Sam Pino, Jeanne R. Thomas, Todd Palmer, and Jodie Palmer, Appellants,
Entity #4812420-0140, Appellee.
District Court, Salt Lake Department The Honorable Robert P.
Faust No. 140903403
N. Crowther, Bret J. Crowther, Matthew S. Brahana, and
Christopher Bond, Attorneys for Appellants
Craig Smith and Kathryn J. Steffey, Attorneys for Appellee
David N. Mortensen authored this Opinion, in which Judges
Jill M. Pohlman and Diana Hagen concurred.
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 properly distributed its assets to a successor
corporation. We affirm.
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.
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
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.
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
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.
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.
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.
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 ...