NODAK MUT. INS. v. Ward County Farm Bureau

• Decision Date: 23 March 2004
• Docket Number: No. 20030134.,20030134.
• Citation: 2004 ND 60,676 N.W.2d 752
• Parties: NODAK MUTUAL INSURANCE COMPANY, a North Dakota mutual insurance company, and the Office of the North Dakota Insurance Commissioner, Plaintiffs and Appellees, v. The WARD COUNTY FARM BUREAU, a North Dakota non-profit corporation located in Ward County, and currently unidentified John Does acting in cooperation or concert with the named Defendant, Defendants and Appellants.
• Court: North Dakota Supreme Court

676 N.W.2d 752

2004 ND 60

NODAK MUTUAL INSURANCE COMPANY, a North Dakota mutual insurance company, and the Office of the North Dakota Insurance Commissioner, Plaintiffs and Appellees, v. The WARD COUNTY FARM BUREAU, a North Dakota non-profit corporation located in Ward County, and currently unidentified John Does acting in cooperation or concert with the named Defendant, Defendants and Appellants.

No. 20030134.

Supreme Court of North Dakota.

March 23, 2004.

Rehearing Denied April 13, 2004.

Todd E. Zimmerman (argued) and Sarah Andrews Herman (on brief), Dorsey & Whitney, Fargo, ND, for plaintiff and appellee Nodak Mutual Insurance Company.

Douglas A. Bahr, Solicitor General, Attorney General's Office, Bismarck, ND, for plaintiff and appellee Office of the North Dakota Insurance Commissioner.

Lynn M. Boughey, Boughey Law Firm, Minot, ND, for defendants and appellants.

MARING, Justice.

[¶ 1] The Ward County Farm Bureau appealed from a judgment and amended judgment dismissing its counterclaims against Nodak Mutual Insurance Company ("Nodak") and the North Dakota Insurance Commissioner and refusing to postpone a special election to amend Nodak's bylaws and select new directors. We conclude the district court correctly ruled Ward County Farm Bureau lacked standing for its counterclaims against the Commissioner, and the court did not abuse its discretion in refusing to postpone the election. We affirm.

I

[¶ 2] Nodak is a North Dakota mutual insurance corporation organized under N.D.C.C. ch. 26.1-12, which serves more than 26,000 policyholders. Ward County Farm Bureau is a North Dakota non-profit corporation located in Ward County, which consists of approximately 1,200 members. Most of its members carry insurance policies with Nodak.

[¶ 3] On September 23, 2002, the Commissioner placed Nodak under administrative supervision after receiving a letter from corporate officers who expressed management concerns. Nodak consented to the administrative supervision. In November 2002, Ward County Farm Bureau sent a lengthy list of questions to the Commissioner and Nodak relating to the supervision and financial position of Nodak. Ward County Farm Bureau was not satisfied with the quality of the answers it received.

[¶ 4] The Commissioner determined it was in the best interests of Nodak to restructure its board of directors, which required an amendment to the corporation's bylaws. Notice of the proposed bylaw amendments, the proposed slate of new directors, and a proxy form were sent to Nodak's policyholders before December 21, 2002. The notice, which was also published, scheduled a special shareholders' meeting for the election on March 21, 2003. In January 2003, Ward County Farm Bureau requested a list of Nodak policyholders from Nodak, and without receiving the list, Ward County Farm Bureau began sending and distributing copies of the original Nodak proxy to Ward County Farm Bureau members. Nodak and the Commissioner demanded that Ward County Farm Bureau stop copying and distributing the proxies. Ward County Farm Bureau stopped distributing the proxy ballets and again asked the Commissioner and Nodak for a list of policyholders. The Commissioner and Nodak refused.

[¶ 5] On January 31, 2003, Nodak and the Commissioner brought this action against Ward County Farm Bureau "and currently unidentified John Does acting in cooperation or concert with the named Defendant." Nodak and the Commissioner asked the district court (1) to enjoin the defendants from copying or distributing Nodak's proxy; (2) to declare that Nodak was not required to make a voting list available to the defendants for inspection and copying; (3) or, in the alternative, to restrict the defendants' access to and use of a policyholder list "to safeguard the privacy of Nodak policyholders to the extent possible." On February 7, 2003, Ward County Farm Bureau filed an answer and counterclaim. In the counterclaim, Ward County Farm Bureau asked the district court (1) to declare Ward County Farm Bureau and its members had the right to copy and distribute Nodak's proxy and to enjoin the plaintiffs from interfering with their rights; (2) to order that the plaintiffs provide the list of Nodak policyholders; (3) to declare that the plaintiffs failed to protect and ensure the voting rights of Nodak policyholders and order the plaintiffs to update the policyholder list, reschedule the election to a later date, and submit a plan for court approval that allows minority policyholders to participate and supervise the collection, verification and counting of the proxies; (4) to dismiss the Commissioner from the action because "he does not have the right to interfere in the rights of Nodak policyholders;" (5) to declare that the Commissioner has exceeded his authority in taking over management of Nodak and enjoin him from interfering in the internal management of Nodak and from interfering with the rights of policyholders regarding the election; and (6) to terminate the Commissioner's administrative supervision over Nodak.

