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Corporate – Nonprofit – Membership Dues – Resignation

The plaintiff-country club’s membership documents – both at the time defendants joined and at the time they resigned – required resigning members to continue paying dues and other amounts until their membership was reissued. Since the Nonprofit Corporation Act also provides, “The resignation of a member does not relieve the member from any obligations the member may have to the corporation as a result of obligations incurred or commitments made before resignation,” defendants were required to keep paying their dues and other charges after their resignation from the club.

We reverse the Court of Appeals’ ruling to the contrary and reinstate summary judgment for the club. We remand to the Court of Appeals to address the remaining issues.

Plan Documents

Section 5.11 of the club’s 2008 plan (in effect when defendants resigned) unambiguously provides that defendants are obligated to continue to pay all membership dues, fees, and other charges after resignation until their membership is reissued. There are no provisions in the club’s 2009 bylaws or 2009 rules (both in effect when defendants resigned) that contradict this.

The provisions of the membership documents that require members to continue to pay their membership dues until their membership is reissued are necessary to ensure the club will remain viable in the future. When defendants entered into this membership agreement, they accepted the obligation to continue to pay their membership dues even under difficult circumstances, such as a financial downturn, a health crisis, or a sudden disinterest in being members in the club.

In doing so, however, they also received the benefit of knowing that if other members experienced those circumstances, the other members would likewise be obligated to continue to make their payments. Without these provisions, members could default on their payments whenever it became convenient to do so, and the non-defaulting members would be forced to absorb the costs.

Therefore, these provisions are not “unfair” or “unreasonable,” but rather are the very feature of the membership documents that enables defendants and other members to sustain a viable club on Callawassie Island, which in turn increases the value of their membership and their property.

Defendants’ membership in the club – and thus their obligation to pay membership dues, fees, and other charges – is tied to their ownership of a lot and house on Callawassie Island. If defendants truly wish to avoid paying membership dues, they may sell their house.

In addition, Callawassie Island is a private resort community developed around the property owners’ use of the amenities paid for by these dues. Defendants purchased their exclusive home there in 1999 for $590,000. They have chosen not to sell, but are instead attempting to keep their home on this resort island without having to pay a property owner’s share of the amenities.

Our decision by no means renders a harsh result. Rather, this is precisely the result to which these sophisticated purchasers of a resort home agreed when they decided to purchase the property and abide by the terms of the governing documents.

Relying on the club’s rules from 2001, the Court of Appeals found there was “an ambiguity as to whether Appellants were entitled to expulsion and thus exposed to a maximum liability of four months’ of unpaid dues (plus any accrued expenses).” There is no such ambiguity.

First, the 2001 rules were not in effect when defendants resigned in 2010. Even if those rules did apply, however, mandatory expulsion arises only after the board has suspended a member, which is discretionary with the board. Here, no suspension ever occurred; defendants resigned. Therefore, the four-month suspension period that leads to expulsion was never triggered.

Second, the 2009 rules, which were in effect when defendants resigned, do not make expulsion mandatory under any condition.

Nonprofit Corporation Act

S.C. Code Ann. 33-31-620(a) provides, “A member may resign at any time.” The Court of Appeals explained that requiring a member to continue to pay dues that accrue after resignation “would create an unreasonable situation in which clubs could refuse to allow a member to ever terminate their membership obligations.”

However, subsection 33-31-620(b) provides, “The resignation of a member does not relieve the member from any obligations the member may have to the corporation as a result of obligations incurred or commitments made before resignation.”

When defendants joined the club, they made a commitment to continue to pay dues, fees, and other charges during the period of time after resignation and before reissuance of the membership. Therefore, the requirement that members continue to pay dues, fees, and other charges after resignation until their membership is reissued is not prohibited by § 33-31-620.

Reversed.

Dissent

(Hearn, J.) I respectfully dissent, as I believe the Court of Appeals was correct that the governing documents are ambiguous and the club’s interpretation violates the Nonprofit Corporation Act.

The majority ostensibly permits defendants to resign from the club yet holds them responsible for the same obligations as an active member, including ever-accumulating dues and fees, only allowing them to escape that obligation in the unlikely event that their membership is reissued. This harsh result is one I do not believe the governing documents require, and certainly not as a matter of law.

Callawassie Island Members Club, Inc. v. Dennis (Lawyers Weekly No. 010-098-18, 19 pp.) (John Few, J.) (Kaye Hearn, J., joined by Donald Beatty, C.J., dissenting) Opinion refiled to remand for consideration of other issues. Appealed from the Circuit Court in Beaufort County (Carmen Mullen, J.) On writ of certiorari to the Court of Appeals. Andrew Lindemann, M. Dawes Cooke, John Fletcher and Stephen Hughes for petitioner; Ian Ford and Neil Thomson for respondents. S.C. S. Ct.

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