Opinion
D074785
01-21-2020
ZACHARY VOUGA, Plaintiff and Appellant, v. OFELIA ALVARADO et al., Defendants and Respondents. BRYAN PEASE et al., Plaintiffs and Appellants, v. BOARD OF DIRECTORS OF OCEAN BEACH PEOPLE'S FOOD COOPERATIVE et al., Defendants and Respondents.
Law Office of Bryan W. Pease, Bryan W. Pease, Parisa Ijadi-Maghsoodi; Law Office of Mitch C. Wallis and Mitch C. Wallis for Plaintiffs and Appellants. Boyd Law, Karie J. Boyd, Thomas D. Georgianna, Emiliza P. San Diego and Salvatore N. Padula for Defendants and Respondents.
ORDER MODIFYING OPINION AND DENYING REHEARING NO CHANGE IN JUDGMENT THE COURT:
It is ordered that the opinion filed herein on January 21, 2020, be modified as follows:
1. On page 12, delete footnote 2 and replace it with the following:
Petitioners claim the Committee never determined candidates must use an approved petition form. However, the trial court found the Committee "interpret[ed] the alleged ambiguity in the Bylaws" and promulgated a "required petition" form. (Italics omitted.) Although Petitioners orally requested a statement of decision, the trial court denied the request as untimely because it was made, as the trial court expressly noted, "after the court had announced its decision." (See Code Civ. Proc., § 632 [a request for a statement of decision in a one-day trial must "be made prior to the submission of the matter for decision"]; see also Cal. Rules of Court, rule 2.900(a).) In the absence of a timely request for a statement of decision, we must apply the doctrine of implied findings and "presume the trial court 'made all factual findings necessary to support the judgment for which substantial evidence exists in the record.' " (LSREF2 Clover Property 4, LLC v. Festival Retail Fund 1, LP (2016) 3 Cal.App.5th 1067, 1076.) The Committee's meeting minutes stating non-recommended candidates "must have our petition form" and its subsequent creation of an approved petition form constitute substantial evidence supporting a finding that the Committee determined non-recommended candidates must use its approved petition form.
2. On page 13, delete the fourth sentence from the top of the page and replace with the following:
However, at the time, the pertinent portion of Section 4.3 had not yet been enacted, the Committee had not yet created an approved form for non-recommended candidates to use, and the Committee did not inform candidates to use any Committee-approved form.
3. On page 17, insert footnote 5 at the end of the third sentence from the bottom of the page with the following:
Petitioners filed a petition for rehearing in which they conceded "the three-year term in question is now up, [so] declaring ... the 2017 'election' ... to be invalid would have no effect whatsoever on the Co-op. The term is over."
There is no change in the judgment.
The petition for rehearing is denied.
McCONNELL, P. J. Copies to: All parties
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2017-00042158-CLR-WM-CTL) (Super. Ct. No. 37-2017-00005368-CU-MC-CTL) APPEAL from a judgment of the Superior Court of San Diego County, Gregory W. Pollack, Judge. Affirmed. Law Office of Bryan W. Pease, Bryan W. Pease, Parisa Ijadi-Maghsoodi; Law Office of Mitch C. Wallis and Mitch C. Wallis for Plaintiffs and Appellants. Boyd Law, Karie J. Boyd, Thomas D. Georgianna, Emiliza P. San Diego and Salvatore N. Padula for Defendants and Respondents.
I
INTRODUCTION
Petitioners Bryan Pease, Oscar Bogoslaw, Paola Potts, Robert Silvern, Mitch Wallis, and Zachary Vouga appeal a judgment in favor of respondents Ocean Beach People's Food Cooperative (Co-op) and Ofelia Alvarado following a bench trial. The Co-op declared Pease ineligible to run in an election for its board of directors after he used a self-created petition form to solicit signatures from Co-op members in support of his candidacy, rather than using the Co-op's approved petition form.
Petitioners filed this action under Corporations Code section 12485 seeking to invalidate the election on grounds that the Co-op's determination of ineligibility violated its corporate bylaws. The trial court denied the petitioners' requested relief and declared the election valid. We agree, and affirm.
