SOAP LAKE ROD GUN CLUB v. ADAMS, 20844-3-III (Wash.App. 5-1-2003)

No. 20844-3-IIIThe Court of Appeals of Washington, Division Three. Panel Two.
Filed: May 1, 2003 DO NOT CITE. SEE RAP 10.4(h). UNPUBLISHED OPINION

Appeal from Superior Court of Grant County Docket No: 00-2-01109-8 Judgment or order under review Date filed: 01/04/2002

Counsel for Appellant(s), Carl Nathan Warring, Warring Law Firm PS, 1340 E Hunter Pl, Moses Lake, WA 98837-2449.

Counsel for Defendant(s), Carl Nathan Warring, Warring Law Firm PS, 1340 E Hunter Pl, Moses Lake, WA 98837-2449.

Counsel for Respondent(s), Michael Rex Tabler, Attorney at Law, 56 C St. NW, P.O. Box 876, Ephrata, WA 98823-0876.

Nicholas Lee Wallace, Attorney at Law, 56 C St. NW, P.O. Box 876, Ephrata, WA 98823-0876.

BROWN, C.J.

The appellants are four officers of the Soap Lake Rod and Gun Club elected in 2000. The new officers decided to significantly increase club size by accepting 26 new memberships. This declaratory action was filed by 24 existing membership holders to nullify the increase. Following a bench trial, the court declared the new memberships void under Club resolutions and bylaws. Additionally, the trial court voided all Club resolutions in which the new members participated. The officers appeal.

FACTS
Soap Lake Rod and Gun Club was created as a non-profit corporation in 1983 under the Washington Nonprofit Corporation Act (the Act) chapter 24.03
RCW, by the filing of its articles of incorporation. The articles named three initial directors, but did not indicate the number of subsequent directors. Following incorporation, the initial directors never adopted bylaws.

In 1986, the members passed a resolution creating a `board of directors’ consisting of current and past-elect officers. This board was created for the limited purpose of reviewing and accepting new members. From 1986 through 1999, the board of directors, consisting of current and past-elect officers, would meet for this purpose. In 1992, the members passed another resolution limiting the total number of members to the Club at no more than 47. Some meetings are reflected in the minutes and newsletters of the corporation. All the other decisions concerning Club management and business were made by the members collectively at regular meetings.

At the 2000 annual meeting, the following defendant officers were elected: Lee Adams as president; Tom Bruno as vice-president; Sherry Zeoli as secretary/treasurer; and Ed Gates as sergeant at arms. The immediate past officers then consisted of plaintiffs Cody Brown, past president, LeeRoy Schooler, past vice-president, Nancy Towry, past secretary/treasurer, and Lewis Schooler, past sergeant at arms.

On May 15, 2000, the board of directors, including current and past-elect officers, met to discuss a variety of topics, including membership. No action was taken to admit new members. On September 13, the defendants conducted a board meeting without the past-elect officers, and decided to increase the membership from 47 to 60. Defendants then issued 26 new memberships. The past-elect officers were not notified of this meeting, and did not attend. Nor did the defendants seek member approval of their decision to increase membership. However, after September 13, the new members paid dues, which the Club accepted, and attended regular membership meetings.

After September 13, the defendants held subsequent meetings, referred to as meetings of the corporate executives. The immediate past officers were not given notice of these meetings, and did not participate. The defendants did not seek membership approval of the decisions made at those meetings.

This declaratory judgment action was filed by the plaintiffs, who consist of 24 long-term members, including the past-elect officers, and the Club, against the current officers. The new members were not named as parties.

At the beginning of trial, the parties made the following stipulations: (a) upon election as officers of the corporation, the defendants became members of the Board of Directors; (b) the corporation has not properly adopted by-laws; and (c) the articles of incorporation are silent as to the admission of new members.

At the close of their case in chief, the trial court granted the defendants’ motion to dismiss the Club as a plaintiff, finding the plaintiffs had failed to get authorization to name the Club as a party.

Following the trial, the court issued findings, conclusions and a memorandum decision. It concluded Soap Lake’s articles did not specify the manner in which new members are to be elected or appointed. Except for review and approval of new membership applications, the corporations’ members have acted as its board of directors in a manner consistent with RCW 24.03.005 and .025. The members of the corporation are all members of the board of directors of the corporation as referred to in chapter 24.03
RCW.

Pursuant to the stipulation, the corporation’s putative bylaws, admitted as Exhibit 3, were not valid bylaws. The members nonetheless adopted bylaws through motions adopted over time and conduct generally consistent with those motions. The trial court concluded it was not bound by the parties’ stipulation concerning bylaws to the extent the stipulation purports to fix a conclusion of law or were contrary to law.

