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Couple must pay fees, despite leaving club

Membership documents signed by a Beaufort County couple require them to continue to pay thousands of dollars in dues and fees to a social club, even though they resigned from it, the South Carolina Supreme Court said in a split 3-2 decision.

Justice John Few, writing for the majority, said that the South Carolina Court of Appeals erred when it overturned a circuit court’s summary judgment on the grounds that the family was given bad advice by a club manager about their liability for fees and that the agreement violates the South Carolina Nonprofit Corporation Act. Justices Kittredge and James concurred in the opinion.

Ronnie and Jeanette Dennis joined the Callawassie Island Club in 1999 when they purchased property on the island northwest of Hilton Head. They paid $31,000 at the time to become equity members. In addition, they also signed the club’s bylaws and rules which require “[a]n equity member who has resigned from the Club … to continue to pay dues and food and beverage minimums to the Club until his or her equity membership is reissued by the Club.”

In 2001, members of the Island Club formed the Callawassie Island Members Club, Inc. to take over the assets and operation of the club. When it formed, the Dennises automatically became members of it as well, and were therefore required to abide by its newly updated rules.

When, in 2010, the Dennis family decided they no longer wanted to be a part of the Members Club, they sent a letter of resignation and quit making payments to it. These included $634 a month in membership fees, $100 a month in special assessment fees and a yearly food and beverage minimum of $1,000.

In 2011, the club filed a breach of contract action, saying the membership documents required the Dennises to continue paying fees until someone else took over their membership.

The Dennises denied liability on the aforementioned grounds, but the Beaufort County Circuit Court granted summary judgment for the club. The Dennises appealed and the Court of Appeals reversed on both issues, saying that ambiguity in the governing documents made it unclear whether members were liable for dues accrued after resignation, and that the provisions that required them to continue to pay violated section 33-31-620 of the Nonprofit Corporation Act. The club then filed a petition for a writ of certiorari which the Supreme Court granted.

Few said in the opinion that while the Dennises urged the court to consider information that was conveyed to them orally, by a membership coordinator, who they said told them they’d only be liable for four months of unpaid membership fees if they resigned, the parol evidence rule prevents such evidence from being heard.

“The parol evidence rule ‘prohibits the admission of evidence of prior or contemporaneous oral agreements … whose effect is to add to, vary, modify, or contradict the terms of a writing which the parties intend to be a final, complete, and exclusive statement of their agreement,” Few said.

While the Court of Appeals found “an ambiguity whether the Appellants were entitled to expulsion and thus exposed to a maximum liability of four months’ of unpaid dues,” Few said the 2009 rules make clear that expulsion only happens after a member is suspended, and that such a measure is left up to the discretion of the board of directors. Because the Dennises resigned, and were never suspended or expelled, they do not qualify for the rules governing expulsion.

The Dennises also rely on subsection 33-31-620(a) of the Nonprofit Corporation Act, which says that a member of a nonprofit organization must be allowed to resign at any time. They argue that because the club’s rules bar them from actually resigning, the club violates this provision.

But Few pointed out that subsection 33-310-620(b) of the same law says that resigning doesn’t relieve members of obligations “incurred or commitments made before resignation.”

“The dues, fees, and other charges the Dennises owe fall into the ‘commitments made’ category,” Few said. “Therefore, we find the requirement that members continue to pay dues, fees, and other charges after resignation until their membership is not prohibited by section 33-31-620.”

While the Callawassie Members Club prevailed on the matters before the court, Few said there were other issues raised in the Court of Appeals that have not yet been addressed and remanded the case back to the appellate court.

Justice Kaye Hearn wrote a dissenting opinion in which she argued that the majority’s stance permits the Dennises to resign, but forces them to continue having the same obligations as an active member of the club, potentially for life. Additionally, she said that the documents are, in fact, ambiguous, and that the majority’s decision incentivizes bad behavior.

“Instead of attempting to resign, members have more incentive to become ‘bad neighbors’ and behave in such a way as to encourage the club to suspend them,” Hearn said. “Surely a member who peaceably resigns should not be placed in a worse pecuniary situation than a member who is suspended for violating Club rules and policies.” Chief Justice Donald Beatty concurred with the dissent.

Ian Ford of Ford Wallace Thomson in Charleston represented the Dennises in the case. He said that while he wishes the dissenting opinion had prevailed, he feels the Court of Appeals will again rule in his clients’ favor on issues concerning whether the club’s documents were properly amended and over whether there were questions of fact that haven’t yet been addressed.

“This was a close decision,” he said. “Now this goes back to the Court of Appeals for an additional ruling … Thus far we’ve won every case in the Court of Appeals. The Supreme Court decision was so close, if I were the other side, I would not feel confident about the other appeals.”

Ford said the Dennises’ case is but one of many he’s currently litigating against the Callawassie Island Club.

“The club has sued dozens and dozens of its members to force them to stay in,” he said, while noting slightly different circumstances in each case. “Their membership model, rather than attracting new members, seems to be to force old members to stay.”

Attorneys for the Callawassie Island Members Club, including Andrew Lindemann of Davidson & Lindemann in Columbia, M. Dawes Cooke Jr. and John Fletcher of Barnwell Whaley Patterson & Helms in Charleston and Stephen Hughes of Howell, Gibson & Hughes of Beaufort did not immediately respond to requests for comment.

 

Follow Matt Chaney on Twitter @SCLWChaney

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