State ex rel. Heitkamp v. FAMILY LIFE SERVICES
| Decision Date | 31 August 2000 |
| Docket Number | No. 990212, No. 990220, No. 990229, No. 990216, No. 990228., No. 990222, No. 990215 |
| Citation | 2000 ND 166,616 N.W.2d 826 |
| Parties | STATE of North Dakota ex rel. Heidi HEITKAMP, Attorney General, Plaintiff and Appellee, v. FAMILY LIFE SERVICES, INC., dba Family Life Credit Services., and Gary Chaffin, Defendants and Appellants, and American Family Credit Services, et al., Defendants. State of North Dakota ex rel. Heidi Heitkamp, Attorney General, Plaintiff and Appellee, v. Family Life Services, Inc., dba Family Life Credit Services, et al., Defendants, and Charlene Uchtman, Defendant and Appellant. State of North Dakota ex rel. Heidi Heitkamp, Attorney General, Plaintiff and Appellee, v. Family Life Services, Inc., dba Family Life Credit Services, et al., Defendants, and Dennis Uchtman, Defendant and Appellant. State of North Dakota ex rel. Heidi Heitkamp, Attorney General, Plaintiff and Appellee, v. Family Life Services, Inc., dba Family Life Credit Services, et al., Defendants and Patricia Larson, Defendant and Appellant. State of North Dakota ex rel. Heidi Heitkamp, Attorney General, Plaintiff and Appellee, v. Family Life Services, Inc., dba Family Life Credit Services, et al., Defendants, and Darold Larson, Defendant and Appellant. State of North Dakota ex rel. Heidi Heitkamp, Attorney General, Plaintiff and Appellee, v. Family Life Services, Inc., dba Family Life Credit Services, et al., Defendants, and Help and Caring Ministries, Benjamin Larson, Joseph Larson, and Diamond Card International, Inc., Defendants and Appellants. State of North Dakota ex rel. Heidi Heitkamp, Attorney General, Plaintiff and Appellee, v. Family Life Services, Inc., dba Family Life Credit Services, and Help and Caring Ministries, Inc., et al., Defendants, and Lyn Sahr, Defendant and Appellant. |
| Court | North Dakota Supreme Court |
David W. Huey (argued), Assistant Attorney General, Bismarck, Andrew Moraghan and Todd Adam Sattler, Assistant Attorneys General, Bismarck, for plaintiff and appellee.
Peter B. Crary, Fargo, Herbert W. Titus (argued), Troy A. Titus, P.C., Virginia Beach, VA, for defendants and appellants Family Life Services, and Gary Chaffin.
Karen Sue Prout (argued), Wahpeton, for defendant and appellant Charlene Uchtman.
Dennis Uchtman, Carthage, pro se.
Patricia Larson, Fargo, pro se.
Darold Larson, Fargo, pro se.
Lyn Sahr, Pine City, pro se.
Richard David Varriano, Moorhead, for defendants and appellants Help and Caring Ministries, Benjamin Larson, Joseph Larson, and Diamond Card International, Inc.
[¶ 1] Family Life Services, Inc., doing business as Family Life Credit Services ("FLS"), Help and Caring Ministries, Inc. ("HCM"), and individual directors of those nonprofit corporations appealed from a district court judgment removing Darold Larson as a director from the HCM board for a period of five years, removing all current directors from the FLS board, and reconstituting the FLS board. We hold the district court's act of reconstituting the FLS board implicates the Establishment and Free Exercise Clauses of the First Amendment, and the court, under the circumstances, did not have authority to reconstitute the board. We reverse that part of the judgment reconstituting the FLS board, affirm all other parts of the judgment, and remand with directions for the court to dissolve FLS in accordance with the involuntary dissolution provisions under N.D.C.C. ch. 10-26 or, in the court's discretion, to impose alternative remedies of injunctive relief and civil penalties authorized under N.D.C.C. § 13-07-07. Because the trial judge, following appellate arguments, may have created an appearance of partiality, the Chief Justice shall appoint a new judge to preside on remand.
