Opinion
H049797
05-30-2023
BALWANT BIRLA et al., Plaintiffs, Cross-Defendants, and Respondents, v. RAJINDER K. SHARMA, Defendant, Cross-Complainant and Appellant.
NOT TO BE PUBLISHED
(Santa Clara County Super. Ct. No. 17-CV-313096)
Grover, J.
The subject of this litigation is the composition of the board of directors for a nonprofit religious corporation. Both plaintiff Balwant Birla and defendant Rajinder Sharma claim to be members of the board, and each claims the other is not. Birla filed suit on behalf of the corporation and requested an order decreeing who the board members are. Sharma cross-complained for the same relief and asserted causes of action for breach of fiduciary duty and related claims against Birla.
Birla moved for summary adjudication. The trial court granted the motion, determining the board consists of Birla and the people identified in his pleadings, but does not include Sharma. The court also summarily adjudicated most of the causes of action in Sharma's cross-complaint, deciding them against Sharma as a matter of law after finding that his challenge to the board's composition is barred by the statute of limitations and that he lacks standing to bring claims on the corporation's behalf.
Based on our review of the entire record, it appears that Sharma's challenge to the board's composition derives from corporate actions that in some cases were taken more than 20 years ago. The time for challenging those actions has long since passed. As a result, Sharma's opposition to the current board composition and the claims for relief he brings on the corporation's behalf necessarily fail. We therefore affirm the judgment.
I. BACKGROUND
The corporation at issue is Hindu Temple Southbay, a nonprofit religious corporation formed in 1992 to establish a Hindu temple and community center. The parties do not dispute Sharma was a founder of the corporation and one of its original board members. Their perspectives differ on what happened after that.
According to Birla, Sharma stopped regularly attending board meetings and was removed as a director by vote of the board in 1998 (and again in 2000, because the board wanted to make certain its action was effective). Though no longer in a formal leadership role, Sharma continued to worship at the temple and stayed involved with its affairs. In July 2017, Sharma, with the assistance of the corporation's treasurer, Raj Bhanot, went to the bank where the corporation maintained its accounts and moved its deposits to a new account the current board members were unable to access. To regain control of its accounts, the corporation (with Birla acting on its behalf) filed suit against Sharma and Bhanot. The complaint alleged a cause of action under Corporations Code section 9418 for a decree determining the composition of the board. It also included causes of action for declaratory relief and an accounting, and for breach of fiduciary duty against Bhanot. The corporation sought provisional relief in the form of a temporary order determining the composition of the board and identifying who had authority to control the corporation's funds. The trial court granted that request, making a provisional finding that the board is composed of Birla and Bhanot, along with four others. The court found Sharma is not a director and ordered that he "relinquish all manner of access" to the corporation's bank accounts.
Sharma responded to Birla's suit with a cross-complaint alleging his own Corporations Code section 9418 claim to determine board members. The crosscomplaint alleged Birla improperly gained control of the corporation over a number of years through actions that violated the corporate bylaws and "were done to further the individual goals of Birla and to isolate and strip Sharma of the authority and powers conferred upon him in 1992." Sharma alleged he remains a current board member because his removals from the board in 1998 and 2000 similarly violated the bylaws. The cross-complaint also contained causes of action for declaratory relief and an accounting, and for breach of fiduciary duty and unfair business practices against Birla and the other directors individually.
Birla, along with the other board members named as cross-defendants, moved for summary adjudication. Birla asked the court to summarily adjudicate his cause of action for determination of board composition. The cross-defendants also requested summary adjudication of Sharma's claims for breach of fiduciary duty, declaratory relief, and an accounting. The trial court granted the motion in its entirety.
The corporation and Birla dismissed their remaining causes of action, and Sharma's cause of action for unfair business practices was tried to the court. The trial court found insufficient evidence to prove the claim and entered judgment against Sharma. He now appeals, challenging the order granting summary adjudication.
II. DISCUSSION
A. Summary Adjudication was Proper on Birla'S Claim for Determination of Board Composition
Corporations Code section 9418 provides a mechanism for the court to determine the composition of the board of directors for a nonprofit religious corporation when there is a dispute about the validity of a director's appointment. (Corp. Code, § 9418.) Such an action can be brought by any director of the corporation; and as a remedy the court can issue an order declaring who is entitled to the office of director or requiring that a new election take place. (Corp. Code, § 9418, subd. (c).)
