Summary 2005 WY 156

Summary of Decision issued December 5, 2005

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Case Name: Mueller, Daley v. Zimmer, Crittenden
Mueller, Daley v. Star Valley Ranch Ass’n & Board of Directors, Cox and Cox, Ohman & Brandstetter

Citation: 2005 WY 156

Docket Number: 05-9 & 05-10

Appeal from the District Court of Lincoln County, Honorable Dennis L. Sanderson, Judge

Representing Appellants (Plaintiffs): Robert J. Logan, Thayne, Wyoming.

Representing Appellees (Defendants): John R. Hursh of Central Wyoming Law Associates, P.C., Riverton, Wyoming for Appellees Zimmer and Crittenden; William K. Rounsborg of White and Steele, P.C., Denver, Colorado for Appellees Star Valley Ranch Association and Star Valley Ranch Association Board of Directors; and Donald F. Carey of Quane Smith, LLP, Idaho Falls, Idaho, for Appellees Cox and Cox, Ohman & Brandstetter.

Date of Decision: December 5, 2005

Issues: Whether the Court lacked subject matter jurisdiction. Whether the district court issued an appealable order because it’s ruling on Cox’s motion for summary judgment did not resolve all issues between Cox and Appellants. Whether the District Court properly granted Appellees’ Motion for Summary Judgment with respect to Appellants’ derivative claims concerning alleged salary overpayments to Crittenden and Zimmer when Appellants failed to come forward with competent and admissible evidence or identified any legal authority to allow Appellants to challenge the actions of the Board. Whether the hiring of Crittenden and Zimmer as general managers without a personal services contract was an ultra vires act. Consideration of the fraud, negligent misrepresentation, and conflict of interest claims against Cox and Cox, Ohman & Brandstetter. Whether the district court’s summary judgment on the declaratory judgment regarding the amendment of the Association’s bylaws should stand.

Holdings: The standard of review for appeals from a summary judgment depends upon the correctness of the dual findings that there is no genuine issue as to any material fact and that the prevailing party is entitled to judgment as a matter of law. When summary judgment motions are deemed denied by the lapse of 90 days from their filing, the district court does not lose jurisdiction because the denial of a summary judgment motion is not a final appealable order. Cox contended that the district court did not issue an appealable order for summary judgment because the judgment did not resolve all the issues between him and Appellants. All indications in the record are that the motion for summary judgment was the dismissal of all claims against Cox in their entirety. The district court order on Cox’s motion for summary judgment was a final, appealable order, and the Court has jurisdiction over the appeal.
Appellant’s allegation of fraud was not pleaded with particularity. There were no facts to support their claim. Whether or not Zimmer’s claim for overtime had merit or not is irrelevant to whether the mutual release he signed with the Board was valid. A contract made in settlement of claims is valid even if the claims settled are of doubtful worth. The business judgment rule is a standard of judicial review for director conduct. It presumes that business decisions are made by disinterested and independent directors on an informed basis and with a good faith belief that the decision will serve the best interests of the corporation. To overcome the business rule presumption, the shareholder plaintiff has the heavy burden of alleging and proving facts. Appellants have not alleged facts sufficient to rebut the presumption of the business judgment rule.
Appellant’s ultra vires claims against Zimmer and Crittenden were barred under subsection (a) of the Wyo. Stat. Ann. § 17-19-304 because Zimmer and Crittenden had completed their service as general managers. Ultra vires will not justify the reopening of a completely executed transaction.
The record does not contain any evidence to support a claim of fraud against Cox. The Court could not locate evidence to support an allegation that Cox failed to exercise reasonable care or competence in obtaining or communicating the information regarding Zimmer’s overtime claim to the Board. Wyo. Stat. Ann. § 17-19-831 prevents a corporate director of a nonprofit corporation from engaging in activity with the corporation in which the director has a direct or indirect interest unless certain specific procedures are followed by the governing board. The Court agreed with the district court conclusion that Cox was not doing business with the Association, but incurring expenses while furthering the Association’s business in his capacity as a director so the statute and bylaw were not applicable.
The district court determined that since a quorum was present and the amendment to the bylaws, increasing the number of directors from five to seven, received two-thirds of the votes present at the meeting, the amendment was effective under Art XI, Section 1, of the Association bylaws. The Court reviewed the record and agreed with the Association and the district court. The copy of the bylaws in the record contains a footnote that the bylaw was amended on June 24, 1995 which is the date of the disputed election. Without a cogent argument as to why this reference is not sufficient notice of the amendment under the Association’s bylaws, the Court stated they would not consider the matter further.
Pursuant to Wyo. Stat. Ann. § 17-9-630(d) relating to derivative suits, the Court, at the request of Cox and the Association, remanded to the district court for determination of attorney fees, costs and expenses because Appellants’ arguments were characterized by the failure to provide evidence in support of their allegations and by the repeated presentation of contentions that were not cogent or supported by citation to any relevant legal authority. Appellants were required to pay all of the defendants’ reasonable expenses, including counsel fees incurred in defending the claim that the employment of Zimmer and Crittenden were ultra vires.

The district court's summary judgments on Appellants’ derivative and declaratory judgment claims are affirmed. The cases were remanded to district court for a determination of costs and fees owed to defendants by Appellants for their frivolous and bad faith claims in their derivative action.

C.J. Hill delivered the opinion for the court.