Case Title: Skane v. Star Valley Ranch Ass'n

Citation: 

Docket Number: 91-111

State: wyoming

Court: Wyoming Supreme Court

Date: 1992-02-14T00:00:00Z

Document:
Skane v. Star Valley Ranch Ass'n1992 WY 21826 P.2d 266Case Number: 91-111Decided: 02/14/1992Supreme Court of Wyoming
James F. SKANE, 

Appellant 
(Plaintiff),

v. 

STAR VALLEY RANCH 
ASSOCIATION, a Wyoming non-profit corporation; Vern C. Bloxham, in his 
individual capacity; Joseph Merrill in his official capacity as President of the 
Star Valley Ranch Association; Charles V. King, Robert S. White, Robert G. 
Henry, Sharon Ward, and Rod Port, in their official capacities as directors of 
the Star Valley Ranch Association, 

Appellees 
(Defendants).

Appeal from District 
Court of Lincoln County, John D. Troughton, J.

George L. Arnold 
of George L. Arnold, P.C., Evanston, for appellant.

Dwight "Bob" 
Despain, Casper, for appellees Star Valley Ranch Ass'n, Joseph Merrill, 
Charles V. King, Robert S. White, Robert G. Henry, Sharon Ward, and Rod 
Port. 

Bret F. King of 
King & King, Jackson, and F. Randall Kline, Pocatello, Idaho, for 
appellee Vern C. Bloxham.

Before 
URBIGKIT, C.J., and THOMAS, CARDINE, MACY and GOLDEN, JJ.

MACY, Justice.

[¶1]      Appellant James 
Skane appeals from a partial summary judgment determining that he suffered no 
compensatory damages as a result of alleged improprieties in the election held 
by the Board of Directors of Appellee Star Valley Ranch Association and 
determining that the Board of Directors' amendment of the Association's by-law 
requiring a vote by two-thirds of the members to amend the by-laws was proper 
and within the powers of the Board of Directors.

[¶2]      We 
affirm.

[¶3]      The issues 
presented by Skane are:

A.        The Issues 
Stemming from the 1987 Annual Election of Directors (Count I Below)

1. Whether, if to support 
causes of action for trespass and breach of fiduciary duty, there must be a 
showing of actual damages.

2. Whether mental 
anguish, emotional distress and/or humiliation constitute an element of actual 
damages, and if so, whether such element was proven to exist, or not to exist, 
as a matter of law.

3. If the evidence is 
viewed in a light most favorable to Appellant, whether Appellant established 
causes of action for trespass and/or breach of fiduciary duty against Vern 
Bloxham (herein "Bloxham") and/or the Star Valley Ranch Association (herein 
"Association").

4. If a cause of action 
exists against Bloxham, whether, as a matter of law, his acts of commission and 
omission were committed under circumstances constituting legal malice for which 
exemplary damages may be awarded.

5. If a cause of action 
does exist against the Association, whether, as a matter of law, the Association 
is liable to Appellant for actual and exemplary damages by reason of a) the 
existence of a vicarious relationship from Bloxham to the Association and/or b) 
the acts of commission and omission of agents of the Association other than 
Bloxham.

B.        The Issues 
Stemming from the Amendment to Article XI, Section 1 of the By[-L]aws (Count II 
Below)

1. Whether the amendment 
to Article XI, Section 1 of the Association's by[-]laws, as adopted by a 
resolution of the Board of Directors on May 17, 1986, disturbed vested 
contractual and property rights of the Appellant as a Member of the 
Association.

2. Whether the amendment 
to Article XI, Section 1 of the Association's by[-]laws is unreasonable, 
oppressive or arbitrary.

3. Whether the amendment 
to Article XI, Section 1 of the Association's by[-]laws was adopted in bad faith 
by the Board of Directors.

4. Whether appellant was 
entitled to an injunction directing the reinstatement of Article XI, Section 1 
of the Association's by[-]laws to the provision, content and language existing 
in said article and section prior to May 17, 1986.

[¶4]      Star Valley Ranch 
Association (the Association) is a recreational subdivision located in Lincoln 
County, Wyoming. At its 1987 annual meeting, the Association held an election to 
fill three positions on the Board of Directors. Skane was one of six candidates 
vying for these positions. He lost the election and allegedly suffered mental 
anguish because invalid votes were cast and because the voting records were lost 
before he could verify their accuracy.

