2019 UT App 69

THE UTAH COURT OF APPEALS

SAM PINO, JEANNE R. THOMAS, TODD PALMER, AND JODIE PALMER,

Appellants,

v.

ENTITY #4812420-0140,

Appellee.

Opinion

No. 20160294-CA

Filed May 2, 2019

Third District Court, Salt Lake Department

The Honorable Robert P. Faust

No. 140903403

Thomas N. Crowther, Bret J. Crowther, Matthew S. 

Brahana, and Christopher Bond, Attorneys

for Appellants

J. Craig Smith and Kathryn J. Steffey, Attorneys

for Appellee

JUDGE DAVID N. MORTENSEN authored this Opinion, in which 

JUDGES JILL M. POHLMAN and DIANA HAGEN concurred.

MORTENSEN, Judge:

¶1 Rather than drawing from their reservoir of cooperative 

experience, the users of a water well dispute how their mutual 

association should continue. A nonprofit water corporation 

failed to renew its registration and was administratively 

dissolved. A group of shareholders (Appellants) contended that, 

upon dissolution, the corporation’s articles of incorporation and 

bylaws required its assets to be liquidated and the proceeds 

distributed to the corporation’s shareholders. Appellants claim 

that the trial court erred in granting summary judgment in favor 

of the corporation when it determined that the corporation 
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properly distributed its assets to a successor corporation. We 

affirm.

BACKGROUND

¶2 In 1997, a group of lot owners in the Brighton Estates 

Subdivision in Wasatch County entered into an agreement to 

drill a well to provide water to the subdivision. In 2000, the 

group formed a nonprofit corporation, Entity #4812420-0140, 

commonly known as The Well Corporation (TWC 2000), to own, 

finance, and oversee the installation of a culinary water 

distribution system and thereafter to own and operate the well 

and water distribution system. The well was drilled on land 

owned by the Ault Family Trust (Trust) and used for the stated

purpose.

¶3 In 2007, Michael Ault, as a representative and agent of the 

Trust, was elected to TWC 2000’s board of directors. And in 

November 2008, the Trust granted an easement to TWC 2000 to 

provide access for the operation and maintenance of the water 

well.

¶4 In December 2010, while Ault was still serving on the 

board, TWC 2000’s registration with the Utah Division of 

Corporations and Commercial Code (Division) expired and was 

not renewed. In February 2012, a new board of directors 

(Directors) was elected, but it was not aware of TWC 2000’s 

expired corporate status. The Directors discovered the expired 

status more than two years after TWC 2000’s registration had 

expired.

¶5 As a result, in February 2013, the Directors formed 

The Well Corporation 2013 (TWC 2013) to function in the 

place of TWC 2000 and receive the assets and liabilities of 

TWC 2000. In October 2013, TWC 2000 executed an assignment

(2013 Assignment) transferring all of its assets and obligations to 
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TWC 2013 so that TWC 2000’s shareholders could continue 

to receive water from the well. In May 2014, Appellants, 

who consist of a group of dissenting shareholders, commenced 

this action against TWC 2000 in the trial court seeking, 

among other relief, confirmation of TWC 2000’s dissolution, 

liquidation of TWC 2000’s assets, return of such assets to 

TWC 2000’s shareholders, and the return of the easement to the 

Trust.

¶6 In August 2014, the Division reinstated TWC 2000, and 

the two companies rescinded the 2013 Assignment, leaving all 

the assets in TWC 2000’s ownership. In September 2014, TWC 

2000 held a shareholder meeting, at which a majority of TWC 

2000’s shares were represented, and ninety-five percent of those 

shares present voted to ratify the Directors’ actions in (1) 

forming TWC 2013 to act as a successor corporation and (2) 

causing TWC 2000 to be reinstated.

¶7 Appellants then filed an objection with the Division to 

TWC 2000’s reinstatement, and in October 2014, the Division 

placed TWC 2000 “in pending status awaiting the outcome of the 

litigation.” In response, TWC 2000 and TWC 2013 enacted a 

conditional recession agreement providing that the 2013 

Assignment would remain effective until TWC 2000 was

restored to active status by the Division.

¶8 In the present proceeding, the trial court considered but 

rejected Appellants’ arguments, granted TWC 2000’s motion for 

summary judgment, and denied Appellants’ cross-motion for 

summary judgment, concluding that “Utah law does not require 

a post-dissolution distribution to comply with the dissolved 

corporation’s Articles of Incorporation and Bylaws,” (Articles)

and, even if the law “did require [TWC 2000] to distribute its 

assets after dissolution in accordance with its [Articles], such a 

requirement has been satisfied in this case.” Appellants appeal 

the judgment of the trial court.
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ISSUES AND STANDARDS OF REVIEW

¶9 The first issue on appeal is whether the Utah Revised 

Nonprofit Corporation Act (Act), see Utah Code Ann. §§ 16-6a102 to -1702, authorized the transfer of TWC 2000’s assets and 

liabilities to a successor corporation or whether the assets were 

required to be distributed in accord with TWC 2000’s Articles.

