Opinion
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 07CC10169, Franz E. Miller, Judge.
Varner & Brandt and Daniel A. Reed for Plaintiffs and Appellants.
Allenbaugh | Samini | Ghosheh, Steven I. Hochfelsen, Bobby Samini and Nader R. Ghosheh for Defendants and Respondents.
OPINION
RYLAARSDAM, ACTING P. J.
Plaintiffs Atef Helmy, Talat Radwan, and Javed Chak appeal from the judgment in a declaratory relief action over the membership and control of the board of directors of a nonprofit public benefit corporation named the Orange County Islamic Foundation (OCIF). The trial court held the letter of resignation submitted by defendant Ribhi Ghosheh was effective immediately but, pending appointment of a successor, defendant Mohannad Malas remained a member of OCIF’s board even after submitting his letter of resignation. The court also determined defendants were the prevailing parties and entitled to recover their costs.
Plaintiffs appeal, contending the trial court erred by finding Malas remained a director of OCIF. They also challenge the award of costs to defendants. We conclude the judgment must be affirmed.
FACTS AND PROCEDURAL BACKGROUND
Plaintiffs’ verified complaint alleges OCIF is a nonprofit corporation incorporated under the laws of the State of California. As of January 2006, OCIF’s nine-member board of directors consisted of Mokhtar Shawky, plaintiffs, plus defendants Jihan Assaf, Farid El-Kasm, Mutia Assaf, Ghosheh, and Malas.
After someone complained that OCIF’s board had engaged in unauthorized and possibly illegal activities, the board commissioned an investigation. The results of the investigation were presented to the board in July and it thereafter adopted several recommendations.
On August 8, defendants Ghosheh and Malas submitted letters of resignation from the board. Ghosheh’s letter declared, in relevant part, “This letter serves as my formal resignation, effective immediately, as a Director of the Board of the [OCIF].” Malas’s letter stated as follows: “This letter is to formally submit my resignation as a member of the Board of Directors of OCIF. [¶] I would like to thank my fellow Board members for the opportunity to serve with you during the past years. I wish you and OCIF the very best of luck in the years to come.” Shortly thereafter, the board removed Jihan Assaf as a board member.
According to the complaint, Ghosheh, Malas, and Jihan Assaf subsequently sought reinstatement as board members. In 2007, defendants allegedly contacted the bank where OCIF maintained its accounts, had the names of the authorized signatories changed, and thereafter made unauthorized disbursements from the accounts. The complaint also alleged unnamed defendants, without board approval, submitted instructions to the California Secretary of State seeking to change the names of the corporate officers and board members. Plaintiffs sought a declaration “that they are the true and correct [d]irectors of OCIF; the rightful signatories to all bank accounts; the sole persons authorized to create, modify or terminate such accounts; and the sole persons authorized to handle any other funds received and disbursed by this entity.”
Defendants’ verified answer admitted the allegations of OCIF’s corporate status, the board’s membership as of January 2006, the complaint about the propriety of OCIF’s activities and the board’s investigation of that complaint, plus its adoption of recommendations. The answer denied the allegations that Ghosheh, Malas, and Jihan Assaf were no longer board members. As for Ghosheh and Malas, defendants admitted they had resigned, but denied “the Board ‘accepted’ the resignations or any implication that... Ghosheh or... Malas are not presently Board members.” Defendants also admitted contacting the corporation’s bank, but alleged they did so only “upon learning that [p]laintiffs had removed the names of the existing signatories and added additional names to the account,” and that they simply instructed the bank to delete these changes. On information and belief, defendants denied the allegations concerning efforts to file amendments with the Secretary of State. Finally, defendants denied the existence of a controversy over “the composition of the Board,” “the rightful signatories of OCIF bank accounts or funds[,] or authority to make deposits into or disbursements therefrom.”
The parties filed a stipulation of facts, identifying the parties to the action and authenticating OCIF’s bylaws. In part, the bylaws provided board members “will continue to serve in this capacity until a member of the Board is replaced according to article 7.06 herein. A member... shall continue to serve until his successor is selected and installed.” (Bylaws, § 7.02.) Article 7.06 declares, in part, “Termination may be made by any member of the Board by voluntary request.... A vacancy for such termination will be filled according to section 7.04 herein.” Under the latter section, “[a]n exiting member of the Board shall have the right to appoint his successor provided such successor is acceptable to the Majority of the Board.” (Bylaws, § 7.04.)
The parties also stipulated to a list of controverted issues, including “[w]hether, pursuant to the By[]Laws of the OCIF and the California Corporations Code,... Malas and... Ghosheh remain as active members of the Board until their replacements are nominated and installed.”