[¶5]      To recover for 
his mental anguish, Skane brought suit against the Association, a non-profit 
corporation; several Association directors, none of whom were directors during 
the 1987 election;1 and Appellee Vern Bloxham, in his 
individual capacity. Bloxham was acting president and general manager of the 
Association during the election, although he had no responsibility for 
conducting the election itself.

[¶6]      Before the 1987 
annual meeting and election, the Board of Directors adopted election guidelines 
to be used in the 1987 election. The guidelines, among other things, suspended 
the voting rights of all members who were delinquent in paying their 
assessments. The election guidelines further provided a procedure whereby an 
individual who suspected that improprieties existed in the election could have 
his suspicions investigated, provided he registered his complaint with the 
Association within thirty days after the election.

[¶7]      Also to ensure 
the election was proper, a resolution was introduced at the 1987 annual meeting 
proposing to preserve the election voting records until each candidate had 
signed a release acknowledging he was satisfied that the vote count was 
accurate. The resolution was not contained in the minutes of the 1987 annual 
meeting; however, an Association member made a private tape recording and 
transcript of the entire meeting. The transcript is ambiguous as to whether or 
not the Association actually passed the resolution.

[¶8]      At the election, 
the Association's secretary voted twenty-one lots owned by the Association, some 
of which had been obtained through foreclosure actions and were still within the 
redemption periods. In another alleged impropriety, an individual presented a 
list to the election vice-chairman of ninety-seven members who had issued 
proxies, but he failed to furnish any of the actual proxies as was required. A 
determination was later made that thirty-two of the ninety-seven proxies had 
been granted by members who were delinquent in paying their Association 
assessments. All ninety-seven proxy votes were cast.

[¶9]      After the 
election, Skane sent a letter dated July 26, 1987, to the Association and its 
legal counsel, requesting that a recount be made of the votes and that he be 
given verification of the voting procedures. Bloxham received the letter on 
August 6, 1987, forty days after the election had been held. On that same day, 
Bloxham was cleaning out the Association's office and decided to empty two 
safety deposit boxes located in the Star Valley State Bank in Afton, one of 
which contained the voting records. Bloxham went to the bank to remove the 
records but was denied admittance because he was not listed as one of the box's 
renters. Bloxham telephoned Donna Duntsch, one of the named renters, and ordered 
her to remove the records. Duntsch went to the bank, removed the records, and 
took them to her residence. Later that evening, Bloxham went to Duntsch's house, 
retrieved the records, and placed them in his pickup truck's toolbox. He has no 
knowledge of the records' subsequent whereabouts.

[¶10]   Skane essentially raises two issues 
concerning the election: (1) Whether Bloxham committed a trespass for which 
Skane could recover mental anguish and punitive damages; and (2) whether 
Appellees breached a fiduciary duty to Skane for which he could recover mental 
anguish and punitive damages.

[¶11]   We approach this case using our 
well established principles for reviewing summary judgments. Baros v. Wells, 780 P.2d 341, 342 (Wyo. 1989).

Trespass

[¶12]   According to Skane, Bloxham 
committed a trespass by ordering Duntsch to remove the voting records from the 
safety deposit box and by leaving them in the back of his pickup truck. Skane 
claims he suffered emotional distress as a result of this trespass.

[¶13]   In Wyoming, "[t]he gist of the 
action of trespass is injury to possession, and the plaintiff must show either 
possession or a right to take immediate possession at the time of the trespass." 
Noble & Carmody v. Hudson, 20 Wyo. 227, 236, 122 P. 901 (1912). See also 
Ruby Drilling Co., Inc. v. Billingsly, 660 P.2d 377 (Wyo. 1983). Wyoming cases 
requiring a plaintiff to show he had a possessory right have been decided in the 
context of a trespass to land, whereas Skane claimed a trespass to chattel. 
Despite this distinction, one asserting a trespass to chattel must still 
demonstrate that he has a possessory interest. See RESTATEMENT (SECOND) OF TORTS 
§ 217 (1965).

[¶14]   Skane advances two theories which 
purportedly gave him a possessory interest in the voting records. First, he 
claims he obtained a possessory interest in the records when he requested a 
recount of the votes in his letter dated July 26, 1987. We disagree. Skane's 
letter could not have given him a possessory interest in the voting records 
because complaints concerning election improprieties had to be registered within 
thirty days after the election and Skane's letter was not received until forty 
days after the election had occurred.

