We have received a request for an amicus brief to be filed in the South Carolina Supreme Court case Callawassie Island Members Club, Inc. v. Ronnie D. Dennis and Jeanette Dennis.
Callawassie Island is a residential community of five hundred homes and two hundred undeveloped lots. The community is governed by a property owners association, the Callawassie Island Property Owners Association, Inc. (CIPOA), and its common amenities are operated and maintained by a second entity, the Callawassie Island Members Club, Inc. (CIMC). Since 2001, The CIPOA declaration has required that lot owners belong to CIMC, as membership dues paid by lot owners to CIMC is the sole course of funds to operate and maintain the community's amenities.
Mr. and Mrs. Dennis are lot owners and members of both CIPOA and CIMC. Prior to August of 2011, the Dennis' submitted a resignation from CIMC, but remain owners of their home in Callawassie Island. On August 10, 2011, CIMC filed suit for breach of contract against the Dennis' to recover delinquent dues, fees and assessments. The Dennis' argued that they had a statutory right to resign from CIMC and that the effect of doing so was to relieve them from further obligations to pay dues to CIMC. CIMC filed a motion for and were awarded summary judgment against the Dennis', the trial court finding that they remained obliged to pay dues until their membership in the Club was issued to a new member.
The Dennis' filed an appeal of the trial court's final order to the South Carolina Court of Appeals. This court issued an opinion that directed the case be returned to the trial court because the Court of Appeals found there were ambiguities in the CIMC governing documents. The Court of Appeals also found that the South Carolina Not-for-Profit Corporations Act permitted members of such corporations to resign and that resignation relieved the resigning member from the obligation to continue to pay dues, despite the language of the relevant statutory section that specifically provides that a member who resigns remains liable for obligations undertaken before resignation.
CIMC's writ of error is asking the Supreme Court to reverse the Court of Appeals' reversal of the trial court's summary judgment finding and to reverse the Court of Appeals' finding that a member who resigns from a South Carolina not-for-profit corporation is no longer obliged to honor commitments made while a member of the corporation.
Most community associations in South Carolina are organized as not-for-profit corporations and have two organizations- one corporation operates/manages aspects of the community and the other maintains the amenities. If the Court of Appeal's statutory interpretation of the Not-For-Profit Corporations Act is held to correct, then, at a minimum South Carolina community associations will be unable to maintain the common amenities and may be without the funding necessary to operate at all. The impact would be devastating to the associations, value of the homes, and budgets of local government which would be forced to assume responsibilities now provided by community associations. A plain reading of the relevant statute and the official comments to the statute make clear that members for not-for-profit corporations must honor commitments they made before resigning their memberships.
Status: Order: Petition for Rehearing Denied
Prior Rulings: South Carolina Supreme Court Opinion, Trial Court Opinion, Court of Appeals Opinion
Brief Author: J. Thomas Mikell, Esq.
CAI Amicus Brief Review Committee: Robert Diamond, Esq., Chair of Amicus Committee, David Mercer, Esq. (VA), Karyn Branco, Esq. (NJ)