[¶ 2] Darold Larson founded, operates, and controls a number of North Dakota nonprofit corporations with both secular and religious objectives. In his appellate brief Larson describes the relevant organizations he founded:
[¶ 3] In January 1996 the State, through the attorney general, brought an action against FLS, HCM, related nonprofit corporations, and individual directors of the boards of the corporations, claiming they violated several provisions of the Consumer Credit Counseling Services Act, N.D.C.C. ch. 13-07, and the Nonprofit Corporation Act, N.D.C.C. chs. 10-24 through 10-26. The attorney general sought involuntary dissolution of FLS and HCM under N.D.C.C. § 10-26-07, injunctive relief and civil penalties under N.D.C.C. § 13-07-07, and other appropriate relief as the court might provide. The district court found violations of law by Darold Larson, as the founder of these corporations, and by the corporations, acting through Larson and other board members. The court found there were numerous instances of commingling of client trust funds, improper loans to directors and officers, misappropriation of funds, and failure to keep adequate corporate financial records. As a remedy for the violations, the court ordered Darold Larson removed from the HCM board of directors and also ordered removal of all members of the FLS board of directors. The court reconstituted the FLS board, expanding it to seven members and specifying the manner for selecting the new members. The corporations and individual board members appealed from the court's judgment.
[¶ 4] The trial court had jurisdiction under N.D. Const. art. IV, § 8, and N.D.C.C. §§ 27-05-06, 10-26-07, 10-26-10, and 13-07-07. The appeals are timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, § 6, and N.D.C.C. §§ 29-01-12 and 29-28-07.
[¶ 5] The State, through the attorney general's office, filed this action under N.D.C.C. § 13-07-07, seeking civil fines and injunctive relief prohibiting FLS from commingling client trust money. Under N.D.C.C. § 13-07-07, the attorney general is expressly granted authority to investigate "upon the attorney general's own motion" any alleged violation of law by a consumer credit counseling service. The statute also specifically authorizes the attorney general to "institute a civil action in the name of the state in the district court for an injunction prohibiting any practice in violation" of N.D.C.C. ch. 13-07. FLS concedes the attorney general had authority to file an action seeking redress under N.D.C.C. ch. 13-07.
[¶ 6] The State also filed this action under N.D.C.C. § 10-26-07, seeking dissolution of FLS on the ground it exceeded and abused its authority.1 Section 10-26-07 provides a "corporation may be dissolved involuntarily by a decree of the district court in an action filed by the attorney general...." Section 10-26-09, N.D.C.C., provides Under those provisions, the attorney general is specifically authorized to bring an action in the courts for involuntary dissolution of a nonprofit business corporation. FLS asserts, however, the attorney general did not have authority to bring this action seeking dissolution of the corporation under N.D.C.C. ch. 10-26 without prior certification by the secretary of state that the corporation violated the law. FLS's argument rests upon the secretary of state's authority under N.D.C.C. § 10-26-08, which provides the secretary of state FLS claims the attorney general cannot file an action for dissolution without first receiving certification from the secretary of state of corporate violations.
[¶ 7] The interpretation of a statute is a question of law fully reviewable on appeal. Peterson v. Traill County, 1999 ND 197, ¶ 10, 601 N.W.2d 268. Our primary objective in construing a statute is to ascertain the intent of the legislature by looking at the language of the statute itself and giving it its plain, ordinary, and commonly understood meaning. N.D.C.C. §§ 1-02-02; Falcon v. State, 1997 ND 200, ¶ 9, 570 N.W.2d 719. Statutes must be construed as a whole to determine the legislative intent, and the intent must be derived from the whole statute. N.D.C.C. §§ 1-02-07 and 1-02-38(2); Narum v. Faxx Foods, Inc., 1999 ND 45, ¶ 18, 590 N.W.2d 454. Under N.D.C.C. §§ 10-26-07 and 10-26-09 the attorney general is given specific statutory authority to commence a civil action to dissolve a corporation for violations of the law. See Perry Center, Inc. v....
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