Johl v. Sri GuruNanakSikhTemple

Filed 3/8/07 Johl v. Sri Guru Nanak Sikh Temple CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sutter)

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This case involves a dispute over whether the plaintiffs retained their status as directors and whether defendants were properly elected as directors of the Sri Guru Nanak Sikh Temple (the Temple) under its articles of incorporation and bylaws. Plaintiffs^[1]allege they are the duly existing directors of the Temple and the individual defendants^[2]are persons who claim to be directors of [the] temple pursuant to an appointment allegedly made on June 5, 2005.

Plaintiffs successfully challenged the validity of the individual defendants appointment by a complaint filed pursuant to Corporations Code section 9418.^[3] On appeal, defendants argue the trial court erred in interpreting the bylaws. We shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In 1977, the Temples directors filed articles of incorporation as a nonprofit corporation for the specific and primary purpose of operat[ing] a church for religious purposes. The articles of incorporation and the bylaws adopted on March 18, 1995 (1995 bylaws) authorized 32 directors to serve the Temple for a term of two years. (See also, Thiara v. Ghag (Super. Ct. Sutter County, 2000, Nos. CVCS 98-0455 & 98-2995).)

Because two of the authorized and elected directors had died, 30 individuals, including plaintiffs, held the position of director on March 1, 2002.

On March 2, 2003, at a special meeting of the directors and membership, 21 of the 30 directors amended the articles of incorporation and the bylaws (2003 bylaws). The 2003 bylaws were applicable at the time of the disputed election on June 5, 2005.

Article IV of the 2003 bylaws included the following provisions relating to directors:

1. Numbers

The corporation has thirty-two (32) directors. The number of directors may be changed by amendment of these Bylaws, but any amendment in this regard shall require a majority vote of the entire Board of Directors. [] . . . []

3. Term of Office

The directors of this corporation shall each serve a term of five (5) years. However, each legally and duly elected director shall serve as a director until he or she dies, resigns, is replaced in office at regular election as provided for in these Bylaws, or is removed from office as provided for in these Bylaws. [] . . . []

5. Election

The directors shall be elected every five (5) years at the regular meeting of the Board of Directors to be held on the first Sunday in March, commencing with the election meeting previously scheduled to occur on March 30, 2003. Only duly appointed or elected and serving directors shall be eligible to vote at said election. Each director shall have one (1) vote to cast at said election. [] . . . []

11. Quorum

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. Any transaction must be approved by a majority of the entire board of directors. [] . . . []

14. Removal of Directors

Any Director may be removed by the Board of Directors, with or without cause, if such removal is approved by a vote of a majority of the Board of Directors.

15. Resignation of Directors

Any Director may resign effective on giving written notice to the President, the Vice-President, the Secretary or the Board of Directors of the Corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

16. Vacancies in the Board

Causes. Vacancies on the Board shall exist on the death, resignation or removal of any directors.

17. Filling Vacancies

Vacancies on the board may be filled by approval of a majority vote of the remaining members of the Board of Directors.

On March 30, 2003, 21 of the 30 directors met for the purpose of electing directors. The 21 directors each cast a single vote for themselves thereby re-electing themselves as directors. Six of the plaintiffs, excluding Mohinder S. Bains, were not present and did not vote.^[4] Plaintiff Mohinder S. Bains was among those elected at the March 30, 2003, meeting. The directors postponed a vote on replacement directors until their regular meeting to be held on April 6, 2003, at which time they filled two vacant directors positions. Thereafter, two directors died: Baldev Singh Bains on March 9, 2004; and Joginder S. Toor on April 26, 2005.

After March 30, 2003, no meeting notices were sent to or received by the six plaintiffs who did not participate in the March 30, 2003, election.

On June 5, 2005, 12 directors attended what was designated in the minutes as a regular meeting of the board of directors. After a discussion concerning the bylaws, the conduct of regular business, and the appointment of replacement directors, the president opened the floor to nominate replacement directors for the nine current vacancies on the Board. The 12 directors approved defendants to serve as directors. Director Harsev S. Thiara died on June 7, 2005.

