633 S.W.2d 469 (Tenn.App. 1981), Bourne v. Williams

Citation:633 S.W.2d 469
Opinion Judge:The opinion of the court was delivered by: Tomlin
Party Name:Mr. and Mrs. Richard BOURNE, et al., Plaintiffs-Appellants, v. Dwayne WILLIAMS et al., Defendants-Appellees.
Attorney:George R. Fusner, Jr., Jackson, for plaintiffs-appellants.
Case Date:March 17, 1981
Court:Court of Appeals of Tennessee

Page 469

633 S.W.2d 469 (Tenn.App. 1981)

Mr. and Mrs. Richard BOURNE, et al., Plaintiffs-Appellants,


Dwayne WILLIAMS et al., Defendants-Appellees.

Court of Appeals of Tennessee, Western Section At Jackson.

March 17, 1981.

Permission to Appeal Denied by Supreme Court June 1, 1981.

George R. Fusner, Jr., Jackson, for plaintiffs-appellants.

Charles C. Harrell, of the law firm of Heiskell, Donelson, Bearman, Adams, Williams & Kirsch, Memphis, for defendants-appellees.

Page 470

Jerry D. Kizer, Jr., of the law firm of Menzies, Rainey & Kizer, Jackson, for appellee Ohio Cas. Ins. Co.

TOMLIN, Judge.

This suit was instituted in the Chancery Court of Hardeman County, Tennessee, by 28 owners of parcels of real estate located in the Grand Valley Lakes Subdivision, located in Hardeman County, Tennessee, which is purported to be maintained by the Grand Valley Lakes Property Owners Association, Inc., a nonprofit corporation incorporated under the laws of the State of Tennessee, hereafter referred to in this opinion as the "Corporation." The suit is against the Corporation, members of the executive committee and board of directors of the Corporation, charging the board of directors with wasting corporate assets to the detriment of the Corporation, and with using corporate assets for the personal gain of the individual board members, alleging further that corporate assets were likewise being depleted.

The plaintiffs, asserting that as lot owners in the subdivision they were thus made members of the nonprofit Corporation, also allege that the defendant Corporation had under its control and management liquid assets in excess of $200,000, and that in addition thereto had the responsibility for and the charge and control of other common area physical assets, such as club house, public roads, golf course, lake, marina and swimming pool, among others.

In great detail, which will not be gone into here, plaintiffs charge the Corporation and the individual defendants with taking actions contrary to the best interests of the Corporation, and in violation of the purposes for which the Corporation was formed. There is also an allegation setting forth the steps taken by the plaintiffs to remedy the actions complained of by the board of directors and executive committee without resorting to this litigation. The complaint also alleges a fiduciary duty on the part of the defendants to use the assets for the best interests of the Corporation. The action is brought as a shareholder's derivative action, seeking injunctive relief and money judgments for the benefit and on behalf of the Corporation.

The defendants filed a motion to dismiss under Rule 12.02, T.R.C.P., stating that the complaint failed to state a cause of action, grounding their motion to dismiss on the bedrock of T.C.A. sec. 48-718, to the effect that shareholder's derivative action may be brought only on behalf of a corporation for profit, and that inasmuch as the defendant Corporation was a corporation not for profit, that this action should fail.

After considering argument of counsel and memoranda filed on behalf of all the parties, the Chancellor found that T.C.A. sec. 48-718 controlled...

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