II
BACKGROUND
A
The Co-op is a cooperative corporation and the operator of a grocery store specializing in the sale of healthy and ecologically sustainable foods. Its business affairs are managed by a board of directors with nine directors, including six members and three employees. Directors serve for three-year terms and members vote to fill vacant director positions in staggered annual elections.
Eligible members interested in filling vacant director positions must interview with the nominating committee (Committee), which at all times relevant to this appeal consisted of four board members and one nonboard member. Under article VI, section 6.2 of the Co-op bylaws (Section 6.2), the Committee is responsible for soliciting, screening, and nominating candidates for vacant director positions. If the Committee recommends a candidate, he or she will appear on the ballot, which is distributed to Co-op members.
If the Committee does not recommend a candidate, he or she may submit to the Committee a petition in support of the nomination signed by 100 members. This procedure is governed by article IV, section 4.3 of the Co-op bylaws (Section 4.3), which provides in pertinent part as follows: "If the Nominating Committee does not recommend a candidate, the candidate is given a specified amount of time to generate and return to the Nominating Committee a petition signed by 100 owners."
B
Six months prior to the annual board election scheduled for spring 2017, the Committee met to discuss, among other issues, the petition procedure that would apply if a candidate were not to receive the Committee's recommendation. It determined candidates must use a petition form prepared by the Committee, as evidenced by minutes from the meeting stating as follows: "If [we] don't recommend a candidate, must have our petition form [sic]." Thereafter, a Committee member prepared and circulated to other Committee members a petition form for non-recommended candidates.
The Committee's petition form included blank spaces for Co-op members to print their names, affix their signatures, and write their member numbers. Additionally, it included a proviso at the top of the petition stating as follows:
"Per Section 4.3 of the Ocean Beach People's Organic Food Market bylaws:
" 'If the Nominating Committee does not recommend a candidate, the candidate is given a specific amount of time to generate and return to the Nominating Committee a petition signed by 100 owner [sic].'
"__________ has chosen to use the petition option to be a candidate in the Ocean Beach People's Food Cooperative 2017 Board of Directors' election. In order to have his/her name placed on the ballot, he/she will need to collect the signature of 100 eligible cooperative owners (members). Your name and owner number will be verified for eligibility.' "
Pease declared his candidacy for one of the vacant member-director positions and interviewed with the Committee on December 15, 2016. On the date of his interview, he signed a set of Committee-generated rules and procedures governing the election (Rules and Procedures). The Rules and Procedures signed by Pease stated as follows: "In order for a candidate's name to be included on the ballot, the candidate must either be recommended by the Nominating Committee or present a petition with the signatures of at least 100 current Co-Op owners supporting their candidacy. Petition forms will be provided by request and must be turned in no later than January 30, 2017."
The Committee voted not to recommend Pease for one of the vacant member-director positions. A few days after the Committee's vote, but before the Committee notified the candidates of its recommendations, Pease wrote the Committee cochairs an e- mail stating he did not believe he would receive a recommendation due to disagreements he had with certain Committee members. He asked the cochairs "when petitions [sic] forms [would] be available to be picked up, or if these forms [could] be emailed, or if [he could] use [his] own form ...." Pease informed the cochairs he needed to know the answers to these questions because he was going to be out of town the following week and it was going to be a "busy week, so [he] need[ed] to know if [he was] going to have to physically come to the store and pick up petitions" before he left.
The following day, one of the Committee cochairs sent Pease an e-mail on behalf of the Committee notifying him he had not been recommended for the board. In response to Pease's questions regarding the petition process, she advised him as follows: "Petitions are available for pick-up at the Membership Desk on the 2nd floor. You will receive a receipt upon picking up a petition and a second receipt when the completed petition is turned in. Petitions need to be turned in no later than 9pm [sic] on January 30, 2017 ...." She did not advise him he could use a self-created petition form. The next day, Pease picked up the approved petition form.