The case proceeded to trial, however no record of the evidence presented by the parties is contained in the appellate record. According to the judgment, “[a]t the close of [p]laintiffs’ case, [d]efendants made a motion for judgment and waived further presentation of evidence.”
The judgment determined OCIF’s board of directors consisted of Shawky, plaintiffs, Jihan Assaf and the other defendants except for Ghosheh. Concerning Malas, the court held he “is a director of the Board... until such time as his successor is selected and installed according to the... By[]Laws...,” and that “Malas has the right to nominate his successor pursuant to Section 7.04 of the By[]Laws....” Finally, citing the fact “[p]laintiffs are not entitled to the declaration sought... and that the net result of the issues subject to declaratory relief ha[ve] been determined in [d]efendants’ favor,” the court ruled defendants were the prevailing parties under Code of Civil Procedure section 1032, subdivision (a)(4).
DISCUSSION
1. Standard of Review
Generally, a declaratory judgment is reviewed under an abuse of discretion standard. (Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 892-893.) “The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason.” (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478.) On appeal, “we employ the equivalent of the substantial evidence test by accepting the trial court’s resolution of credibility and conflicting substantial evidence, and its choice of possible reasonable inferences. [Citation.]” (In re Executive Life Ins. Co. (1995) 32 Cal.App.4th 344, 358; accord Galbiso v. Orosi Public Utility Dist. (2008) 167 Cal.App.4th 1063, 1078.)
But here, the appellate record is limited to: (1) An appellants’ appendix containing the pleadings, the parties’ stipulations of fact and controverted issues, documentary evidence, and judgment; (2) a respondents’ appendix consisting of a trial brief; and (3) a partial reporter’s transcript covering only the afternoon session of the last day of trial where the judge gave an explanation of his decision. As such, our review is limited to the purely legal issues presented by the parties.
Where an “appeal is presented on the judgment roll... the evidence is not before this court....” (Montaldo v. Hires Bottling Co. (1943) 59 Cal.App.2d 642, 646; see also National Secretarial Service, Inc. v. Froehlich (1989) 210 Cal.App.3d 510, 522 [“‘It is elementary and fundamental that on a clerk’s transcript appeal the appellate court must conclusively presume that the evidence is ample to sustain the findings’”].) Thus, “we are confined to a determination of the questions as to whether the complaint states a cause of action; whether the findings are within the issues; whether the judgment is supported by the findings and whether reversible error appears upon the face of the record. [Citations.] The findings should receive a liberal construction to uphold rather than to defeat the judgment. [Citation.]” (Montaldo v. Hires Bottling Co., supra, 59 Cal.App.2d at p. 646.) Since no issue is presented concerning the first three questions, the sole issue presented here is whether, on its face, the record reflects the trial court committed reversible error.
2. The Trial Court’s Factual Determination
The foregoing limitation on appellate review defeats plaintiffs’ claim the trial court erred by construing Malas’s resignation letter as being effective at some future date. In his oral statement of decision at the completion of trial, the judge found “the language by Dr. Ghosheh resigning effective immediately indicated an attempt to be off the board immediately and to give up his right to appoint a successor,” while “Mr. Malas’... resignation does not indicate that..., and so the court does not find an intention in his letter of resignation to give up his right to continue on the board until his successor is appointed.” Plaintiffs now argue “there is no evidence by which the [t]rial [c]ourt c[ould] conclude... there exists an absence of an intention by Malas to resign immediately” and “[a]ny reasonable person sitting on the OCIF [b]oard of [d]irectors would [so] interpret Malas’ written resignation” letter.
Generally, “‘An appellate court is not bound by a construction of the contract based solely upon the terms of the written instrument without the aid of evidence [citations], where there is no conflict in the evidence [citations], or a determination has been made upon incompetent evidence [citation].’ [Citations.]” (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) But “[i]nterpretation of a written instrument becomes solely a judicial function only when it is based on the words of the instrument alone, when there is no conflict in the extrinsic evidence, or a determination was made based on incompetent evidence. [Citations.]” (City of Hope Nat. Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375, 395, fn. omitted.) Thus, if “the intent of the parties at the time the contract was executed depends on the credibility of extrinsic evidence, that credibility determination and the interpretation of the contract are questions of fact that may properly be resolved by the [trier of fact] [citation].” (Ibid.)
The trial of this matter covered several days. The record reflects there was testimony presented concerning the resignation notices, and the trial judge did not expressly state he was relying solely on a construction of the documentary evidence in reaching his decision. Unlike Ghosheh’s resignation letter, that unambiguously declared it was a “formal resignation, effective immediately,” Malas’s letter merely “submit[ted his] resignation” to the board. It did not clearly indicate when the resignation would become effective. To the extent there was testimony concerning Ghosheh’s and Malas’s intent, we must presume it supports the trial court’s finding.
