* Erwin Chappel, Et Al., Respondent/cr-appellants V. Douglas Johnson, Et Al., Appellant/cr-respondents

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
ERWIN CHAPPEL; CARDELL
THOMPSON; NORTHWEST
ASSOCIATION OF RETIRED BLACK
FIRE FIGHTERS, a Washington state
corporation; CLARENCE WILLIAMS,
Respondents/ Cross Appellants,
v.
DOUGLAS JOHNSON; SEATTLE
BLACK FIREFIGHTERS
ASSOCIATION, a non-profit
corporation; JULIANA EDWARDS;
HILTON JONES; CHRISTIANSON
DOCKTER,
Appellants/Cross Respondents
No. 86392-4-I
DIVISION ONE
PUBLISHED OPINION
BIRK, J. — This appeal arises from a dispute between certain active and
retired firefighter members of the Seattle Black Firefighters Association (SBFFA)
and members of the SBFFA Board (Board). SBFFA members originally brought
this action seeking, among other relief, to enjoin the SBFFA from selling the house
it has owned in Seattle’s Central District since the 1970s, and has historically used
as a center of its charitable, community, and other activities. The superior court
reached four conclusions that the parties challenge on appeal: (1) that retired black
firefighters remained members of the SBFFA with voting rights, (2) that, though the
Board violated certain requirements of the Washington Nonprofit Corporation Act,
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No. 86392-4-I/2
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chapter 24.03A RCW (NpCA), the members did not prove the Board committed
any fiduciary breach, (3) that, though it has long contributed charitable works to
the community, the SBFFA is not a charitable corporation whose property is
subject to restrictions on property held for charitable purposes, and (4) that costs
were not taxable under RCW 4.84.030. Finding no error, we affirm.
I
In 1959, Seattle hired its first black firefighter, Claude Harris, who eventually
became the first black fire chief. It would take eight years before the department
hired more black firefighters. These firefighters created the SBFFA to fight against
racism in the department and the community at large. The SBFFA is a non-profit
corporation. The SBFFA elected its first president in 1969 and filed its articles of
incorporation 10 years later, in 1979. The SBFFA’s purposes to support black
firefighters in the fire service, serve the community through charitable works, and
raise the skill and efficiency of the fire service are reflected in its articles of
incorporation and its bylaws, discussed in greater detail below. In the 1970s, the
SBFFA acquired a house in Seattle’s Central District, at 2302 East Pike Street.
Harris was elected as the SBFFA’s first president in 1969. In 1970,
Clarence Williams was elected as the SBFFA’s second president. He was
president for 10 years. During his tenure, the SBFFA filed its articles of
incorporation, bought the SBFFA house, and solidified its position in the
community as an organization that helped the community fight against racism.
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Harris and Williams were among the 16 witnesses who testified at trial. Some of
the community activities the SBFFA engaged in included to
• Allow the Seattle Black Police Officers Association to
establish its first headquarters at the SBFFA house;
• Allow the SBFFA house to be used by the Black Transit
Worker Association;
• Use the SBFFA house as the headquarters for the “Rides To
the Polls” program;
• Establish a voter registration program that was operated in the
SBFFA house;
• Allow community organizations to use the SBFFA house for
meetings;
• Generously donate to charitable organizations and
community members who were fighting against racism and
supporting the black community;
• Provide free CPR training to the community;
• Create an advisory board made up of community leaders and
activists;
• Allow Mt. Calvary Church to conduct Sunday school classes
at the SBFFA house;
• Provide training exercises to potential new recruits and new
hires; and
• Hold monthly breakfast meetings at the house for retired
members.
The SBFFA also engaged in political activities, including helping Seattle Mayor
Wes Uhlman resist a recall effort.
Starting in 2020, Douglas Johnson began serving as president of the
SBFFA. Johnson described challenges facing the organization and stated that
because of waning interest in the SBFFA house and its need for repairs, a special
committee recommended selling the house. The SBFFA house was listed for sale
on or about January 25, 2022. In February 2022, Erwin Chappel, a captain with
the Seattle Fire Department and a member of the SBFFA, and others filed a
complaint against Johnson and others. The complaint alleged breach of fiduciary
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No. 86392-4-I/4
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duty and violation of the nonprofit statute, and sought injunctive and declaratory
relief.
