Corporate – Nonprofit – Country Club Membership – Suspension & Perpetual Dues 

When the defendant-member joined the plaintiff-club, if defendant stopped paying dues, his expulsion was mandatory. According to defendant, the club changed its governing documents unilaterally – though a membership vote was required – such that, when a member stops paying dues, the club can now suspend the delinquent member, refuse to reissue his membership and continue to charge the delinquent member dues indefinitely. Since there is evidence to support defendant’s position, the Court of Appeals erred in upholding the circuit court’s grant of summary judgment. 

We reverse the decision of the Court of Appeals and remand to the circuit court for further proceedings. 

Facts 

This case concerns a country club on Callawassie Island. Under the plaintiff-club’s 1994 plan, equity club memberships were separate from real property ownership. In 1995, defendant separately bought real property on the island and an equity membership in the club. 

Subsequently, plaintiff amended its organizational documents. One such amendment provided that all persons who purchased property on the island were required to purchase an equity membership in the club and retain it as long as they owned their property. 

After nearly 15 years as a dues-paying member, defendant sought to exit the club, but he encountered difficulties in doing so. He stopped paying dues in October 2009. There is evidence that the club formally deemed defendant’s account delinquent and placed his membership on the club’s suspension list in 2011. Defendant retained ownership of his property on the island. 

In 2012, the club brought this action against defendant to collect allegedly delinquent dues, fees and assessments. The club maintained that ownership of a lot required defendant to remain a member in good standing and to continue paying dues until his membership was reissued by the club to a new member. 

Defendant relied on the organizational documents in effect in 1995. He contended that, not only were club membership and real property ownership separate, but the 1994 organizational documents required that he be expelled after four months of nonpayment. Defendant also contended that the expulsion provision was unilaterally changed by the club without notice to or voting by the equity members, contrary to provisions in the organizational documents that required any material alterations in the controlling terms affecting equity members to be approved by a majority of the members. 

Defendant also alleged that the club quietly reissued the memberships of some club members while refusing to reissue his. 

The circuit court granted summary judgment for the club and awarded the club damages of $58,744.23 and attorney’s fees of $9,132.23. Relying on Callawassie Island Members Club, Inc. v. Dennis, 425 S.C. 193, 821 S.E.2d 667 (2018) (Dennis II), our Court of Appeals upheld the circuit court’s judgment. 

Analysis 

Dennis II did not require the Court of Appeals to uphold summary judgment for the club in this case. Dennis II concerned whether the Court of Appeals erred in holding specific portions of the club’s organizational documents regarding resignation were ambiguous and in interpreting a portion of the Nonprofit Corporation Act (NCA) that is applicable to resignations. 

In contrast, defendant here was formally suspended by the club. This status triggers different provisions in the club’s organizational documents. Moreover, in Dennis II, we acknowledged that we were not addressing the question at issue in this case: the potential for perpetual liability. 

Defendant’s case presents a genuine issue of material fact as to whether the club violated the NCA by failing to afford each of its members the same rights and obligations as to their transfer rights and in making changes that affected those rights and obligations without the vote of the affected members. There is evidence in the record that the club selectively allowed some members to concede their memberships, while others, such as defendant, found themselves lingering on the club’s elusive resale list. 

The manner in which the club made its decisions regarding the reissuance of memberships is an appropriate topic for further development at trial. 

Under the club’s theory of the case, even though membership at the time defendant joined was strictly optional, a member can never actually terminate his or her membership following a delinquency after the club unilaterally changed the terms of the organizational documents. The original and amended organizational documents both stated dues obligations would continue until a membership was reissued, but at the time defendant joined, this reissuance provision operated in tandem with other provisions that stated a member who was delinquent could be suspended (which defendant was) and that after four months any suspended member must be expelled and their payments forfeited. 

We find the alteration of one part of the equation, i.e., the provision for expulsion and the forfeiture of all payments, is evidence that may support defendant’s claim that the club has effectively made it impossible for members to terminate their obligations if the club chooses not to reissue a membership. This is, arguably, a material, substantive change that alters the parties’ original documents and adversely affects the rights of the members. Consequently, it required a majority vote of the affected equity members pursuant to the terms of the original organizational documents. 

The club does not deny that it unilaterally made this change, but it argues it was free to do so without the consent of the equity members. Under this scenario, a suspended member could theoretically be forced to pay membership dues in perpetuity. 

The club’s plans and bylaws originally required a majority vote of the equity members in these circumstances, and the club could not subvert this protection on voting rights by making a unilateral change in the general club rules for its own benefit that materially and adversely affected the financial interests of equity members like defendant. Provisions that surreptitiously purport to permanently lock in club members in this manner violate the NCA. 

Reversed and remanded. 

Callawassie Island Members Club, Inc. v. Martin (Lawyers Weekly No. 010-025-22, 17 pp.) (Donald Beatty, C.J.) Appealed from Beaufort County Circuit Court (Ernest Kinard, J.) On writ of certiorari to the Court of Appeals. Ian Ford, Neil Davis Thomson and Ainsley Fisher Tillman for petitioner; Andrew Lindermann, Dawes Cooke, John Fletcher, Bradley Banias Stephen Hughes and James Andrew Hoyo for respondent. S.C. S. Ct.