One month later and five days before the deadline to submit completed petitions, Pease wrote a letter to the Committee cochairs stating the petition form he was provided was "inadequate and improper." He argued Section 4.3 required the candidate—not the Committee—to prepare any petition form necessary to qualify for the ballot. He also objected to the proviso at the top of the Committee's approved form, which he claimed was "an improper attempt to deter people from signing the petition." For these ostensible reasons, he told the cochairs he intended to use his own petition form and threatened legal action if the Committee did not accept his petition. On the deadline to submit completed petitions, Pease submitted over 100 valid member signatures on a self-created petition form, which did not include the proviso contained in the Committee's approved petition form.
The Committee cochairs informed Pease he did not use the Committee's "required" petition form. They explained the Committee's petition form "serve[d] to inform Co-Op owners that a petition is not a regular procedure for all candidates," "maintain[ed] a level playing field for all non-recommended candidates," and "provid[ed] a clear and direct understanding of the process for all Co-Op owners presented with the petition." Because Pease did not use the Committee's petition form, he was informed he was ineligible to run in the election.
A week after the Committee informed Pease of his ineligibility—and three days after Pease filed the litigation discussed post—an executive committee authorized to exercise the authority of the board approved a resolution pertaining to Section 4.3. It stated: "Pursuant to Section 11.1 of the by-laws, the Nominating Committee has interpreted Section 4.3 to require that the non-recommended candidate must use the form provided by the Nominating Committee in order to ensure a fair and responsible process for all candidates. [¶] [Text of Section 4.3 omitted.] [¶] The Board therefore agrees that this process has been implemented and has been approved by the Board."
C
On February 10, 2017, Pease filed a petition for writ of mandate against the board and board president Ofelia Alvarado alleging the Committee's rejection of his self-created petition violated Section 4.3. Based on this allegation, he requested a writ of mandate compelling respondents to allow him to run for a seat in the upcoming election and an injunction requiring the board to comply with the Co-op bylaws in future elections.
However, the board election occurred in March 2017, Committee-recommended candidates were elected to fill the vacant director positions, and election results were ratified in April 2017, before resolution of Pease's claims. Therefore, he filed an amended petition requesting the election be declared invalid and a new election be held. The amended petition added four other Co-op members as petitioners and a cause of action under Corporations Code section 12485. A sixth Co-op member filed a separate action challenging the board election, which was consolidated with the original action.
After substantial discovery and written motion practice, the parties agreed to have the cases decided based on written briefing. In their briefing, petitioners argued Section 4.3 authorized a candidate to submit a self-created petition to appear on the ballot because it stated a candidate must be given time to "generate and return" a petition to the Committee. They contended the word " 'generate' " unambiguously indicated "it [was] the duty of the candidate to create a petition, not the Nominating Committee" or the board. Further, they argued respondents' interpretation of Section 4.3—one authorizing the Committee to require candidates to use its approved petition form—was unreasonable because it required candidates to "deliver a message" with which they disagreed.
In response, respondents argued Section 4.3 was ambiguous because the word " 'generate' " can mean " 'to produce or create.' " Thus, Section 4.3 could be interpreted merely to require that a candidate " 'show or provide' " his or her petition to the Committee. Respondents also emphasized that section 11.1 of the Co-op bylaws (Section 11.1) grants the board the power to interpret and apply the bylaws. According to respondents, the board properly exercised its authority in this case when it subsequently ratified the Committee's recommendations and interpretation of Section 4.3.
After receiving the parties' briefing, the trial court declared the election valid. As the court explained, the word " 'generate' " in Section 4.3 reasonably could be interpreted to mean " 'show or provide for consideration, inspection, or use.' " Alternatively, it found " 'generate' " reasonably could be interpreted to mean "the obtaining [of] signatures on the petition, not the mere preparation of the petition form." Finally, it found " 'return' " reasonably could be interpreted to mean " 'bring, take, give, or send back.' " The court opined this definition "support[ed r]espondents' interpretation that the [p]etition form to be returned [was] the form which had been provided to Pease, not one that he might develop on his own." Given these findings, the court concluded there was nothing improper about the Committee requiring candidates to use an approved petition form.