[¶15]   Second, Skane contends the 
resolution which was introduced at the 1987 annual meeting requiring each 
candidate to sign a release indicating his satisfaction with the vote's accuracy 
gave him a possessory interest in the voting records. Assuming the resolution 
did pass, Skane's interest would consist of the right to have the votes 
recounted.2 Such a right would not give him a 
possessory interest in the voting records. According to the RESTATEMENT, supra § 
216, at 415, "[A] person who is in `possession of a chattel' is one who has 
physical control of the chattel with the intent to exercise such control on his 
own behalf, or on behalf of another." Skane had no right to physically control 
the voting records, nor did he have the right to demand to have physical 
control.

[¶16]   We hold that, as a matter of law, 
Skane lacked a possessory interest in the voting records. Absent such a 
possessory interest, Skane could not bring an action in trespass. Because Skane 
could not maintain an action in trespass, he could not recover actual damages.3 Without actual damages, Skane could 
not recover punitive damages, and no separate cause of action existed for the 
recovery of punitive damages alone. Cates v. Barb, 650 P.2d 1159, 1161 (Wyo. 
1982).

Fiduciary 
Duty

[¶17]   Skane argues that Appellees, as 
officers and directors of the Association, breached a fiduciary duty owed to him 
as a member of the Association. Appellees allegedly breached their fiduciary 
duty by destroying the voting records, allowing votes to be cast for members who 
were delinquent in paying their assessments, and voting lots which were still in 
foreclosure. The only allegation supported by conduct which might be construed 
as wrongful was that Bloxham disposed of the voting records by leaving them in 
his pickup truck. Yet, even if we assume arguendo that, when he lost the voting 
records, Bloxham breached a fiduciary duty, Skane still could not recover 
because he did not suffer actual damages.

[¶18]   Skane did not seek nominal damages 
or injunctive relief to correct improprieties in the election. Rather, he sought 
actual damages for his mental anguish and exemplary damages to punish Appellees' 
conduct. The burden of proving damages beyond nominal damages is on the party 
seeking the recovery. Willmschen v. Meeker, 750 P.2d 669, 672 (Wyo. 1988). 
Damages cannot be presumed. Id.; State ex rel. Scholl v. Anselmi, 640 P.2d 746, 
750 (Wyo.), appeal dismissed and cert. denied, 459 U.S. 805, 103 S. Ct. 28, 74 L. Ed. 2d 43 (1982). In his deposition, Skane described his mental anguish as 
follows:

Q         As to 
mental anguish, would you describe for me the degree of anguish that you went 
through? 

A         All I 
can answer to that is that I was extremely angry and upset that this could have 
happened, very disappointed that the board, after my appeal for a recount, did 
not react as I felt they should have.

To a greater degree, I 
cannot give you any description. I was not climbing walls, I was not throwing 
things. I was very deeply concerned and upset that our own association would 
behave in such a manner through the improper actions of certain of its employees 
or directors or their essential responsibility to overseeing some of those 
actions.

Now, beyond that I can't, 
I can't give you any further question - I was not under medical treatment, 
psychiatric treatment, at no time. I have had a lot tougher breaks than this one 
in my life and this one was hardly a major one.

[¶19]   Skane, like all members of society, 
must cope with life's indignities and failures. The ordinary person who loses an 
election or views an election as being imperfect will naturally be upset and 
disappointed. However, in an already overly litigious society, this Court cannot 
fashion remedies for all life's disappointments. Skane probably best summed up 
his lack of damages by saying, "I have had a lot tougher breaks . . . in my life 
and this one was hardly a major one." Because no actual damages exist, Skane is 
unable to recover punitive damages. Cates, 650 P.2d  at 1161.

By-Law 
Amendment

[¶20]   In 1986, the Board of Directors 
amended the Association's by-laws, making it more difficult for the membership 
to amend the by-laws. Skane sought to have the original by-law reinstated and 
claimed the Board of Directors' amendment was adopted in bad faith, was 
unreasonable and oppressive, and disturbed vested contractual and property 
rights.

[¶21]   Originally, Article XI of the 
by-laws read in pertinent part as follows:

Section 1. Powers of 
Members. 
The By-Laws of this Association may be adopted, amended or repealed at a meeting 
duly called for said purpose by the vote of a majority of the voting power 
represented at said meeting, provided a quorum is present. . . .

