Emerson v. Cape Fear Country Club, Inc., COA17-1149

• Decision Date: 05 June 2018
• Docket Number: No. COA17-1149,COA17-1149
• Citation: 259 N.C.App. 755,817 S.E.2d 402
• Parties: William P. EMERSON, Jr., Plaintiff, v. CAPE FEAR COUNTRY CLUB, INCORPORATED, Defendant.
• Court: North Carolina Court of Appeals

259 N.C.App. 755

817 S.E.2d 402

William P. EMERSON, Jr., Plaintiff,

v.CAPE FEAR COUNTRY CLUB, INCORPORATED, Defendant.

No. COA17-1149

Court of Appeals of North Carolina.

Filed: 5 June 2018

Block, Crouch, Keeter, Behm & Sayed, LLP, by Daniel Lee Brawley and Auley M. Crouch, III, Wilmington, for plaintiff-appellant.

Cranfill, Sumner & Hartzog, LLP, Wilmington, by Benton L. Toups and Elizabeth C. King, for defendant-appellee.

MURPHY, Judge.

N.C.G.S. § 55A-6-31(a) calls for nonprofit corporations to act "in a manner that is fair and reasonable and ... in good faith" when they terminate or suspend a membership. N.C.G.S. § 55A-6-31(a) (2017). However, it does not require a country club's board of directors, in all situations, to provide a member with prior notice or an opportunity to be heard regarding the termination of a membership.

Plaintiff, William P. Emerson, Jr. ("Emerson"), appeals from the trial court's order granting summary judgment in favor of Defendant, Cape Fear Country Club, Inc. ("Club"), a nonprofit corporation, on all of Emerson's three claims. In his Complaint, filed 21 April 2016, Emerson sought declaratory judgments as to (1) Emerson's membership status in the Club and (2) whether the Club could, in alleged compliance with N.C.G.S. § 55A-6-31(a), conduct a curative hearing after Emerson's membership had been terminated. Emerson's third claim for relief sought compensatory and punitive damages for his hypothetical expenses in joining a comparable country club and for the Club's purportedly wrongful and malicious termination of his membership.

Below, we address (1) the statutory requirement of N.C.G.S. § 55A-6-31(a), (2) Emerson's failure to mitigate his alleged damages, and (3) the mootness of Emerson's remaining claims. While we hold that the statute does not require prior notice and a participatory hearing in all situations, even if notice and a hearing are required here, Emerson failed to mitigate his alleged damages resulting from the Club's alleged violation of N.C.G.S. § 55A-6-31(a). Thus, Emerson is barred from recovering the compensatory and punitive damages sought in his Complaint. Due to our resolution of Emerson's third claim for relief, his first two claims under the Declaratory Judgment Act are moot, and we decline to address them. Accordingly, we affirm the trial court's grant of summary judgment in favor of the Club on each of Emerson's claims.

BACKGROUND

On 1 January 2016, Emerson, who had been a member of the Club for approximately 30 years, had a disagreement with an employee in the golf shop.¹ The employee reported the incident to the Club's General Manager, Mary Geiss, who brought the matter to the attention of the Executive Committee by email on 2 January 2016. This was not Emerson's first act of misbehavior, and Club President Buck Beam and other members of the Executive Committee met on 5 January 2016 to discuss the incident. The Executive Committee then called a special meeting of the Board of Directors ("Board"), which met and voted on 7 January 2016 to terminate Emerson's membership.

It is uncontested that Emerson was aware neither of the Executive Committee's nor the Board's deliberations until 8 January 2016, when the Club President and two other Board members called Emerson to advise him of his termination. Emerson also received a letter from the Club President dated 8 January 2016 informing him of his termination. The letter provided the grounds for termination, stating that it was "in response to [Emerson's] actions on club property on January 1, 2016 and [Emerson's] cumulative disciplinary history while a member of Cape Fear Country Club." Emerson's disciplinary history at the Club included one incident on or about 27 February 2005 and another incident on 29 April 2007.

In the February 2005 incident, Emerson got in an argument with another Club member, which resulted in damage to Club property. Emerson also threatened a Club employee's job. In response to the 2005 incident, Emerson was suspended for thirty days, placed on a twelve-month probation period, given a twelve-month alcohol prohibition, fined $1,500, and required to replace the damaged property and apologize to the employees involved. Emerson appealed and was given an opportunity to appear before the Board. The Club eliminated the twelve-month probationary period, the twelve-month alcohol prohibition, and the $1,500 fine as conditions of Emerson's punishment. Although the record reflects that Emerson came on to Club premises during his suspension, thus violating its terms, his written apology of 3 June 2005 prompted the Club's then-President to lift Emerson's suspension.