In the lawsuit, Chappel sought to block the pending sale of the SBFFA
house, which Johnson asserted had been authorized by a vote of the membership.
At trial, the superior court heard conflicting testimony about whether proper
procedures were followed before the alleged vote. No witnesses were able to
testify who made the motion to sell the house, who seconded the motion, or what
the language of such a motion was. The meeting minutes did not provide clarity.
Chappel also asserted that retired firefighter members were entitled to full
membership rights. During the litigation, the SBFFA adopted a “policy,” which
purported to strip retired firefighter members of their voting rights. No meeting
minutes were presented showing a vote to strip the voting rights, despite a
provision in the bylaws requiring a majority vote of the SBFFA membership to
amend the bylaws. The SBFFA also returned some dues payments tendered by
retired members.
At the conclusion of the bench trial, the court held that the request to enjoin
the sale of the house was moot because the sale had not been completed and the
house was not on the market. Relevant to the issues presented on appeal, the
superior court ruled that under the bylaws, certain retired firefighters were
members with voting rights, and the SBFFA should not reject dues payments from
its members. The superior court ruled that the Board had violated the NpCA in
several ways. The house sale had not been properly authorized by a vote, and
any future sale would require a quorum, notice, proper procedure, and a vote of
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No. 86392-4-I/5
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the membership. But the court held that Chappel had not met his burden of proof
as to the breach of fiduciary duty claim and that Board members were not
individually liable for any of Chappel’s claims. The superior court held that the
SBFFA was “not a charitable corporation within the meaning of the [NpCA].” As a
result, the house is not subject to legal restrictions on the disposition of charitable
property. Finally, the superior court denied Chappel’s motion for costs as
prevailing party.
Johnson timely appealed. On appeal, Johnson argues that the superior
court erred in its interpretation of the SBFFA bylaws by granting membership rights
to retired members behind on their dues and to members who were not parties to
the lawsuit. Chappel cross appealed, arguing the superior court erred by not
concluding the Board breached its fiduciary duty, by ruling the SBFFA was not a
charitable corporation, and by denying Chappel’s motion for costs. The Attorney
General of the State of Washington filed an amicus curiae brief addressing
SBFFA’s status as a charitable corporation and the duties owed by the Board.
II
Johnson argues that the superior court erred in declaring retired members
of the SBFFA “retain their membership and voting rights indefinitely,” despite “not
paying dues and not being in good standing.” Johnson asserts that the superior
court’s interpretation of the SBFFA’s bylaws was counter to the evidence
presented at trial, that the superior court did not have jurisdiction to extend
membership rights to individuals not party to the lawsuit, and that members must
pay dues to retain membership. We disagree.
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No. 86392-4-I/6
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A
Johnson contends that the superior court erred in its interpretation of the
bylaws based on the testimony at trial. Chappel answers that Johnson provided
only a partial verbatim report of proceedings, that Johnson’s factual arguments
should therefore be disregarded, and that we should treat the superior court’s
findings as true on appeal. We agree with Chappel.
Under RAP 9.2(b), if the “party seeking review intends to urge that a verdict
or finding of fact is not supported by the evidence, the party should include in the
record all evidence relevant to the disputed verdict or finding.” See Bulzomi v.
Dep’t of Lab. & Indus., 72 Wn. App. 522, 525, 864 P.2d 996 (1994) (“The party
seeking review has the burden of perfecting the record so that the reviewing court
has before it all of the relevant evidence. An insufficient record on appeal
precludes review of the alleged errors.” (Citation omitted.)). If the trial record
provided on appeal is incomplete, our “ability to fairly evaluate the findings” is
“compromised,” and we treat the superior court’s findings of fact as true. In re
Parentage of A.F.J., 161 Wn. App. 803, 806 n.2, 260 P.3d 889 (2011), aff’d, 179
Wn.2d 179, 314 P.3d 373 (2013).
