Disabled Am. Veterans v. the Lakeside Veterans Club Inc.

• Citation: 150 N.M. 569,2011 -NMCA- 099,263 P.3d 911
• Decision Date: 07 September 2011
• Docket Number: No. 29,134.,29,134.
• Parties: DISABLED AMERICAN VETERANS, Cavern City Chapter 13; Disabled American Veterans Department Of New Mexico; E. De P. Bujac Post 3277 Veterans of Foreign Wars; Veterans of Foreign Wars New Mexico; Allen Semrau, Individually; and Earl Diggs, Individually, Plaintiffs–Appellees,v.The LAKESIDE VETERANS CLUB, INC., Defendant–Appellant.
• Court: Court of Appeals of New Mexico

150 N.M. 569

263 P.3d 911

2011 -NMCA- 099

DISABLED AMERICAN VETERANS, Cavern City Chapter 13; Disabled American Veterans Department Of New Mexico; E. De P. Bujac Post 3277 Veterans of Foreign Wars; Veterans of Foreign Wars New Mexico; Allen Semrau, Individually; and Earl Diggs, Individually, Plaintiffs–Appellees,

v.The LAKESIDE VETERANS CLUB, INC., Defendant–Appellant.

No. 29,134.

Court of Appeals of New Mexico.

July 14, 2011.Certiorari Denied, Sept. 7, 2011, No. 33,153.

Montgomery & Andrews, P.A., Sarah M. Singleton, Jaime R. Kennedy, Santa Fe, NM, McCormick, Caraway, Tabor & Byers, L.L.P., John M. Caraway, Carlsbad, NM, for Appellees.Rodey, Dickason, Sloan, Akin & Robb, P.A., Edward R. Ricco, Jocelyn C. Drennan, Albuquerque, NM, Marek & Francis, P.A., Thomas L. Marek, Carlsbad, NM, for Appellant.

OPINION

GARCIA, Judge.

{1} Under NMSA 1978, Section 53–8–55(A)(1)(e) (1975), the liquidation of a nonprofit corporation may be initiated by the individual members of the organization. The district court recognized that as of a specific date prior to the filing for liquidation, Lakeside Veterans Club, Inc. (Lakeside) did not have any members. Despite this specific finding, the district court allowed the corporate liquidation action filed by two former members of Lakeside to proceed under the statute. On appeal, Lakeside asserts that these two nonmember Plaintiffs did not have standing to pursue liquidation. Without statutory standing to pursue a cause of action, our Supreme Court has recognized that the district court is without subject matter jurisdiction to proceed. We agree with Lakeside and determine that Plaintiffs Allen Semrau (Semrau) and Earl Diggs (Diggs) did not have standing to initiate liquidation proceedings and that the district court lacked subject matter jurisdiction in this case. We reverse and remand this matter for a dismissal of the statutory proceeding to liquidate Lakeside pursuant to Section 53–8–55(A)(1)(e).

FACTUAL AND PROCEDURAL HISTORY

{2} The material facts that are necessary to address the standing issue in this case are not significantly in dispute. However, the parties materially disagree regarding the legal interpretation of those facts as they apply to the liquidation of Lakeside under Section 53–8–55(A)(1).

{3} Lakeside is a veterans' organization that was formed in 1957 to preserve and promote fellowship among veterans of foreign wars and/or disabled American veterans through the ownership of real property and a service club facility located in Carlsbad, New Mexico. The original plaintiffs included E. De P. Bujac Post 3277 Veterans of Foreign Wars (VFW 3277) and Disabled American Veterans, Cavern City Chapter Number 13 (DAV 13), but the district court dismissed both organizations from this lawsuit at trial. VFW 3277 is a local Carlsbad, New Mexico chapter under the jurisdiction and control of the Veterans of Foreign Wars of the State Department of New Mexico (VFW State), which was established under the National Constitution of Veterans of Foreign Wars (VFW National). DAV 13 is a local Carlsbad, New Mexico chapter under the jurisdiction and control of the Disabled American Veterans Department of New Mexico (DAV State), which was established under the National Constitution of Disabled American Veterans (DAV National). VFW 3277 and DAV 13 were both in existence in Carlsbad, New Mexico, prior to the formation of Lakeside in 1957.

{4} On January 21, 1953, VFW 3277 and DAV 13 came into joint ownership of a parcel of real estate in equal, undivided one-half interests (the Plum Lane Property). VFW 3277 and DAV 13 were apparently aware of a restriction that prohibited the local chapters of these two organizations from jointly owning or operating real property together, including the Plum Lane Property. Lakeside was apparently created by VFW 3277 and DAV 13 in an effort to thwart this prohibition and to obscure their joint ownership and operation of the Plum Lane Property. VFW 3277 and DAV 13 originally conveyed the Plum Lane Property to Lakeside in 1958 and then reconveyed it to Lakeside in 1995. At all relevant time periods, membership in Lakeside was limited to persons who were (1) original September 1, 1957 members in good standing of VFW 3277 or DAV 13; or (2) persons who later satisfied all eligibility requirements for membership and became members in good standing of VFW 3227 or DAV 13 after September 1, 1957. In 2007, both VFW 3227 and DAV 13 were suspended by VFW State and DAV State as a result of the circumstances involving the joint ownership of the Plum Lane Property and their joint membership arrangement in Lakeside.