Contrary to plaintiffs claim the onus of preparing an adequate appellate record fell on them, not defendants. “It is incumbent upon the appellant to make it affirmatively appear that error was committed by the trial court and to present a transcript which affirmatively shows on its face that error. [Citations.]” (Hudspeth v. Earlywine (1964) 225 Cal.App.2d 759, 762; accord Utz v. Aureguy (1952) 109 Cal.App.2d 803, 807 [same]; 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 628, pp. 704-706.) As noted, we must assume the evidence supports of the trial court’s determination Malas intended to remain on the board until the appointment of his successor.
3. The Trial Court’s Construction of the Corporations Code and Bylaws
Citing the judge’s comment that “[n]otwithstanding the statutory provisions in this area,... the by[]laws control,” plaintiffs contend the trial court erred by disregarding Corporations Code section 5224, subdivision (c) and relying on OCIF’s bylaws to find Malas remained on the board “until his successor is selected.” We disagree.
Corporations Code section 5224, subdivision (c) declares, “Any director may resign effective upon giving written notice to the chairman of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.” Under article 7.06 of OCIF’s bylaws, a board member can terminate his or her membership “by voluntary request.” But section 7.02 nonetheless provides “[b]oard members... continue to serve... until a member... is replaced,” and section 7.04 gives “[a]n exiting member... the right to appoint his successor provided such successor is acceptable to the Majority of the Board.”
Merely because the bylaws governing vacancies on OCIF’s board deviate from Corporations Code section 5224, subdivision (c) does not render them invalid. We note Corporations Code section 5224, subdivision (c) is permissive in nature. It states a “director may resign effective upon giving written notice,” and that “a successor may be elected to take office when the resignation becomes effective.” (Italics added.) “Courts routinely construe the word ‘may’ as permissive,” and interpreting the word “‘“‘as equivalent to “must”... is proper only where [the] sense of [the] entire enactment requires it or it is necessary to carry out legislative intention.’” [Citations.]’ [Citation.]” (Jones v. Catholic Healthcare West (2007) 147 Cal.App.4th 300, 307; see also SWAB Financial v. E*Trade Securities (2007) 150 Cal.App.4th 1181, 1197 [“The word ‘may’ is permissive rather than mandatory”].) Nothing in the relevant statutory framework suggests the Legislature intended “may” as used in Corporations Code section 5224, subdivision (c) to mean either “shall” or “must.”
Furthermore, courts construe bylaws to sustain their validity whenever possible. (Olincy v. Merle Norman Cosmetics, Inc. (1962) 200 Cal.App.2d 260, 272 [a bylaw amendment adopted at board meeting attended by only three of five directors was held invalid where the bylaw then in force provided that four members were necessary for quorum contrary to statute]; see also Sanchez v. Grain Growers Assn. (1981) 123 Cal.App.3d 665, 672.) Corporations Code section 5151 declares a nonprofit public benefit corporation’s bylaws “may contain provision, not in conflict with law or the articles, for the management of the activities and for the conduct of the affairs of the corporation....” (Corp. Code § 5151, subd. (c); see also Corp. Code, § 212, subd. (b).)
“‘A by[]law of a private corporation is a rule or law adopted by it for its internal government, and to regulate the conduct and prescribe the rights and duties of its members towards itself and among themselves in reference to the management of its affairs.... The legislature may prescribe the formalities to be observed in their enactment, and may limit the scope and subjects for which they may be enacted; but in the absence of any restriction by the legislature, the propriety or character of the by[]laws is to be determined by the corporation itself....’” (Olincy v. Merle Norman Cosmetics, Inc., supra, 200 Cal.App.2d at p. 267.)
Other relevant provisions of the Corporations Code reflect a Legislative intent to allow a nonprofit corporation to determine the process by which a director can serve a term of office, resign, and select a successor to fill the resulting vacancy. Subdivision (a) of section 5224, specifying the manner in which a board of directors may fill a vacancy, also contains the proviso “[u]nless otherwise provided in the articles or bylaws....” (Corp. Code, § 5224, subd. (a).) Furthermore, Corporations Code section 5220, subdivision (b) states “[u]nless the articles or bylaws otherwise provide, each director, including a director elected to fill a vacancy shall hold office until the expiration of the term for which he is elected and until a successor has been elected and qualified....” (Corp. Code § 5220, subd. (b).) This language is essentially identical to section 7.02 of OCIF’s bylaws. “In the construction of statutes, the primary goal of the court is to ascertain and give effect to the intent of the Legislature. [Citations.]... [¶]... The words used ‘must be construed in context, and statutes must be harmonized, both internally and with each other, to the extent possible.’ [Citations.]” (Young v. Gannon (2002) 97 Cal.App.4th 209, 223; see also California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist. (1997) 14 Cal.4th 627, 642.)
