Laumalie Ma'Oni'Oni Free Wesleyan Church of Tonga v. Ma'Afu ( 2019 )

2019 UT App 41THE UTAH COURT OF APPEALS
THE LAUMALIE MA’ONI’ONI FREE WESLEYAN CHURCH OF TONGA,
Appellant,
v.
ETIMANI MA’AFU, THE ROCKY MOUNTAIN CONFERENCE OF
THE UNITED METHODIST CHURCH, THE TONGAN UNITED
METHODIST CHURCH, and THE BOARD OF TRUSTEES OF THE
UNITED METHODIST CHURCH
Appellees.
Opinion
No. 20170637-CA
Filed March 21, 2019
Third District Court, Salt Lake Department
The Honorable Mark S. Kouris
No. 120908228
Robert C. Avery, Nathan E. Burdsal, and
Hutch U. Fale, Attorneys for Appellant
Geoffrey C. Haslam and Kristen C. Kiburtz,
Attorneys for Appellee Etimani Ma’afu
Gary L. Johnson, Zachary E. Peterson, and Richard
A. Marsh, Attorneys for Appellees the
Rocky Mountain Conference of the United
Methodist Church, the Tongan United Methodist
Church, and the Board of Trustees of the
United Methodist Church
JUDGE KATE APPLEBY authored this Opinion, in which
JUDGES DAVID N. MORTENSEN and JILL M. POHLMAN concurred.
APPLEBY, Judge:
¶1 This case involves a church property dispute between
dissident members of the Tongan United Methodist Church
Free Wesleyan Church of Tonga v. Ma'afu
(TUMC) and various representatives of the United Methodist
denomination, including the Rocky Mountain Conference of
the United Methodist Church (the RMC).1 TUMC is a Utah
nonprofit corporation functioning as a local United Methodist
congregation since 1978. The RMC is the United Methodist
denomination’s regional representative in Utah.
¶2 In 2012, a group of TUMC members purported to amend
TUMC’s articles of incorporation by removing any reference to
the United Methodist Church and changing the corporation’s
name to the Laumalie Ma’oni’oni Free Wesleyan Church of
Tonga (Free Wesleyan). 2 Prior to these changes, Etimani Ma’afu
was the president of TUMC’s board of directors, but the
amendments purported to remove him from that position. Free
Wesleyan filed a claim against Ma’afu in the district court,
seeking an injunction forbidding him from acting on behalf of
the corporation and a declaratory judgment that Free Wesleyan
was the only entity entitled to control church property.
¶3 The RMC, joined by various parties affiliated with the
United Methodist Church, filed a separate lawsuit arguing that
Free Wesleyan’s actions were invalid and unenforceable because
the dissident members did not comply with TUMC’s governing
documents. The RMC also claimed that, even if the dissident
members’ actions were proper, those members were not entitled
to use the local church property because it was held in trust by
1. Appellees include Etimani Ma’afu, the Tongan United
Methodist Church, and the Board of Trustees of the United
Methodist Church.
2. TUMC and Free Wesleyan are actually the same
entity because TUMC became Free Wesleyan when TUMC’s
dissident members purportedly amended TUMC’s articles of
incorporation. In this opinion, we refer to that entity by the name
it was using at the time of the relevant events.
20170637-CA 2 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
TUMC for the benefit of the United Methodist denomination.
The RMC’s case was consolidated with Free Wesleyan’s case.
¶4 After discovery, the district court granted Ma’afu and the
RMC’s joint motion for summary judgment, determining that
Free Wesleyan’s actions were not authorized under TUMC’s
governing documents. The court then entered a final judgment
restoring TUMC “to how it existed prior to the improper
corporate acts.”
¶5 Free Wesleyan appeals. We affirm.
BACKGROUND
¶6 The United Methodist Church is “a ‘connectional’
network of distinct, but affiliated entities known as local
churches, charges, conferences, boards, commissions and
agencies.” The denomination has a “hierarchical” structure 3
consisting of multiple tiers, and each affiliated entity is subject to
a higher authority within that multi-tier structure. Thus,
although local churches are incorporated as individual entities,
they are members of a “regional conference,” which charters the
local church and oversees the local congregation.
¶7 Within the United Methodist Church, each of the
affiliated entities is required to follow the denomination’s
3. Hierarchical churches are “organized as a body with other
churches having similar faith and doctrine with a common
ruling convocation or ecclesiastical head.” Kedroff v. Saint
Nicholas Cathedral of Russian Orthodox Church in N. Am., 344 U.S.
94, 110 (1952). In such a denomination, “the local congregation is
itself but a member of a much larger and more important
religious organization, and is under its government and control,
and is bound by its orders and judgments.” Watson v. Jones, 80
U.S. 679, 726–27 (1871).
20170637-CA 3 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
governing document: The Book of Discipline (the Discipline).
In addition to detailing religious doctrine, the Discipline
establishes requirements for governance of the local
churches and procedures for implementing changes at the local
level.
¶8 Under the Discipline, decisions regarding local
churches are made by two groups: the Charge Conference and
the Church Conference. The Charge Conference is the
“connecting link between the local church and the
general Church.” That is, it serves as the local “unit in the
connectional system of the United Methodist Church.”
The Charge Conference consists of a “church council” made up
of elected local church members and “any others as may be
designated in the Discipline.” At annual or special meetings,
the Charge Conference elects officers of the local congregation,
authorizes property transfers, and makes other major decisions.
¶9 The Church Conference “encourage[s] broader
participation by members of the church” by “extending the
vote” on any issue generally decided by the Charge Conference
“to all professing members of the local [congregation].” A
Church Conference may be called “at the discretion of the
district superintendent or following a written request to the
district superintendent by . . . the pastor, the church council, or
10 percent of the professing membership of the local
[congregation].”
¶10 The Discipline requires any meeting of the Charge
Conference or the Church Conference to be called and presided
over by the district superintendent. Regardless of the type of
meeting, the Discipline does not authorize voting by proxy or
mail-in voting. Instead, at a Charge Conference, “[t]he members
present and voting at any duly announced meeting shall
constitute a quorum.” And at a Church Conference, the vote
extends “to all professing members of the local church present at
[the] meetings.”