The trial court also denied petitioners' requested relief on grounds that the balance of hardships tilted sharply in favor of respondents. It found the effect of granting petitioners' request may be to "unwind" all decisions made by the board since April 2017. Further, at the hearing on the parties' briefing, the court opined that Pease could have run for vacant director positions in 2018, but chose not to do so. For all these reasons, the court declared the election valid and entered judgment in respondents' favor.
During the hearing on petitioners' request to invalidate the election, Pease told the trial court it would have taken him eight hours to collect the member signatures necessary to qualify for the 2018 election. Pease told the court it would have been too difficult and time consuming to undertake such an effort.
III
DISCUSSION
A
This appeal requires us to interpret the bylaws of a cooperative corporation and apply them to a determination declaring a member ineligible to run in an election for vacant positions on the corporation's board of directors. The member was declared ineligible to run for the positions on grounds he did not use the corporation's approved petition form to collect member signatures supporting the nomination. Petitioners claim the ineligibility determination violates one of the corporation's bylaws.
Corporate bylaws are interpreted "according to the general rules governing the construction of statutes and contracts." (American Center for Education, Inc. v. Cavnar (1972) 26 Cal.App.3d 26, 32.) If the express language of the bylaws is susceptible to only one interpretation, "the judicial inquiry into meaning is finished and the clear and explicit meaning governs." (Scheenstra v. California Dairies, Inc. (2013) 213 Cal.App.4th 370, 390.) By contrast, if it is " 'capable of more than one reasonable interpretation, it is ambiguous [citations], and it is the court's task to determine the ultimate construction to be placed on the ambiguous language by applying the standard rules of interpretation in order to give effect to the mutual intention of the parties [citation].' " (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 524-525.)
B
In accordance with the interpretive principles discussed ante, we begin our analysis by examining the express language of the relevant bylaw. Section 4.3 (situated in an article entitled Board of Directors) states in pertinent part as follows: "If the Nominating Committee does not recommend a candidate, the candidate is given a specified amount of time to generate and return to the Nominating Committee a petition signed by 100 owners." (Italics added.)
Petitioners' challenge turns on the meaning of "generate and return" in Section 4.3. According to petitioners, the "dictionary definition of 'generate' is 'to produce or create' " and the "definition of the transitive form of 'return' according to Merriam Webster dictionary is 'to give (something, such as an official account to a superior.' " Adopting these definitions, petitioners contend Section 4.3 unambiguously requires candidates to use self-created petition forms to obtain access to the ballot.
We disagree. While petitioners' interpretation of Section 4.3 may be reasonable, it is not the only sensible construction of the bylaw. The Oxford English Dictionary defines the word "generate" to mean "produce," among other definitions. (6 Oxford English Dict. (2d ed. 1989) p. 435, col. 2.) Further, it defines the word "return" to mean "send (a person or thing) back again," among other definitions. (13 Oxford English Dict. (2d ed. 1989) at p. 806, col. 1.) These definitions are consistent with respondents' interpretation of Section 4.3, under which the Committee may require a candidate to obtain, produce, and send back a Committee-approved petition form. Therefore, we reject petitioners' claim that Section 4.3 unambiguously requires candidates to use self-created petition forms.
Because Section 4.3 is ambiguous, we examine the parties' construction of the bylaw before a dispute arose to discern their understanding of its meaning. (Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 753 [" 'The acts of the parties under the contract afford one of the most reliable means of arriving at their intention; and, while not conclusive, the construction thus given to a contract by the parties before any controversy has arisen as to its meaning will, when reasonable, be adopted and enforced by the courts.' "]; In re Tobacco Cases I (2010) 186 Cal.App.4th 42, 52 [" ' "[W]hen a contract is ambiguous, a construction given to it by the acts and conduct of the parties with knowledge of its terms, before any controversy has arisen as to its meaning, is entitled to great weight, and will, when reasonable, be adopted and enforced by the court." ' "].)
