Disabled Am. Veterans v. Lakeside Veterans Club, Inc., Docket No. 29,134

• Decision Date: 14 July 2011
• Docket Number: Docket No. 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 OF 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

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 OF NEW MEXICO; ALLEN SEMRAU, Individually;
and EARL DIGGS, Individually, Plaintiffs-Appellees,
v.
THE LAKESIDE VETERANS CLUB, INC., Defendant-Appellant.

Docket No. 29,134

COURT OF APPEALS OF THE STATE OF NEW MEXICO

Filing Date: July 14, 2011

Opinion Number: ______________________

APPEAL FROM THE DISTRICT COURT OF EDDY COUNTY

J. Richard Brown, District Judge

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

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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 non-member 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

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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 3227or 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...