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¶11 The Discipline also establishes that all “properties of
the United Methodist local churches . . . are held, in trust, for
the benefit of the entire denomination, and ownership and
usage of church property is subject to the Discipline.” The
Discipline authorizes regional conferences to bring suit in
their own names to protect and enforce denominational
interests in matters of local church property, governance, and
operations.
¶12 Utah’s regional conference is the RMC. In 1978, the RMC
chartered a local congregation in Salt Lake City—TUMC—and
appointed a minister to oversee the congregation. Under the
RMC’s direction, TUMC filed its original articles of
incorporation (the Original Articles) with the State of Utah. The
Original Articles included these provisions: (1) “The purpose for
which the corporation is organized is to conduct and operate a
United Methodist Church and congregation according to the
Discipline”; (2) “All title to real property bought and sold by the
[c]orporation shall be in full conformity with the Discipline”;
(3) “The internal affairs of the corporation shall be managed and
controlled by the Board of Trustees of the corporation. The
bylaws . . . may be amended by the board . . . , provided that
they remain in accord with these Articles of Incorporation and
with the Discipline”; (4) “The Board of Trustees shall consist of
the members of the Board of Trustees of the Tongan United
Methodist Church of Salt Lake City, elected and organized as
prescribed in the Discipline”; and (5) “Upon dissolution, all net
assets and property transfer to the [RMC].”
¶13 A provision in the Original Articles titled “Amendments”
provides:
These [Original Articles] may be amended by the
vote of at least two-thirds of the members of the
corporation present at the annual meeting or at a
special meeting of the corporation called for that
purpose.
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¶14 After its incorporation, TUMC operated as a local
congregation of the United Methodist Church for thirty-four
years. In conformity with the Discipline, it elected officers,
purchased property, and held annual Charge Conferences,
presided over by the district superintendent. In 2012, as the
result of a dispute between the RMC and the local congregation,
a group of local leaders attempted to disaffiliate TUMC from the
United Methodist Church. They proposed amendments to the
Original Articles that removed any reference to the United
Methodist Church or the Discipline, and changed the
corporation’s name to Free Wesleyan.
¶15 TUMC’s corporate secretary sent a letter titled “Important
Corporate Notice Regarding Proposed Amendments to Articles
of Incorporation” to all local members. The letter explained the
proposed amendments and directed members to vote yes or no
on an attached ballot and mail it to the corporation.
¶16 When the RMC learned of the mail-in vote, it sent a letter
to the local congregation informing it that the results of the vote
“will not be valid and will be legally unenforceable” because the
vote “does not comply” with the “process for calling and
holding a church membership meeting” as established by the
Discipline. The letter specified that a Church Conference must be
called and presided over by the district superintendent and held
in person, and that “[t]he only votes that count are those cast by
eligible church members in attendance at a properly called
meeting.” It also stated that the proposed amendments would
not “allow the new church to take the [local congregation’s]
property and building” because, “[u]nder the [Discipline], all
church property is owned by the local church in trust for The
United Methodist Church.”
¶17 Despite the RMC’s letter, the local leaders proceeded with
the mail-in vote, and the proposed amendments were approved
by two-thirds of the members. Based on the results, the local
members purported to elect a new board of directors, and the
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board filed the amended articles of incorporation (the Amended
Articles) with the Division of Corporations and Commercial
Code (the Division).
¶18 At the time of the mail-in vote, Ma’afu was the president
of TUMC’s board of directors, but he was removed from that
position under the Amended Articles. Ma’afu refused to
recognize the amendments and continued to use local church
property and withdraw funds from the local church’s account.
¶19 In response to Ma’afu’s actions, on the same day the
Division received the Amended Articles, Free Wesleyan filed
with the district court a claim against Ma’afu seeking a
declaratory judgment “with respect to the rights, status, and
other legal relations between the parties.” Free Wesleyan also
asked for a temporary restraining order forbidding Ma’afu from
representing “that he is an authorized agent of the Corporation,”
and sought damages for “the value of the property converted by
[Ma’afu]” and an award of costs and attorney fees.
¶20 The RMC filed a motion to intervene in the case. The
motion cited provisions from the Discipline that authorize the
RMC “to bring suit and intervene in its own name to protect
denominational interests in matters of local church governance,
operations and property.” It claimed that the United Methodist
Church held an irrevocable trust in the local church property,
and asserted that the “property is necessarily affected by the
purported amendment to [the Original Articles]” and the
dissident members’ efforts to assume control of the property and
spend the church’s assets. The district court granted the motion
to intervene, concluding that the RMC had “alleged a sufficient
interest . . . to intervene as a matter of right.”
¶21 The RMC also contested before the Division TUMC’s
filing of the Amended Articles. In a letter, it asked the Division
to “conduct whatever investigation you deem appropriate to
determine the validity of the contested filings.” The RMC also
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asked the Division to change the principals of the corporation
back to the principals who were in place before the mail-in vote.
¶22 After receiving the RMC’s objections, the Division sent a
letter to counsel for the parties, stating that the Division was
“unable to clearly establish whether the filings were made with
authority or not.” It therefore took the filings on “good faith,”
but placed on hold all contested changes until it received “a
court order or a notarized document signed by all parties that
specifically states the name of the non-profit corporation and the
roster of officers and directors.”
¶23 Free Wesleyan informed the Division that it intended to
challenge the decision to place the changes on hold. At the
Division’s request, Free Wesleyan produced affidavits from its
members stating that they agreed to adopt the Amended
Articles. The Division then removed the “hold” and accepted the
Amended Articles. A note in the Division’s records says,
“Although Principals still in dispute, renewal authorized.”
¶24 The Division issued Free Wesleyan new “Certificates of
Existence.” The certificates listed the new corporate name and
certified that Free Wesleyan was “authorized to transact
business and was duly registered under the laws of the State of
Utah,” had “paid all fees and penalties owed,” had filed “its
most recent annual report,” and had not filed “Articles of
Dissolution.”