Examination of the parties' predispute conduct is fatal to petitioners' interpretation of Section 4.3. Prior to the challenged election, the Committee determined that non-recommended candidates must use an approved petition form. The Committee conveyed its determination to all candidates in the Rules and Procedures form Pease signed the day of his Committee interview, which stated, "Petition forms will be provided by request and must be turned in no later than January 30, 2017." From this conduct, it is clear the Committee did not view self-created petition forms as required or acceptable.
Petitioners claim the Committee never determined candidates must use an approved petition form. However, the trial court found the Committee "interpret[ed] the alleged ambiguity in the Bylaws" and promulgated a "required petition" form. (Italics omitted.) Petitioners did not file a timely request for a statement of decision. Therefore, under the doctrine of implied findings, we must "presume the trial court 'made all factual findings necessary to support the judgment for which substantial evidence exists in the record.' " (LSREF2 Clover Property 4, LLC v. Festival Retail Fund 1, LP (2016) 3 Cal.App.5th 1067, 1076.) The Committee's meeting minutes stating non-recommended candidates "must have our petition form" and its subsequent creation of an approved petition form constitute substantial evidence supporting a finding that the Committee determined non-recommended candidates must use its approved petition form.
Further, after his interview with the Committee, Pease sent an e-mail to the Committee cochairs asking for clarification as to when petition forms would be available for pick up or, alternatively, whether he could use a self-created petition form. He received a response informing him petition forms were available for pick up and the details of the pickup procedure. Importantly, he was not told he could use his own petition form. Thereafter, he went to the designated pickup location and procured the approved petition form. Pease's act of collecting the approved petition form—an act he apparently wanted to avoid due to his schedule—indicates he too did not believe he must, or even could, use a self-created petition form. In view of the parties' prelitigation conduct, we reject petitioners' after-the-fact construction of Section 4.3.
Petitioners assert several additional arguments challenging the validity of the Committee's determination of ineligibility, none of which are persuasive. First, they claim the Committee had a "long[-]standing policy and practice" of allowing candidates to use self-created petition forms and Section 4.3 must be interpreted consistent with this policy and practice. The parties agree candidates have invoked the petition process after a non-recommendation once before, in 2010, and were permitted to use their own self-created petition forms on that occasion. However, at the time, the pertinent portion of Section 4.3 had not yet been enacted by the board, the Committee had not yet created an approved form for non-recommended candidates to use, and the Committee did not inform candidates to use any Committee-approved form. Rather, candidates were instructed to use self-created petition forms. Given these differences, we do not view the Committee's conduct in 2010 as relevant to the requirement it imposed in 2017.
Next, petitioners contend we must construe any ambiguity in the bylaws in favor of permitting candidates such as Pease to run for and hold office. The authorities on which they rely interpreted restrictions on a candidate's right to seek and hold public office, which " 'has been accorded special, sensitive protection as a fundamental and valuable constitutional right by our California courts.' " (Pease v. Zapf (2018) 26 Cal.App.5th 293, 306.) Petitioners' authorities do not concern restrictions on a candidate's ability to seek a board of director position for a private business entity, and we are aware of no fundamental or constitutional right to seek and hold such a position. Therefore, petitioners' interpretive argument is misplaced.
Petitioners argue this case implicates Pease's right to seek and hold office because the bylaws state the Co-op is committed to the creation of an "optimal democratic forum to meet the needs of [the] community." However, this stated value does not affect our analysis. The contested position in the election was a board of director position within a private business entity and not a position of public office, irrespective of whether the Co-op espoused a commitment to democratic values.
Next, petitioners contend the requirement that candidates use a Committee approved petition form violates Corporations Code section 12470, which requires that "reasonable nomination and election procedures" be made available to cooperative corporation members for the election of directors. (Ibid.; Braude v. Havenner (1974) 38 Cal.App.3d 526, 533, 530-534 (Braude) [nonprofit mutual benefit corporation's director election procedures were unfair and unlawful because they provided no " 'fair opportunity' " for members to vote for preferred candidates].) According to petitioners, the petition form approved by the Committee was unreasonable because it contained a "convoluted" and disparaging proviso that would have made it too difficult for Pease to collect member signatures supporting his nomination.