The report of proceedings submitted for our review includes excerpted
testimony from six witnesses. The trial minutes indicate that 16 witnesses were
called at trial. We cannot review the propriety of the superior court’s factual
determinations without an adequate report of proceedings. The superior court
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No. 86392-4-I/7
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relied on testimony establishing that the SBFFA is a “brotherhood” in which
membership does not cease, ruling,
[I]t [is] clear to me that the expectation was that once you’re a Seattle
Black firefighter, once you’re a member of the Association, it
becomes a brotherhood. You’re always a member, right? And so,
that dues issue was never contemplated to be, like, a thing that
would—would kick you out. And that was very consistent for me
with—when I had the opportunity to listen to these founding
members, that was very clear to me. You could—it was palpable. I
mean, you could see it in the demeanor. You could feel it in the
energy. Like, once a part of the brotherhood, always a part.[1]
The testimony on which this finding was based was in large part not supplied to
this court.
The superior court also based its analysis of the membership issue on the
bylaws. Its conclusion that retired members do not lose their membership, even if
they neglect to pay dues, is a facially reasonable way to read the bylaws. The
membership article of the bylaws states,
Membership in the [SBFFA] shall be limited to the members who are
professional [firefighters,] current or retired, of good moral character
and in good standing in the Seattle Fire Department and shall be
bound by the provisions of these [SBFFA bylaws]. [Firefighters]
wishing to become a member of the [SBFFA] shall make an
application on forms as provided by the association. New members
must be approved by a majority of the membership present at any
regular meeting.
(Emphasis added.) Article 13, dues and revenues, states that “[r]etired members
dues will be one half the amount of active duty members,” and that “[r]etired
1 A trial court’s oral ruling may be used to complement and explain written
findings. Spencer v. Badgley Mullins Turner, PLLC, 6 Wn. App. 2d 762, 801, 432
P.3d 821 (2018).
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No. 86392-4-I/8
8
members may pay dues by check or money order payable to: SBFFA.” The bylaws
do not state that membership is contingent on payment of dues.
Meanwhile, other provisions of the bylaws contemplate that members might
continue as members even if they are behind on their dues. Article 12, § 5, on
discipline and misconduct, requires any suspended or expelled members seeking
reinstatement to pay “all back dues (up to one year) and assessments unpaid.” In
article 13, § 4, the bylaws provide for the possibility that the SBFFA might provide
loans to members, but they make loan requests contingent on the member being
“in good standing (all dues current).”
“The governing documents of a corporation are interpreted in accordance
with accepted rules of contract interpretation.” Roats v. Blakely Island Maint.
Comm’n, Inc., 169 Wn. App. 263, 273-74, 279 P.3d 943 (2012). Relevant to the
superior court’s analysis of the bylaws, the focus is on “the reasonable meaning of
the contract language to determine the parties’ intent.” Viking Bank v. Firgrove
Commons 3, LLC, 183 Wn. App. 706, 712-13, 334 P.3d 116 (2014). Courts view
a contract “as a whole, interpreting particular language in the context of other
contract provisions.” Id. at 713. The superior court adopted a reasonable reading
of the bylaws as providing membership to any members admitted, retired or
otherwise, regardless of whether they are current on their dues. In the absence of
the record on which the superior court relied, and with its adopting a reasonable
reading of the bylaws, we decline to revisit its reasonable interpretation.
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No. 86392-4-I/9
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B
Johnson also challenges the superior court’s ruling on membership on
procedural grounds, contending that the superior court lacked jurisdiction to extend
membership rights to individuals who were not parties to the lawsuit, that its ruling
erroneously imposed membership on persons who had not consented to
membership, and that by statute members must pay dues to retain membership.