Finally, the trial court concluded the motions passed by the members constituted bylaws. These bylaws included the creation of a board of directors, consisting of current and past-elect officers, created for the limited purpose of reviewing and accepting new members. A bylaw was created limiting the memberships to no more than 47. Any action taken by the defendants after September 13, 2000, without the past-elect officers, was contrary to the bylaws and a nullity, including the defendants’ acts of increasing membership and adding new members. The court granted consistent declaratory relief.

The defendants appealed.

ANALYSIS
The issue is whether the trial court erred in granting declaratory relief nullifying the new memberships and concluding the memberships were unauthorized and void along with any actions taken by the Club in which the new members participated.

The defendants assign error to two of the trial court’s findings of fact and six of the trial court’s conclusions of law. When findings of fact and conclusions of law are entered following a bench trial, appellate review is limited to determining whether the findings are supported by substantial evidence, and if so, whether the findings support the trial court’s conclusions of law and judgment. Holland v. Boeing Co., 90 Wn.2d 384, 390-91, 583 P.2d 621 (1978). Substantial evidence is evidence sufficient to persuade a fair-minded, rational person of the truth of the statement. Hensel v. Dep’t of Fisheries, 82 Wn. App. 521, 526, 919 P.2d 102 (1996).

As the challenging party, the defendants bear the burden of showing the findings are not supported by the record. Standing Rock Homeowner’s Ass’n v. Misich, 106 Wn. App. 231, 243, 23 P.3d 520, review denied, 145 Wn.2d 1008 (2001). Unchallenged findings of fact, and findings supported by substantial evidence are verities on appeal. See RAP 10.3(g); Waremart, Inc. v. Progressive Campaigns, Inc., 139 Wn.2d 623, 632-33, 989 P.2d 524 (1999); Moreman v. Butcher, 126 Wn.2d 36, 39, 891 P.2d 725 (1995).

Finding of Fact No. 8 reads: ‘[f]rom 1986 through 1999, all of the [Club’s] management and business decisions, other than the review and approval of membership applications, were addressed by the [Club’s] membership at regular or special meetings.’ Clerk’s Papers (CP) at 428.

The appellants contend the Club’s minutes and newsletters reflect that current and sometimes past-elect officers would meet to conduct management and business decisions for the Club.

The appellants assign error to Finding of Fact No. 12: `The minutes and newsletters of the [Club] reflect a pattern of the immediate past officers and current officers of the [Club] meeting (as the `board of directors’) to admit new members.’ CP at 429. However, appellants fail to present argument on this assignment of error; the assignment is therefore waived. See RAP 10.3(a)(5).

Nevertheless, substantial evidence supports both findings. The appellants merely point to contrary evidence. However, contradicting evidence on a particular factual issue is irrelevant when reviewing challenged findings on appeal. We do not substitute our judgment for the trial court’s, weigh the evidence, or determine credibility. Greene v. Greene, 97 Wn. App. 708, 714, 986 P.2d 144 (1999). Rather, our focus is whether substantial evidence exists to support the finding.

Here, ample evidence supports the trial court’s findings. The trial court put together a grid analyzing the Club’s actions over the past 14 years, and used the grid to show the members made all of the management decisions except for new memberships, which were decided by a board of directors composed of current and past-elect officers.

The appellants assign error to six conclusions. The essence of their argument is that they were authorized to increase membership numbers and accept new members, and their authority derived by default because they were the only elected agents, and no one else had proper authority to act on behalf of the Club. This argument fails because an agent’s authority must be affirmatively granted. The court’s findings show otherwise.

The appellants were elected officers of the Club. As officers, they have no more authority than that specifically conferred or implied. Reuter Organ Co. v. First Methodist Episcopal Church of Kelso, 7 Wn.2d 310, 319-20, 109 P.2d 798 (1941). The officers’ authority may be implied from the express powers granted by statute, charter, bylaws, or the board of directors. Authority may also be implied from the express powers, from usage or custom, or from the nature of the Club’s business. Id. The scope of their authority, as officers, is a question of fact. Sons of Norway v. Boomer, 10 Wn. App. 618, 623-24, 519 P.2d 28 (1974).

The trial court found that a Club resolution limited the number of members to 47. New membership applications were decided by a committee, called the `board of directors,’ consisting of current and past-elect officers. CP at 428-29. The trial court did not find the defendants, as current officers, had authority to increase membership numbers and accept new members. Yet, the current officers met, without notice or participation of the past-elect officers, and attempted to increase membership numbers and accept new members. Since the current officers were not granted this authority, the trial court did not err in concluding their unauthorized acts were null and void.

The appellants argue they are more than officers; they are also directors because they are the only elected agents of the Club. As directors, they contend, they had authority granted by statute, to manage the Club and increase membership. Instead, the trial court found the members were the directors. Generally, the number of directors is set in the bylaws. RCW 24.03.100.