¶25 Later, the RMC filed a separate district court action
against Free Wesleyan, seeking a declaratory judgment that the
mail-in vote was not authorized and that “its claimed results are
null and void.” In response, Free Wesleyan filed a motion to
consolidate the RMC’s action with its own. The motion said that
each of the parties claim the “control and access to the same
property,” and “[c]onsolidation will enable one Court to
adjudicate all issues that have been raised as to the Church
Property in one action.” It also noted that the district court
would “necessarily decide” all of the parties’ claims by
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“determining whether the [Church] . . . properly amended its
articles of incorporation and changed its name.” See Utah Code
Ann. § 78B-6-403(1) (LexisNexis 2018) (“When declaratory relief
is sought all persons shall be made parties who have or claim
any interest which would be affected by the declaration . . . .”).
¶26 The district court granted Free Wesleyan’s motion to
consolidate the two actions. After discovery, the RMC and
Ma’afu filed a joint motion for partial summary judgment. They
argued that Free Wesleyan’s actions, including electing a new
board and filing the Amended Articles, were invalid because the
mail-in vote did not comply with the Discipline, which,
according to them, had been incorporated by reference into the
Original Articles. They asked the district court to issue an order
invalidating the changes and restoring the corporation’s name
and principals to what they had been before the mail-in vote.
¶27 Free Wesleyan opposed the motion on three grounds.
First, it argued that the court lacked subject matter jurisdiction
because the RMC and Ma’afu failed to exhaust their
administrative remedies with the Division. Second, it asserted
that the RMC and Ma’afu lacked standing because they were not
members of the corporation and had no independent interest in
its internal actions. Third, it argued that the Amended Articles
were valid because they were approved according to the
procedures detailed in the corporation’s governing documents.
¶28 The district court granted the motion for partial summary
judgment. It rejected Free Wesleyan’s exhaustion of
administrative remedies argument, stating that “the Division
made no determination regarding the parties’ rights, the validity
of the vote by mail, or the [Amended] Articles.” Thus, there was
nothing “before the Court to indicate this action should be
considered as an appeal from a determination made by the
Division.”
¶29 Next, the court determined that it “need not decide
whether the RMC or [Ma’afu] would have standing to bring
20170637-CA 9 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
their claims” because Free Wesleyan placed the validity of its
actions at issue when it asserted its claims against Ma’afu. Thus,
the RMC and Ma’afu had “the ability to file any relevant
motions regarding the subject matter of [Free Wesleyan’s]
claims.”
¶30 The court then analyzed whether Free Wesleyan’s actions
were valid under the corporation’s governing documents.
Recognizing the constitutional restraints of a dispute over
church property, the court based its determination on “sources
that do not implicate matters of church doctrine.” (Citing Jones v.
Wolf, 443 U.S. 595, 603 (1979).) The court stated that, if it were to
ignore the provisions of the Discipline, Free Wesleyan’s actions
likely were valid. (Citing Utah Code Ann. § 16-6a-709
(LexisNexis 2013) (allowing nonprofit corporations to hold
special meetings and hold votes by mail, “[u]nless otherwise
provided by the bylaws”).) But the court concluded the
Discipline was “expressly incorporated by reference into the
Original Articles.” Thus, to “give full effect to all the provisions
of the Original Articles,” the court read “the Original Articles to
require compliance with the Discipline before holding a special
meeting or attempting to amend the [Original Articles].”
¶31 And because “[n]either the vote by mail nor the meeting
held by the board of directors before holding the vote complied
with the Discipline”—the meeting was not called by the
conference superintendent nor were the voting members
physically present at the meeting—“[n]one of the subsequent
Corporate Actions were undertaken with authority” and were
therefore invalid. After granting the motion for partial summary
judgment, the court concluded that the other issues raised by the
parties, “including the competing claims regarding ownership of
church property,” were moot.
¶32 The RMC notified the Division of the district court’s
decision, and the Division rescinded the Amended Articles,
reinstated the Original Articles, and reverted the corporation’s
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name and officers of record to those in place prior to the mail-in
vote. Thereafter, the district court entered a final judgment in
which it invalidated Free Wesleyan’s actions and “restored the
corporation to how it existed prior to the improper corporate
acts.”
¶33 Free Wesleyan appeals.
ISSUES AND STANDARDS OF REVIEW
¶34 Free Wesleyan appeals the district court’s judgment on
three grounds. First, it argues the district court lacked subject
matter jurisdiction because the RMC and Ma’afu failed to
exhaust their administrative remedies. “[W]hether a court lacks
subject matter jurisdiction due to a party’s failure to exhaust
administrative remedies is a question of law, reviewed for
correctness.” Republic Outdoor Advert., LC v. Utah Dep’t of Transp.,
2011 UT App 198, ¶ 12, 258 P.3d 619.
¶35 Second, it argues the RMC and Ma’afu did not
have standing to challenge the validity of the Amended Articles.
“A standing determination is primarily a question of law,
although there may be factual findings that bear on the issue.”
Angel Inv’rs, LLC v. Garrity, 2009 UT 40, ¶ 14, 216 P.3d 944(quotation simplified). “[W]e review the district court’s legal
determinations for correctness but review its factual
determinations with some deference.” Id.¶36 Third, it argues the district court erred in granting
summary judgment to the RMC and Ma’afu on their claim that
the mail-in vote was not valid under the corporation’s governing
documents. We review the district court’s grant of summary
judgment for correctness. Hertzske v. Snyder, 2017 UT 4, ¶ 6, 390
P.3d 307. Summary judgment is appropriate when “the moving
party shows that there is no genuine dispute as to any material
fact and the moving party is entitled to judgment as a matter of
law.” Utah R. Civ. P. 56(a).
20170637-CA 11 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
ANALYSIS
I. Exhaustion of Administrative Remedies
¶37 Free Wesleyan argues the district court lacked subject
matter jurisdiction because the RMC and Ma’afu failed to
exhaust their administrative remedies. We disagree. Because the
Division does not make discretionary decisions regarding the
validity of corporate actions, the RMC and Ma’afu were not
required to exhaust any administrative remedies with it before
seeking a declaratory judgment in the district court. See Walker
Bank & Trust Co. v. Taylor, 390 P.2d 592, 595 (Utah 1964)
(determining that the exhaustion of administrative remedies
requirement “only applies where the discretion of an
administrative officer or body, acting . . . pursuant to statutory
directive, is in question”).