On October 31, 2005, plaintiffs filed their complaint against the Temple and the individual defendants contesting the June 5, 2005, appointment of replacement directors. Citing section 9220, subdivision (c),^[5]and the 2003 bylaws, plaintiffs argued at trial that the six surviving directors who held office on March 1, 2002, but did not participate in the March 30, 2003, election under the 2003 bylaws, were still directors on June 5, 2005. Plaintiffs noted that between March 30, 2003, and June 5, 2005, the first six named plaintiffs have not died, resigned, been replaced by someone else at an election nor have they been removed as provided for in the Bylaws. Plaintiffs stressed the significance of the directors action to appoint only two replacement directors on April 6, 2003, a week after the March 30, 2003, election. Plaintiffs counsel argued, Now thats a very strong showing that theybelieved at that point in time that there were still 30 and there were only two vacancies left to fill. Under plaintiffs analysis, the 12 directors present at the June 5, 2005, meeting did not formthe majority necessary to elect defendants directors.

Defendants offered three principles to support the argument they were validly appointed on June 5, 2005. First, defendants maintained it was law of the case in these Temple cases. If you walk out, you cant obliterate what happens. Second, they cited California Trial Lawyers Assn. v. Superior Court (1986) 187 Cal.App.3d 575, and argued, when the Bylaws of a small group are interpreted by the members themselves and that interpretation is reasonable then that interpretation stands. Third, they asserted the statute of limitations set forth in section 9419^[6]barred any consideration of the March 30, 2003, election.^[7]

Following trial, during which the court received documentary evidence in the form of the Temples articles of incorporation, bylaws, minutes of various meetings, and Chain S. Kheras April 7, 2005, letter to the board of directors, the court issued a statement of decision. The courtfound that the March 30, 2003, election did not have the legal effect of removing any existing directors. At that time there were 30 directors in office: 21 uncontested directors including plaintiff Mohinder S. Bains, all of whom voted for themselves; the six plaintiffs; and the three directors who died after 2003. Of the 30 directors then currently in office only 21 directors were elected at the March 30, 2003 election; the remaining 9 directors had not resigned or been removed. The court found it significant that no other persons were elected to replace the six plaintiffs (and the other absent directors) and no persons were elected to fill the remaining two vacancies. It found the six plaintiffs continued in office as directors -- consistent with the Temples articles of incorporation, bylaws, and section 9220, subdivision (c). The court also found thatthe purported action by the directors on June 5, 2005, appointing the nine defendants as replacement directors, was invalid. In its judgment after court trial, the court determined:

1. Pursuant to section 9418, subdivision (a), the purported appointment of the nine defendants, . . . appointed on June 5, 2005, was ineffective and these nine persons do not hold the office of director of the corporation Sri Guru Nanak Sikh Temple . . . .

2. Pursuant to section 9418, subdivision (c),^[8]as of the date of trial on December 8, 2005, the following twenty-nine (29) individuals are the true and proper directors of the corporation Ski [sic] Guru Nanak Sikh Temple . . . :

