Nelson v. WEB Water Development Ass'n, Inc.

507 N.W.2d 691, 1993 S.D. LEXIS 136, 1993 WL 435871
CourtSouth Dakota Supreme Court
DecidedOctober 27, 1993
Docket17966
StatusPublished
Cited by95 cases

This text of 507 N.W.2d 691 (Nelson v. WEB Water Development Ass'n, Inc.) is published on Counsel Stack Legal Research, covering South Dakota Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Nelson v. WEB Water Development Ass'n, Inc., 507 N.W.2d 691, 1993 S.D. LEXIS 136, 1993 WL 435871 (S.D. 1993).

Opinions

WUEST, Justice.

Willis J. Nelson (Nelson) appeals from a decision granting summary judgment to WEB . Water Development Association (WEB). We affirm in part, reverse in part and remand.

FACTS

Nelson was hired as manager of WEB, a non-profit corporation for water development, in March 1988. In August 1989, WEB and Nelson signed an employment contract in which WEB agreed to employ Nelson for three years. On December 9, 1989, new members of the WEB Board of Directors (Board) were elected, three of whom had campaigned that a change of management was needed at WEB. On January 17, 1990, without full Board authorization, a settlement was offered to Nelson if he would resign as WEB manager. He refused.

At a public WEB meeting on January 17, 1990, a motion was made to fire Nelson. Nelson’s job performance was then discussed; the motion carried and he was fired that day.

Nelson filed suit against WEB and the directors as individuals alleging breach of contract, conversion of salary, defamation, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, negligent or intentional infliction of emotional distress, conspiracy to breach the contract, interference with business relationship or expectancy, and requesting punitive damages. WEB was granted summary judgment; Nelson appeals.

Subsequent to the oral arguments before this court, a motion was made by Nelson to take judicial notice of article X of WEB’s articles of incorporation. Apparently, the trial court and lawyers were previously unaware of article X. We find that this court’s judicial notice of the article is proper. Nauman v. Nauman, 336 N.W.2d 662 (S.D.1983). In Nauman, we stated:

By both statute, SDCL 19-10-2(2) and 19-10-3, and case law, even though it be a fact of which the court does not possess actual present knowledge, State v. Larson, 81 S.D. 540, 138 N.W.2d 1 (1965), judicial notice may be taken of public or official records. Walz v. City of Hudson, 327 N.W.2d 120 (S.D.1982); Elfring v. Paterson, 66 S.D. 458, 285 N.W. 443 (1939).... It would be an idle act to remand the proceedings to find what we know, and can accept, as factual.

Nauman, 336 N.W.2d at 664-65. This authority allows judicial notice of the WEB articles of incorporation filed with the Secretary of State for the State of South Dakota.

STANDARD OF REVIEW

In reviewing a grant of summary judgment under SDCL 15-6-56(c) we must determine whether the moving party has demonstrated there is no genuine issue of material fact and he is entitled to judgment as a matter of law. Wilson v. Great Northern Ry. Co., 83 S.D. 207, 212, 157 N.W.2d 19, 21 (1968); Groseth Int’l, Inc. v. Tenneco, Inc., 410 N.W.2d 159, 164 (S.D.1987); Breen [694]*694v. Dakota Gear & Joint Co., 433 N.W.2d 221, 223 (S.D.1988). “The evidence must be viewed most favorably to the nonmoving party and reasonable doubts should be resolved against the moving party.” Groseth, 410 N.W.2d at 164 (citing Wilson, 157 N.W.2d at 21; Trapp v. Madera Pac., Inc., 390 N.W.2d 558 (S.D.1986)). Affirmance is proper if any basis exists which would support the trial court’s ruling. Breen, 433 N.W.2d at 223 (citing Blote v. First Fed. Sav. & Loan Ass’n, 422 N.W.2d 834, 837 (S.D.1988); Uken v. Sloat, 296 N.W.2d 540, 542 (S.D.1980)).

ANALYSIS

I. VALIDITY OF EMPLOYMENT CONTRACT BETWEEN WEB AND NELSON.

The WEB bylaws provide the Board of Directors with the authority to discharge an employee at the pleasure of the Board. WEB asserts that its otherwise valid contract with Nelson was void because it was beyond the power of the Board as expressed in the bylaws of the corporation to enter a valid employment contract for a specified term. Nelson claims that because South Dakota law gives corporations the power to enter into contracts, the Board possessed the authority to enter valid employment contracts independent from its authointy to terminate employment and thus, his contract is valid.

The bylaws of the WEB Corporation provide in part:

ARTICLE XIII
Section 1. The Board of Directors subject to the restrictions of the law, the Articles of Incorporation, and By-Laws, shall exercise all of the powers of the Corporation. Without prejudice to, or limitation upon, their general powers, it is hereby expressly provided that the Board shall have, and are given, full power and authority to perform the duties and functions hei’einafter set forth, to wit: [Emphasis added.]
⅝ ⅜ ⅜ ⅝ # ⅜
b. To select and appoint all officers, agents, or employees of the Corporation or remove all such agents or employees of the Corporation, at the pleasure of the Board, and to prescribe such duties and designate such powers as may be consistent with these By-Laws, and fix their compensation and pay for faithful services. [Emphasis added.]
ARTICLE XVI
[T]hese By-Laws may be altered, amended or repealed by a majority of the members at any regular or special meeting, provided the notice of such meeting shall have contained a copy of the proposed alternation, amendment or repeal.... Changes in the By-Laws may be proposed by the Board of Directors subject to review and approval of the membership at any annual or special meeting. Proposed changes by the Board of Directors must be included in the notice of the meeting.

The circuit court held there was no enforceable contract between Nelson and WEB because entering into a contract for a specified term was an amendment of the bylaws by the Board.

SDCL 47-22-33 provides, in part:

The power to alter, amend or repeal the bylaws or adopt new bylaws shall be vested in the board of directors unless otherwise provided in the articles of incorporation or the bylaws. The bylaws may contain any provisions for the regulation and management of the affairs of a corporation not inconsistent with law or the articles of incorporation.

Unfortunately, the trial court and parties were laboring without the benefit of article X of the articles of incorporation. As shall be seen, there is an apparent conflict between article XVI of the WEB bylaws and article X of the articles of incorporation. The bylaw provision of article XVI to the effect that the members may alter or amend the bylaws is clearly in disaccord with article X of the articles of incorporation which provides that the Board of Directors “shall be empowered to amend or repeal the By-Laws, from time to time, by means of a 66% favorable vote, ■ after proper notice to Directors.” SDCL 47-[695]

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Cite This Page — Counsel Stack

Bluebook (online)
507 N.W.2d 691, 1993 S.D. LEXIS 136, 1993 WL 435871, Counsel Stack Legal Research, https://law.counselstack.com/opinion/nelson-v-web-water-development-assn-inc-sd-1993.