A plaintiff obtains summary adjudication of a cause of action by showing there is no viable defense to it. (See Code Civ. Proc., § 437c, subd. (a)(1).) Summary adjudication is appropriate when the evidence submitted shows there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) Appellate review of a decision granting summary adjudication is de novo. (Sharufa v. Festival Fun Parks, LLC (2020) 49 Cal.App.5th 493, 497.)
Sharma argues the summary adjudication procedure cannot be used to resolve a cause of action under Corporations Code section 9418 because such a claim can only be decided after the taking of live testimony. We reject that argument, as it is not supported by authority. No requirement of that kind is mentioned anywhere in the statute. And summary adjudication is broadly authorized for any "action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding." (Code Civ. Proc., § 437c, subd. (a)(1).)
In support of the motion for summary adjudication, Birla submitted evidence that the corporation's board consists of the members he identified in his complaint-himself, Ashwin Patel, Sanjay Agarwal, Hitesh Patel, Surajit Sengupta, and Raj Bhanot. The evidence consists of declarations from each of the identified members (aside from Bhanot who is aligned with Sharma, Birla's opponent in this litigation), in which each asserts under oath that the board is currently composed of Birla, Sengupta, Agarwal, Hitesh Patel, Ashwin Patel, and Bhanot. Each declarant indicates the year of his appointment (1992 for Birla, "at least 20 years" ago for Sengupta, 2005 for Agarwal, 2005 for Hitesh Patel, and 2014 for Ashwin Patel). Each also asserts that no other board members have been elected, and each denies ever having nominated or voted for Sharma to be a director.
In opposition, Sharma argued the appointments of those directors are invalid because they violated corporate bylaws. He presented evidence intended to show there was no quorum at the meetings when some of the appointments occurred. He also pointed to a lack of records reflecting the appointments, and the failure of certain directors to have an independent recollection of how and when they were elected. Sharma further argued that his removal from the board, in 1998 and again in 2000, was invalid because of lack of quorum and violation of meeting location requirements.
Sharma attempts to create a dispute about the composition of the board by casting doubt on the validity of actions taken by the corporation, specifically the appointments of each of the board members and his own removal from the board. But as the trial court correctly ruled, it is too late for Sharma to challenge those actions. The applicable statute of limitations for challenging a corporate action is at most the four years allowed under Code of Civil Procedure section 343, the catch-all statute for actions where a limitations period is not otherwise specified. Birla commenced this litigation in 2017. Most of the actions Sharma challenges in his cross-complaint happened well beyond four years before: his removal from the board occurred, at the latest, in 2000; Birla's appointment in 1992; appointments of Hitesh Patel and Agarwal in 2005; and Sengupta over 20 years ago. Any challenge to those corporate actions is barred by the statute of limitations, regardless of whether the challenge is framed as an affirmative claim for relief (as it is in Sharma's cross-complaint) or, in this context, as a defense to Birla's request for an order determining the identity of the board members. (Schuman v. Ignatin (2010) 191 Cal.App.4th 255, 266 [statute of limitations bars litigating an issue as a defense that would be time barred if asserted as an affirmative claim for relief].) The lone exception is the appointment of Ashwin Patel, which happened in 2014, less than four years before this suit. But regarding that appointment, Sharma argues only that there is an absence of evidence to support a finding that Ashwin Patel is a director. That argument cannot succeed given that the record contains both Ashwin Patel's own declaration that he was elected in 2014, and declarations from every board member save Bhanot confirming Ashwin Patel is currently a director. Sharma has not demonstrated a triable issue of fact regarding Ashwin Patel's status as a director.
Whether presented as a defense to Birla's suit or as a claim for affirmative relief, Sharma is challenging the validity of actions that occurred many years ago. Litigating issues so long after the fact is proscribed not only because memories are no longer fresh and relevant evidence harder to find, but also because it would undermine reliance on actions perceived as settled matters. (See Jordache Enterprises, Inc. v. Brobeck, Phleger &Harrison (1998) 18 Cal.4th 739, 755 ["Limitations statutes are intended to enable defendants to marshal evidence while memories and facts are fresh and to provide defendants with repose for past acts. [Citations.] ... [T]he legislative goal underlying limitations statutes is to require diligent prosecution of known claims so that legal affairs can have their necessary finality and predictability and so that claims can be resolved while evidence remains reasonably available and fresh."].) Sharma's arguments against the validity of the corporate actions (that witnesses have no independent recollection, no records have been produced to confirm the actions, and the records that have been produced appear to contain conflicting information) themselves illustrate the rationale for imposing time limits on commencing litigation.