¶38 “District courts have original jurisdiction in all matters
except as limited by statute.” Osmond Senior Living LLC v. Utah
Dep’t of Public Safety, 2018 UT App 218, ¶ 11 (quotation
simplified). Thus, district “courts have subject matter jurisdiction
over a legal claim unless adjudicative authority for that claim is
specifically delegated to an administrative agency.” Id.(quotation simplified). If adjudicative authority has been
delegated to an administrative agency, “a party seeking relief
must exhaust ‘all administrative remedies available’ before
seeking judicial review.” Ramsay v. Kane County Human Res.
Special Service Dist., 2014 UT 5, ¶ 9, 322 P.3d 1163 (quoting Utah
Code section 63G-4-401(2)).
¶39 “The basic purpose underlying the doctrine of exhaustion
of administrative remedies is to allow an administrative agency
to perform functions within its special competence—to make a
factual record, to apply its expertise, and to correct its own errors
so as to moot judicial controversies.” Maverik Country Stores, Inc.
v. Industrial Comm’n of Utah, 860 P.2d 944, 947 (Utah Ct. App.
1993) (quotation simplified). Accordingly, we require parties to
20170637-CA 12 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
exhaust administrative remedies only “where the discretion of
an administrative officer, or body, acting . . . pursuant to
statutory directive, is in question.” Taylor, 390 P.2d at 595.
¶40 Free Wesleyan argues the Division made a discretionary
determination of the validity of the Amended Articles by
(1) filing them and (2) issuing certificates of existence that
reflected the changes they contained. But contrary to Free
Wesleyan’s arguments, the Division made no such
determination.
¶41 Under the Utah Revised Nonprofit Corporation Act (the
Act), the Division’s duty to file documents is “ministerial.” Utah
Code Ann. § 16-6a-110(4)(a) (LexisNexis 2013). By definition, a
ministerial duty “requires neither the exercise of official
discretion nor judgment.” Ministerial Duty, Black’s Law
Dictionary 617 (10th ed. 2014). As the Act explains,
the [D]ivision’s filing or refusal to file a document
does not: (i) affect the validity or invalidity of the
document in whole or in part; (ii) relate to the
correctness or incorrectness of information
contained in the document; or (iii) create a
presumption that: (A) the document is valid or
invalid; or (B) information contained in the
document is correct or incorrect.
Utah Code Ann. § 16-6a-110(4)(a). Instead, the Division is
required to file a document if the document satisfies certain
statutory requirements. Id. § 16-6a-110(1) (“If a document
delivered to the [D]ivision for filing satisfies the requirements of
Section 16-6a-105, the [D]ivision shall file the document.”).
¶42 Here, the Division confirmed to the parties that it lacked
adjudicative authority. In a letter, it stated that it could not
determine whether the corporate changes were made with
proper authority and would therefore place the changes on hold
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until it received a court order or an agreement signed by the
parties. Free Wesleyan attempts to inflate the Division’s
authority by citing Utah Code section 16-6a-203. That provision
states, “[T]he filing of the articles of incorporation by the
[D]ivision is conclusive proof that all conditions precedent to
incorporation have been satisfied.” Id. § 16-6a-203(2). 4 We
interpret this section to mean that when the Division files articles
of incorporation, or amended articles of incorporation, the
relevant entity is conclusively recognized in Utah as a nonprofit
corporation that is “in existence.” See Terry v. Wilkinson Farm
Service Co., 2007 UT App 369, ¶ 8, 173 P.3d 204.
¶43 Free Wesleyan also argues that, even if filing the
Amended Articles did not confirm their validity, issuing new
certificates of existence did. We are not persuaded.
¶44 A certificate of existence does not certify the legal validity
of the underlying corporate documents. Instead, a certificate of
existence allows the applicant to access “facts of record in the
[D]ivision.” Utah Code Ann. § 16-6a-113(2) (LexisNexis 2013).
Certificates list the “corporate name” and state “the corporation
is incorporated under the law of this state”; “the date of its
incorporation”; whether “all fees, taxes, and penalties owed to
this state have been paid”; the corporation’s “most recent annual
report” has been filed; “the articles of dissolution have not been
filed by the [D]ivision”; and “other facts of record in the
[D]ivision that may be requested by the applicant.” Id.¶45 Free Wesleyan notes that “a certificate issued by
the [D]ivision may be relied upon as conclusive evidence of
the facts set forth in the certificate.” Id. § 16-6a-113(3). We
agree with that statement, but “the facts set forth in the
4. As used in the Act, the term “articles of incorporation”
includes “amended articles of incorporation.” Utah Code Ann.
§ 16-6a-102(3)(a) (LexisNexis 2013).
20170637-CA 14 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
certificate” do not include a legal determination regarding the
validity of the corporation’s actions. Here, the new certificates
listed the corporation’s name and certified that it was authorized
to transact business, was duly registered under the laws of Utah,
had paid all fees and penalties, and had filed an annual report.
The certificates were conclusive evidence of those facts in the
sense that they accurately reflected the Division’s records
regarding the corporation.
¶46 In Terry, this court determined that the Division has
“initial, conclusive authority to determine corporate status.”
2007 UT App 369, ¶ 4 (quotation simplified). That is, it has the
authority to determine whether a nonprofit corporation exists
and is in good standing—meaning that the corporation has paid
the required taxes, fees, and so forth, has filed the required
reports, and has not filed articles of dissolution. Id. ¶ 3. The
Division exercises this authority, in part, by maintaining
corporate information and issuing “certificate[s] of existence.”
Utah Code Ann. § 16-6a-113(1) (“Any person may apply to the
[D]ivision for . . . a certificate of existence for a domestic
nonprofit corporation . . . .”); id. § 16-6a-104 (“The [D]ivision has
the power reasonably necessary to perform the duties required
of the [D]ivision under this chapter.”).
¶47 Thus, to challenge the existence of a nonprofit corporation,
a party must first exhaust its administrative remedies.