The proviso at the top of the Committee's approved petition form was neither convoluted nor disparaging to Pease or other non-recommended candidates. Using neutral language mirroring Section 4.3, the proviso merely stated a candidate not recommended by the Committee may have his or her name placed on the ballot by generating and returning to the Committee a petition signed by 100 owners. It had an instructional purpose for potential signatories unfamiliar with the pertinent election procedures or the bylaws governing the election. Further, it served to reduce potential confusion among signatories, who typically vote for board members on only one occasion annually and may have been unclear why they were being asked for their input twice in 2017—once on the petition form and a second time on the ballot. For these reasons, we conclude the proviso on the approved petition form was reasonable.
Finally, petitioners challenge the reasonableness of the approved petition form on grounds that Pease was not provided notice he must complete the form until after he collected signatures on his own petition form. The record indicates otherwise. As discussed ante, the Rules and Procedures stated "[p]etition forms will be provided" and the Committee instructed Pease to pick up the petition form, obtain a receipt upon pickup, and return the completed petition. Further, just days before the deadline to submit completed petition forms, Pease told the Committee he intended to submit signatures on a self-created petition form and threatened legal action if the Committee did not accept his self-created petition. Pease's threat of legal action is a clear indication he was aware of—though he disagreed with—the Committee's requirement that candidates had to use the approved petition form.
Based on the foregoing, we reject petitioners' contention that the Committee's promulgation of a mandatory petition form and subsequent determination of Pease's ineligibility violated Section 4.3. Rather, the Committee's acts were valid exercises of its authority to screen director candidates under Section 6.2. Further, the Committee-approved petition form was reasonable both in its content and the timing of its promulgation. For all these reasons, we affirm the judgment.
C
We also affirm the judgment, in the alternative, because the trial court did not err in its determination that the balance of hardships tipped sharply in respondents' favor. "An action to defeat a corporate election is a broad-based equity action in which the court may examine the entire transaction without being limited to technical or procedural issues and may adjust the rights of the parties to do justice among them." (Goss v. Edwards (1977) 68 Cal.App.3d 264, 271; see also Braude, supra, 38 Cal.App.3d at p. 530 [describing procedure to challenge corporate election as "equitable remedy"].)
When the trial court denied petitioners' request to invalidate the election, a full year had elapsed since the election. Now, as of the date of this opinion, nearly three years have elapsed—virtually the full duration of the contested director positions. Although the parties dispute the cause of the delay, it is undisputed the delay is inconsistent with the summary proceeding anticipated by the Corporations Code, which calls for hearings challenging board of director elections to be conducted within five days of the filing of a complaint. (Corp. Code, § 12485, subd. (b).) Based on the passage of time, the potential benefits arising from invalidation of the election would be minimal.
Petitioners blame respondents for the delay, claiming they "forc[ed] the parties to mediation" and opposed efforts to resolve the case expeditiously. Respondents blame petitioners for the delay, claiming they "insisted on serving discovery and deposing each available [b]oard member[.]" Regardless of the cause, it is apparent there was significant delay.
By contrast, the costs associated with invalidation of the election would be substantial. As the trial court opined, invalidation of the election potentially could render nearly three years of board decisions voidable or void. Further, a special election at this juncture would require the Co-op to incur financial costs borne by the Co-op's members, to the extent it is still possible to hold a special election prior to the regularly-scheduled 2020 director election. And, if a special election cannot be completed before the regularly-scheduled election, petitioners' challenge would be moot and remand would be an idle act. We will not order such an idle act. (In re Vincent S. (2001) 92 Cal.App.4th 1090, 1093 ["[T]he law does not require idle acts."].)
IV
DISPOSITION
The judgment is affirmed. Respondents are entitled to their costs on appeal.
McCONNELL, P. J. WE CONCUR: BENKE, J. IRION, J.