Johnson argues that the court lacked jurisdiction to confer membership on
retired members who did not directly participate in the litigation. We disagree. As
a starting point, as courts of general jurisdiction, superior courts have the power to
determine all matters, legal and equitable, unless those powers are expressly
denied. Bour v. Johnson, 80 Wn. App. 643, 647, 910 P.2d 548 (1996). The NpCA
contemplates that a list of members entitled to vote at a meeting must be available
for inspection by any member. RCW 24.03A.405(1)-(2). The NpCA authorizes the
court to grant relief in aid of a member’s inspection of the list of members entitled
to vote. RCW 24.03A.405(4). In certain circumstances, a member may petition a
court to determine the validity of a corporate action. RCW 24.03A.966(1). The
court in that case may “make such orders” as “may be just and proper,” and if no
valid corporate action has been taken, may order a meeting in accordance with
RCW 24.03A.964. RCW 24.03A.966(2). And RCW 24.03A.964(2) allows the court
to “determine the right to vote at the meeting of persons claiming that right.” Taken
together, these provisions afforded the superior court lawful authority to determine
who were members of SBFFA entitled to vote at a meeting pursuant to the NpCA
and the SBFFA bylaws.
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No. 86392-4-I/10
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Next, Johnson cites RCW 24.03A.325 as prohibiting the imposition of
membership without explicit consent, and he cites the notice requirements for class
action lawsuits under CR 23(b)(3). Johnson argues that the superior court’s order
imposes membership without “affirmative acceptance.” The superior court
determined that the bylaws did not make membership contingent on staying
current on dues. Then, the court found, “Per the bylaws, retirement of black
firefighters does not divest them of their membership in SBFFA or their voting
rights.” Contrary to Johnson’s argument, the superior court’s ruling did not vest
membership in persons who had not consented. Rather, it ruled that, under the
bylaws, persons who had been members continued as members.
Finally, Johnson makes a statutory argument that the superior court ruling
improperly granted membership and voting rights to members who have not paid
their dues. Johnson highlights RCW 24.03A.360 as providing “clear guidelines for
imposing and enforcing membership dues.” But RCW 24.03A.360 defers to
individual nonprofit corporations’ articles of incorporation or bylaws to authorize,
assess, and impose fees. The superior court found that membership and its
corresponding rights were not contingent on the payment of dues. The court noted
that the SBFFA may revise this policy and may do so through a bylaws amendment
through a majority vote of its membership.
We affirm the superior court’s ruling that the retired black firefighters
remained members of the SBFFA.
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No. 86392-4-I/11
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III
On cross-appeal, Chappel argues that the superior court’s conclusion that
Board members did not breach their fiduciary duties or act negligently is contrary
to its findings that “describe in great detail” the Board’s “illegal breach of the non-
profit statute and several provisions of the SBFFA bylaws.” We disagree.
Whether an individual owes a legal fiduciary duty is a question of law, but
breach of a legal duty is generally a question of fact. Lodis v. Corbis Holdings,
Inc., 172 Wn. App. 835, 857, 292 P.3d 779 (2013). Because we were provided
with an incomplete record for review, and Chappel does not challenge the superior
court’s findings of fact, we decline to revisit generally the superior court’s
conclusion that Chappel failed to meet his burden of proving breach of fiduciary
duty or negligence. We confine our review to whether the Board’s statutory and
bylaws violations compel a finding of breach of fiduciary duty or negligence. See
Custody of A.F.J., 161 Wn. App. at 806 n.2 (with an incomplete record, our ability
to “fairly evaluate the findings” is “compromised”). We conclude that they do not.
The NpCA was revised in 2021, with an effective date of January 1, 2022.
See LAWS OF 2021, ch. 176. Because the Board’s conduct spanned before and
after the implementation date of the new NpCA, the superior court analyzed
Chappel’s breach of fiduciary duty claim under the old and new NpCAs. We begin
by describing the standards required of directors under each.
The old NpCA, former RCW 24.03.540 (1989), does not specifically address
director liability, but under the new NpCA, a “director of a nonprofit corporation is
not liable to any member of the nonprofit corporation for any action taken, or any
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No. 86392-4-I/12
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failure to take action, as a director except” for a “knowing infliction of harm upon
the member; or an intentional violation of criminal law or this chapter that results
in harm or loss to the member.” RCW 24.03A.540(5). Both laws describe a
statutory director standard of care. Under the old NpCA, a director owed duties of
acting in “good faith, in a manner such director believes to be in the best interests
of the corporation, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar circumstances.”