Utah Code Ann. § 16-6a-113; see also id. § 63G-4-401(1)–(2)
(LexisNexis 2016). But in this case, unlike Terry, the RMC and
Ma’afu do not claim the corporation does not exist. See Terry,
2007 UT App 369, ¶ 5 (“Terry argues that because Wilkinson’s
charter expired . . . , it suffered a dissolution and corporate
death . . . and was no longer in existence.” (quotation
simplified)). They claim instead that the mail-in vote was not
authorized by TUMC’s governing documents and thus the
changes purportedly made to those documents and to the
corporation by Free Wesleyan are invalid. Such a determination
is outside the Division’s authority.
20170637-CA 15 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
¶48 As the Division clarified on multiple occasions, it made no
determination regarding the validity of the Amended Articles or
Free Wesleyan’s actions. Even after the Division removed the
“hold” and reinstated the changes, its records noted that the
principals were “still in dispute.”
¶49 In sum, we agree with the district court that the Division
never made a determination regarding the validity of the mail-in
vote, the Amended Articles, or any of the resulting changes.
Those issues turn on legal questions that fall outside the
Division’s authority. And because the Division did not make
such a determination, the RMC and Ma’afu were not required to
raise their claims there before seeking relief in the district court.
Accordingly, the district court had subject matter jurisdiction
over the dispute.
II. Standing
¶50 Free Wesleyan argues that the RMC and Ma’afu lack
standing under the traditional test for standing to challenge the
validity of the Amended Articles. It further argues that, even if
the RMC and Ma’afu have standing under the traditional test,
the Act preempts their standing. We address each argument in
turn, concluding that the RMC and Ma’afu have standing under
the traditional test and that the Act does not preempt their
standing.
A. Traditional Standing
¶51 “In Utah, standing is a jurisdictional requirement” and
“[a] challenge to a party’s standing raises fundamental questions
regarding a court’s basic authority over the dispute.” Osguthorpe
v. Wolf Mountain Resorts, LC, 2010 UT 29, ¶ 14, 232 P.3d 999(quotation simplified). Generally, standing is satisfied when a
party has “a personal stake in the outcome of the dispute.” Victor
Plastering, Inc. v. Swanson Bldg. Materials, Inc., 2008 UT App 474,
¶ 9, 200 P.3d 657 (quotation simplified).
20170637-CA 16 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
¶52 “Not surprisingly, the vast majority of Utah standing law
has developed in the context of evaluating a plaintiff’s ability to
prosecute a claim, not a defendant’s ability to defend against it.”
MCG S. LLC v. Veracity Networks LLC, 2018 UT App 33, ¶ 15, 415
P.3d 1174 (quotation simplified). But the Utah Supreme Court
has established that “[w]here a plaintiff meets the jurisdictional
requirements to bring a cause of action, there is no need to
evaluate whether a defendant has standing to defend the
action.” Osguthorpe, 2010 UT 29, ¶ 14. “[A] defendant will
necessarily have a personal stake in the outcome of litigation
solely by virtue of being named as a party defendant.” MCG S.,
2018 UT App 33, ¶ 15.
¶53 Here, Free Wesleyan filed a complaint against Ma’afu,
seeking to exclude him from the church property and prevent
him from acting on behalf of the church. It also sought damages
for conversion, and attorney fees. In the complaint, Free
Wesleyan asserted that, “pursuant to a duly held ballot, [it] has
legally amended [the Original Articles]” and removed Ma’afu
from the board of directors, stripping him of “any authority to
represent the Corporation in any capacity.” Free Wesleyan’s
claims against Ma’afu turn on whether its actions in amending
the Original Articles and removing Ma’afu from his position on
the board of directors were valid. As a named defendant, Ma’afu
has standing to defend himself against Free Wesleyan’s lawsuit.
See id. And because the result of that lawsuit depends on
whether Free Wesleyan’s corporate actions were done with
proper authority, Ma’afu has standing to challenge those actions
as part of his defense.
¶54 Further, the district court permitted the RMC to intervene
as a defendant in Free Wesleyan’s lawsuit against Ma’afu. The
Utah Supreme Court has determined that, “[u]pon proper
intervention, a party has the ability to file any relevant motions
regarding the subject matter of the claims.” Osguthorpe, 2010 UT
29, ¶ 18. On appeal, Free Wesleyan does not challenge the
RMC’s intervention, and we see no reason to conclude it was
20170637-CA 17 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
improper. Free Wesleyan asserted in its complaint that it had
legally disaffiliated from the United Methodist denomination
and asked the district court for a declaration that it is the only
entity authorized to control the local church property,
“including granting or denying access to any person desiring to
enter and/or occupy [it].” With that declaration, Free Wesleyan
seeks to prevent local United Methodist members from accessing
the church property.
¶55 The RMC claims a denominational trust interest in the
local church property and argues that Free Wesleyan’s actions to
enjoin its use as a United Methodist church and convert it to a
Free Wesleyan church violate that trust. “When declaratory relief
is sought all persons shall be made parties who have or claim
any interest which would be affected by the declaration.” Utah
Code Ann. § 78B-6-403(1) (LexisNexis 2018). As the district court
noted in its summary judgment ruling, determining the validity
of Free Wesleyan’s corporate actions “could affect the RMC’s
rights and interests to the [church property] and the rights of the
members of the [local] church that the RMC purports to
represent.” Thus, as an intervenor-defendant, the RMC has
standing to file motions presenting arguments relevant to Free
Wesleyan’s claims. And as previously discussed, Free
Wesleyan’s declaratory judgment action turns on whether its
corporate actions were valid under the Original Articles.
Accordingly, the RMC has standing to argue that Free
Wesleyan’s corporate actions were invalid. See id.
¶56 The RMC also has standing as a plaintiff in the
consolidated case. In its lawsuit against Free Wesleyan, the
RMC, along with other parties affiliated with the United
Methodist Church, claimed that Free Wesleyan and its members
“believe that they are able to transfer and take control of all
church property contrary to the Discipline.” (Emphasis omitted.)
In support of that claim, the RMC asserted that Free Wesleyan
has “taken possession of real and personal property owned by
[TUMC]; sequestered and spent funds of [TUMC]; effected name
20170637-CA 18 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
changes to ownership records of real and personal property
owned by [TUMC]; and otherwise purported to assume use of
and control over [TUMC]’s primary place of worship.” And
“absent a court order, [Free Wesleyan] will not deliver
possession of the property at issue to [the RMC] or to . . . the
local church members who have retained their affiliation with
the [United Methodist Church].”