The second issue on appeal is whether an administratively 

dissolved corporation can be reinstated by the Division even if 

the corporation failed to make an application for reinstatement 

within two years after its dissolution.

¶10 Both issues involve questions of statutory interpretation 

and the standard for granting summary judgment. “We review 

questions of statutory interpretation for correctness, affording no 

deference to the [trial] court’s legal conclusions.” Grimm v. DxNA 

LLC, 2018 UT App 115, ¶ 14, 427 P.3d 571 (cleaned up). And 

“[w]e review a [trial] court’s legal conclusions and grant or 

denial of summary judgment for correctness, viewing the facts 

and all reasonable inferences in the light most favorable to the 

nonmoving party.” Rapoport v. Martin, 2018 UT App 163, ¶ 6, 432 

P.3d 772.

ANALYSIS

I. Transfer of TWC 2000’s Assets and Liabilities

¶11 The trial court ruled that TWC 2000’s transfer of its assets 

and liabilities to TWC 2013 was proper under the Act. The trial 

court concluded that “Utah law does not require a 

post-dissolution distribution to comply with the dissolved

corporation’s [Articles].” Specifically, the trial court found that 

the Utah Code “expressly authorizes a nonprofit corporation to 

‘make distributions upon dissolution . . . to another nonprofit 

corporation, including a nonprofit corporation organized to 

receive the assets of and function in place of the dissolved 
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nonprofit corporation.’” (Quoting Utah Code Ann. § 16-6a1302(2)(c).)

¶12 Appellants argue that the trial court erred by not giving

effect to Article XII of TWC 2000’s Articles, which states: “In the

event of dissolution of [TWC 2000], each shareholder shall 

receive its proportionate share of [TWC 2000’s] property and 

assets, including gains from the sale of appreciated assets, in 

proportion to the number of shares held.” Appellants also note 

that the Act provides an alternative to the path taken by the 

court. Instead of distribution to a successor nonprofit 

corporation, distribution on dissolution of a nonprofit 

corporation may also be made “to its members if it is a mutual 

benefit corporation.” Utah Code Ann. § 16-6a-1302(2)(b)

(LexisNexis Supp. 2009).1 Appellants conclude by asserting that 

given the choices (namely, distributing the assets to a successor 

nonprofit corporation or to the shareholders), the court erred in 

choosing the first:

If there is a choice between two equally applicable

contract alternatives,[2] and if one alternative does 

 

1. Appellants rightly point out that TWC 2000 is a “mutual 

benefit corporation” because it is a nonprofit corporation “that 

issues shares of stock to its members evidencing a right to 

receive distribution of water or otherwise representing property 

rights.” Utah Code Ann. § 16-6a-102(33)(a) (LexisNexis Supp. 

2009).

2. Citing Okelberry v. West Daniels Land Ass’n, Appellants contend

that Utah Code section 16-6a-302 and the Articles are part of the 

same contract between TWC 2000 and its shareholders. See 2005 

UT App 327, ¶ 14, 120 P.3d 34 (stating that “the bylaws of a 

corporation, together with the articles of incorporation, the 

statute under which it was incorporated, and the member’s 

(continued...)
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not give effect to all terms in the contract and 

another alternative does so, the alternative giving 

effect to all contract terms must govern. The trial 

court erred by applying and giving effect to the 

statutory alternative allowing transfer of TWC 2000 

assets to TWC 2013 in violation of [the Articles] 

instead of the alternative directing distribution of 

the TWC 2000 assets to its shareholders in 

conformity with [the Articles].

¶13 Appellants’ argument fails because it relies on a nonexistent conflict between the Articles and the statutory options

upon dissolution laid out in Utah Code section 16-6a-1302(2).3

 

(...continued)

application, constitute a contract between the member and the 

corporation” (cleaned up)).

3. We note that “[t]he statutes under which a corporation is 

formed constitute the preeminent authority governing the 

corporation, making other sources of corporate authority and 

governance—e.g., resolutions, bylaws, and declarations—

inferior to and subject to the controlling statutes.” Park West 

Condo. Ass’n v. Deppe, 2006 UT App 507, ¶ 20, 153 P.3d 821; see 

also Utah Code Ann. § 16-6a-202(1)(g) (LexisNexis Supp. 2012)

(“The articles of incorporation [of a nonprofit corporation] shall 

set forth . . . provisions not inconsistent with law regarding the 

distribution of assets on dissolution.”). In addition, TWC 2000’s 

Articles state that the corporation was organized to “[d]o any 

and all acts and things, and to have and exercise all rights and 

powers from time to time granted to a corporation by law, 

including, without limitation, those powers described in the 

Utah Nonprofit Corporation and Cooperative Act, § 16-6-1 et 

seq., U.C.A., (1953), as amended.” In 2001, the Act replaced the 

Utah Nonprofit Corporation and Cooperative Act. See Bruce L. 

