Morales v. Sevananda, Inc., 63718

• Decision Date: 07 July 1982
• Docket Number: No. 63718,63718
• Citation: 162 Ga.App. 854,293 S.E.2d 387
• Parties: MORALES et al. v. SEVANANDA, INC. et al. 1
• Court: Georgia Court of Appeals

Page 387

293 S.E.2d 387

162 Ga.App. 854

MORALES et al. v. SEVANANDA, INC. et al. ¹ No. 63718.

Court of Appeals of Georgia.

July 7, 1982.

Mary E. Mann, Atlanta, for appellants.

John F. Sweet, Atlanta, for appellees.

POPE, Judge.

Appellants are three members of the seven-member board of directors of Sevananda, Inc., a nonprofit Georgia corporation. Under the original articles of incorporation each director was elected by the board and served for life but could resign his position at any time or could be removed at any time, with or without cause, by a two-thirds vote of the entire board. A philosophical dispute arose between the three appellants and the four other board members, appellees herein. As a result of this controversy the four appellees, constituting a majority of the board, voted to amend the articles of incorporation. One of the amendments stated that the number of directors and the duties and responsibilities of the board would be set out in the bylaws. The bylaws propounded for this purpose provided for the election of an expanded nine-member board of directors to be elected by the entire membership of the corporation to serve staggered three-year terms. Elections were held in April, 1979 and nine new directors were elected to the board.

The three appellant members of the pre-amendment board of directors filed this action against appellee corporation and the four other members who comprised the pre-amendment board. The complaint sought to have the amended articles of incorporation, and bylaws promulgated thereunder, declared void. The complaint also sought to have appellants reinstated as directors on the board of Sevananda. The trial court granted appellants' motion for summary judgment, declaring the April, 1979 election to be null and void and reinstating appellants as directors of Sevananda on the basis that the amended articles of incorporation had not been filed with the Secretary of State at the time of the election.

The trial court also ruled that the pre-amendment board of directors had the right to amend the articles of incorporation by majority vote. The court declared that the corporation, upon filing the amended articles with the Secretary of State, could proceed in accordance with those amended articles and require an election for the board of directors in accordance therewith. Appellants bring this appeal challenging the trial court's ruling that the corporation could require an election for the board of directors in accordance with the amended articles of incorporation, which have now been filed with the Secretary of State. The amended articles make no provision for the retention of a director who had been serving a term on the board for life under the pre-amendment articles.

Appellants contend that they, as original directors of the board of Sevananda, have a vested right to remain as directors for life or until removed by a two-thirds vote of the entire board. In support of their contention appellants cite Code Ann. § 22-906(b) (adopted as part of the Georgia Nonprofit Corporation Code by Code Ann. § 22-2805) which provides: "No amendment [to the articles of incorporation] shall affect any existing cause of action in favor of or against such corporation, or any pending suit to which such corporation shall be a party, or the existing rights of persons other than [members]...." (Emphasis supplied.)

"The essence of a vested right is fixity; rights are vested only when they are fixed, unalterable or irrevocable." Miller v. Johnstown Traction Co., 167 Pa.Super. 421, 428, 74 A.2d 508 (1950). Code Ann. § 22-2801 provides: "A [nonprofit] corporation may amend its articles of incorporation, from time to time, in any and as many respects as may be desired, so long as the amendment contains only such provisions as might be lawfully contained in original articles of incorporation at the time of making such amendment." Appellants concede that the amendments in this case were authorized by statute. See also Code Ann. § 22-2802(a)(2). Indeed, this statutory right to amend its articles of incorporation would be...