Callawassie Island Members Club v. Dennis ( 2019 )

THE STATE OF SOUTH CAROLINA
In The Court of Appeals
The Callawassie Island Members Club, Inc., Respondent,
v.
Ronnie D. Dennis and Jeanette Dennis, Appellants.
Appellate Case No. 2014-001524
Appeal From Beaufort County
Carmen T. Mullen, Circuit Court Judge
Opinion No. 5696
Heard May 7, 2019 – Filed December 18, 2019
AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED
Ian S. Ford and Neil Davis Thomson, both of Ford
Wallace Thomson, LLC, of Charleston, for Appellants.
M. Dawes Cooke, Jr., John William Fletcher, and
Bradley B. Banias, all of Barnwell Whaley Patterson &
Helms, LLC, of Charleston; Stephen P. Hughes, of
Howell Gibson & Hughes, PA, of Beaufort; James
Andrew Yoho, of Carlock Copeland & Stair, LLP, of
Charleston; and Andrew F. Lindemann, of Lindemann,
Davis & Hughes, PA, of Columbia, for Respondent.
LOCKEMY, C.J.: This case comes before this court on remand after the supreme
court's decision in Callawassie Island Members Club, Inc. v. Dennis, 425 S.C. 193,
821 S.E.2d 667 (2018), with instructions to address the Dennises' remaining issues
on appeal.
FACTS/PROCEDURAL BACKGROUND
In 1999, Ronnie and Jeanette Dennis purchased property on Callawassie Island. At
that time, the Dennises joined a private non-profit club known as the Callawassie
Island Club, and paid $31,000 to become "equity members." In their application,
the Dennises agreed their membership would be governed by the "Plan for the
Offering of Memberships in The Callawassie Island Club," which the developer of
Callawassie Island created in 1994. The 1994 Plan included exhibits labeled as
Bylaws and Rules. The 1994 Plan stated, "An equity member who has resigned
from the Club will be obligated to continue to pay dues and food and beverage
minimums to the Club until his or her equity membership is reissued by the Club."
Similarly, the 1994 Bylaws stated, "Any equity member may resign from the Club
by giving written notice to the Secretary. Dues, fees, and charges shall accrue
against a resigned equity membership until the resigned equity membership is
reissued by the Club."
The 1994 Plan contemplated that the members would eventually take over the
assets and operation of the Island Club. In 2001, the members of the Island Club
formed The Callawassie Island Members Club, Inc. (the Club) for this purpose.
The Club assumed ownership and operations of all Island Club amenities,
including a golf course and driving range, tennis courts, a swimming pool, and a
clubhouse. The members of the Island Club—including the Dennises—received a
membership certificate to the Club and continued to enjoy the benefits of
membership. The Club established its own Bylaws, Plan, and Rules in 2001, each
of which was amended several times over the years.
In 2010, the Dennises decided they no longer wanted to be in the Club, so they
submitted a "letter of resignation" and stopped making all payments. Those
payments included $634 per month for the membership, "special assessments" that
totaled $100 per month, and yearly food and beverage minimums of $1,000. In
2011, the Club filed a breach of contract action against the Dennises, alleging the
unambiguous terms of the membership documents required the Dennises to
continue to pay their membership dues, fees, and other charges until their
membership is reissued. The Dennises denied any liability, alleging they were told
by a club manager that their maximum liability would be only four months of dues,
because after four months of not paying, they would be expelled. The Dennises
also alleged the membership arrangement violates the South Carolina Nonprofit
Corporation Act. See S.C. Code Ann. §§ 33-31-101 to -1708 (2006 & Supp.
2019).
The Club filed a motion for summary judgment. The circuit court held a hearing
and issued an order granting summary judgment. The circuit court found the
membership documents unambiguously require a resigned member to continue to
pay dues, fees, and other charges until the membership is reissued. The court
rejected the Dennises' arguments relating to the Nonprofit Corporation Act.
The Dennises appealed, and this court reversed on both issues. See Callawassie
Island Members Club, Inc. v. Dennis, 417 S.C. 610, 790 S.E.2d 435 (Ct. App.
2016). We found there was "some ambiguity in the governing documents as to
whether club members are liable for dues accruing after resignation." 417 S.C. at
616, 790 S.E.2d at 438. In addition, we found the provisions of the documents that
require the Dennises to continue to pay their membership dues after resignation
violate section 33-31-620 of the Nonprofit Corporation Act. 417 S.C. at 618-19,
790 S.E.2d at 439. We found it unnecessary to address the other issues raised on
appeal, 417 S.C. at 619 n.5, 790 S.E.2d at 440 n.5, and remanded to the circuit
court for trial, 417 S.C. at 619, 790 S.E.2d at 440.
The Club filed a petition for a writ of certiorari, which the supreme court granted.
