Summers v. Colette

246 Cal. Rptr. 3d 116, 34 Cal. App. 5th 361
CourtCalifornia Court of Appeal, 5th District
DecidedApril 15, 2019
DocketB285488
StatusPublished
Cited by17 cases

This text of 246 Cal. Rptr. 3d 116 (Summers v. Colette) is published on Counsel Stack Legal Research, covering California Court of Appeal, 5th District primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Summers v. Colette, 246 Cal. Rptr. 3d 116, 34 Cal. App. 5th 361 (Cal. Ct. App. 2019).

Opinion

SEGAL, J.

*364INTRODUCTION

While serving as a director of a nonprofit public benefit corporation called Wildlife Waystation, Margaret Summers filed this action against the Waystation and another director, Martine Colette, alleging self-dealing and other misconduct by Colette. Colette and the Waystation demurred to the complaint, arguing Summers, who as a director had standing to bring this action when she filed it, lost standing when the Waystation board of directors later removed her as a director. The trial court sustained the demurrers without leave to amend.

We conclude that Summers did not lose standing to maintain this action when the Waystation removed her as a director and that the trial court erred in not granting Summers leave to amend to add the Attorney General as an indispensable party. Therefore, we reverse and remand with directions to overrule the demurrers based on lack of standing and allow Summers to add the Attorney General as a party to this action.

FACTUAL AND PROCEDURAL BACKGROUND

A. After Summers Files This Action, the Waystation Removes Her as a Director

Summers filed this action against Colette and the Waystation to assert "claims *119... as a director on behalf of the ... Waystation." Summers alleged that, while serving on the Waystation's board of directors, she learned Colette, a director who "treated the Waystation as her own personal fiefdom,"1 had engaged in numerous acts of self-dealing and breaches of fiduciary duty. Summers alleged that, after she confronted Colette about this misconduct, Colette orchestrated a vote to remove Summers from the board of directors, but that the vote was unlawful.2 Summers alleged causes of *365action for "breach of fiduciary duty (self-dealing)," "breach of fiduciary duty (due care)," breach of charitable trust, wrongful removal, unjust enrichment, declaratory relief, and conversion. She sought damages on behalf of the Waystation caused by Colette's misconduct, removal of Colette as a director, a declaration Summers was a director, and a temporary restraining order and preliminary injunction enjoining the Waystation from removing her as a director.

After issuing a temporary restraining order, the trial court issued a preliminary injunction enjoining Colette and the Waystation from conducting further board meetings without providing notice to Summers and allowing her to participate as a director. At a subsequent Waystation board meeting of which Summers had proper notice and at which she participated, the board again voted to remove Summers as a director. Conceding her cause of action for wrongful removal was "now[ ] unnecessary," Summers filed a first amended complaint without that cause of action. She also added a cause of action for an accounting and alleged she brought the "claims in this action as a director at the time of the filing of [the] original complaint on behalf of the ... Waystation."

B. The Trial Court Sustains Demurrers by the Waystation and Colette

The Waystation demurred to all causes of action in the first amended complaint on the ground Summers "is not the real party in interest and therefore lacks standing to sue." The Waystation also demurred to the cause of action for breach of fiduciary duty by self-dealing on the grounds Summers had failed to join the Attorney General as an indispensable party and to allege she notified the Attorney General of the action before filing it. The Waystation similarly demurred to the cause of action for breach of charitable trust on the ground Summers did not give the Attorney General notice of the action. Colette demurred to the entire complaint on the ground Summers had "no standing to bring this action" because she was not a director or a member of the Waystation.

In opposing the demurrers, Summers argued three statutes gave her standing to bring this action: Corporations Code section 5233, subdivision (c),3 which provides *120that a director of a nonprofit corporation may "bring an action" to address self-dealing by another director; section 5142, subdivision (a), which provides that a director of a nonprofit corporation may "bring an action to ... remedy a breach of a charitable trust"; and section 5223, subdivision (a), which authorizes the superior court, "at the suit of a director" *366of a nonprofit corporation, to remove another director for, among other things, fraud, dishonesty, or gross abuse of authority. Summers contended that, because she was a director when she filed the action, she continued to have standing under these statutes. She argued that allowing the Waystation and Colette to deprive her of standing by removing her after she filed this action would "render[ ] the statute[s] meaningless" and would be "contrary to public policy."

Regarding the Waystation's arguments about her failure to notify the Attorney General, Summers contended she did not have to allege such notification or notify the Attorney General before filing the complaint. She also submitted evidence she notified the Attorney General of the action in writing shortly after filing the complaint. Summers conceded her cause of action for self-dealing required her to join the Attorney General as an indispensable party, and she requested leave to amend to do so.4 She also requested that, in the event the trial court sustained the demurrer for failure to notify or join the Attorney General, the court grant her leave to amend to cure those defects.

The trial court sustained the demurrers without leave to amend. The court ruled " Code of Civil Procedure Section 367 provides that cases must be prosecuted by real parties in interest. [Summers], whatever her standing or interest at the outset of this case, no longer has any standing or interest, and the current Board of Directors and officers, the present 'real parties in interest,' have no interest in pursuing the action." The court also ruled section 5233, subdivision (c), required the Attorney General "to be joined and notified ... before the Complaint was filed, something that could not be cured retroactively." The court denied Summer's request for leave to amend to cure defects regarding joining or notifying the Attorney General on the ground Summers no longer had "the status required to file anything." The court entered judgment dismissing the action with prejudice, and Summers timely appealed.

DISCUSSION

Summers argues the trial court erred in sustaining the demurrers. She contends that she continues to have standing under the statutes that authorized her to bring the action and that the trial court misapplied the statutory requirements for notifying the Attorney General of the action. She also contends the trial court abused its discretion in denying her leave to amend to join the Attorney General as an indispensable party. All three contentions have merit.

*367A. Standards of Review

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Cite This Page — Counsel Stack

Bluebook (online)
246 Cal. Rptr. 3d 116, 34 Cal. App. 5th 361, Counsel Stack Legal Research, https://law.counselstack.com/opinion/summers-v-colette-calctapp5d-2019.