Former RCW 24.03.127 (1986). Under the new NpCA, each director shall act “in
good faith” “[w]ith the care an ordinarily prudent person in a like position would
exercise under similar circumstances” and “[i]n a manner the director reasonably
believes to be in the best interests of the nonprofit corporation.” RCW
24.03A.495(1). The language of the two statutes is not identical, but under both
directors owe duties of good faith, ordinary prudence, and a reasonable belief that
their actions are in the corporation’s best interests.
The superior court ruled that the Board violated the NpCA and the bylaws
in several ways. First, the sale of the SBFFA house was a fundamental transaction
under RCW 24.03A.010(31) for which the notice provisions of RCW 24.03A.890
were required to be followed, but were not followed. The deficiencies included
both lack of notice to all SBFFA members and inadequate substantive notice
including the purpose of the meeting, a description of the disposition, its terms and
conditions, and the consideration to be received by the corporation. See RCW
23.03A.890(4). Second, by purporting to eliminate the eligibility of retired members
to vote, the Board violated their voting rights under RCW 24.03A.345, .435, and
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No. 86392-4-I/13
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.695, and under the bylaws as properly interpreted. Third, the corporation failed
to keep Board meeting minutes, six years of financial statements, and other
documents, in violation of RCW 24.03A.210(1). Fourth, Johnson’s simultaneously
acting as the president and the secretary of the SBFFA violated RCW
24.03A.585(3). But the trial court ruled that Chappel had “not met their burden as
to the breach of fiduciary duty claim, under either the old or the new statute.” In its
oral ruling, the superior court described the SBFFA as historically run “very
informally,” and said of the Board, “I don’t find anything malicious, nefarious,
an[d]—I [don’t] even find any negligence. I really don’t.”
Chappel argues that “[i]f the [b]oard breached their duties under the non-
profit statutes and SBFFA bylaws, they certainly breached their fiduciary duties.”
To support this proposition, he cites Senn v. Northwest Underwriters, Inc., 74 Wn.
App. 408, 875 P.2d 637 (1994). In Senn, we held the defendant director and officer
liable for breach of fiduciary duty because they committed “blatant” fraud, diverting
$12.3 million in company funds and insurance premiums over 18 months, much of
which went to themselves or their family. 74 Wn. App. at 411, 413, 418-19. “Senn
is consistent with Washington case law, which generally holds that a corporate
officer cannot be held personally liable unless the officer knowingly and in bad faith
commits or condones a wrongful act in the course of carrying out his or her duties.”
Annechino v. Worthy, 162 Wn. App. 138, 147, 252 P.3d 415 (2011), aff’d, 175
Wn.2d 630, 290 P.3d 126 (2012).
Washington courts will not substitute their judgment for that of corporate
directors absent evidence of fraud, dishonesty, or incompetence. Riss v. Angel,
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131 Wn.2d 612, 632, 934 P.2d 669 (1997). For comparison, Delaware has
suggested that failure to comply with procedural requirements is not necessarily in
itself a fiduciary breach. See Oberly v. Kirby, 592 A.2d 445, 465 (Del. 1991) (“[T]he
falsification of a corporation’s minutes might constitute a breach of a director’s duty
of candor. Here, however, the appellants offered no evidence that anyone was or
even could have been deceived by the alleged falsification.”); In re McDonald’s
Corp. Stockholder Derivative Litig., 291 A.3d 652, 692 (Del. Ch. 2023) (“failure to
keep minutes can be a cause for suspicion” but “the lack of minutes is not sufficient
to support an inference of bad faith.”). The superior court could validly conclude
that the Board violated provisions of the NpCA and the bylaws, but without
breaching fiduciary duties or committing negligence.
Chappel secured remedies from the superior court to address the Board’s
violative conduct. The court ordered future elections, ordered enforcement of the
bylaws, clarified membership and voting rights, and directed the SBFFA to hold a
compliant meeting to determine the future of the SBFFA house. And no sale
occurred as a result of the corporate acts affected by the violations the trial court
found. Chappel did not show that the notice, voting, records, and officer violations
were the product of or were themselves a fiduciary breach, as opposed to the result
of traditionally informal management. With the incomplete record before us, and
the nature of the statutory violations committed, we have no basis to overrule the
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superior court’s conclusion that Chappel failed to meet his burden of proof as to
his claims for breach of fiduciary duty and negligence.2
IV
Property held for charitable purposes by a nonprofit corporation “may not
be diverted from charitable purposes.” RCW 24.03A.900(1). And, the law restricts
the disposition of charitable property. See generally RCW 24.03A.900(2)-(6).