[¶ 6] On February 13, 2003, the district court, relying on N.D.C.C. § 10-19.1-73.3, allowed Ward County Farm Bureau to copy and distribute Nodak's proxy and to copy Nodak's policyholder list for use in contacting policyholders regarding the March 21, 2003, election. The court found that "ample time still exists for the shareholder or his agent to copy such list and contact the shareholders prior to the meeting scheduled for March 21, 2003." Nodak provided the list to Ward County Farm Bureau the next day. The Commissioner and Nodak did not appeal.

[¶ 7] On February 20, 2003, Ward County Farm Bureau sent 58 interrogatories to Nodak. On March 7, 2003, the Commissioner moved to dismiss the counterclaims against him, asserting, among other things, that the first two counterclaims were mooted by the court's previous ruling and Ward County Farm Bureau had no standing to assert the remainder of its counterclaims against the Commissioner. On March 13, 2003, Ward County Farm Bureau moved to postpone the special election "for at least 60 days from the day that it is scheduled, or in the alternative at least 30 days after complete and full answers to interrogatories have been received." Ward County Farm Bureau scheduled a hearing on March 14, 2003, two days after faxing the motion to the Commissioner and Nodak, and almost one week before Ward County Farm Bureau was required to file a response to the Commissioner's motion to dismiss. Although Nodak responded with a brief to Ward County Farm Bureau's motion to postpone the election, the Commissioner did not file a written response and Ward County Farm Bureau did not file a written response to the Commissioner's motion to dismiss by the March 14 hearing date.

[¶ 8] At the hearing, the Commissioner argued standing was a threshold issue that had to be addressed before considering the merits of Ward County Farm Bureau's remaining counterclaims and its motion to postpone the election. At the conclusion of the hearing, the district court denied Ward County Farm Bureau's motion, noting Ward County Farm Bureau had pointed to "no statutory violation of anything," and finding Ward County Farm Bureau faced no irreparable harm because "[i]f this election is conducted wrongfully[,] that can be challenged." The court also dismissed the remainder of Ward County Farm Bureau's counterclaims that had not been disposed of in the earlier decision because Ward County Farm Bureau "has no standing to bring all these issues on behalf of whatever policy holders are individual policy holders or individual stockholders." The special election was conducted on March 21, 2003. After Ward County Farm Bureau appealed from the district court judgments, the Commissioner lifted and discontinued his administrative supervision over Nodak effective July 29, 2003.

II

[¶ 9] After this appeal was filed, Ward County Farm Bureau moved in this Court to supplement the record under N.D.R.App.P. 10(h). Ward County Farm Bureau seeks to introduce documentation that it was a Nodak policyholder until January 28, 2003, two days before the Commissioner and Nodak commenced the action against Ward County Farm Bureau. It is unnecessary to rule on this motion, because assuming Ward County Farm Bureau was a policyholder, it would not change the result in this case.

III

[¶ 10] Ward County Farm Bureau argues the district court erred in ruling it had no standing to raise the remainder of its counterclaims challenging the Commissioner's actions.

[¶ 11] In Rebel v. Nodak Mut. Ins. Co., 1998 ND 194, ¶8, 585 N.W.2d 811, we said:

A party is entitled to have a court decide the merits of a dispute only after demonstrating the party has standing to litigate the issues placed before the court. State v. Tibor, 373 N.W.2d 877 (N.D.1985). Standing is the concept used " `to determine if a party is sufficiently affected so as to insure that a justiciable controversy is presented to the court.' " Billey v. North Dakota Stockmen's Ass'n, 1998 ND 120, ¶7, 579 N.W.2d 171 (quoting Black's Law Dictionary 1405 (6th ed.1990)). A person cannot invoke the jurisdiction of the court to enforce private rights or maintain a civil action for the enforcement of those rights unless the person has in an individual or representative capacity some real interest in the cause of action, or a legal or equitable right, title, or interest in the subject matter of the controversy. State v. Rosenquist, 78 N.D. 671, 51 N.W.2d 767 (1952). Litigants cannot by consent, either passive or express, dispense with necessary parties, or confer upon a person who does not have a sufficient interest in a controversy entitlement to bring suit. McIntyre v. State Board of Higher Education, 71 N.D. 630, 3 N.W.2d 463 (1942).

Standing analysis requires a two-fold inquiry: (1) plaintiffs must suffer some threatened or actual injury resulting from the putatively illegal action, and (2) the asserted harm must not be a...