(continued...)
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Rather, we conclude that the Directors complied with the 

statutory scheme and TWC 2000’s Articles. See Olincy v. Merle 

Norman Cosmetics, Inc., 19 Cal. Rptr. 387, 394 (Cal. Dist. Ct. App. 

1962) (stating that “where a by-law is reasonably susceptible of 

different constructions, one in harmony and the other in conflict 

with a statute, the former construction will be adopted” (cleaned 

up)); see also Kahn v. Bank of St. Joseph, 70 Mo. 262, 270 (Mo. 1879) 

(rejecting a construction of a bylaw as “unreasonable” when 

such construction is “in conflict with, if not the letter, at least 

with the spirit of many of our statutory provisions relative to 

this subject”). We now explain how the Directors complied with 

both the statutory scheme and the Articles.

¶14 First, the Directors complied with the statutory 

requirements. The Act provides that “[a]uthorized distributions 

by a dissolved nonprofit corporation may be made by 

authorized officers or directors,” Utah Code Ann. § 16-6a1302(4), as follows: (1) “to a member that is a domestic or foreign 

nonprofit corporation”; (2) “to its members if it is a mutual 

benefit corporation”; (3) “to another nonprofit corporation, 

including a nonprofit corporation organized to receive the assets 

of and function in place of the dissolved nonprofit corporation”; 

and (4) “otherwise in conformity to this chapter [i.e., chapter 

6a],” id. § 16-6a-1302(2).4 Under part 14, Dissolution, of chapter 

 

(...continued)

Olson, Utah Revised Nonprofit Corporation Act, 14 Utah B.J. 17, 17 

(June/July 2001). Thus, insofar as provisions in TWC 2000’s 

Articles regarding the distribution of assets after dissolution 

conflict with the Act, the Act governs because it enjoys 

preeminent authority under the Utah Code and TWC 2000’s 

Articles.

4. Furthermore, the Act states that “[d]issolution of a nonprofit 

corporation does not . . . transfer title to the nonprofit 

(continued...)
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6a, a dissolved nonprofit corporation may transfer “its assets as 

provided in or authorized by its articles of incorporation or 

bylaws.” Id. § 16-6a-1405(1)(c). The Directors chose the third 

option when they assigned TWC 2000’s assets and liabilities to 

TWC 2013.

¶15 Second, the Directors complied with the Articles by

distributing the assets of TWC 2000 after its dissolution. The 

Articles specifically provide in Article XII that “[i]n the event of 

dissolution of [TWC 2000], each shareholder shall receive its 

proportionate share of [TWC 2000’s] property and assets, 

including gains from the sale of appreciated assets, in proportion 

to the number of shares held.” The Directors observed this 

requirement when they assigned the corporation’s assets and 

liabilities to the successor corporation. We note that TWC 2013 

was “organized to replace and serve as successor-in-interest to 

[TWC 2000] for the benefit of all of the shareholders of [TWC 

2000].” Furthermore, TWC 2013’s Amended Articles of 

Incorporation (Amended Articles) are identical in every material 

respect to TWC 2000’s Articles, including all provisions 

regarding internal governance processes, voting rights, and 

determining shareholders and directors. And TWC 2013’s

Amended Articles provided for TWC 2000’s shareholders to be 

 

(...continued)

corporation’s property including title to water rights, water 

conveyance facilities, or other assets of a nonprofit corporation 

organized to divert or distribute water to its members.” Utah 

Code Ann. § 16-6a-1405(3)(a) (LexisNexis Supp. 2009). Thus, the 

plain meaning of the statute is that the assets of a nonprofit 

water corporation do not automatically revert to the 

shareholders on dissolution. Rather, the Act makes clear that 

such assets of a dissolved water corporation are to be distributed 

in a deliberate fashion in accord with one of the four options

identified in sections 16-6a-1302(2) and 16-6a-1405(1)(c).
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issued shares in TWC 2013 once the new corporation filed its 

articles:

To ensure continued water availability and 

delivery to the [members holding shares in TWC 

2000] in the event the Division ultimately rescinds

[TWC 2000’s] reinstatement, [TWC 2000] has 

determined that it is necessary and appropriate for 

the Board of Directors of [TWC 2013] to cause these 

Articles of Amendment to be filed in order to 

ensure that [TWC 2013] conforms in all respects to 

the structure and operation of [TWC 2000], such 

that, upon any dissolution of [TWC 2000], [TWC 

2013] shall be the successor-in-interest to [TWC 

2000] and will be legally authorized to continue 

operations pursuant to Utah Code Ann. § 16-6a1405. Upon the filing of these Amendments, 

certificates will be issued for the benefit of all eligible 

prospective Members.