In the April 2007 incident, Emerson had some sort of dispute with another Club member in the Card Room after a disagreement over a golf bet. As a result, Emerson's membership was suspended for six months. Emerson's initial readmittance was unsuccessful after Emerson's "address at the Board of Directors meeting," and the Board decided to extend Emerson's suspension for an additional six months. The Board received letters on Emerson's behalf from other Club members and decided to invite Emerson back to his membership approximately two months after imposing the additional six-month suspension.

In the instant matter, after notifying Emerson of the termination of his membership by letter dated 8 January 2016, the Club President sent Emerson another letter dated 5 February 2016. This subsequent letter advised Emerson that the Board "[was] prepared to provide [Emerson] an opportunity to speak on [his] behalf concerning the termination of [his] membership." Emerson acknowledged receipt by letter on 12 February 2016 but declined to attend the proposed 15 February 2016 meeting.

Emerson filed his Complaint on 21 April 2016. After discovery and depositions, the trial court disposed of Emerson's claims by entering summary judgment in favor of the Club. Emerson timely appealed.

ANALYSIS

"The standard of review for summary judgment is de novo." Forbis v. Neal , 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007). Summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C.G.S. § 1A-1, Rule 56 (2017). Additionally, we draw all inferences of fact in favor of the non-moving party. Forbis , 361 N.C. at 524, 649 S.E.2d at 385.

Emerson's Complaint raises questions about the procedural requirement of N.C.G.S. § 55A-6-31, which governs the termination, expulsion, and suspension of an individual's membership in a nonprofit corporation.

N.C.G.S. § 55A-6-31 states:

(a) No member of a corporation may be expelled or suspended, and no membership may be terminated or suspended, except in a manner that is fair and reasonable and is carried out in good faith.

(b) Any proceeding challenging an expulsion, suspension, or termination shall be commenced within one year after the member receives notice of the expulsion, suspension, or termination.

(c) A member who has been expelled or suspended may be liable to the corporation for dues, assessments, or fees as a result of obligations incurred or commitments made by the member prior to expulsion or suspension.

Emerson's Complaint alleges various deficiencies with the Board's termination, including: the failure to notify Emerson of the 7 January 2016 meeting, the lack of opportunity for Emerson to appear, hear, or present evidence at the meeting, and the alleged failure by the Board to hear from witnesses against Emerson at the meeting.

Our only precedent interpreting the requirement of N.C.G.S. § 55A-6-31(a) has involved First Amendment issues not argued here.² See Tubiolo v. Abundant Life Church, Inc. , 167 N.C.App. 324, 330, 605 S.E.2d 161, 165 (2004) ("A church's criteria for membership and the manner in which membership is terminated are core ecclesiastical matters protected by the First and Fourteenth Amendments of the United States Constitution and section 13 of Article I of the Constitution of the State of North Carolina."). Because this case does not implicate core ecclesiastical matters and no other First Amendment arguments are before us, we proceed to consider Emerson's arguments regarding the procedural requirement of N.C.G.S. § 55A-6-31(a).

A. Compensatory and Punitive Damages

To determine whether N.C.G.S. § 55A-6-31 includes participatory rights—the purported violation of which forms the basis of Emerson's claim for compensatory and punitive damages—we begin with the text of the statute. See Elec. Supply Co. of Durham v. Swain Elec. Co. , 328 N.C. 651, 656, 403 S.E.2d 291, 294 (1991) ("Legislative purpose is first ascertained from the plain words of the statute."). The terms "fair and reasonable and ... good faith" do not have a statutory definition, so it is useful to look to the enactment of the statute to discover legislative intent. Our Supreme Court has interpreted legislative intent based on the similarity between model legislation submitted to the General Assembly and the statutory provisions ultimately adopted. See Quick v. United Benefit Life Ins. Co. , 287 N.C. 47, 51-52, 56, 213 S.E.2d 563, 565-66, 568-69 (1975) (considering the applicability of N.C.G.S. § 31A-3(3), in light of the Model Act upon which it was based, to a person convicted of involuntary manslaughter).

The General Assembly enacted the first version of the North Carolina Nonprofit Corporation Act in 1955 ("1955 Act"). See 1955 N.C. Sess. Laws 1239 (amended 1993). The 1955 Act borrowed many provisions from the A.B.A. Model Nonprofit Corporation Act ("Model Act"), which had been created in 1952. See Comm. on Corp. Laws of the Section of Corp., Banking, and Bus. Law of the A.B.A., Model Non-Profit Corporation Act (1952). The early versions of the Model Act and the 1955 Act lacked provisions describing procedures for member expulsion or...