Ferrill v. North American Hunting Retriever Assn., Inc.

Ferrill v. North American Hunting Retriever Assn., Inc.  (2001-047); 
173 Vt. 587; 795 A.2d 1208

[25-Feb-2002]


                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 2001-047

                            SEPTEMBER TERM, 2001


  Donald A. Ferrill    	           }	APPEALED FROM:
                                   }
       v.	                   }
                                   }	Franklin Superior Court
  North American Hunting Retriever }
  Association, Inc.	           }	DOCKET NO. S 58-00 Fc

                                        Trial Judge: Edward J. Cashman

       In the above-entitled cause, the Clerk will enter:

       The North American Hunting Retriever Association, Inc. ("NAHRA"), a
  Vermont nonprofit corporation, appeals a summary judgment ruling granting
  plaintiff Donald A. Ferrill access to certain corporate documents as a
  corporate member of NAHRA.  NAHRA contends that summary judgment for
  plaintiff was error because NAHRA has not conferred corporate membership
  rights as provided under Vermont law to members of the NAHRA association. 
  We conclude that the court erred, and accordingly we reverse and remand for
  further proceedings.

       The essential facts are undisputed.  NAHRA is a Vermont nonprofit
  corporation whose purpose is to, among things, promote the use and training
  of hunting retrievers as a conservation and management tool for wildlife
  resources, educate hunting retriever owners, handlers and the public on the
  use and training of hunting retrievers, and encourage quality breeding and
  field testing of purebred hunting retrievers.  When NARHA was incorporated
  in 1984, Vermont statutes defined a nonprofit corporate "member" as a
  person with membership rights in the corporation as provided in the
  corporate articles of incorporation or bylaws.  11 V.S.A. § 2302(6) (1984)
  (repealed 1997).  A nonprofit corporation was not required to have members,
  but if it chose not to have members, the law required the corporation to
  state that fact in its articles of incorporation.  Id. § 2358(a).  The law
  further required that any limitation on a member's voting rights be set
  forth in either the articles of incorporation or the corporate bylaws.  Id.
  § 2362(a).  Absent such an explicit limitation, all members were entitled
  by law to one vote on each matter that the corporation submitted to a vote
  of its members.  Id. 
   
       NAHRA's 1984 articles of incorporation, which NAHRA has never amended,
  do not contain any specific provision for membership voting and do not
  state that the organization will not have members.  The articles mention
  membership only in the context of how NAHRA will dispose of corporate
  assets, if any, upon dissolution.  Specifically, the articles state, "No
  part of the net assets or net earnings of the North American Hunting
  Retriever Association shall inure to the benefit of or be paid or
  distributed to any officer, director, member, employee, or donor of the
  North American Hunting Retriever Association."  (Emphasis added.)  NAHRA
  has never adopted bylaws since its 1984 incorporation.

  
   
       In 1998, Ferrill applied for and received an affiliation with NAHRA
  which the organization termed a "membership."  For an annual payment of
  thirty-seven dollars, Ferrill was entitled to a wallet membership card, a
  one-year subscription to the corporation's newsletter, a NAHRA decal, a
  NAHRA rule book, and eligibility for discounts at NAHRA-sponsored events. 
  NAHRA also offered an affiliation it called "Sponsor" for an annual fee of
  $200, which included the "membership" benefits as well as a jacket with an
  embroidered NAHRA patch. 

       In April 1999, Ferrill wrote to NAHRA asking for copies of certain
  corporate records, including the corporation's bylaws, articles of
  incorporation, minutes of the meetings of the board of directors,
  accounting records, financial statements, names and addresses of all NAHRA
  members, and other documents.  Ferrill informed NAHRA that he wanted the
  documents to investigate the activities of NAHRA's officers and directors
  to determine whether they had engaged in any wrongdoing.  NAHRA responded
  to Ferrill's request the next month, but did not provide copies of the
  documents he sought.  NAHRA's president instead told Ferrill that the NAHRA
  board of directors would further consider his request if Ferrill specified
  in detail the wrongful conduct he suspected.  

