Ayres v. Hadaway
| Decision Date | 23 December 1942 |
| Docket Number | No. 6.,6. |
| Citation | 303 Mich. 589,6 N.W.2d 905 |
| Parties | AYRES et al. v. HADAWAY et al. |
| Court | Michigan Supreme Court |
OPINION TEXT STARTS HERE
Suit in equity by Eben R. Ayres and others against John M. Hadaway and others, individually and as members of the Board of Directors of the Lost Lake Woods Association, for mandatory injunction. From an adverse decree, plaintiffs appeal.
Affirmed. Appeal from Circuit Court, Alcona County, in Chancery; Fred P. Smith, Presiding Judge.
Before the Entire Bench.
William R. Barber, of Harrisville (Eben R. Ayres, of Detroit, of counsel), for appellants.
Carl R. Henry, of Alpena, for appellees.
Dean W. Kelley, Henry L. Woolfenden, Jr., and Paul G. Eger, all of Lansing, amici curiae.
This is a suit in equity by a minority group of members of the Lost Lake Woods Association, a Michigan non-profit corporation, against the board of directors of the association for the purpose of obtaining injunctive relief and a mandatory injunction requiring the board of directors to do certain acts.
The case also involves the right of an inactive member of the State Bar of Michigan to engage in the practice of law.
The association owns approximately 9,200 acres of land in Alcona county upon which is located a club house. Its purposes are recreational. The association is governed by a set of by-laws. The by-laws provide that the annual meeting of the association shall be held during the first week in July. This meeting is for the purpose of electing officers and directors of the association and for the transaction of such other business as may properly come before the meeting.
The issues arising in this case result from action taken by the members at their annual meeting held July 6, 1940. At that meeting the members voted to return the printing of the club paper known as ‘Lost Lake News' to R. E. Prescott free from dictation or censorship by the board of directors and at the same rate of compensation as was formerly paid to him; and to publish a list of the names and addresses of the members of the association in the ‘Lost Lake News' in its first issue for the year. On August 3, 1940, the board of directors held a meeting and declined to recognize the action taken at the annual meeting.
The trial court after hearing the evidence entered a decree denying the relief prayed for on the ground that there was no fraud or mismanagement shown on the part of the board of directors. Plaintiffs appeal and urge that the trial court was in error in refusing to grant the relief prayed for.
In our discussion of this case we shall assume, without deciding, that the meeting of July 6, 1940, was a legal meeting with a sufficient number of members present and voting in person or by mail to conduct such business as could properly come before an annual meeting of this association.
Act No. 327, § 124, Pub.Acts 1931, Act No. 287, § 1, Pub.Acts 1939 (Comp.Laws Supp.1940, § 10135-124, Stat.Ann.1942 Com.Supp. § 21.125) provides: ‘The property and lawful business of a non-profit corporation shall be held and managed by a board of not less than 3 trustees or directors * * * which board shall possess such powers and authority, in addition to the powers and authority herein specifically prescribed, as may be necessary to the complete execution of the purposes of each such corporation, as limited by the articles, or by-laws duly made.’
Section 122 of Act No. 327, Pub.Acts 1931, Act No. 194, Pub. Acts 1935 (Comp.Laws Supp.1940, § 10135-122, Stat.Ann. 21.123) provides: ‘Each member or shareholder of a non-profit corporation shall be equally privileged with all other members or shareholders in his voice and vote upon any proposition presented for discussion or decision at any meeting of the members. * * *’
Section 1-a of article 2 of the by-laws of the association provides: ‘The business and the property of this association shall be managed and controlled by the board of directors exception as these by-laws specifically require action by its members.’
We have examined the by-laws of the association and find that they do not limit the powers of the board of directors as mentioned in section 124 of the corporation act, nor do we think that section 122 of the act gives the members of the association the right to direct the board of directors in all of its acts and doings. This section does not qualify or limit the powers of the board of directors, but prescribes the voting rights of the members inter sese.
In Nahikian v. Mattingly, 265 Mich. 128, 251 N.W. 421, 423, we said: ‘It is a well-settled rule of law that the authority of the directors is absolute when they act within the law, and that questions of policy and internal management are, in the absence of nonfeasance, misfeasance, or malfeasance, left wholly to their decision.’
In Barrows v. J. N. Fauver Co., 280 Mich. 553, 274 N.W. 325, 328, we said:
See, also, Wagner Electric Corp. v. Hydraulic Brake Co., 269 Mich. 560, 257 N.W. 884;Burch v. Norton Hotel Co., 261 Mich. 311, 246 N.W. 131.
While the rule above announced applies to so-called profit corporations, yet the same rule applies to nonprofit corporations. Cicotte v. Anciaux, 53 Mich. 227, 18 N.W. 793. In the case at bar, the by-laws of the association prescribed that the business and the property of the association should be managed and controlled by the board of directors. The action taken at the annual meeting was contrary to the by-laws and hence not binding on the board of directors. In our opinion the awarding of the contract for printing the publication is a matter that should be left to the discretion of the board of directors. Nor can we say that the board of directors abused its discretion in refusing to publish the names and addresses of its...
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