Black v. Glass

Decision Date08 July 1983
Citation438 So.2d 1359
PartiesJames BLACK, Jim Blan, Jesse Gilliam, Joseph Machen and Mabel Rooney, individually and as representatives of all members of the Gulf Fishing and Boating Club, Inc. v. Mrs. Russell GLASS, et al. GULF FISHING AND BOATING CLUB, INC. v. Mrs. Russell GLASS, et al. Rosemary BENDER v. GULF FISHING AND BOATING CLUB, INC. June Marie DRAGO, et al. v. GULF FISHING AND BOATING CLUB, INC. 81-976, 81-977, 81-1004 and 81-1007.
CourtAlabama Supreme Court

Robert E. Gibney of Kilborn & Gibney, Mobile, for appellants/cross appellees.

James E. Moore, George A. Tonsmeire, Jr., Vincent A. Noletto, Joseph O. Kulakowski, and John A. Courtney, Jerry A. McDowell of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for appellee/cross appellant Mrs. Rosemary Bender.

BEATTY, Justice.

At issue in these cross appeals is division of the proceeds from sale of the corporate assets of a dissolved private club. The trial court allocated 65% of the proceeds to the so-called active members and 35% to the inactive members. Both groups appealed. The inactive members (also referred to herein as defendants or appellees) seek a pro rata distribution of the proceeds; the active members (plaintiffs-appellants) claim that the trial court should have distributed the proceeds to them alone. In addition, the case of one club member, Mrs. Rosemary Bender, has been treated separately throughout the proceedings and is discussed separately below. We affirm in part, reverse in part, and remand.

FACTS

These proceedings began in August 1980 when the Gulf Fishing and Boating Club, Inc. (Club), filed a petition in Mobile Circuit Court (1) to invoke the trial court's authority to supervise and approve the Club's voluntary dissolution under the applicable provision, Code of 1975, § 10-3-165(3), of the Alabama Non-Profit Corporation Act and (2) seeking a declaratory judgment regarding the validity of the inactive members' claim to share in the distribution of the corporate assets, the Club's position being that only the active members were entitled to make that claim. The first aspect of the petition was uncontested and dissolution proceedings took place. After further hearings the trial court on May 21, 1982, issued a decree which provides in part as follows:

"This cause coming before the Court on the aspect of this case which calls on the Court to determine what persons shall be entitled to share in the net assets of the Club upon its final dissolution, it being shown to the Court that earlier in the proceedings in this cause the Club has taken proper and appropriate steps toward final dissolution, which were approved by this Court by Order entered on January 26, 1981, and that the last remaining properties of the Club, consisting of a substantial and valuable tract of land located on Dog River in Mobile County, Alabama, has been sold with the approval of this court, and the sale confirmed by this Court on November 17, 1981 for a sale price of One Million One Hundred Thousand Dollars, and that all that now remains to be done before the final dissolution of the Club is to determine those persons who will be entitled to share in the net proceeds received from the sale of the assets of the Club and any other funds which are the property of the Club upon its dissolution.

"It quickly evolved and became apparent to the Court upon the opening of this hearing that the contest as to what parties shall be entitled to share in the assets of the Club upon dissolution is between those parties, forty-five (45) in number, who were active dues paying members of the Club at the time the final decision to dissolve the corporation was approved, all of whom individually had purchased and held a 'Certificate of Membership' in the Club, (which certificate the Court will hereinafter discuss) which group for convenience the Court will designate as the Plaintiffs; and those parties who were not active dues paying members of the Club at the date of the final decision to dissolve the corporation, but who had purchased and paid for a 'Certificate of Membership' in the Club, but had retired from active membership at some date prior to the date on which the action to dissolve was taken. This group numbers sixty-four (64) persons whom the Court shall call the Defendants. A number of this group appeared by counsel, some appeared pro se, and some twenty-six (26) made no appearance at all.