In a 3-2 decision, the supreme court reversed this court and reinstated summary
judgment in favor of the Club. Callawassie Island Members Club, Inc. v. Dennis,
425 S.C. 193, 821 S.E.2d 667 (2018). The supreme court held the membership
documents1 unambiguously provide that club members are required to continue to
pay all membership dues, fees, and other charges after resignation until their
membership is reissued. Id. at 200, 821 S.E.2d at 670. The court found this
requirement was not prohibited by section 33-31-620 of the Nonprofit Corporation
Act. Id. at 206, 821 S.E.2d at 673. The supreme court remanded to this court to
address the remaining issues on appeal. Id. at 206, 821 S.E.2d at 674.
STANDARD OF REVIEW
When reviewing the grant of a summary judgment motion, the appellate court
applies the same standard that governs the trial court under Rule 56(c), SCRCP,
which provides that summary judgment is proper when there is no genuine issue as
1
The supreme court found the 2008 Plan, the 2009 Bylaws, and the 2009 Rules
were in effect when the Dennises resigned in 2010. Dennis, 425 S.C. at 199, 821
S.E.2d at 670.
to any material fact and the moving party is entitled to judgment as a matter of law.
Rule 56(c), SCRCP; Fleming v. Rose, 350 S.C. 488, 493, 567 S.E.2d 857, 860
(2002). In determining whether a genuine issue of fact exists, the evidence and all
reasonable inferences drawn from it must be viewed in the light most favorable to
the nonmoving party. Sauner v. Pub. Serv. Auth. of S.C., 354 S.C. 397, 404, 581
S.E.2d 161, 165 (2003). To withstand a motion for summary judgment in cases
applying the preponderance of the evidence burden of proof, the nonmoving party
is only required to submit a mere scintilla of evidence. Hancock v. Mid-South
Mgmt. Co., 381 S.C. 326, 330, 673 S.E.2d 801, 803 (2009).
LAW/ANALYSIS
The Dennises assert the following issues were neither addressed by this court nor
reached by the supreme court.
I. Standard of Review
The Dennises contend the circuit court improperly shifted the burden of proof and
failed to apply the "mere scintilla" standard. This issue was decided by the
supreme court when the court cited the applicable standard of review. See Dennis,
425 S.C. at 198, 821 S.E.2d at 669. Accordingly, we need not address this issue.
II. Governing Documents
A. Ability to Concede/Swap Memberships
The Dennises argue genuine issues of fact exist as to whether they were treated
differently from other Club members. The Dennises contend (1) the Club refused
to allow them to swap memberships with another willing club member, and (2) the
Club allowed other members to concede memberships but refused to do so for the
Dennises.
The circuit court found that to the extent club members were treated differently,
such treatment was in furtherance of the negotiated settlements of debts owed to
the Club. The circuit court held the board of directors was authorized by the Club's
governing documents and section 33-31-302 of the Nonprofit Corporation Act to
take such actions. Therefore, the circuit court stated it would not review the intra
vires corporate action of the Club, where it was exercising its business judgment,
and there was no evidence suggesting self-dealing, fraud, or bad faith on the part of
the board.
The Dennises argue they have been injured by the Club's denial of their request to
swap a golf membership with the less costly social membership of another
member. Jeannette Dennis testified the Dennises, unlike other club members, were
unable to swap memberships. The Dennises rely on the Club's 1994 Bylaws to
support their position that such swaps were permitted by the Club. Pursuant to the
1994 Bylaws,
Social Members may, at all times subject to availability,
upgrade to a Golf Membership upon the payment of the
difference between the membership contribution for a
Golf Membership, and the membership contribution for a
Social Membership, at the time of the upgrade. The
downgrade of a Golf Membership to a Social
Membership is not permitted unless there is another
equity member who desires to upgrade to the Golf
Membership.
The 1994 Bylaws were not in effect when the Dennises resigned in 2010. The full
version of the 2009 Bylaws, which were in effect at the time the Dennises
resigned, is not in the record.
Next, the Dennises argue they were injured by the Club's refusal to allow them to
concede their membership. The Dennises cite a number of examples of the Club
allowing some members to concede their memberships and end all financial
obligations to the Club. The record includes concession letters from the Club, the
Club's resale list which documents the members who conceded their memberships,
and deposition testimony from a former board member and membership director.
The governing documents do not contain any provisions governing the concession
of a club membership.
We find the Dennises have presented at least a mere scintilla of evidence that some
club members were permitted to concede their memberships, thus creating a
disputed material issue of fact as to the claim that the Club violated the Nonprofit
Corporation Act. We discuss the Act below.
B. Nonprofit Corporation Act
The Dennises argue the circuit court failed to consider sections 33-31-610 and 33-
31-611(c) of the Act. The Dennises assert that while these provisions of the Act
require all club members to have the same rights, they were treated differently
from other members with regard to previous requests to swap or concede their
membership.