Sharma's challenge to his removal from the board and to the appointments of most current directors is time barred. Birla and the corporation have shown beyond dispute that Sharma has no defense to their claim seeking a determination of board members under Corporations Code section 9418. The trial court properly granted summary adjudication of that cause of action in favor of the plaintiffs.
B. Summary Adjudication was Proper on Sharma'S Cross-Claims
A defendant (or in this case, cross-defendant) obtains summary adjudication by showing a cause of action is without merit because, based on the undisputed facts, an essential element of the claim cannot be established. (Severin Mobile Towing, Inc. v JPMorgan Chase Bank, N.A. (2021) 65 Cal.App.5th 292, 302.) The claims in Sharma's cross-complaint that were summarily adjudicated are his causes of action to determine board composition under Corporations Code section 9418; breach of fiduciary duty; declaratory relief; and an accounting.
Regarding Sharma's Corporations Code section 9418 claim, the resolution of Birla's competing claim for that relief (which we have already discussed) means Sharma's necessarily fails-the court cannot decree that Sharma is a board member when it has already found, in adjudicating Birla's claim, that Sharma is not a board member. In addition, the finding that Sharma is not a board member deprives him of standing to bring a Corporations Code section 9418 claim. (See Corp. Code, § 9418, subd. (a) [allowing an action only by a director, member, or someone with a right to vote in an election being challenged].)
The summary adjudication of Birla's claim to determine board composition also leaves Sharma without standing to pursue his remaining causes of action for breach of fiduciary duty, declaratory relief, and an accounting. With those causes of action Sharma asserts rights belonging not to him but to the corporation. The claims are therefore derivative in nature, brought not on Sharma's own behalf but on behalf of the corporation. (Smith v. Tele-Communication, Inc. (1982) 134 Cal.App.3d 338, 342-343.) Sharma does not dispute the derivative nature of the claims. Birla points out that it is unclear whether a derivative action is authorized in the case of a nonprofit religious corporation. We need not decide the question here because even assuming such an action is allowed, Sharma has no authority to bring it. The judicial determination that Sharma is not a director of the corporation means he has no standing to bring claims on its behalf. He is not a director or shareholder, nor does he hold any other status that would allow him to assert derivative claims. (Ibid.)
The undisputed facts establish Sharma is without standing to bring his remaining claims. The trial court therefore correctly ruled that the cross-defendants are entitled to summary adjudication on those claims.
C. Sharma'S Evidentiary Objections Do Not Affect the Result
Sharma asserted 59 objections to the evidence submitted in support of Birla's summary adjudication motion. Given the repetitive nature of the objections, it is unsurprising that the trial court did not rule on them. Most are patently meritless and the challenged evidence clearly admissible.
Although Sharma correctly notes that his evidentiary objections are preserved for appeal despite not being ruled on by the trial court (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 535), merely preserving an issue for appeal does not mean it has to be decided when doing so would make no difference to the outcome. The resolution of this appeal turns on application of the statute of limitations, a legal issue on which most of Sharma's evidentiary objections have no bearing. Even if those objections were sustained, it would not change the dispositive fact that Sharma is challenging corporate actions which took place far beyond the maximum four-year limitations period. Of the small number of Sharma's objections with some potential to affect the outcome, none has merit. He objects to the portions of the current board member declarations confirming their status and tenure as directors. Those objections if sustained would leave Birla without the evidence needed to support summary adjudication of his affirmative claim. But the statements in the declarations are admissible.
Citing Evidence Code section 403, Sharma asserts that the statements regarding board membership lack foundation and are conclusionary. Evidence Code section 403 conditions admissibility of testimony on proof of a declarant's personal knowledge about its subject matter. The subject matter here is the identity of members of the board. Each declarant has personal knowledge of whether they are serving as a corporate director and for how long. Serving on a corporate board also provides each member with a basis for knowing who else is serving on the board. The fact that the statements embrace the ultimate issue presented in Birla's claim make them relevant, not inadmissible.
Sharma also objects to the statements as violating the secondary evidence rule in Evidence Code section 1521, which affects the admissibility of evidence offered to prove the content of a document where the material terms of the document are in dispute. A statement that a person is currently serving on a corporate board is a recitation of fact from personal knowledge; it is not evidence offered to prove the content of a document and Evidence Code section 1521 therefore has no application.
III. DISPOSITION
The judgment is affirmed. Costs are awarded to respondents by operation of California Rules of Court, rule 8.278, subdivision (a)(1).
WE CONCUR: Greenwood, P. J. Danner, J.