Chappel argues that the SBFFA was a “ ‘[c]haritable [c]orporation’ organized and
operated for charitable purposes,” and as a result, “[t]he SBFFA house was
‘property held for charitable purposes.’ ” Chappel argues the superior court erred
“by concluding that the Board could unilaterally redefine property held for
charitable purposes as non-charitable and redefine a charitable corporation to a
non-charity.” In an amicus curiae brief, the Attorney General argues that the
superior court erred in finding that the SBFFA is not a charitable corporation
because its “articles of incorporation plainly state that its purpose is charitable, and
charitable corporations cannot change their purpose without following specific
statutory provisions.” By contrast, Johnson asserts the “SBFFA was never a
charitable organization.” Johnson is correct.
A
The new NpCA created a new classification, “charitable corporations.”3
RCW 24.03A.010(5). Charitable corporations are domestic nonprofit corporations
2 In affirming the trial court’s conclusion that the statutory violations in this
case did not amount to a fiduciary breach, we do not foreclose the possibility that
a statutory violation could amount to a fiduciary breach.
3 Rather than recognizing “charitable corporations,” the old NpCA put limits
on the disposition of property held by a nonprofit for charitable purposes. Former
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“operated primarily or exclusively for one or more charitable purposes.” Id.
Charitable purpose is defined as a purpose that either (a) would “make a
corporation organized and operated exclusively for that purpose eligible to be
exempt from taxation under section 501(c)(3) of the internal revenue code,” see
26 U.S.C. § 501(c)(3), or (b) “is considered charitable under applicable law other
than this chapter or the internal revenue code.”4 RCW 24.03A.010(6). Property
held by a charitable corporation is considered property “held for charitable
purposes,” and is subject to restrictions under the NpCA. RCW 24.03A.165. It is
clear from the statutory scheme that property held for charitable purposes must
ultimately serve a charitable purpose.
To determine if a corporation, not registered under 26 U.S.C. § 501(c)(3),5
is “charitable under applicable law” under RCW 24.03A.010(6), we look to the
intent expressed in its articles of incorporation and bylaws, applying traditional
RCW 24.03.225(3) (2020). In the event of a dissolution, the old NpCA said assets
held by the corporation “subject to the limitation permitting their use only for
charitable, religious, eleemosynary, benevolent, educational, or similar purposes”
shall be “transferred or conveyed to corporations or organizations “engaged in
activities substantially similar to those of the dissolving corporation.” Id. And,
under former law, a nonprofit corporation holding assets usable only for charitable
or similar purposes was also defined as a “trustee” for purposes of chapter 11.110
RCW. Former RCW 11.110.020 (2020).
4 In chapter 19.09 RCW, “The term ‘charitable’ is used in its generally
accepted legal sense and includes relief of the poor, the distressed, or the
underprivileged; advancement of religion; advancement of education or science;
erecting or maintaining public buildings, monuments, or works; lessening the
burdens of government; lessening neighborhood tensions; eliminating prejudice
and discrimination; defending human and civil rights secured by law; and
combating community deterioration and juvenile delinquency.” RCW
19.09.020(3).
5 Because the SBFFA is not registered under section 501(c)(3) of the
internal revenue code, 26 U.S.C. § 501(c)(3), we do not address the analysis that
would apply to a corporation that is so registered.
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principles of contract interpretation. The “creation and administration of a
charitable trust lies with the settlor’s intent.” Niemann v. Vaughn Cmty. Church,
154 Wn.2d 365, 375, 113 P.3d 463 (2005). Again, the governing documents of a
corporation are interpreted in accordance with accepted rules of contract
interpretation.6 Roats, 169 Wn. App. at 273-74.