       In February 2000, Ferrill commenced the present action against NAHRA
  in Franklin Superior Court.  In his complaint, Ferrill asserted that he is
  a corporate member of NAHRA and is therefore entitled to inspect certain
  corporate records in accordance with § 16.02 of Vermont's Nonprofit
  Corporation Act.  See 11B V.S.A. § 16.02.  He asked the court to compel
  NAHRA to provide him with copies of the documents he previously requested
  and to order a meeting of NAHRA's corporate members in accordance with 11B
  V.S.A. § 7.03(a)(1).  NAHRA promptly moved for summary judgment arguing
  that it has never had corporate members and therefore NAHRA was entitled to
  judgment as a matter of law on Ferrill's claims because only members are
  entitled to the relief offered by §§ 7.03(a)(1) and 16.02.  Ferrill
  cross-moved for summary judgment, which the trial court granted.  The court
  directed NAHRA to allow Ferrill to inspect and copy NAHRA's records, but
  did not set a date or time for a NAHRA membership meeting, stating that it
  would do so in the future should Ferrill still seek that remedy.  NAHRA
  appealed the judgment to this Court.

       NAHRA argues that Ferrill does not fit the statutory definition of
  "member" because its articles of incorporation do not create members, and
  therefore Ferrill is not entitled to inspect and copy documents nor seek a
  judicially ordered membership meeting.  Ferrill counters that he was
  entitled to summary judgment because NAHRA did not limit his membership
  rights in the NAHRA articles of incorporation or adopt bylaws setting forth
  membership limitations, both requirements under the Vermont Nonprofit
  Corporation Act.  Ferrill argues alternatively that NAHRA must be estopped
  from denying him the benefits of corporate membership (i.e., voting and
  document inspection rights) by virtue of his affiliation with NAHRA which
  he believed conferred such rights.  On appeal, we use the same standard to
  review summary judgment orders as the trial court.  Wentworth v. Fletcher
  Allen Health Care, 171 Vt. 614, 616, 765 A.2d 456, 459 (2000) (mem.).  If
  no genuine issue of material fact exists and any party is entitled to
  judgment as a matter of law, summary judgment is proper.  V.R.C.P.
  56(c)(3).

        
       We begin by noting that the parties briefed and argued this matter
  under the current law applicable to Vermont nonprofit corporations.  We
  accept this as the law of the case and do not 

  

  address whether the pre-1997 law would produce a different result. 
  Effective January 1, 1997, the Vermont Nonprofit Corporation Act modified
  the statutory scheme that was in effect when NAHRA incorporated in 1984. 
  The changes include a new definition of "member," which limits "members" to
  those persons "who on more than one occasion, pursuant to a provision of a
  corporation's articles or bylaws, have the right to vote for the election
  of a director or directors."  11B V.S.A. § 1.40(21) (emphasis added).  In
  contrast to the old statute, the law now mandates that nonprofit
  corporations state in their articles of incorporation whether or not they
  will have members.  Id. § 2.02(a)(5).  Thus, while the 1984 statutes
  arguably created default corporate membership if the corporation's articles
  or bylaws did not explicitly state that the nonprofit would not have
  members, the new scheme restricts members to those persons to whom the
  corporation's articles or bylaws have expressly granted voting rights.  If
  the corporation chooses to have members, all members have the same rights
  and obligations with respect to voting unless the articles or bylaws
  "establish classes of membership with different rights or obligations." 
  Id. § 6.20.  The new Act also recognizes that a nonprofit may have
  "members" who participate in the corporation's activities, but who do not
  have the right to vote.  Id. § 1.40(21)(D).  Such "membership" alone does
  not confer corporate membership with all its attendant rights, however,
  under the Act.  Id.

