Dennis Mulholland, et al., Respondents, vs. Robert Paradis, et al., Appellants, David DeChambeau, et al., Defendants, vs. Ricardo Alcoser, third party defendant, Respondent.

Dennis Mulholland, et al., Respondents, vs. Robert Paradis, et al., Appellants, David DeChambeau, et al., Defendants, vs. Ricardo Alcoser, third party defendant, Respondent. A05-437, Court of Appeals Unpublished, December 13, 2005.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2004).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A05-437

 

Dennis Mulholland, et al.,

Respondents,

 

vs.

 

Robert Paradis, et al.,

Appellants,

 

David DeChambeau, et al.,

Defendants,

 

vs.

 

Ricardo Alcoser,

third party defendant,

Respondent.

 

Filed December 13, 2005

Affirmed

Kalitowski, Judge

 

Wabasha County District Court

File No. C2-03-156

 

Peter C. Sandberg, Dunlap and Seeger, P.A., 206 South Broadway, Suite 505, P.O. Box. 549, Rochester, MN 55903-0549 (for respondents)

 

Diane B. Bratvold, Timothy J. Nolan, Kathy S. Kimmel, Rider Bennett, LLP, 33 South Sixth Street, Suite 4900, Minneapolis, MN 55402 (for appellants)

 

            Considered and decided by Kalitowski, Presiding Judge; Toussaint, Chief Judge; and Willis, Judge.

U N P U B L I S H E D   O P I N I O N

KALITOWSKI, Judge

            Appellants challenge the district court order that respondents are the lawful board of elders for Woodville Chapel.  Specifically, appellants argue that the district court erred by (1) concluding that respondents did not violate the church's elder agreement; (2) determining that appellant Kenneth Mulholland exceeded his authority as an elder when he attempted unilaterally to appoint new elders to the board; and (3) failing to address appellants' claim that respondents breached their fiduciary duties.  Appellants also contend that they are entitled to a jury trial if this court reverses and remands.  We affirm.

D E C I S I O N

 

            Courts may decide church disputes when they can do so according to "neutral principles of law."  Odenthal v. Minn. Conference of Seventh-Day Adventists, 649 N.W.2d 426, 435 (Minn. 2002) (quotation omitted).  Here, the district court ruled in its March 30, 2004 scheduling order that it could decide the church's dispute based on "neutral principles of law," and therefore, it had jurisdiction over the matter.  Because neither respondents nor appellants appealed that order, and neither party properly brought the jurisdictional issue before this court, we conclude that jurisdiction is proper.  See Furrer v. Campbell's Soup Co., 403 N.W.2d 658, 660 (Minn. App. 1987), review denied (Minn. May 28, 1987) (refusing to address jurisdictional issue raised by respondent when respondent failed to file a notice of review).

I.

 

            Appellants first argue that the district court erred by concluding that respondents did not violate the church's elder agreement.  At issue is a motion that respondent Dennis Mulholland made to amend the church's policy regarding the display of the Christian flag and crosses.  At the time of respondent's motion, the church's 1991 constitution was in effect, and the bylaws stated:

            Because the Christian flag has become a symbol under which the entire ecumenical church worldwide has begun to assemble, the Chapel shall display no flag other than our Nation's flag.

            Crosses will not be used at Woodville Chapel, as this practice stems from their use by the Roman Catholic organization and is often associated with forms of worship that take the focus off the resurrected Christ.

 

Appellants contend that the church's elder agreement and other governing documents unambiguously prohibit elders from both moving to amend and amending the church's bylaws.  We disagree.

            Whether a contract is ambiguous is a question of law, and this court owes no deference to the district court's determination.  Blackburn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643 (Minn. App. 1985), review denied (Minn. June 24, 1985).  Ambiguity arises when the court gives the contract language its plain and ordinary meaning and the contract language is reasonably susceptible to more than one interpretation. Current Tech. Concepts, Inc. v. Irie Enters., Inc., 530 N.W.2d 539, 543 (Minn. 1995).

            Here, we conclude that the church's elder agreement and constitution are ambiguous as a matter of law.  The church's governing documents do not provide a procedure for amending the constitution, nor do they discuss whether elders may amend or move to amend the constitution.  Instead, the constitution merely states that the board of elders "assume[s] the responsibility necessary to carry forward the ministry," and "[w]hen matters of importance arise, other than the general routine of affairs" the board will make the final decision.  Further, "[a]ny person deviating from correct doctrine, or who endeavors to introduce teaching which is incompatible with the doctrinal statement of Woodville Chapel, forfeits the right of voice in matters pertaining to the work at Woodville Chapel."  Thus, the constitution does not discuss whether attempts to amend the bylaws are incompatible with the doctrinal statement.

The elder agreement also offers little guidance.  That agreement provides that an elder pledges to "[u]phold the doctrinal statement and bylaws of Woodville Chapel."  Additionally, it mandates that upon failure to fulfill any part of his pledge, the elder "further pledge[s] that [he] will withdraw as an Elder of Woodville Chapel" and his "vote as an Elder will be nullified and [he] will automatically lose [his] right to serve as an Elder of Woodville Chapel."  The agreement, however, does not define "uphold."  The term "uphold" could either mean that the elders pledge that they will not violate the current doctrinal statement and bylaws, or that they will not attempt to change them.  Because the language is reasonably susceptible to either meaning, the agreement is ambiguous.