The purpose of contract interpretation is to determine the intent of the
parties. Id. at 274. Under the “context rule” courts look to extrinsic evidence,
including the subject matter and objective of the contract, the circumstances
surrounding the making of the contract, the subsequent acts and conduct of the
parties, and the reasonableness of the parties’ respective interpretations. Hearst
Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 502, 115 P.3d 262 (2005).
Contract interpretation is a question of law only when “the interpretation does not
depend on the use of extrinsic evidence,” or “only one reasonable inference can
be drawn from the extrinsic evidence.” Tanner Elec. Coop. v. Puget Sound Power
& Light Co., 128 Wn.2d 656, 674, 911 P.2d 1301 (1996). Otherwise, “[c]ontract
interpretation is normally a question of fact for the fact-finder.” Spradlin Rock
6 In other contexts, Washington courts have held that even if a corporation’s
governing documents clearly show charitable intent, the conduct of the
organization may still prove that it is not charitable. See Miller v. Mohr, 198 Wash.
619, 634-35, 89 P.2d 807 (1939), overruled on other grounds by Pierce v. Yakima
Valley Mem’l Hosp. Ass’n, 43 Wn.2d 162, 260 P.2d 765 (1953) (to determine
hospital’s charitable status, for purposes of tort liability, the court first examined the
hospital’s articles of incorporation and bylaws as a matter of law, and when
evidence was introduced that showed the hospital “did not observe the basic
principles laid down in its” organizing documents, a matter of fact was raised to be
determined by a factfinder); Adult Student Hous., Inc. v. Dep’t of Revenue, 41 Wn.
App. 583, 591-92, 705 P.2d 793 (1985) (examining nonprofit organization’s
activities, not its incorporating documents, to determine if it was a charity for
purposes of tort liability).
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No. 86392-4-I/18
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Prods., Inc. v. Pub. Util. Dist. No. 1 of Grays Harbor County, 164 Wn. App. 641,
654-55, 266 P.3d 229 (2011).
B
In its articles of incorporation, the SBFFA’s stated purpose is to
offer a variety of services and resources in response to the needs of
Blacks who are recruited and employed as firefighters and to aid in
motivating our Black Brothers to seek advancement to elevated
ranks throughout the Fire Service. The corporation is organized
exclusively for educational, charitable, religious, scientific, and
literary purposes, within the meaning of Section 501(c)(6) of the
Internal Revenue Code.[7]
And more recently, current leadership pursued designation of the organization for
tax purposes under Section 501(c)(5).8 In the SBFFA’s bylaws, its stated
objectives are “the recruitment and promotion of minority membership into the
Seattle Fire Department. The encouragement of higher degrees of skill and
efficiency in the fire service, the cultivation of friendship and fellowship among it[s]
members.” These documents highlight the charitable purposes of the SBFFA.
See RCW 19.09.020(3) (definition of “charitable” includes “eliminating prejudice
and discrimination”). And the SBFFA pursues charitable purposes. But the bylaws
also emphasize the professional advancement of its members. They do not
7 26 U.S.C. § 501(a) and (c)(6) provide a tax exemption, unless otherwise
denied under other sections, to “[b]usiness leagues, chambers of commerce, real-
estate boards, boards of trade, or professional football leagues (whether or not
administering a pension fund for football players), not organized for profit and no
part of the net earnings of which inures to the benefit of any private shareholder or
individual.”
8 26 U.S.C. § 501(c)(5) covers “[l]abor, agricultural, or horticultural
organizations.”
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No. 86392-4-I/19
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unambiguously indicate an intent that SBFFA operate “primarily or exclusively” for
charitable purposes under RCW 24.03A.010(5).
The superior court heard testimony from founders of the SBFFA and
concluded that the founders wanted to engage in political activity, which is why the
organization was never registered under 26 U.S.C. § 501(c)(3). The superior
court, in its oral ruling, stated that “the founders of this organization intended for it
to be and, in fact, operated it as a charitable organization, notwithstanding the
political—the activities that they were involved in politically.” The superior court
explained that, “[t]his is not an organization today that meets the definition based
upon the evidence that I heard. I don’t find that the burden has been borne, if you
will, for the Court to make a finding that—that the [SBFFA] meets the definition of
a charitable organization.” In its written findings, the superior court found that the
SBFFA is not a charitable corporation, and noted that the SBFFA “historically
operated as an organization engaged in community and charitable activities,” and
that the “values of the organization and its activities, under its current leadership,
have changed.”