{5} Plaintiffs initiated this lawsuit seeking damages and other relief against Lakeside, including a liquidation and distribution of all of its assets pursuant to Section 53–8–55(A)(1) and NMSA 1978, Section 53–8–56 (1975). The parties do not dispute that Plaintiffs Semrau and Diggs were previous members in good standing with DAV 13 prior to its suspension by DAV State. At trial, Plaintiffs argued that the suspensions of VFW 3227 and DAV 13 left Lakeside without any membership. Plaintiffs further argued that Lakeside must be liquidated because it could not engage in corporate acts or otherwise carry out any corporate business. Lakeside argued that the suspensions of VFW 3227 and DAV 13 did not cause the loss of Lakeside's membership or a revocation of any local charter. The district court agreed with Plaintiffs' argument and found that due to the suspensions of VFW 3227 and DAV 13 by their respective state organizations, Lakeside had no membership and could not engage in corporate acts or otherwise carry out its purposes. As a result, the court ordered the liquidation of Lakeside and distribution of its assets.

{6} On appeal, Lakeside asserts that Plaintiffs Semrau and Diggs did not have standing to pursue liquidation under Section 53–8–55(A)(1) based upon the district court's finding that Lakeside had no members. Consequently, Lakeside contends that the district court should have dismissed the action for lack of subject matter jurisdiction. Despite prevailing below, Plaintiffs now argue that in fact Lakeside still has its membership, but the current members should be given a special type of classification and be recognized as ineligible and nonfunctioning members. As a result, Plaintiffs argue that Semrau and Diggs still have standing as ineligible members to seek a corporate liquidation under Section 53–8–55(A)(1). Alternatively, Plaintiffs contend that Lakeside is barred and has waived any right to contest the issue of standing and subject matter jurisdiction due to Lakeside's undisputed position and proposed findings that Semrau and Diggs were members of Lakeside in good standing and that subject matter jurisdiction existed to proceed with a liquidation under Section 53–8–55(A)(1).

DISCUSSION

{7} Our Supreme Court recently clarified the analysis of the issue of standing and its effect on subject matter jurisdiction in New Mexico proceedings. ACLU of N.M. v. City of Albuquerque, 2008–NMSC–045, 144 N.M. 471, 188 P.3d 1222. Specifically, the Court noted that “standing may be a jurisdictional matter when a litigant asserts a cause of action created by statute.” Id. ¶ 9 n. 1. “When a statute creates a cause of action and designates who may sue, the issue of standing becomes interwoven with that of subject matter jurisdiction.” Id. (internal quotation marks and citation omitted). Under these circumstances, “[s]tanding then becomes a jurisdictional prerequisite to an action.” Id. (internal quotation marks and citation omitted). Our Courts have long recognized that when the issue of standing is considered jurisdictional, it “may not be waived and may be raised at any stage of the proceedings, even sua sponte by the appellate court.” Gunaji v. Macias, 2001–NMSC–028, ¶ 20, 130 N.M. 734, 31 P.3d 1008 (internal quotation marks and citation omitted); Alvarez v. State Taxation & Revenue Dep't, 1999–NMCA–006, ¶ 6, 126 N.M. 490, 971 P.2d 1280; Armijo v. Save 'N Gain, 108 N.M. 281, 282, 771 P.2d 989, 990 (Ct.App.1989). Under the present circumstances, standing is a jurisdictional question because Section 53–8–55(A)(1) creates a cause of action and explicitly designates who is entitled to bring an action under that provision. See Section 53–8–55(A)(1) (providing that a district court shall have power to liquidate a corporation under certain circumstances in an action initiated by a director or member of that corporation). As a result, although Lakeside did not expressly raise the issue of standing in the district court below, the issue of standing is a jurisdictional prerequisite that may properly be addressed by this Court. See Gunaji, 2001–NMSC–028, ¶ 20, 130 N.M. 734, 31 P.3d 1008.

{8} Lakeside asserts that Plaintiffs Semrau and Diggs did not have standing to pursue liquidation under Section 53–8–55(A)(1) because the district court found that Lakeside did not have any members once VFW 3227 and DAV 13 were suspended by their respective state organizations. Plaintiffs specifically argued and requested that the district court enter findings of fact reflecting that once VFW 3227 and DAV 13 were suspended, Lakeside had “no members ... capable of voting” and had no members capable of “engag[ing] in corporate acts or otherwise carry[ing] on corporate business.” Plaintiffs' factual argument was premised on the express language in Lakeside's bylaws stating that no person was eligible for membership in Lakeside “unless that person has satisfied all eligibility requirements for membership in, and is a member in good standing of [VFW 3227] and/or [DAV 13].”

Standard of Review

{9} “We review factual questions for substantial evidence. Substantial evidence is relevant evidence that a reasonable mind would find adequate to support a conclusion.” Sitterly v. Matthews, 2000–NMCA–037, ¶ 22, 129 N.M. 134, 2 P.3d 871 (citation omitted). However, the determination of “[w]hethe...