Section 33-31-610 provides,
[a]ll members have the same rights and obligations with
respect to voting, dissolution, redemption, and transfer,
unless the articles or bylaws establish classes of
membership with different rights or obligations. All
members have the same rights and obligations with
respect to any other matters, except as set forth in or
authorized by the articles or bylaws.
S.C. Code Ann. § 33-31-610 (2006). Section 33-31-611(c) states, "[w]here
transfer rights have been provided, no restriction on them is binding with respect to
a member holding a membership issued before the adoption of the restriction
unless the restriction is approved by the members and the affected member." S.C.
Code Ann. § 33-31-611(c) (2006).
The circuit court treated the determination of whether the Club violated the Act by
allowing other members to concede memberships as a question of law. We hold
the determination of whether the Club violated the Act is more appropriately an
issue to be determined by a factfinder. Accordingly, we reverse the circuit court's
grant of summary judgment and the accompanying award of damages.
C. Amendment of Governing Documents
The Dennises argue genuine issues of fact exist as to whether the Club's governing
documents were properly amended. Specifically, they contend the Club changed
language in section 13.3.1 of the Rules from "shall be expelled" to "may be
expelled" without discussion among the board and without presentation to club
members. The Dennises rely on the deposition testimony of Karen Norwood,
former board president, who testified the change was made without consultation
with club members.
Pursuant to section 13.3.1 of the 2001 Rules, "[a]ny member whose account is
delinquent for sixty (60) days from the statement date may be suspended by the
Board of Directors. . . . Any member whose account is not settled within the four
(4) months' period following suspension shall be expelled from the Club."
(emphasis added).
The record does not contain any subsequent version of section 13.3.1. Assuming
this rule remains unchanged except for the "shall" and "may" language in the 2009
Rules, which were in effect when the Dennises resigned in 2010, we need not
decide this issue. As noted by the supreme court, the rules regarding expulsion are
clear that mandatory expulsion arises only after the board has suspended a
member, which is discretionary with the board. See Dennis, 425 S.C. at 204, 821
S.E.2d at 673. Here, the Dennises resigned; they were never suspended. Thus, the
expulsion provision was never triggered.
In addition, pursuant to the 2001 Rules, the board had the right to change the rules
without a vote of the membership. Section 1.3 of the 2001 Rules provides "[t]he
Board of Directors reserves the right to amend or modify these rules when
necessary and will notify the membership of such changes. Any such amendments
or modifications shall be subject to and controlled by the applicable provisions of
the By-Laws and the Plan for the Offering of Memberships."2 Accordingly, we
find a genuine issue of fact does not exist as to whether the governing documents
were properly amended.
D. Contract
The Dennises argue there is no evidence in the record supporting the circuit court's
conclusions that club members voted to take over the assets of the Club. This issue
was addressed by this court and the supreme court; therefore, we need not address
this issue on remand. The supreme court held:
We begin our analysis of this case with a general
discussion of the membership arrangement and the
membership documents that govern that arrangement.
Three documents governed the Dennises' membership in
the Island Club and the Members Club—the Bylaws, the
Plan, and the Rules. The three documents reference each
other and are intended to operate together. When the
Dennises first joined the Island Club, the 1994 versions
of those documents applied. However, these documents
were amended several times over the years, as permitted
2
The 2009 Rules contain the same provision.
by the Bylaws, the Plan, and the Rules. The first
amendments occurred when the club assets were
transferred from the Island Club to the Members Club in
2001, at which point the Members Club enacted its own
Plan, Bylaws, and Rules. All three documents were
further amended several times during the 2000s. There is
no evidence that the various amendments to the
documents were in any way contrary to the Bylaws, Plan,
and Rules in place at the time of the amendments.
Dennis, 425 S.C. at 198-99, 821 S.E.2d at 670. Noting our prior rejection of the
Dennises's argument that there was no evidence their Island Club membership
transferred to the Club, the supreme court specifically found there was "no
question" the Dennises were contractually bound to the Club.
III. Attorney's Fees
Because of our reversal of the grant of summary judgment to the Club, we also
reverse the award of attorney's fees to the Club. See Camburn v. Smith, 355 S.C.
574, 581, 586 S.E.2d 565, 568 (2003) ("An award of attorney's fees will be
reversed [when] the substantive results achieved by counsel are reversed on
appeal.").
CONCLUSION
We affirm the circuit court's grant of summary judgment on the Dennises' claim
that the Club improperly amended the governing documents. In addition, we find a
genuine issue of fact exists as to whether the Club violated the Nonprofit
Corporation Act by allowing some club members to concede their memberships
and not others. Accordingly, we reverse the grant of summary judgment as to this
issue and remand to the circuit court for trial.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
SHORT and MCDONALD, JJ., concur.