Left Hand Ditch Co. v. Hill

Supreme Court of Colorado · Property

Propertywater rightsmutual ditch companiesshareholder inspection rightsmutual ditch companyshareholder listinspection rightscommon law

Facts

Left Hand Ditch Company was organized as a nonprofit corporation to provide water to shareholders and allocated water pro rata according to shares owned. David and Joan Hill owned thirty-three shares and asked to inspect and copy the company's shareholder list so they could sell or rent their shares, understand Left Hand's future, and communicate with other shareholders. Left Hand's board denied the requests, citing confidentiality and offering instead to relay the Hills' interest to prospective purchasers. The Hills then sued to compel release of the shareholder list.

Issue

Do shareholders in a nonprofit mutual ditch company have a right to inspect the company's shareholder list, either under the Colorado Corporation Code or at common law? More specifically, are mutual ditch companies subject to the Colorado Corporation Code's inspection statute, and if not, does common law still provide an inspection right?

Rule

Mutual ditch companies are special purpose corporations outside the reach of the Colorado Corporation Code, so that code's shareholder-list inspection provision does not apply to them. Nevertheless, shareholders of a mutual ditch company have a common law right to inspect the company's shareholder list, and where the shareholder seeks the list for a lawful and proper purpose without bad faith or improper motive, that right must be accommodated.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Cedar Fork Canal Association, a nonprofit mutual ditch company serving farms near Greeley, Colorado, refuses shareholder Maya Torres's request to inspect its shareholder list. Maya argues that the shareholder-list inspection provision in the Colorado Corporation Code applies because the company is incorporated and issues shares.

Which is the strongest response under the governing rule?

Explanation. The majority held that nonprofit mutual ditch companies are special purpose corporations, not ordinary for-profit corporations governed by the Colorado Corporation Code. Thus, the code's shareholder-list inspection statute does not apply to them, even though they issue shares. (Derived from Left Hand Ditch Co. v. Hill (n.d.).)