Focusing on the language that the organization’s values and activities have
changed, Chappel and the Attorney General attribute to the superior court a ruling
that the SBFFA once met the current definition of a charitable corporation, but no
longer does. We agree with the Attorney General that “a charitable corporation
may not change its purpose to a non-charitable one without taking specific and
statutorily-mandated steps intended to protect charitable assets from misuse.”
See, e.g., RCW 23.03A.908 (limitations on corporations holding property for
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No. 86392-4-I/20
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charitable purposes). But neither the SBFFA’s history as a civil rights organization
engaging in charitable works nor its values and activities changing is inconsistent
with the superior court’s conclusion that it did not meet the definition of a charitable
corporation. Engaging in charitable activities does not make the SBFFA a
“charitable corporation” under RCW 24.03A.010. In addition to its charitable
activities, the SBFFA worked to advance the interests of its members and it
engaged in political activities. Though the SBFFA engaged in charitable activities,
its later, changed, activities are proper extrinsic evidence to show it was not
operated primarily or exclusively for charitable purposes. This is supported by the
SBFFA’s articles of incorporation, its bylaws, the record provided to us, and the
superior court’s clear conclusion that the SBFFA is not a charitable corporation.
As a result, the SBFFA house is not subject to the restrictions on property held for
charitable purposes.9
V
Chappel argues the superior court erred in denying his motion for costs
because he was the substantially prevailing party and entitled to costs under
chapter 4.84 RCW. We disagree.
We review an award of costs for abuse of discretion.10 Payne v. Paugh,
190 Wn. App. 383, 413, 360 P.3d 39 (2015). Under RCW 4.84.030, a prevailing
9 Because we affirm the superior court’s ruling that the SBFFA is not a
charitable corporation, it is not necessary to address the Attorney General’s
argument about the nature of the duties owed by Board members of a charitable
corporation.
10 Case law suggests that whether a party is a “prevailing party” may be a
mixed question of law and fact and reviewed “under an error of law standard.”
Dave Johnson Ins., Inc. v. Wright, 167 Wn. App. 758, 782, 275 P.3d 339 (2012).
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No. 86392-4-I/21
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party in the superior court “shall be entitled to his or her costs.” The statute
narrowly defines costs to certain expenses such as filing fees, process server fees,
publication fees, notary fees, and reasonable expenses incurred in obtaining
reports and records. RCW 4.84.010(1)-(5). In general, a prevailing party is one
who receives an affirmative judgment in their favor, but if neither party wholly
prevails, “then the determination of who is a prevailing party depends upon who is
the substantially prevailing party, and this question depends upon the extent of the
relief afforded the parties.” Riss 131 Wn.2d at 633. “If both parties prevail on major
issues, however, there may be no prevailing party.” Phillips Bldg. Co. v. An, 81
Wn. App. 696, 702, 915 P.2d 1146 (1996).
Chappel prevailed on several issues: he blocked the sale of the house
(though the requested injunction was not granted because the issue had become
moot), secured declaratory relief guaranteeing a vote of the membership to resolve
the house’s future, obtained a declaratory judgment on the membership issue,
proved breaches of the NpCA, and defeated Johnson’s tortious interference
counterclaim. Johnson prevailed on several issues: Chappel’s breach of fiduciary
duty, breach of contract, and individual officer liability claims failed, the SBFFA was
found not to be a charitable corporation, the SBFFA house was found not to be
charitable property, and the superior court affirmed that the Board was properly
constituted. Both parties prevailed on major issues. Given the extent of relief
Because we reach the same result under either standard of review, we do not
consider whether review for abuse of discretion or error of law governs.
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afforded to the parties, the superior court did not abuse its discretion in denying
costs to Chappel as a prevailing party.
Johnson requests fees on appeal. Because Johnson does not show
entitlement to appellate relief, we deny Johnson’s request for fees. The parties
shall bear their own costs on appeal.
Affirmed.
WE CONCUR:
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