"There is a third category, consisting of one individual, namely Mrs. Rose Mary [sic] Bender, the widow of Tom Bender, whose husband paid membership dues faithfully until the time of his death, and after his death Mrs. Bender continued to pay his dues under a widow's membership privilege in the Club up to and through the date of the decision to dissolve the Club, but her husband was not required, under a special agreement with the Club, to purchase a 'Certificate of Membership', even though this was a strict membership requirement which was complied with by all other members of the Club in both the above categories.

"Evidence was offered at this hearing by all of the above categories, both by oral testimony in open Court, and by exhibits and documents submitted into evidence, among which was a 'Certificate of Membership', as well as written and oral stipulations offered from time to time during the hearing.

"The Court, having heard, reviewed, and considered all of the legal evidence presented at the hearing, now makes the following Findings of Fact, conclusions of law, and judgment on the case:

"1. The Court finds that the Gulf Fishing and Boating Club is a long standing, social and recreational Club, having been established either before or shortly after the turn of this century, and that it acquired and continued to own a large tract of land on the North side of Dog River which runs through Mobile County into Mobile Bay. Around the year 1960, the Club was in financial difficulties and being, in the opinion of the Members of the Club, in urgent need of repairs and improvements to the Club House, and a fresh water swimming pool on the premises for the enjoyment of the members and their children. No funds were available for these necessities, so the Club decided, as a means of raising the necessary funds to finance these improvements, to issue and sell to members of the Club, and to make it a requirement of membership for future members, a 'Certificate of Membership', for a price of $250.00 each, this price being payable either on time, or in cash, but in all events to be paid in full before the Certificate would be issued to the purchaser. A total of one hundred nine (109) Certificates were issued and sold, representing the classes of holders referred to above. Each Certificate carried a provision that it was issued subject to the Constitution and By-Laws of the Club and any changes which might later be made therein. That provision is worded as follows:

" 'This Certificate is purchased and held subject to all the terms, conditions and limitations contained in the charter, constitution and by-laws of the Gulf Fishing and Boating Club, Inc. Any changes, additions or amendments of said charter, constitution and by-laws hereafter made shall become and be a part of this Certificate of Membership and shall be binding on the holder of this certificate.'

"The Certificate also contains a specific provision that 'In the event of dissolution of the Gulf Fishing and Boating Club, Inc., the assets of the corporation, after payment of all obligations shall be distributed among the members of the corporation holding Certificates of Membership on a pro rata basis.' If therefore, in the final analysis, there is at the time of the dissolution of the Club, a conflict between these two quoted provisions of the Certificates, the Court must determine which provision shall prevail.

"At the time the Certificates of Membership were initiated, which from the evidence was around the year 1960, the By-Laws of the Club provided that upon dissolution of the Club, the net assets would be 'equally divided among the active members of the Club in good standing at the time of dissolution' which class was defined as active dues paying members. However, around the year 1971, the Club, which continued to have financial difficulties, entered into an agreement with the Elks Lodge in Mobile under which the Elks would operate and be in charge of the Club premises, and members of the Gulf Fishing and Boating Club would have to become members of the Elks in order to continue to have the use and enjoyment of the Club facilities. Thus the Club became practically inactive at that time, and the dues were reduced to the amount of $10.00 per year, and about the only activity of the Club for its members was the annual membership meeting. In 1973 the By-Laws as to membership were amended to provide for two categories of membership, one being 'ACTIVE MEMBERS,' this group being defined as those members who hold Certificates of Membership and are paying dues. The other category of members was 'INACTIVE MEMBERS,' which group was defined as those members holding Certificates of Membership but not paying dues. This classification gave membership status in good standing to all holders of Certificates, even though they were not paying dues. Then, in March of 1980 the Active Members of the Club amended the By-Laws by deleting completely the category 'INACTIVE MEMBERS,' and restricting membership only to those members holding Certificates who were currently paying dues. If this amendment to the By-Laws was permitted, it would have the effect of eliminating the membership status of the Inactive Members so that they could not qualify under the provision of the Certificate of Membership referred to above which provides that in the event of dissolution the assets of the corporation shall be distributed among the 'Members of the Corporation' holding Certificates of Membership on a...

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