(Emphases added.) TWC 2013’s Amended Articles were 

subsequently filed on November 19, 2014.

¶16 Appellants contend that after TWC 2000 was dissolved, 

“shareholders did not receive the assets,” rather “[t]he assets 

were transferred to TWC 2013.” Appellants argue that the only 

way to give effect to Article XII is the “distribution of assets to 

TWC 2000’s shareholders instead of the alternative of transfer of 

the assets to TWC 2013.” But Appellants fail to acknowledge a 

key fact: TWC 2013’s Amended Articles provided that TWC 

2000’s shareholders be issued shares of TWC 2013. Therefore, in 

transferring assets to TWC 2013 and investing TWC 2000’s 

shareholders with shares in TWC 2013, the Directors gave 

Appellants precisely what they requested, namely, a 

proportionate share of TWC 2000’s post-dissolution assets. 

Appellants appear to prefer that TWC 2000’s assets be 
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liquidated, resulting in a monetary distribution. But that is not 

what Article XII called for upon dissolution. TWC 2013’s

Amended Articles provided TWC 2000’s shareholders a 

proportionate share of the corporation’s assets, albeit in the form 

of shares in the successor corporation.

¶17 Thus, we conclude that the Directors complied with the 

Act and the Articles when they distributed TWC 2000’s assets in 

the form of shares in TWC 2013.5

 

5. Appellants also argue that because the proper notice 

procedure was not followed, the distribution of assets was 

invalid. But this argument is without merit. As the trial court 

explained, “[E]ven if Utah Code [section] 16-6a-1302(3) did 

require [TWC 2000] to distribute its assets after dissolution in 

accordance with its [Articles], such a requirement has been 

satisfied in this case.” The court noted that the Directors 

delivered written notice, which referred to the legal challenge 

faced by TWC 2000, of the shareholders’ meeting. The court 

further noted that the notice met the requirements of TWC 

2000’s bylaws, which stated that notice be given to shareholders 

“either personally, or by mailing a copy of the notice, . . . and by 

compliance with all conditions as provided in the Bylaws or 

rules and regulations adopted by the Board of Directors.”

Appellants argue that the notice TWC 2000 gave to shareholders 

was defective under Utah Code section 16-6a-1202 because it 

“did not give notice that ratification of transfer of all of TWC 

2000’s assets to TWC 2013 would be submitted to a vote at the 

meeting.” But the provisions of section 16-6a-1202 do not apply 

here because “[a] transaction that constitutes a distribution is 

governed by Part 13” of the Act, which deals with distributions 

upon dissolution, and not by section 1202. Utah Code Ann. § 16-

6a-1202(8) (LexisNexis 2009). Because part 13 of the Act has no 

notice requirements, see id. §§ 16-6a-1301 to -1302, the Directors 

(continued...)
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II. Reinstatement of an Administratively Dissolved Corporation

¶18 Appellants contend that an administratively dissolved 

corporation cannot be reinstated by the Division if the 

corporation fails to make an application for reinstatement within 

two years after its dissolution. They argue that “the trial court 

should have removed TWC 2000’s pending status and ruled that 

it is irrevocably dissolved.”

¶19 We decline to address this issue because Appellants failed 

to join the Division as a party to the proceedings below in 

accordance with rule 19 of the Utah Rules of Civil Procedure. 

Consequently, the trial court had no authority to enter directives 

binding on the Division. See Hiltsley v. Ryder, 738 P.2d 1024, 1025 

(Utah 1987) (“Courts can generally make a legally binding 

adjudication only between the parties actually joined in the 

action.”); see also R.M.S. Corp. v. Baldwin, 576 P.2d 881, 883 (Utah 

1978) (“[N]o judgment was rendered against the corporation, 

and no judgment could have been so entered for the reason that 

the corporation was not before the court.”).

¶20 Thus, we decline to address the issue of whether it was 

appropriate for the Division to reinstate TWC 2000 more than 

two years after its registration expired because the Division is 

not a party to this case and such a determination would result in 

the issuance of an advisory opinion.

CONCLUSION

¶21 We conclude that the trial court correctly granted 

summary judgment when it determined that the Directors 

 

(...continued)

were required to comply only with the notice requirements 

found in TWC 2000’s Articles.
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properly transferred assets from TWC 2000 to TWC 2013. And 

because the Division was not joined as a party to the 

proceedings below, we decline to address whether it had the 

authority to reinstate TWC 2000 after more than two years had 

passed since the corporation’s expiration.