       Because the statute defines a corporate member by reference to the
  nonprofit corporation's articles of incorporation or bylaws, a court faced
  with a request like Ferrill's must first construe the articles of
  incorporation or bylaws.  A corporation's articles of incorporation are a
  contract between the state and the corporation and among its shareholders
  or members.  See State v. Delano Cmty. Dev. Corp., 571 N.W.2d 233,236
  (Minn. 1997); Walden Inv. Group v. Pier 67, Inc., 627 P.2d 129,131 (Wash.
  Ct. App. 1981).  The Court should therefore interpret the articles using
  the same rules used to construe contracts.  See Delano Cmty. Dev. Corp.,
  571 N.W.2d  at 236; Walden Inv., 627 P.2d  at 131.

       In this case, the superior court determined that Ferrill was a member
  of NAHRA by default because the corporation had no bylaws and NAHRA's
  articles of incorporation do not establish different classes of membership. 
  The court reasoned that because his voting rights were not limited in
  accordance with § 6.20, "and because he has voting rights, [Ferrill] fits
  the statutory definition of a member of [NAHRA]."  The court did not
  explain, however, how it reached the conclusion that Ferrill "has voting
  rights."  The court's order does not reflect any examination or analysis of
  NAHRA's articles of incorporation to support the court's conclusory
  statement that Ferrill has voting rights in NAHRA.  In view of the
  statutory definition of "member," the trial court erred by failing to
  examine the language of NAHRA's articles of incorporation according to the
  principles of contract construction.

        
       Under those principles, if the written instrument is unambiguous on
  its face, its meaning must be determined by reference to the words used in
  the document itself only.  Isbrandtsen v. North Branch Corp., 150 Vt. 575,
  578, 556 A.2d 81, 83-84 (1988).  A court may inquire into the circumstances
  surrounding the making of the instrument to determine whether an ambiguity
  exists.  Id. at 579, 556 A.2d  at 84.  "Ambiguity will be found where a
  writing in and of itself supports a different interpretation from that
  which appears when it is read in light of surrounding circumstances,

  

  and both interpretations are reasonable."  Id.  Whether a contract term is
  ambiguous is a matter of law for the court to decide.  Id. at 577, 556 A.2d 
  at 83.  If the court finds an ambiguity, the rules of contract construction
  may be used to interpret the disputed term, id. at 579, 556 A.2d  at 85, and
  the term's meaning is a question for the trier of fact.  John A. Russell
  Corp. v. Bohlig, 170 Vt. 12, 16, 739 A.2d 1212, 1216 (1999).  In this case,
  a question exists about whether the term "member" as used in the articles
  of incorporation means corporate member or member of the NAHRA association. 
  Because the court may take evidence of the circumstances surrounding the
  use of the terminology, we conclude on this record that it is appropriate
  to remand the matter to the trial court so it may decide the question of
  ambiguity in the first instance.

       Ferrill nevertheless urges us to affirm the trial court's decision
  because NAHRA has not abided by the directives contained in the Vermont
  Nonprofit Corporation Act to adopt bylaws and to specify in their articles
  of incorporation whether NAHRA has members and what their voting rights
  are.  He contends that sound public policy must create default membership
  in a nonprofit corporation like NAHRA when the nonprofit does not comply
  with statutory requirements.  Ferrill provides no legal authority from this
  or other jurisdictions to support his argument on this point, however.  The
  Vermont Legislature has not provided the remedy Ferrill seeks, and we are
  not persuaded that we should provide it by judicial fiat.

       Accordingly, we reverse and remand to the trial court so that it may
  consider Ferrill's claim anew using the correct legal standard.  We decline
  to reach Ferrill's estoppel claim because we do not have a sufficient
  record upon which to address the claim in view of the trial court's ruling. 
  Should the court conclude that NAHRA's articles of incorporation do not
  entitle Ferrill to corporate membership, we direct the trial court to
  consider Ferrill's estoppel claim in the first instance. 

       Reversed and remanded for further proceedings consistent with the
  views expressed herein.


       BY THE COURT:

  _______________________________________
  Jeffrey L. Amestoy, Chief Justice

  _______________________________________
  John A. Dooley, Associate Justice

  _______________________________________
  James L. Morse, Associate Justice

  _______________________________________
  Denise R. Johnson, Associate Justice

  _______________________________________
  Marilyn S. Skoglund, Associate Justice