¶57 In Utah, the RMC is authorized to enforce the United
Methodist Church’s denominational interests in matters of
local church property, governance, and operations. In that
capacity, it has standing to enforce its claimed denominational
trust and assert that Free Wesleyan improperly claims
“ownership and control” of the local church property. See id.§ 78B-6-401(1) (LexisNexis 2018) (“Each district court has the
power to issue declaratory judgments determining rights, status,
and other legal relations within its respective jurisdiction.”).
Indeed, as the district court recognized in its summary judgment
ruling, a determination of the validity of Free Wesleyan’s
corporate actions “would necessarily resolve all of the parties’
claims.”
¶58 Free Wesleyan’s motion to consolidate the RMC’s action
with its own action further supports our conclusion that the
RMC has standing. In that motion, Free Wesleyan asserted that
each of the parties claim the right over the “control and access to
the same property,” and “[c]onsolidation will enable one Court
to adjudicate all issues that have been raised as to the Church
Property in one action.” It also noted that the district court
would necessarily decide all of the parties’ claims by
“determining whether [Free Wesleyan] properly amended its
articles of incorporation and changed its name.”
¶59 Free Wesleyan, Ma’afu, and the RMC each claim an
interest in the local church property. And a determination of
Free Wesleyan’s corporate actions is essential to each of those
claims. Thus, we conclude that the RMC and Ma’afu have
20170637-CA 19 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
standing to challenge the validity of Free Wesleyan’s corporate
actions, including the Amended Articles.
B. Statutory Standing
¶60 Free Wesleyan argues that the Act prohibits the RMC and
Ma’afu from challenging the validity of the corporation’s actions.
It notes that, “in certain instances, statutory provisions may
preempt the traditional elements of standing whereby only those
specifically granted standing under the statute may assert
standing.” (Citing R.P. v. K.S.W., 2014 UT App 38, ¶¶ 5, 28, 320
P.3d 1084.) And because the RMC and Ma’afu “are not listed in
the Act as appropriate parties to challenge the Amended
Articles,” Free Wesleyan argues, they “lack standing” to do so.
¶61 First, Free Wesleyan asserts that Utah Code section
16-6a-304 strips the RMC and Ma’afu of standing. That section
governs challenges to a nonprofit corporation’s “ultra vires”
acts. It provides:
(1) Except as provided in Subsection (2), the
validity of corporate action may not be challenged
on the ground that the nonprofit corporation lacks
or lacked power to act.
(2) A nonprofit corporation’s power to act may be
challenged: (a) in a proceeding against the
nonprofit corporation to enjoin the act brought by:
(i) a director; or (ii) one or more voting members in
a derivative proceeding; (b) in a proceeding by or
in the right of the nonprofit corporation, whether
directly, derivatively, or through a receiver,
trustee, or other legal representative, against an
incumbent or former director, officer, employee, or
agent of the nonprofit corporation; or (c) in a
proceeding by the attorney general under Section
16-6a-1414.
20170637-CA 20 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
Utah Code Ann. § 16-6a-304(1)–(2) (LexisNexis 2013).
¶62 After reviewing section 16-6a-304, we conclude that, in
this case, it does not preempt traditional standing. As the RMC
and Ma’afu note in their brief, Free Wesleyan—as the
corporation—initiated this case “to determine the ‘respective
ownership, rights and obligations’ of the parties based on the
mail-in [vote] initiated by the dissident members.” That is, in its
lawsuit against Ma’afu—a former director, according to Free
Wesleyan—the corporation requested a declaratory judgment
determining whether the mail-in vote and the subsequent
corporate actions were valid.
¶63 “The primary purpose of [section 16-6a-304] . . . is to
eliminate a corporation’s ability to avoid its obligations to third
parties by raising a defense of ultra vires.” Reedeker v. Salisbury,
952 P.2d 577, 588 (Utah Ct. App. 1998). It “provides third parties
a measure of certainty when contracting with a corporation in
good faith without knowledge of the details of its articles of
incorporation or of its internal operations.” Johannessen v. Canyon
Road Towers Owners Ass’n, 2002 UT App 332, ¶ 26, 57 P.3d 1119(quotation simplified); see also id. ¶ 26 n.4 (noting different
language in section 16-6a-304, enacted in 2001, from that of the
previous ultra vires statute, but applying the same rationale to
both provisions).
¶64 Here, Free Wesleyan asked the district court to determine
the legal status of the corporation in order to resolve uncertainty
regarding the parties’ ownership and control of the local church
property. Section 16-6a-304 does not prohibit such an action. See
Reedeker, 952 P.2d at 588 (determining that, notwithstanding the
statute “limiting ultra vires as a defense, . . . claims alleging
corporate ultra vires acts may still be maintained” but “[s]uch
actions would most likely be for declaratory or injunctive relief,
not damages”). Thus, notwithstanding section 16-6a-304, we
conclude that Ma’afu and the RMC—as parties to Free
Wesleyan’s action—have standing to challenge the validity of
20170637-CA 21 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
the mail-in vote as well as the subsequent corporate actions,
including the Amended Articles.
¶65 Next, Free Wesleyan asserts that the RMC and Ma’afu
“make several claims that are claims owned by the Corporation”
and argues that, under the Act, such claims must be brought in a
derivative proceeding. The Act establishes that “a proceeding
may be brought in the right of a nonprofit corporation” by “a
voting member” of the corporation or “a director in a nonprofit
corporation that does not have voting members.” Utah Code
Ann. § 16-6a-612(1) (LexisNexis 2013). According to Free
Wesleyan, section “16-6a-612 is fatal to the RMC [and Ma’afu’s]
claims” because they “are not voting members of the
Corporation and did not comply with this section of the Act.”
That is, it argues that the RMC and Ma’afu “are precluded by
[section] 16-6a-612 from having standing to raise [their] claims.”
¶66 We also reject this argument. Contrary to Free Wesleyan’s
assertions, the RMC and Ma’afu do not assert derivative claims.
