Andrews v. Sheepscot Island Co.
| Citation | 2016 ME 68,138 A.3d 1197 |
| Decision Date | 10 May 2016 |
| Docket Number | Docket No. BCD–15–287. |
| Parties | Nathalie Taft ANDREWS et al. v. SHEEPSCOT ISLAND COMPANY. |
| Court | Supreme Judicial Court of Maine (US) |
Albert G. Ayre, Esq., and John A. Turcotte, Esq. (orally), Ainsworth, Thelin & Raftice, P.A., South Portland, for appellants Nathalie Taft Andrews et al.
Paul McDonald, Esq. (orally), and Eben M. Albert, Esq., Bernstein Shur, Portland, for appellee Sheepscot Island Company.
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
, J.
[¶ 1] After the shareholders of Sheepscot Island Company (SICO) approved a plan to convert from a for-profit corporation into a nonprofit corporation, several dissenting shareholders (collectively, the Tafts) sought declaratory and injunctive relief in the Business and Consumer Docket.1 The court (Murphy, J. ) dismissed the Tafts' complaint pursuant to M.R. Civ. P. 12(b)(6)
, concluding that the Tafts could not make out a claim that SICO's conversion plan was invalid. The Tafts appeal, arguing that the court incorrectly applied the law governing corporations and nonprofit conversions. We disagree and affirm the judgment.
[¶ 2] The following facts, which we view as admitted for purposes of this appeal, are drawn from the Tafts' complaint and the documents attached to the complaint. See Nadeau v. Frydrych, 2014 ME 154, ¶ 5, 108 A.3d 1254
; Moody v. State Liquor & Lottery Comm'n, 2004 ME 20, ¶¶ 6–11, 843 A.2d 43.
[¶ 3] SICO is a Maine corporation that was formed over one hundred years ago as a for-profit corporation. It owns land and facilities on MacMahan Island, which is located near the mouth of the Sheepscot River and is part of the town of Georgetown. There are forty cottages on MacMahan Island. A majority of SICO's shares is held by shareholders who own cottages on the island, but there are numerous shareholders who do not own cottages on the island, including four of the plaintiffs in this case. SICO issued only one class of shares, and its bylaws do not distinguish between cottage-owning shareholders and non-cottage-owning shareholders.
[¶ 4] SICO first attempted to convert into a nonprofit corporation in 2005. After a conversion plan was approved by a majority of shareholders, some dissenting shareholders, including three of the plaintiffs in this case, challenged the plan's validity. The Superior Court (Sagadahoc County, Warren, J. ) entered a summary judgment in their favor, concluding that SICO's conversion plan did not comply with 13–C M.R.S.A. § 931(3)(B) (2005)
, which required such plans to “include ... [t]he manner and basis of reclassifying” the corporation's shares.2
Macmahan Island Ass'n v. Andrews, No. CV–05–61, 2006 WL 6872297 (Me.Super. Nov. 2, 2006). We affirmed the judgment on appeal. MacMahan Island Ass'n v. Andrews, 2008 ME 52, 943 A.2d 592.
[¶ 5] In July of 2014, SICO presented a second nonprofit conversion plan to its shareholders. The plan proposed the replacement of SICO's articles of incorporation with new articles, which would reclassify all SICO shares into two classes of memberships: “cottage memberships,” available to cottage-owning shareholders, and “associate memberships,” available to all shareholders who did not become cottage members. Both cottage and associate members would be entitled to vote on matters upon which any members could vote; however, each cottage member would be entitled to twelve votes, while the associate members would be entitled to no more than twelve votes collectively. All members, or their successors or assigns, would retain perpetual liquidation rights in proportion to the shares they held before the conversion. Both cottage and associate members would be entitled to receive or contract for SICO's services and both would retain the right to access and use community lands and facilities. Associate memberships would be non-transferable; as a consequence, each associate membership would terminate upon the associate member's death.
[¶ 6] At SICO's annual shareholders' meeting in August of 2014, the Tafts voted against the plan and preserved their rights as dissenters, but the majority of the shareholders voted to approve the plan.
