Valley Victory Church v. Sandon

• Citation: 2005 MT 72,109 P.3d 273,326 Mont. 340
• Decision Date: 22 March 2005
• Docket Number: No. 04-618.,04-618.
• Parties: VALLEY VICTORY CHURCH, Plaintiff and Appellant, v. Gregory SANDON, d/b/a Sandon Gravel & Excavating, Inc., Sandon Gravel and Excavating Company, Sandon Construction Company, Inc., Russel Olsen d/b/a Russel Olsen Trucking, Jeremy Juntunen d/b/a Bare Naked Paving Company, and Does 1-5, Defendants and Respondents, and Darvin Struck and Bonnie Struck, Third-Party Respondents.
• Court: United States State Supreme Court of Montana

109 P.3d 273

2005 MT 72

326 Mont. 340

VALLEY VICTORY CHURCH, Plaintiff and Appellant, v. Gregory SANDON, d/b/a Sandon Gravel & Excavating, Inc., Sandon Gravel and Excavating Company, Sandon Construction Company, Inc., Russel Olsen d/b/a Russel Olsen Trucking, Jeremy Juntunen d/b/a Bare Naked Paving Company, and Does 1-5, Defendants and Respondents, and Darvin Struck and Bonnie Struck, Third-Party Respondents.

No. 04-618.

Supreme Court of Montana.

Submitted on Briefs February 2, 2005.

Decided March 22, 2005.

For Appellant: William L. Managhan, Managhan Law Firm PLLC, Kalispell, Montana.

For Respondents: Joshua A. Racki (Sandon) and Paul A. Sandry (Olsen), Johnson, Berg, McEvoy & Bostock, Kalispell, Montana, John R. Quatman, Quatman & Quatman, PC, Whitefish, Montana (Juntunen), Michael H. Keedy, Henning & Keedy, P.L.L.C., Kalispell, Montana (Struck).

Justice W. WILLIAM LEAPHART delivered the Opinion of the Court.

¶ 1 Valley Victory Church appeals from the grant of summary judgment to Respondents. We reverse and remand in regards to Respondents Sandon and Olsen, and Third-Party Respondents Strucks, and dismiss the action against Jeremy Juntunen.

¶ 2 We restate the issues on appeal as:

¶ 3 1. Whether, in light of the subsequent 2004 reinstatement of the Church's corporate status, the Church is deemed to have been a corporation as of the date of the Strucks' gift in 2002.

¶ 4 2. Whether the Strucks can question whether they had the requisite donative intent at the time they made their gift to the Church.

¶ 5 3. Whether Juntunen should be dismissed because he received permission to dump on the property and removed the asphalt he had dumped after the Church told him to do so.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 6 Most of the facts involved in this action are not in dispute. Valley Victory Church (the Church) of Kalispell incorporated as a religious corporation on January 22, 1998. The Church hired an attorney to attend to its responsibilities as a corporation, including filing required annual reports with the Secretary of State. Sometime after the attorney properly filed an annual report on February 4, 1999, the attorney left Montana. The attorney did not inform the Church that it needed to continue filing annual reports in order to retain its status as a corporation. Because of a failure to file the next annual report, the Secretary of State suspended the Church's corporate status and involuntarily dissolved the corporation on December 1, 2000. The Secretary of State sent notice of the suspension, but it sent the notice to the Church's former attorney's now vacant office. Therefore, the Church did not receive word of the suspension. It is undisputed that the Church continued operating as though it were a religious corporation, and that it did so in good faith.

¶ 7 Subsequent to the involuntary dissolution, Darvin and Bonnie Struck gave a plot of land outside of Kalispell to the Church. The Strucks transferred the land by quitclaim deed on August 5, 2002. The Strucks gave the land partly because they wished to help the Church, but also partly because they wanted to take advantage of the tax deduction attendant to such a large gift. At his deposition, Darvin Struck insisted that he asked the Church officials if they were a corporation and they told him "yes." As of the time of the summary judgment hearing in the District Court, the Strucks had not taken the tax deduction nor had they ever asked the Church for paperwork necessary in taking the tax deduction.

¶ 8 The Church anticipated erecting a new church building on the property. Before it could do so, however, it needed to raise the level of the land. Therefore, around the time the Strucks made their gift, a sign was placed on the land asking for anyone who wanted to help out to dump fill dirt on the property. Many different parties took advantage of this opportunity. Unfortunately, much of the fill contained asphalt and garbage. The Department of Environmental Quality told the Church that the asphalt and garbage must be removed from the fill. The substantive claims of this suit, not at issue in this appeal, concern damages the Church incurred in cleaning the fill.

¶ 9 One party to this appeal, Respondent Jeremy Juntunen, received permission from Darvin Struck to dump fill, including asphalt, on the land. He did this until a representative from the Church told him to cease. Thereafter Juntunen removed fifteen loads of asphalt from the land.