The Act establishes that “[a] complainant may not commence a
derivative proceeding” unless the corporation itself refuses “to
take suitable action.” Id. § 16-6a-612(3)(a). As the RMC and
Ma’afu note in their brief, “a derivative action assumes that the
powers that control a corporation chose not to proceed to assert
a claim.” See id. Here, because the corporation initiated the
lawsuit, section 16-6a-612 does not apply. We therefore conclude
that section 16-6a-612 does not deprive the RMC and Ma’afu of
standing to challenge the mail-in vote and the subsequent
corporate actions. 5
5. Free Wesleyan also argues that Utah Code sections 16-6a-111
and 16-6a-203 strip the RMC and Ma’afu of standing. Section
16-6a-111 allows a party to appeal the Division’s refusal “to file a
document delivered to it for filing.” Utah Code Ann.
§ 16-6a-111 (LexisNexis 2013). Section 16-6a-203 establishes that
(continued…)
20170637-CA 22 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
¶67 In sum, the Act does not preempt traditional standing in
this case, and the RMC and Ma’afu—as parties to Free
Wesleyan’s lawsuit—have standing to challenge the mail-in vote
and the subsequent corporate actions.
III. Summary Judgment
¶68 Free Wesleyan contends on two grounds that the district
court erred in granting partial summary judgment to the RMC
and Ma’afu. First, it argues the district court erred in
determining that the mail-in vote was not authorized under the
corporation’s governing documents. Second, it argues that the
district court’s interpretation and application of the Discipline
violated the corporation’s and the corporation’s members’
constitutional rights. We discuss each argument in turn.
A. Validity of the Mail-in Vote
¶69 Free Wesleyan argues the district court erred in
determining that the mail-in vote was not authorized under the
corporation’s governing documents. We disagree. Because the
Discipline was incorporated by reference into the Original
Articles, and the mail-in vote did not comply with the Discipline,
we affirm the district court’s determination.
(…continued)
“[t]he filing of the articles of incorporation by the [D]ivision is
conclusive proof that all conditions precedent to incorporation
have been satisfied, except in a proceeding by the state” to
“cancel or revoke the incorporation” or “involuntarily dissolve
the nonprofit corporation.” Id. § 16-6a-203(2). But as previously
discussed, the Division did not make a decision regarding the
validity of the mail-in vote or the subsequent corporate actions.
See supra Part I. Thus, in this case, these provisions that deal with
the Division’s filing of documents do not strip the RMC and
Ma’afu of standing to challenge the corporation’s actions.
20170637-CA 23 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
¶70 A nonprofit corporation’s articles of incorporation,
together with the bylaws and the statute under which the
corporation was incorporated, “constitute a contract.” Okelberry
v. West Daniels Land Ass’n, 2005 UT App 327, ¶ 14, 120 P.3d 34(quotation simplified). And the nonprofit corporation “may not
act in any way not authorized” by those governing documents.
Id. (quotation simplified).
¶71 Further, “[p]arties may incorporate by reference into their
contract the terms of some other document.” Consolidated Realty
Group v. Sizzling Platter, Inc., 930 P.2d 268, 273 (Utah Ct. App.
1996) (quotation simplified). To incorporate a document by
reference, “the reference must be clear and unequivocal, and
must be called to the attention of the other party, the party must
consent thereto, and the terms of the incorporated document
must be known or easily available to the contracting parties.” Id.(quotation simplified).
¶72 Free Wesleyan asserts that, when the Original Articles
were executed, the Discipline’s terms were not known or easily
available to the corporation’s members. Free Wesleyan does not
point to any evidence to support that claim. Instead, it points to
the absence of proof, claiming “there is no evidence that the
terms of the Discipline were ever provided to the members of
the Corporation” and “without evidence to the contrary,” it
argues, “the proper inference is that the terms of the Discipline
were not known or easily available.” But contrary to Free
Wesleyan’s assertion, the undisputed evidence before the district
court supported its conclusion that the terms of the Discipline
were known or easily available to the corporation and its
members when the Original Articles were executed.
¶73 To become affiliated with the United Methodist Church,
local congregations must agree to adhere to and follow the
Discipline. The evidence in this case establishes that the
corporation and its members agreed to this requirement when
they executed the Original Articles. Indeed, the corporation’s
20170637-CA 24 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
stated purpose “is to conduct and operate a United Methodist
Church and congregation according to the Discipline.” The
Original Articles also state that “[a]ll title to real property bought
and sold by the [c]orporation shall be in full conformity with the
Discipline,” that the internal affairs of the corporation and the
corporation’s bylaws must “remain in accord with . . . the
Discipline,” and that “[t]he Board of Trustees shall . . . [be]
elected and organized as prescribed in the Discipline.”
Additionally, the same year the Original Articles were executed,
the corporation purchased property, and the grantor required
the property to be “used, kept and maintained as a place of
divine worship . . . subject to the Discipline.”
¶74 Following incorporation, the local congregation
functioned according to the Discipline for more than thirty years.
Of particular relevance here, it conducted annual Charge
Conferences, which were presided over by the district
superintendent. This is not surprising, given that the Discipline
is the governing document of the United Methodist Church, is
published every four years, and is made available to local
congregations. Because TUMC was a self-professed affiliate of
the United Methodist Church, it is unreasonable to infer that the
corporation and its members did not have access to the
Discipline when the Original Articles were executed. See Surety
Underwriters v. E & C Trucking, Inc., 2000 UT 71, ¶ 37, 10 P.3d 338(explaining that, on summary judgment, “[t]he law . . . does not
require unreasonable factual inferences, nor does it require that
the court turn a blind eye to reasonable inferences based on
uncontested facts”).
¶75 Free Wesleyan argues that such an inference is reasonable
because “the Discipline is a long and complex document,” and
the corporation’s members were “first generation Tongan
immigrants . . . with limited ability to worship in English.” But
the fact that a document is long and complex and that some of
the corporation’s members were first generation Tongan
immigrants does not, without more, suggest that the document
20170637-CA 25 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
was not either (1) known to those members who professed to
follow its terms or (2) easily available to them. “Under Utah law,
each party has the burden to read and understand the terms of a
contract before he or she affixes his or her signature to it.” ASC
Utah, Inc. v. Wolf Mountain Resorts, LC, 2010 UT 65, ¶ 28, 245 P.3d
184 (quotation simplified). Where, as here, the contract clearly
and unequivocally references an incorporated document, “[a]
party may not sign [the] contract and thereafter assert
ignorance” based on a lack of English proficiency. Id. (quotation
simplified); see also Semenov v. Hill, 1999 UT 58, ¶ 12, 982 P.2d 578(explaining that “the illiteracy of a party” is relevant to “the
existence of fraud in procuring a signature,” but “in the absence of
fraud or mistake he will be bound by all [the contract’s]
provisions”).