[¶ 7] On December 23, 2014, the Tafts filed a complaint against SICO claiming that the nonprofit conversion plan should be invalidated because it “fails to reclassify all shares of the corporation equally” in violation of both 13–C M.R.S. § 601(1) (2015)
and statutes governing nonprofit conversion, specifically, 13–C M.R.S. § 931 (2015). They attached various documents related to the proposed conversion, including the conversion plan itself. The Tafts sought a declaratory judgment invalidating the plan and a permanent injunction barring its implementation. On SICO's motion, the trial court (Business and Consumer Docket, Murphy, J. ) dismissed the Tafts' complaint with prejudice pursuant to M.R. Civ. P. 12(b)(6)
. The court reasoned that SICO's plan complied with the plain terms of the nonprofit conversion statute and that there is no requirement that shares be reclassified into “equal” memberships in the resulting nonprofit entity. This appeal followed.
[¶ 8] When we review a trial court's grant of a motion to dismiss for failure to state a claim upon which relief can be granted, “we view the facts alleged in the complaint as if they were admitted.” Frydrych, 2014 ME 154, ¶ 5, 108 A.3d 1254
(quotation marks omitted). We also consider “documents referred to in the complaint ... when the authenticity of such documents is not challenged.” Moody, 2004 ME 20, ¶ 11, 843 A.2d 43. “We review the legal sufficiency of the complaint de novo and view the complaint in the light most favorable to the plaintiff to determine whether it sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to relief pursuant to some legal theory.” Frydrych, 2014 ME 154, ¶ 5, 108 A.3d 1254 (quotation marks omitted).
Strout v. Cent. Me. Med. Ctr., 2014 ME 77, ¶ 10, 94 A.3d 786.
[¶ 10] Pursuant to 13–C M.R.S. § 931(1)
, “[a] domestic business corporation may become a domestic nonprofit corporation pursuant to a plan of nonprofit conversion.” Section 931(3) sets forth the elements that must be included in a domestic nonprofit conversion plan:
is broad, but its language is not ambiguous. It contains no express limitations on the actual manner of reclassification or the basis on which shares may be reclassified, providing only that the plan “must include ... [t]he manner and basis of reclassifying the shares of the corporation following its conversion.” 13–C M.R.S. § 931(3)(B). Accordingly, when a business corporation's conversion into a nonprofit corporation becomes effective, “[t]he shares of the corporation are reclassified into memberships, securities, obligations, rights to acquire memberships or securities or into cash or other property in accordance with the plan of conversion. ” 13–C M.R.S. § 935(1)(E)
(emphasis added).
[¶ 12] “[W]e do not read exceptions, limitations, or conditions into an otherwise clear and unambiguous statute,” Adoption of M.A., 2007 ME 123, ¶ 9, 930 A.2d 1088
, and we agree with the official comment to the applicable section of the Model Business Corporation Act, which confirms that the nonprofit conversion statute “imposes virtually no restrictions or limitations on the terms and conditions of a nonprofit conversion,” Model Bus. Corp. Act § 9.30 cmt. 2 (Am. Bar Ass'n 2008).3 SICO's conversion plan tracks the requirements of the statute, describing in detail the terms and conditions of the conversion and the manner and basis of reclassifying the SICO shares, and it includes new articles of incorporation to replace SICO's articles of incorporation when the articles of nonprofit conversion become effective. We therefore conclude that SICO's conversion plan complies with the plain terms of section 931(3).
[¶ 13] The Tafts further argue, however, that SICO's conversion plan is unlawful because it does not comply with 13–C M.R.S. § 601(1)
, a provision of the Maine Business Corporation Act found outside the nonprofit conversion statute. Section 601(1) provides, in relevant part: “Except to the extent varied as permitted by this section, all shares of a class or series must have terms, including preferences, rights and limitations that are identical with those of other shares of the same class or series.” (Emphasis added.) The Tafts contend that SICO's nonprofit conversion plan runs afoul of section 601(1) because it proposes the reclassification of SICO's shares into two different types of memberships with disparate rights.
[¶ 14] This contention is unpersuasive for several reasons. First, at all times, SICO's corporate share structure has complied with section 601(1)
. At the moment the conversion occurs, SICO ceases...
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