] party, upon reasonable notice to other parties and all persons
affected thereby, may apply for an order compelling discovery . . . ." Rule 37(a),
SCRCP.

The Act provides a member the right to inspect records. S.C. Code Ann. § 33-31-
1602(a) (2006). The Act further provides, however, that "[t]his section does not
affect: (1) the right of a member to inspect records . . . , if the member is in
litigation with the corporation, to the same extent as any other litigant"). S.C.
Code Ann. § 33-31-1602(d) (2006). CSA argues once it declined to make the
Amendment available to Advocaat, Advocaat was required to move for an order
compelling production under Rule 37(a) of the South Carolina Rules of Civil
Procedure.

We find no impropriety by the circuit court in treating Advocaat's complaint,
which sought "inspection of corporate records" and alleged "violation of the . . .
Act," as a motion to compel the document under the South Carolina Rules of Civil
Procedure or as the invocation of the right to inspect under the Act. Under either
law, Advocaat was entitled to the relief the circuit court granted.

It is a well-recognized legal concept in South Carolina that pleadings and motions
should be treated based on substance and effect as opposed to how they are styled
by the moving party. See Mickle v. Blackmon, 255 S.C. 136, 140, 177 S.E.2d 548,
549 (1970) (treating a motion for its substance and effect rather than how it was
styled); Richland County v. Kaiser, 351 S.C. 89, 94, 567 S.E.2d 260, 262 (Ct. App.
2002) (finding "[i]t is the substance of the requested relief that matters 'regardless
of the form in which the request for relief was framed'" (quoting Standard Fed.
Sav. & Loan Ass'n v. Mungo, 306 S.C. 22, 26, 410 S.E.2d 18, 20 (Ct. App. 1991)));
see also Stokes-Craven Holding Corp. v. Robinson, 416 S.C. 517, 536, 787 S.E.2d
485, 495 (2016) ("A trial court's rulings in matters related to discovery generally
will not be disturbed on appeal in the absence of a clear abuse of discretion."). We
find no error by the circuit court.

AFFIRMED. 2

THOMAS, MCDONALD, and VERDIN, JJ., concur.

2
We decide this case without oral argument pursuant to Rule 215, SCACR.