Section 2. Powers of 
Directors. Subject to the right of 
the members to adopt, amend or repeal these By-Laws, as provided in Section 1 of 
this ARTICLE XI, at any special or regular meeting, the Board of Directors may 
adopt, amend, or repeal any of these By-Laws other than a By-Law or amendment 
thereof changing the authorized number of directors.

A quorum was 
defined as thirty percent of the members entitled to vote, so under the original 
by-law a majority of fifteen percent plus one member could conceivably amend the 
by-laws.

[¶22]   In 1986, the Board of Directors, 
upon the advice of legal counsel, amended Article XI, Section 1 to read in 
pertinent part as follows:

Section 1. Powers of 
Members. 
The By-laws of this Association may be adopted, amended, or repealed at a 
meeting duly called for said purpose by an affirmative vote of at least 
two-thirds (2/3) of the voting power of the entire membership of the 
Association. For purposes of this provision, the entire membership shall refer 
to all members of the Association authorized to vote, and shall not refer to a 
two-thirds (2/3) majority in person or by proxy at the meeting.

The Board of 
Directors made the amendment because a small group called the Council of 
Concerned Members, of which Skane was a member, had proposed to amend the 
by-laws. At a June 25, 1989, Board of Directors' meeting, the Association's 
attorney explained the dangers which could result from a small minority being 
allowed to amend the by-laws. The attorney's comments were recorded in the Board 
of Directors' minutes as follows:

The membership is not 
obligated to follow by-laws as much as the board members and chaos would 
prevail. He suggested that all of us retire if this ever occurs. When the firing 
starts the by-laws are the only protection for the Board. That's where we'll 
hide. If you have membership making by-laws it's a very, very [] dangerous 
situation. The few members that are making the changes will never take 
responsibility for 1640 members.

[¶23]   Skane claims the Board of Directors 
breached its fiduciary duty by acting in bad faith when it amended the by-law. 
As support for his allegation of bad faith, Skane points to the comments made by 
the Association's attorney at the 1989 Board of Directors' meeting and also to 
the fact that the by-law amendment was a response to actions proposed by the 
Council of Concerned Members.

[¶24]   In this case we can safely say 
that, as a matter of law, no material question of bad faith existed. The 
attorney's comments in 1989 explained why the original by-law should not be 
restored; his comments were not evidence of the 1986 Board of Directors' bad 
faith in amending the by-law. More importantly, the comments did not evidence 
any bad faith. The attorney was merely concerned that a minority of members 
could make changes without the majority's interests being protected.

[¶25]   Skane's only other support for his 
claim of bad faith is that the Board of Directors' minutes described the meeting 
to change the by-laws as "a special meeting to take action by the Board of 
Directors to change the By-Laws as recommended by our attorney due to ac[ti]on 
taken by the Council of Concerned [Members]." This statement demonstrated that 
the Board of Directors relied upon the advice of its attorney, not that it acted 
in bad faith.

[¶26]   Skane also argues that the 
amendment requiring a two-thirds majority is oppressive and unreasonable. He 
views the by-law amendment as being oppressive because a meeting had never been 
held when two-thirds of the membership were in attendance, much less when 
two-thirds of the membership voted affirmatively on a matter. According to 
Skane, the amended by-law made it virtually impossible for the membership to 
amend the by-laws.

[¶27]   Whether by-laws are reasonable or 
oppressive is normally a question of fact and, therefore, not appropriate for 
summary judgment. 18A AM.JUR 2D Corporations § 319 (1985). However, in this case 
the membership essentially ratified the amended by-law at the 1987 annual 
meeting when, by a vote of 723 to 250, they denied a motion to reinstate the 
original by-law. Since the membership itself voted to retain the amended 
version, no material question of fact existed regarding the reasonableness of 
the by-law amendment.

