Nania v. Sunset Country Club

• Decision Date: 15 February 1994
• Docket Number: No. 63126,63126
• Citation: 870 S.W.2d 459
• Parties: Jake NANIA, Plaintiff/Appellant, v. SUNSET COUNTRY CLUB, et al., Defendants/Respondents.
• Court: Missouri Court of Appeals

Page 459

870 S.W.2d 459

Jake NANIA, Plaintiff/Appellant, v. SUNSET COUNTRY CLUB, et al., Defendants/Respondents.

No. 63126.

Missouri Court of Appeals,

Eastern District,

Division Four.

Feb. 15, 1994.

Paul Simon Jr., Evelyn Mehler, St. Louis, for plaintiff-appellant.

Allen Spencer Boston, St. Louis, for defendants-respondents.

CARL R. GAERTNER, Judge.

Jake Nania appeals from summary judgment entered in favor of Sunset Country Club (Sunset), a Missouri corporation, and its board of directors. ¹

In 1989 Nania was a shareholder in Sunset. During that year Sunset's Board of Directors began to formulate a plan to renovate Sunset's golf course and club house. Nania was dissatisfied with the board's plan so he and several other shareholders attempted to devise an alternative renovation plan. On May 4, 1989, the board held a special shareholders meeting to discuss the renovation. Several shareholders tried to discuss the alternate plan but were ruled out of order. Shortly after this incident, shareholder Bud Conklin, acting pursuant to a Sunset by-law, petitioned Sunset President Ken Schaefer to call another special meeting to allow shareholders to consider the alternate plan. Schaefer refused to call such a meeting. However, the board did allow Nania to present the alternate plan to a joint meeting of the full board of directors and Sunset's House Committee. They rejected the plan unanimously.

Since Schaefer still refused to call a special meeting of shareholders to review the alternate plan, Nania, along with eight other shareholders, filed a petition in the Circuit Court of St. Louis County seeking a writ of mandamus to compel Schaefer to call the meeting. The court denied the writ.

Schaefer then suspended all nine shareholders who had petitioned the court. He submitted charges against Nania to Sunset's House Committee. Nania appeared before the committee, and its members voted to expel Nania. Thereafter, the board met to vote on the committee's recommendation that Nania be expelled. Nania was expelled by a vote of ten to two by the members of the board. The other eight shareholders who had filed the petition were reinstated.

Nania filed a petition in the Circuit Court of St. Louis County against Sunset and the individual members of the board of directors. All the defendants moved for summary judgment, and the trial court granted their motion. Nania appeals arguing that Sunset did not have the authority to expel him.

In reviewing a grant of summary judgment in favor of a defendant, we view the record in the light most favorable to the plaintiff and accord the plaintiff all reasonable inferences that may be drawn from the evidence. Martin v. City of Washington, 848 S.W.2d 487, 489 (Mo.banc 1993). Summary judgment is appropriate only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits filed in support of the motion, demonstrate that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Id. at 489.

In the present case, Sunset had enacted a by-law which dealt specifically with the procedures to expel shareholders. The by-law provided the president with the power to suspend members for conduct "prejudicial to the good order, peace, or interest of the Club." It also empowered Sunset's House Committee to hear such charges and recommend a course of action to the board of directors. The board of directors could expel a shareholder if ten directors voted to do so. When Nania was expelled, each procedure was followed in accordance with this by-law. Nania was given notice of the charges against him and an opportunity to defend those charges. It is not disputed that Nania, as a condition of the acceptance of his application for membership, agreed in writing to conform to the by-laws and rules of Sunset. Nevertheless, he now argues that the provisions of the by-laws pertaining to expulsion from Sunset are unenforceable.

In Purdy v. Banker's Life Association of Des Moines, 101 Mo.App. 91, 74 S.W. 486 (1903), an Iowa corporation refused to pay an insured's beneficiary maintaining that the insured's certificate of membership in the corporation had been forfeited in accordance with a corporate by-law. The corporate by-law provided for the board of directors to cancel the certificate of any member who drank alcohol so excessively that it impaired his health. Purdy, 74 S.W. at 490. The appellate court held the by-law invalid and stated:

Corporations organized for gain have no power of expulsion or forfeiture unless granted by their charter or by general municipal law; that is to say, the power must be derived from the legislative sovereignty of the state ...; and, if granted, the power extends no further than the language of the grant warrants when strictly construed, and can be exercised for no other causes than those enumerated.

Id. at 490 (emphasis added).

There is no question that Sunset's charter does not include any provision for the expulsion of shareholders. Sunset was originally organized as a corporation pursuant to §§ 4933 et seq. RSMo.1929, the predecessor statutes of today's General and Business Corporation Law, Chapter 351 RSMo.1986. Therefore, Nania argues, Sunset must be deemed to be a corporation "organized for gain" and subject to the rule laid down in Purdy. It is true that § 4940 RSMo.1929 included, among other enumerated purposes for which incorporation was authorized, "any other purpose intended for pecuniary profit or gain not otherwise especially provided for...." However, we find Nania's argument--that Sunset's organization and continued existence pursuant to these statutes is conclusive proof that the purpose of its existence is the realization of profit--to be an oversimplification.

In Owyhee Grazing Ass'n, Inc. v. Field, 637 F.2d 694 (9th Cir.1981), the Ninth Circuit dealt with a somewhat analogous situation. At issue in Owyhee was the right of a member of a corporation to withdraw from the corporation. Generally, withdrawal and expulsion are similar issues in that both rights depend on the nature of the corporation. A shareholder cannot withdraw from a corporation which has as its purpose the realization of profit. Owyhee at 697. Members generally may withdraw or resign from membership corporations. Owyhee at 697. The Owyhee Grazing Association was organized under the general corporation law of Idaho; yet, the Ninth Circuit chose to treat Owyhee as a membership corporation. Id. In doing so, the court relied on the statement of purpose in Owyhee's articles of incorporation. The articles of incorporation stated that Owyhee's purpose was to "engage in the business of providing ... lands for grazing ... for the use and benefit of its members and not for the purpose of direct gain to the association itself." Id.

We find the reasoning of the Ninth Circuit persuasive. The statute under which a corporation organizes is not conclusive proof of the corporation's purpose. Although Sunset incorporated under a statute enabling the existence of corporations which have as their purpose the realization of profit, this fact is...