In the absence of relevant by-laws the number of directors is the same as the number of initial directors established in the articles. Id. Directors shall be elected or appointed as provided in the bylaws or articles. Id. The ‘[b]oard of directors’ is `the group of persons vested with the management of the affairs of the corporation irrespective of the name by which such group is designated in the articles or bylaws.’ RCW 24.03.005(7). Here, the Club failed to elect directors as required by law or its articles. The statutes do not provide for a method of determining directors in this situation. Thus, the defendants have no more right to the title of director than the other members even though they argue that as officers, they were the default directors. In any event, the trial court rejected this position, and determined that the act of managing the corporation was determinative. Since the members had been managing the business of the Club since its incorporation, they were more akin to Directors than the officers. In effect, the court found that the members were de factor directors. See Independence Lead Mines Co. v. Kingsbury, 175 F.2d 983, 986 (9th Cir. 1949) (where acting president of corporation had for years been in open and unchallenged possession of the office, discharging its duties under color of authority, and with acquiescence of the generality of stockholders, he was at least a `de facto officer’). The trial court did not err. As directors, the members could adopt, amend and repeal bylaws. RCW 24.03.070. In this respect, the appellants claim the trial court erred in disregarding the stipulation that no valid bylaws existed, and finding that the resolutions passed by the members constituted bylaws even though they were not adopted in conformity with the statutes. First, whether the resolutions constituted the adoption of bylaws is a question of law, and a stipulation on a conclusion of law is not binding on the trial court. State v. Vangerpen, 125 Wn.2d 782, 792, 888 P.2d 1177 (1995). Second, the trial court concluded the Club’s bylaws could be adopted informally. In reaching this conclusion, the trial court recognized the Club was a `limited purpose organization with a relatively simple facility. . . .’ which by-and-large ignored the statutory requirements for self-governing. CP at 545. Under these facts, we agree with the trial court.

We conclude the trial court did not err in concluding the Club adopted bylaws by passing resolutions and acting in a manner consistent with those resolutions over a significant period of time.

Procedurally, the appellants contend the trial court was without authority to enter its judgment because neither the corporation nor the new members were joined as parties. As to the corporation, the issue is raised for the first time on appeal, and thus waived. RAP 10.3(g); Primark, Inc. v. Burien Gardens Assocs., 63 Wn. App. 900, 907, 823 P.2d 1116 (1992); Draper Mach. Works, Inc. v. Hagberg, 34 Wn. App. 483, 488, 663 P.2d 141 (1983); State Bank of Wilbur v. Wilbur Mission Church, 44 Wn.2d 80, 91, 265 P.2d 821 (1954). As to the new members, the appellants argue the 26 new memberships were necessary parties because the payment of their dues created a contract, and under RCW 24.03.040(1), the ultra vires statute, all parties to a contract with a corporation must be joined as parties to the lawsuit before a trial court can exercise equitable authority to terminate the contract. This statute does not apply because the respondents did not allege an ultra vires act. An act is ultra vires when a corporation exceeds the authority granted by its charter or articles of incorporation. Hartstene Pointe Maintenance Ass’n v. Diehl, 95 Wn. App. 339, 345, 979 P.2d 854
(1999). Here, the Club did have authority to accept new members. But, the allegation is that the defendants’ method and manner used to create and accept the new members was unauthorized.

The defendants next contend the trial court failed to join the new members as required by the Uniform Declaratory Judgment Act, chapter 7.24
RCW, which provides if an absent party is necessary for complete determination of the controversy, a mandatory duty exists to bring them in. RCW 7.24.110.

A necessary party for these purposes is defined as one whose ability to protect its interest in the subject matter of the litigation would be impeded by a judgment. Such a party must claim a sufficient interest in the litigation such that the judgment cannot be determined without affecting that interest.

Primark, 63 Wn. App. at 907. Dismissal may not be required for failure to join when an application to intervene is not timely or if the interested party has a designated representative. Id. If complete determination of the controversy can be made without the presence of the absent parties, the decision is discretionary. Town of Ruston v. City of Tacoma, 90 Wn. App. 75, 82, 951 P.2d 805 (1998).

Here, the issue can be decided without joining the new members. Even if the new members had a contractual right, the contract was for one year.

The new members received their one-year benefits. Thus, the retroactive nullification of the memberships is of little consequence because of the limited term. This record shows no claim by any new member to continuing rights of membership. Thus, prejudice to continuing rights is not shown.

RCW 7.24.110; Primark, 63 Wn. App. at 907.

Finally, appellants argue if the new memberships were unauthorized, they are merely voidable, not void. This issue was not raised before the trial court, and will not be considered on appeal. RAP 10.3(g). Because the new members were not expelled, we do not consider issues connected to expulsion.

In sum, the trial court did not err. The findings of fact support the conclusions of law, and the trial court did not err in entering a declaratory judgment voiding the new memberships as unauthorized, and voiding any Club action in which the new members may have participation.

Affirmed.

A majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.

SCHULTHEIS and KATO, JJ., concur.