¶76 Thus, even accepting as true Free Wesleyan’s assertion
that the Discipline is a “long and complex document” and that
the corporation’s members were “first generation Tongan
immigrants,” no jury could reasonably infer based on those facts
alone that the Discipline’s terms were not “known or easily
available” to the corporation and its members when the Original
Articles were executed. See Sizzling Platter, 930 P.2d at 273.
¶77 Free Wesleyan argues next that, because the Discipline is
not specifically mentioned in the “Amendments” provision of
the Original Articles, TUMC did not intend the Discipline to
apply to that provision. This argument also is unavailing.
¶78 The “Amendments” provision states, “These Articles . . .
may be amended by the vote of at least two-thirds of the
members of the corporation present at the annual meeting or at a
special meeting of the corporation called for that purpose.”
Although this provision does not specifically reference the
Discipline, it also fails to distinguish a “special meeting” for
amendment purposes from the “special meetings” provided for
in the Discipline. To properly interpret the parties’ intent, we
must consider the “Amendments” provision “in relation to all
20170637-CA 26 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
the others, with a view toward giving effect to all and ignoring
none.” Café Rio, Inc. v. Larkin-Gifford-Overton, LLC, 2009 UT 27,
¶ 25, 207 P.3d 1235 (quotation simplified).
¶79 The Original Articles state that the corporation must
conduct and operate the local congregation according to the
Discipline, and that the corporation’s internal affairs must
remain in accord with the Discipline. Given these clear,
unequivocal references, we conclude that corporation and its
members intended the Discipline to apply to the entirety of the
Original Articles, including the “Amendments” provision.
¶80 Finally, we reject Free Wesleyan’s argument that the
Discipline permitted the mail-in vote. Under the Discipline, any
meeting—annual, special, or otherwise—must be presided over
and called by the district superintendent, and only members
present at those meetings are entitled to vote. Here, the mail-in
vote did not comply with those requirements.
¶81 We therefore conclude the district court did not err in
determining that the Discipline was incorporated by reference
into the Original Articles, and because of this, the mail-in vote
was unauthorized under the corporation’s governing
documents.
B. Constitutional Claims
¶82 Free Wesleyan argues that the “trial court’s interpretation
and application of the Discipline violated the corporation’s and
its members’ constitutional rights.” We disagree. The district
court’s analysis did not violate Free Wesleyan’s constitutional
rights because “no question of church doctrine is central to this
case.” Jeffs v. Stubbs, 970 P.2d 1234, 1244 (Utah 1998).
¶83 “The state has an obvious and legitimate interest in
the peaceful resolution of property disputes, and in providing a
civil forum where the ownership of church property can
be determined conclusively.” Jones v. Wolf, 443 U.S. 595, 602
20170637-CA 27 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
(1979). But the state and federal constitutions prohibit civil
courts “from resolving church property disputes on the basis of
religious doctrine and practice.” Id.; see also Jeffs, 970 P.2d at
1251–52.
¶84 Although courts may “open[] their doors to disputes
involving church property,” they must decide those disputes
“without resolving the underlying controversies over religious
doctrine.” Jeffs, 970 P.2d at 1244 (quotation simplified).
Essentially, courts “must treat property disputes between
religious factions in the same manner they treat disputes among
other voluntary associations.” Id. at 1251 (quotation simplified).
But a court’s analysis should be “carefully crafted to be the least
restrictive means available to further the state’s compelling
interest . . . in a manner that minimizes the burden upon free
exercise.” Id.
¶85 Considering these principles, the district court’s
interpretation and application of the Discipline was
constitutionally sound. In resolving the dispute, the court looked
to the corporation’s governing documents, “without inquiring
into matters of church doctrine.” The Discipline requires any
meeting of the Charge Conference or the Church Conference to
be presided over and called by the district superintendent. The
Discipline does not authorize mail-in voting. Instead, at a Charge
Conference, “[t]he members present and voting at any duly
announced meeting shall constitute a quorum.” And at a Church
Conference, the vote extends only to “members of the local
church present at [the] meetings.”
¶86 Free Wesleyan argues that these matters relate to “faith
and doctrine.” We disagree. Whether a corporate meeting must
be called and presided over by a certain person and whether
voting members must be present at a meeting are not matters of
religious doctrine or faith. Indeed, the district court would
clearly have considered these issues in a “dispute[] among other
voluntary associations.” Id. at 1251.
20170637-CA 28 2019 UT App 41Free Wesleyan Church of Tonga v. Ma'afu
¶87 Free Wesleyan seems to make a “slippery slope”
argument, contending that “there would be no end to the
intrusion of government into religious matters” if “the
interpretation of the Discipline in the manner pursued by the
[district] court” were allowed. Essentially, because “the
Discipline is a religious document, setting forth religious goals
and religious means to accomplish religious purposes,” it asserts
that any interpretation of that document “violated [Free
Wesleyan’s] constitutional rights.”
¶88 But, as stated, the law provides standards to help courts
avoid such constitutional issues. In Utah, courts must “decide
church property disputes without resolving underlying
controversies over religious doctrine.” Id. at 1244. Here, the court
interpreted the Discipline according to those standards.
¶89 In sum, the district court’s analysis did not violate Free
Wesleyan’s constitutional rights because “no question of church
doctrine is central to this case.” Id.
CONCLUSION
¶90 The RMC and Ma’afu were not required to exhaust any
administrative remedies before seeking relief in the district
court. They also have standing to assert their claims against Free
Wesleyan. And the district court did not err in granting partial
summary judgment to the RMC and Ma’afu on their claim that
the mail-in vote was not authorized by the corporation’s
governing documents. We affirm.
20170637-CA 29 2019 UT App 41