            Where a contract is ambiguous, contract interpretation is a question of fact, and a court may consider extrinsic evidence.  City of Virginia v. Northland Office Props. Ltd. P'ship, 465 N.W.2d 424, 427 (Minn. App. 1991), review denied (Minn. Apr. 18, 1991).  This court will not overturn a district court's findings of fact unless they are clearly erroneous.  Minn. R. Civ. P. 52.01; Trondson v. Janikula, 458 N.W.2d 679, 682 (Minn. 1990). 

Here, the district court examined the church's past practices and found that the elder agreement does not prohibit elders from moving to amend or amending the constitution.  The court based its conclusions on findings that the church made numerous changes to its constitution and bylaws in 1991, and that the church did not remove any elders as a result of those changes.  We conclude that the record supports these findings.

            The church's 1975 constitution contained a clause that provided that "[n]o authority shall at any time be granted for the alteration or modification of the doctrinal statement herein specified as a basis for the spiritual activities of the Woodville Chapel Believers."  But, when the elders amended the constitution in 1991, they removed this clause.  We cannot assume that this modification was inadvertent.

            Appellants argue that because past elders have resigned when they disagreed with governing documents, respondents Dennis Mulholland and Denis Post automatically resigned as a result of Dennis Mulholland's motion to amend the constitution and Dennis Mulholland's and Denis Post's vote to amend the constitution.  But appellants do not provide evidence that any elders resigned in 1991 as a result of proposed changes to the constitution.  Rather, the record shows that the church adopted the amended constitution and it became one of the church's governing documents.  In addition, the removed provision is evidence that the elders knew how to unambiguously prohibit changes to the constitution, but deliberately chose not to include such a prohibition in the 1991 constitution or the elder agreement.

            Appellants further argue that it was clearly erroneous for the district court to find that respondents did not violate the elder agreement because they "did not unilaterally begin displaying the Christian flag or crosses."  Appellants offered photographic evidence and witness testimony that respondents displayed crosses, in violation of the governing documents, after January 2002.  But the district court's findings only dealt with the display of crosses as of August 2001.  Because appellants provided no evidence that any respondent displayed crosses at that time, we conclude that the district court's findings are not clearly erroneous.

            We conclude that the district court's interpretation of the church's governing documents was not clearly erroneous.  The record supports the district court's findings that respondents Dennis Mulholland and Denis Post did not violate the elder agreement by moving to amend the constitution's cross-display provision or by later amending the constitution.  We therefore uphold the district court's decision that respondents are the lawful members of the board of elders.

II.

 

            Appellants next contend that the district court erred by determining that former elder Kenneth Mulholland exceeded his powers when he unilaterally appointed new members to the board of elders.  Application of a statute to the facts of a case involves a question of law, and the district court's decision is not binding on this court.  O'Malley v. Ulland Bros., 549 N.W.2d 889, 892 (Minn. 1996).  Under Minnesota law, the board of a nonprofit corporation derives its authority from statute and the corporation's bylaws and articles of incorporation.  Rehn v. Fischley, 557 N.W.2d 328, 334 (Minn. 1997); see also Minn. Stat. § 317 A. 201 (2004) (describing requirement of board of directors for nonprofit corporation).  Board members do not have the authority to act individually unless the corporate bylaws or articles of incorporation specifically authorize them to do so.  Rehn, 557 N.W.2d at 334.

            In addressing this issue, the church's 2002 bylaws control because those bylaws were in effect when Kenneth Mulholland attempted to appoint a new board.  Those bylaws provide that the board governs church business and makes the final decision regarding the replacement or addition of elders.  The bylaws do not, however, authorize elders to act individually. 

            Because we uphold the district court's findings that Dennis Mulholland and Denis Post did not resign from the board, Dennis Mulholland's and Denis Post's votes to appoint Leonard Schultz to the board were valid.  As a consequence, at the time Kenneth Mulholland attempted to appoint new elders, the board had four members, the three respondents and Kenneth Mulholland.  Kenneth Mulholland therefore needed the support of other board members to appoint new elders.  Thus, we conclude that the district court properly determined that Kenneth Mulholland exceeded his authority when he attempted  unilaterally to appoint new elders. 

III.

 

            Appellants argue that the district court erred by failing to address appellants' counterclaim that respondents breached their fiduciary duties.  An officer of a nonprofit corporation owes a fiduciary duty to act "in good faith, in a manner the officer reasonably believes to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would exercise under similar circumstances."  Minn. Stat. § 317 A. 361, subd. 1 (2004).  To establish a breach of fiduciary duty claim, a party must show that "the action attacked is so far opposed to the true interests of the corporation as to lead to the clear inference that no officer thus acting could have been influenced by an honest desire to secure such interests."  Shepherd of the Valley Lutheran Church of Hastings v. Hope Lutheran Church of Hastings, 626 N.W.2d 436, 442 (Minn. App. 2001) (quotations omitted), review denied (Minn. July 24, 2001).

            Appellants contend that respondents breached their fiduciary duties by (1) failing to uphold Woodville Chapel's doctrinal statement and bylaws; (2) refusing to relinquish control of the board and the church's assets; and (3) denying appellants access to the church's facilities and assets.  But the district court concluded that respondents did not fail to uphold the church's governing documents and therefore had the right to control the board and the church's assets.  Because we affirm the decision of the district court, we conclude that respondents did not breach their fiduciary duties, and the district court did not need to make further findings on this issue.

            Finally, appellants argue that if this court reverses and remands, they are entitled to a jury trial.  Because we affirm the district court's order, we need not address this issue.

            Affirmed.