The cases cited by plaintiffs do not compel a different result. Security Investors Realty Co. v. Superior Court (1929) 101 Cal.App. 450 held a plaintiff failed to properly serve the defendant corporation by merely delivering copies of the summons and complaint to a person after the latter had resigned as corporate secretary and a board member. Although the corporation’s bylaws provided a board member or officer served for the term specified and until election and qualification or appointment of his or her successor, the Court of Appeal relied on the common law rule that “‘[t]he fact that a statute requires directors, unless removed, to continue in office until their successors are appointed, does not prevent a director from resigning at any time....’” (Id. at p. 451; see also Annot., When Resignation of Officer of Private Corporation Becomes Effective (1922) 20 A.L.R. 267.) By finding Ghosheh’s resignation to be immediately effective, the trial court acknowledged OCIF’s board members retained the right to resign at any time and forego their right to choose and participate in the selection of a successor.
In Seal of Gold Mining Co. v. Slater (1911) 161 Cal. 621, one issue concerned whether a quorum of board members were present at a board meeting where one member had already submitted a letter of resignation “‘to take effect upon acceptance....’” (Id. at p. 626.) The Supreme Court affirmed, finding “there was evidence sufficient to warrant the trial court in believing that [the resignation] was not accepted by the board until” three days later. (Ibid.) Nothing in the present ruling conflicts with the Supreme Court’s decision.
Mayo v. Interment Properties, Inc. (1942) 53 Cal.App.2d 654 is to the same effect. During a board meeting, a director submitted his written resignation to take effect upon the election and qualification of a successor and thereafter participated in the election of his successor. On appeal, it was argued a board member “‘whose resignation... creates the vacancy cannot vote upon his successor....’” (Id. at p. 658.) Citing former Civil Code section 306 and Seal of Gold Mining Co. v. Slater, supra, 161 Cal. 621, the Court of Appeal disagreed: “‘The board of directors has power to accept the resignation of a director, and to elect his successor at the same meeting, but a director who has tendered his resignation to take effect upon acceptance does not cease to be a director until acceptance of his resignation, and may therefore participate in a meeting and fill out a quorum. [Citation.]’” (Mayo v. Interment Properties, Inc., supra, 53 Cal.App.2d at p. 658.)
These cases recognize that under certain circumstances, a director may continue to participate in board activities after submitting his or her resignation. The wording of Malas’ resignation was ambiguous concerning its effective date. Relying on the evidence and the terms of OCIF’s bylaws, the court found it would only become effective upon the election of his successor. Thus, we conclude the trial court did not err by relying on the bylaws to determine the effective date of Malas’ resignation.
4. The Prevailing Party Finding
Finally, plaintiffs contend the trial court erred in finding defendants’ were the prevailing party entitled to recover their costs of suit.
Code of Civil Procedure section 1032, subdivision (a)(4) defines the phrase “prevailing party” for the purpose of awarding costs. In part, it declares “[w]hen any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties....” (Code Civ. Proc., § 1032, subd. (a)(4).) “Where the prevailing party is one not specified, [Code of Civil Procedure section 1032,] subdivision (a)(4) permits the trial court to determine the prevailing party and then allow costs or not, or to apportion costs, in its discretion.” (Texas Commerce Bank v. Garamendi (1994) 28 Cal.App.4th 1234, 1248-1249, fn. omitted.)
The foregoing principles apply in this circumstance. Plaintiffs’ sought only declaratory relief and neither party obtained a monetary award in its favor. (Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 188 [“Generally, when a party falls squarely within one of the... situations enumerated in the definition of a prevailing party under [Code Civ. Proc.,] section 1032, that party is entitled to recover costs as a matter of right,” but “[i]n other circumstances, the trial court exercises its discretion to determine the prevailing party, ‘comparing the relief sought with that obtained, along with the parties’ litigation objectives as disclosed by their pleadings, briefs, and other such sources’”].)
Plaintiffs achieved limited success in this action. The court agreed that Ghosheh was no longer a board member, but rejected their efforts to both remove Jihan Assaf and Malas, and gain sole control of OCIF’s finances and operations. Consequently, we conclude the trial court did not abuse its discretion by declaring the defendants prevailing parties and entitled to recover their costs.
DISPOSITION
The judgment is affirmed. Respondents shall recover their costs on appeal.
WE CONCUR: ARONSON, J., IKOLA, J.