UNCONTESTED

1. Kuldip S. Thiara

2. Lal David Rai

3. Iqbal S. Johl

4. Gurdial S. Nijjar

5. Gurmit S. Rai

6. Mohinder S. Ghag

7. Gurbax S. Gill

8. Gurdev S. Thiara

9. Tarsem S. Khera

10. Mohinder S. Bains^[9]

11. Karnail S. Chima

12. Gurmit S. Suprai

13. Anter S. Pamma

14. Malkiat S. Gosol

15. Shangara S. Khera

16. Baljinder S. Thiara

17. Mohan S. Bains

18. Harbans S. Pammal

19. Malkiat S. Johl

20. Chain S. Khera

21. Surjit K. Chima

22. Kamaljit S. Sohal

23. Jasbir S. Rai

PLAINTIFFS

24. Gian S. Johl

25. Baldev Singh

26. Gurmej S. Bajwa

27. Harsev S. Thiara, Jr.

28. Kartar S. Takhar

29. Mohinderjit K. Thiara

3. Pursuant to section 9418, subdivision (c): (1) under the articles of incorporation, the authorized number of directors is 32; (2) under the 2003 bylaws, a quorum of 17 directors, a majority of the authorized number of directors, was necessary for the transaction of business; (3) under the bylaws, once a quorum is assembled, the transaction of any business by the Board of Directors requires the approval of a majority of the Board of Directors then currently in office, excluding any vacancies; (4) at the time of trial, there were 29 directors in office and three vacancies, requiring the approval of a majority of 15 directors to transact any business of the corporation; (5) under the bylaws, [a] quorum is not necessary for the filling of vacancies of the Board of Directors, so long as the remaining members of the Board of Directors act by a majority vote; and (6) at the time of trial a majority vote required the vote of at least 15 members of the 29-member board of directors.

DISCUSSION

I

Standard of Review

It is generally accepted that corporate bylaws are to be construed according to the general rules governing the construction of statutes and contracts. [Citation.] Bylaws must be given a reasonable construction and, when reasonably susceptible thereof, they should be given a construction which will sustain their validity . . . . [Citation.] [Citation.] (Singh v. Singh (2004) 114 Cal.App.4th 1264, 1294 (Singh).) When the trial courts interpretation is based solely upon the terms of the written instrument, and there is no conflict in the evidence, we review the ruling de novo. [Citation.] Although we review the construction of the express terms of the instrument de novo, we review the evidence regarding the interpretation of the words under the substantial evidence test. [Citation.] We must uphold any factual determination of the trial court, express or implied, so long as there is substantial evidence in the record to support it. [Citation.] If the evidence is conflicting, we must accept that which supports the trial courts decision and make all reasonable inferences in support of the judgment. [Citation.] (Singh, supra, 114 Cal.App.4th 1264, at pp. 1293-1294.)

II

Validity of the June 5, 2005, Election of the Defendants as Directors

The validity of the June 5, 2005, election turns on whether: (1) plaintiffs were duly appointed or elected and serving directors at the time of the election; and (2) there was a quorum present when the 12 directors voted to appoint defendants to serve as directors of the Temple. The first question requires us to interpret the 2003 bylaws.

Article IV, paragraph 3 states that directors shall each serve a term of five (5) years. The paragraph continues: However, each legally and duly elected director shall serve as a director until he or she dies, resigns, is replaced in office at regular election as provided for in these Bylaws, or is removed from office as provided for in these Bylaws.

The documentary evidence introduced at trial shows none of these contingencies occurred to alter the legal status of plaintiffs Gian S. Johl, Baldev Singh, Gurmej S. Bajwa, Harsev S. Thiara, Jr., Kartar S. Takhar, and Mohinderjit K. Thiara. Plaintiff Mohinder S. Bains cast his single vote to reelect himself a director at the March 30, 2003, election.

As we explained, section 9220, subdivision (c) provides that [u]nless the articles or bylaws otherwise provide, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. (Italics added.) Because none of the contingencies set forth in article IV, paragraph 3, occurred, and the bylaws do not otherwise provide for ending a directors service, plaintiffs continued to serve as duly elected directors until the expiration of their term and the qualification and election of their successors occurred. The latter event did not occur.

Defendants do not dispute that plaintiffs did not die or resign and that the directors did not vote to remove or replace them before June 5, 2005. They maintain plaintiffs two-year term ended and was not extended under the 2003 bylaws because plaintiffs chose not to appear and vote at the March 30, 2003, election. Defendants cite article IV, paragraph 5 of the 2003 bylaws and argue section 9220, subdivision (c) is inapplicable. Article IV, paragraph 5, entitled Election, reads in part: The directors shall be elected every five (5) years at the regular meeting of the Board of Directors to be held on the first Sunday in March, commencing with the election meeting previously scheduled to occur on March 30, 2003. . . . (Italics added.) Defendants contend it is reasonable to interpret the highlighted language to mean the new, five-year term began on March 30, 2003. They argue [t]o read Corporation Code 9220(c) to say a director under these Bylaws where only the directors may vote need not vote yet retains his status as a director is to exalt form over substance.