[¶28]   Finally, Skane contends that 
by-laws are contractual in nature and that the original by-law created a vested 
contractual right which the Board of Directors had no authority to impair. He 
relies upon the distinction between by-laws which "`are mere regulations 
governing the conduct of the internal affairs of the corporation,' and those `in 
the nature of a contract which are evidently designed to vest property rights 
inter se among all stockholders.'" Black v. Glass, 438 So. 2d 1359, 1371 (Ala. 
1983) (quoting Bechtold v. Coleman Realty Co., 367 Pa. 208, 79 A.2d 661, 663 
(1951)). Skane views the original by-law as being within the vested rights 
category because members relied upon the by-laws when they were purchasing 
property in the Association's subdivision.4

[¶29]   We agree with Skane that by-laws 
are contractual in nature, yet we disagree with his analysis that the original 
by-law created a vested right which could not be impaired. See, e.g., Black, 438 So. 2d 1359; and 8 WILLIAM MEADE FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW OF 
PRIVATE CORPORATIONS § 4166 (perm. ed. 1982). To analyze this issue, we have 
limited statutory guidance. The only reference in Wyoming's nonprofit 
corporations statute regarding by-laws amendments says, "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 certificate of incorporation or the 
bylaws." Wyo. Stat. § 17-6-107 (1989).5

[¶30]   The Association's by-laws clearly 
allowed the Board of Directors to amend the by-laws. Article XI, Section 2 
provided the Board of Directors with authority to "adopt, amend, or repeal any 
of these By-Laws other than a By-Law or amendment thereof changing the 
authorized number of directors." Thus, anyone joining the Association was on 
notice that the by-laws were subject to amendment by the Board of 
Directors.

[¶31]   Apparently, under Skane's analysis, 
prospective purchasers relied upon the by-law which allowed members to amend the 
by-laws, yet they ignored the by-law giving the Board of Directors the right to 
make amendments. As one court has said:

"It is not one by-law or 
some by-laws of which the member must take notice, for he must take notice of 
all which affect his rights or interests. Where, as here, there is an express 
and clear reservation of the right to amend he is bound to take notice of the 
existence and effect of that reserved power.

". . . Associations and 
corporations have a right to change their by-laws when the welfare of the 
corporation or association requires it. . . ."

Orchard Ridge 
Country Club, Inc. v. Schrey, 470 N.E.2d 780, 782-83 (Ind. App. 1984) (quoting 
The Supreme Lodge, Knights of Pythias v. Knight, 117 Ind. 489, 20 N.E. 479, 483 
(1889) (citation omitted)).

[¶32]   Despite the Board of Director's 
broad authority to amend the by-laws, a by-law which creates a vested right 
cannot be amended so as to impair that right. Lambert v. Fishermen's Dock 
Cooperative, Inc., 61 N.J. 596, 297 A.2d 566, 568-69, 61 A.L.R.3d 967 (1972). 
See also 8 FLETCHER, supra, at §§ 4177 and 4188. However, Skane fails to 
sufficiently articulate why the original by-law created a vested contractual or 
property right. The fact that a prospective purchaser relied upon a particular 
by-law was not sufficient to create a vested right. If mere reliance upon a 
by-law creates a vested right, a member could arbitrarily create a vested right 
by claiming he relied upon a particular by-law at the time he made his purchase. 
This would make every by-law potentially immune from amendment, no matter how 
trivial the proposed change might be. Because Skane fails to explain why the 
original by-law was a vested right, and we can discern no reason for its being a 
vested right, we hold that any right the members had in the original by-law is 
not superior to the Board of Directors' authority to amend the 
by-laws.

[¶33]   In summary, we hold that Skane's 
trespass action cannot lie because he lacked a possessory interest, nor can 
Skane recover for breach of a fiduciary duty when he did not suffer any actual 
damages. The Board of Directors' by-law amendment was not adopted in bad faith, 
was not unreasonable or oppressive, and did not disturb vested contractual or 
property rights.

[¶34]   Affirmed.

FOOTNOTES

1           
Appellee Joseph Merrill was elected to the Board of Directors in 1985 and 
was up for reelection in the 1987 election.

2           
We are also assuming, without deciding, that a private individual could 
record an annual meeting and have that recording be binding upon the 
Association.

3           
Because Skane cannot maintain an action in trespass, we do not need to 
consider whether mental anguish damages are recoverable in a trespass 
action.

4           
Skane also cites authority for the proposition that the right to vote is 
a vested right. He never explains how this authority related to the amended 
by-laws at issue here. The right to vote may be a vested right; however, the 
Association members were not denied the right to vote. Rather, a small fraction 
of members can no longer amend the by-laws.

5           
While it is not directly applicable, the Wyoming Business Corporation Act 
is interesting because Wyo. Stat. § 17-16-1001(b) (1989) states that a 
shareholder does not have a vested property right in the articles of 
incorporation.