¶ 10 The Church filed this action against Respondents on December 5, 2003. Respondent Olsen then filed a third-party complaint against the Strucks. At some point after the litigation commenced it became known, for the first time to any of the parties, that the Church's corporate status had been dissolved some three years earlier. Accordingly, on February 26, 2004, the Strucks, now parties to the suit, filed a "Revocation and Notice of Invalidity of Deeds" in the county office, "revoking" their gift of land to the Church. Soon thereafter, the Church filed for reinstatement of corporate status with the Secretary of State. The reinstatement was made official on March 18, 2004.

¶ 11 Respondents moved for summary judgment, and the District Court granted the motion. It reasoned that the Church could not have accepted the gift from the Strucks because at the time it was not a corporation; and since the Church did not acquire ownership of the land, it lacked standing to bring the suit. The court summarily disposed of the Church's arguments that while it was involuntarily dissolved it was a de facto corporation and that the reinstatement of its corporate status by the Secretary of State retroactively validated its acceptance of the Strucks' gift.

STANDARD OF REVIEW

¶ 12 We review a district court's grant of summary judgment de novo. Olympic Coast Inv., Inc. v. Wright, 2005 MT 4, ¶ 19, 325 Mont. 307,

¶ 19, 105 P.3d 743, ¶ 19. The moving party has the initial burden of showing that no genuine issues of material fact exist. Once the moving party meets that burden, in order to raise a genuine issue of material fact the non-moving party must provide substantial credible evidence that one exists. Von Petersdorff v. Kenyon Noble Lumber Co., 2004 MT 382, ¶ 8, 325 Mont. 94, ¶ 8, 103 P.3d 1082, ¶ 8. Once the district court establishes that no genuine issues of material fact exist the court must determine whether the moving party is entitled to judgment as a mater of law. We review that determination for whether the district court was correct. Von Petersdorff, ¶ 8.

DISCUSSION

ISSUE ONE

¶ 13 Whether, in light of the subsequent 2004 reinstatement of the Church's corporate status, the Church is deemed to have been a corporation as of the date of the Strucks' gift in 2002.

¶ 14 A gift inter vivos requires (1) donative intent, (2) delivery, and (3) acceptance. Albinger v. Harris, 2002 MT 118, ¶ 31, 310 Mont. 27, ¶ 31, 48 P.3d 711, ¶ 31. Respondents and Third-Party Respondents contend that (1) and (3) were not met in this case. This section addresses element (3). Issue Two will address element (1).

¶ 15 The various Respondents argue that since the Church was not a legal corporation at the time of the gift, it could not have then accepted the gift. The Church counters that although the Secretary of State had dissolved its corporate status at the time of the Strucks' gift, the Church was able to accept the gift because it was a de facto corporation. In conjunction with this argument, the Church contends that once the Secretary of State reinstated its corporate status it must be viewed as though it were a legal corporation during the period of dissolution. The Church invokes § 35-6-202, MCA, which states: "Any restoration of corporate rights pursuant to this chapter relates back to the date the corporation was involuntarily dissolved, and the corporation shall be considered to have been an existing legal entity from the date of its original incorporation."

¶ 16 Whether or not the Church was a de facto corporation at the time of the gift is not relevant to our inquiry. Indeed, there is a question as to whether the common law de facto corporation doctrine, long recognized by this Court, see, e.g., Sun River Stock & Land Co. v. Montana Trust & Sav. Bank (1928), 81 Mont. 222, 235-36, 262 P. 1039, 1044, continues to exist in this State in light of the legislature's adoption of aspects of the Model Business Corporation Act. See § 35-1-119, MCA, Official Comments ("This section of the law is intended to clarify that the doctrine of de facto corporations has been abolished."); see also DBA/Delaware Sys. Corp. v. Greenfield (R.I.1994), 636 A.2d 1318, 1319

("The defendants... sought to raise the defense of a de facto corporation. Such a defense is precluded by this statute, which was taken from the 1969 Model Business Corporation Act."). But see Montana Ass'n of Underwriters v. State ex rel. Dep't of Admin. (1977), 172 Mont. 211, 217, 563 P.2d 577, 581 (applying the doctrine without analyzing the impact of recent legislation). The de facto corporation doctrine arose out of concerns that an involuntarily dissolved corporation acting in good faith should not lose its ability to act as a corporation merely because of a technicality. See Sun River Stock & Land, 81 Mont. at 236, 262 P. at 1044.

¶ 17 In the case sub judice, however, whatever concerns the Church has in its ability to receive the Strucks' gift may be addressed simply through an application of § 35-6-202, MCA. The Strucks gave the property to the Church in August 2002. On March 18, 2004, the Church's corporate status was reinstated. Under § 35-6-202, MCA, we must now treat the Church as though it were a legal corporation able to accept donated property in August 2002.

¶ 18 Respondents argue that this reading of § 35-6-202, MCA, does not give effect to § 35-2-725, MCA, which states: "A dissolved corporation continues its corporate existence but may not carry on any activities...