Salt Lake City Laumalie Ma'oni'oni Free Wesleyan Church of Tonga v. Dep't of Commerce, 20200778-CA

CourtCourt of Appeals of Utah
Writing for the CourtMORTENSEN, Judge:
PartiesSalt Lake City Laumalie Ma'oni'oni Free Wesleyan Church of Tonga and Viliami Hosea,Appellants, v. Department of Commerce, Division of Corporations,Appellee.
Docket Number20200778-CA
Decision Date18 August 2022

2022 UT App 102

Salt Lake City Laumalie Ma'oni'oni Free Wesleyan Church of Tonga and Viliami Hosea,Appellants,
v.

Department of Commerce, Division of Corporations,Appellee.

No. 20200778-CA

Court of Appeals of Utah

August 18, 2022


Third District Court, Salt Lake Department The Honorable Patrick Corum No. 180907281

Robert C. Avery, Nathan E. Burdsal, and Hutch U. Fale, Attorneys for Appellants

Sean D. Reyes, Sarah E. Goldberg, and Erin T. Middleton, Attorneys for Appellee

Judge David N. Mortensen authored this Opinion, in which Judges Ryan M. Harris and Ryan D. Tenney concurred.

OPINION

MORTENSEN, Judge:

¶1 From "the metaphysical principle that nothing can confer what it does not possess," it follows that an administrative agency cannot confer validity on a document if it lacks the power to do so. See City of Chicago v. Morales, 527 U.S. 41, 91 n.9 (1999) (Scalia, J., dissenting).[1]

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¶2 Salt Lake City Laumalie Ma'oni'oni Free Wesleyan Church of Tonga and Viliami Hosea (collectively, FWC) argue that the Division of Corporations (the Division) is endowed with the authority to determine the validity of corporate filings. From this position, FWC asserts that the district court erred in dismissing a petition that asked for a determination that the Division lacked the authority to revoke and rescind amended articles of incorporation (the Amended Articles) that FWC had previously filed with the Division. Seeing no error in the district court's decision, we affirm.

BACKGROUND

¶3 In 1978, the Rocky Mountain Conference (RMC) of the United Methodist Church chartered a congregation, the Tongan United Methodist Church (TUMC), in Utah. TUMC was incorporated as a Utah nonprofit corporation. In 2012, several members of TUMC sought to disaffiliate with TUMC and sever ties with the United Methodist Church. Five of the nine trustees for TUMC called for a mail-in vote seeking to amend its articles of incorporation. After the mail-in vote approved the Amended Articles, the members who had initiated the vote submitted a series of registration changes to the Division, including changing the name of TUMC to the Salt Lake City Laumalie Ma'oni'oni Free Wesleyan Church of Tonga and changing the principals (including the registered agent). Thereafter, FWC submitted the Amended Articles to the Division.

¶4 The same day FWC submitted the Amended Articles, it filed a lawsuit seeking (1) an injunction to prevent a former director and principal of TUMC from controlling or accessing any of the entity's property and (2) declaratory relief that Hosea was

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the only individual authorized to represent the entity or control its property. TUMC's board of trustees and the RMC, in turn, filed a lawsuit against FWC and the members of FWC's board of directors (the Private Litigation) seeking, among other things, a declaration that the mail-in vote was improper and that any corporate actions FWC attempted to take were null and void.

¶5 After being notified of the Private Litigation, the Division informed the parties that it would place the Amended Articles on administrative hold until the dispute was settled through agreement or by the court. FWC then informed the Division that it intended to challenge the decision to place the changes on hold, and the Division subsequently removed the hold and accepted the Amended Articles. See Laumalie Ma'oni'oni Free Wesleyan Church of Tonga v. Ma'afu, 2019 UT App 41, ¶¶ 22-23, 440 P.3d 804. Nevertheless, the Division's record noted a dispute pending among the principals. Id. ¶ 23.

¶6 In the Private Litigation, the district court eventually entered an order determining that the mail-in vote was improper because the vote did not comply with TUMC's original articles of incorporation, and therefore none of FWC's subsequent corporate actions were authoritatively taken or valid. Id. ¶¶ 30-31. The court further determined that TUMC and the RMC were not required to exhaust administrative remedies because "the Division made no determination regarding the parties' rights, the validity of the vote by mail, or the Amended Articles." Id. ¶ 28 (cleaned up). The RMC notified the Division of the court's decision, and the Division rescinded the Amended Articles and reinstated TUMC's original articles of incorporation. Id. ¶ 32.

¶7 Shortly thereafter, in the wake of the court ruling, FWC sought agency review of the Division's decision to rescind the Amended Articles. The Department of Commerce affirmed the Division's decision. FWC then filed the petition that initiated the present case, seeking judicial review in the district court of the

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Department of Commerce's order affirming the Division's decision. In the petition, FWC asserted that it was "entitled" to a court order providing that the "Amended Articles must be accepted and approved by the Division, and that the Division lacked the authority to revoke and erred in revoking such Amended Articles."

¶8 After filing the petition for the present case, FWC appealed the decision rendered in the Private Litigation, and this court affirmed. Id. ¶ 90. While that appeal was pending, the district court granted a stay in the present case. After this court issued its opinion affirming the district court in the Private Litigation, the district court granted the Division's motion to dismiss FWC's petition in this case because (1) issue preclusion prevented relitigation of FWC's claims, (2) FWC failed to state a claim on which relief could be granted because the Amended Articles had been determined to be invalid in the Private Litigation, and (3) the case was moot. FWC now appeals the district court's dismissal of its petition.

ISSUE AND STANDARD OF REVIEW

¶9 The issue on appeal is whether the district court properly dismissed FWC's petition when the court determined that the results of the Private Litigation foreclosed the relief FWC sought. "A ruling on a motion to dismiss presents a legal question that we review for correctness, affording no deference to the district court's decision." AL-IN Partners, LLC v. LifeVantage Corp., 2021 UT 42, ¶ 17, 496 P.3d 76 (cleaned up).[2]

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ANALYSIS

¶10 FWC argues that our legislature "has explicitly delegated the ability to make a conclusive determination regarding the validity of amended articles of incorporation for a nonprofit corporation in Utah to the Division." FWC's position appears to be primarily based on its assertion that nothing in the Utah Revised Nonprofit Corporations Act (the Act), see generally Utah Code Ann. §§ 16-6a-101 to -1705 (LexisNexis 2013 & Supp. 2021), "allows the Division to defer to any other entity, even a district court," to determine the validity of corporate filings. In essence, FWC's entire case rests on the assertion that the Division's eventual acceptance of the Amended Articles endowed that document with permanent validity.

¶11 But FWC's premise about the extent of the Division's authority to determine the validity of filings is simply wrong. As was resolved in the Private Litigation, and as we further explain below, the Division does not have the authority to determine the validity of corporate filings. Because of this, the Division's act of accepting the Amended Articles had no impact on their validity, and the relief FWC now seeks is unavailable.

¶12 Far from "explicitly" granting the...

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