The actions of the directors elected at the March 30, 2003, election do not support defendants interpretation of article IV, paragraph 5 of the 2003 bylaws because on April 6, 2003, one week after the March 30, 2003 election, the directors voted to replace only two directors. If those directors believed the six plaintiffs no longer held office as directors, it is reasonable to infer that the directors would have acted on April 6, 2003, to fill 11vacancies, not just the two vacancies representing directors who had died before March 30, 2003.

Moreover, defendants reading of article IV, paragraphs 3 and 5, ignores the plain language of section 9220, subdivision (c). Under that statute, a director continues to serve as a director until his or her term has expired and a successor has been duly elected as a replacement. Thus, even if plaintiffs two-year terms ended in March 2003, the directors did not act to replace them before the June 5, 2005, election. We therefore conclude plaintiffs Gian S. Johl, Baldev Singh, Gurmej S. Bajwa, Harsev S. Thiara, Jr., Kartar S. Takhar, and Mohinderjit K. Thiara maintained their positions as directors even though they failed to appear and vote at the March 30, 2003, election.

The second question is whether there were a sufficient number of directors present and voting at the June 5, 2005, meeting to appoint defendants directors under the 2003 bylaws. The parties do not dispute that the articles and bylaws authorize 32 directors. Under article IV, paragraph 11, [a] majority of the authorized number of directors constitutes a quorum for the Board of Directors for the transaction of business. Any transaction must be approved by a majority of the entire board of directors. A majority of the 32 authorized directors is 17. The 12 directors present at the June 5 2005, meeting did not constitute a quorum. Therefore, those 12 directors lacked power under the bylaws to transact business, including a vote to appoint defendants as directors. Even if the second sentence of article IV, paragraph 11 is read to mean that a majority of directors then currently in office could transact business and fill vacancies, with 29 directors in office, the 12 directors present at the June 5, 2005, meeting did not constitute the required majority of 15 to transact business.

DISPOSITION

The judgment is affirmed. Respondents shall recover their costs on appeal. (Cal. Rules of Court, rule 8.276.)

CANTIL-SAKAUYE , J.

We concur:

SIMS , Acting P.J.

BUTZ , J.

Publication Courtesy of California attorney referral.

Analysis and review provided by Vista Property line attorney.

^[1] The seven named plaintiffs are Gian S. Johl, Baldev Singh, Gurmej S. Bajwa, Harsev S. Thiara, Jr., Kartar S. Takhar, Mohinderjit K. Thiara, and Mohinder S. Bains.

^[2] The named defendants are the Temple and nine individual defendants Dalbir S. Bains, Amarjit S. Rai, Harbhajan S. Bhangal, Gurshinder S. Thiara, Takhatpal S. Johl, Gurmit S. Gill, Ranjit S. Khagura, Amarjit S. Sohal, and Kulwant S. Nijjar.

^[3] Corporations Code section 9418, subdivision (a) applies to nonprofit religious corporations and states: Upon the filing of an action therefor by any director or member, or by any person who had the right to vote in the election at issue after such director, member, or person has exhausted any remedies provided in the articles or bylaws, the superior court of the proper county shall determine the validity of any election or appointment of any director of any corporation.

Undesignated statutory references are to the Corporations Code.

^[4] Three directors, not included among the six plaintiffs, were also absent that day and died after the 2003 election.

^[5] Section 9220, subdivision (c) reads: Unless the articles or bylaws otherwise provide, each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

^[6] Section 9419 provides: In the absence of fraud, any election, appointment or removal of a director is conclusively presumed valid nine months thereafter if the only defect in the election, appointment or removal is the failure to give notice as provided in this part or in the corporation's articles or bylaws.

^[7] On appeal, at oral argument counsel for defendants withdrew argument on the statute of limitations and section 9419. We accept the withdrawal.

^[8] Section 9418, subdivision (c) provides: The court, consistent with the provisions of this part and in conformity with the articles and bylaws to the extent feasible, may determine the person entitled to the office of director or may order a new election to be held or appointment to be made, may determine the validity of the issuance of memberships and the right of persons to vote and may direct such other relief as may be just and proper.

^[9] A named plaintiff who was elected a director on March 30, 2003.