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Foreman v. Bell

Filed: April 6, 1982.

KENNETH J. FOREMAN, JR.
v.
CHARLES W. BELL, LETA BAHN, FREDERICK E. BROGDON, WILLIAM GUY DELANEY, JAMES F. FORD, MARY HAMMOND, COLLIER S. HARVEY, JR., WILLIAM G. HAZEN, A. RUDOLPH HENDRICKS, C. DOOLEY HITCH, THOMAS L. JONES, III, BRYON H. KNIGHT, KATHERINE MORTON, RICHARD PORTER, HERBERT C. RULE, III, W. HERBERT SMITH, JR. CONSTITUTING THE MOUNTAIN RETREAT ASSOCIATION MANAGEMENT COUNCIL, AND THE MOUNTAIN RETREAT ASSOCIATION, INC., A NORTH CAROLINA CORPORATION



Appeal by plaintiff from Allen, Judge. Judgment entered 5 November 1980 and final judgment entered on 13 December 1980 in Superior Court, Buncombe County. Heard in the Court of Appeals 5 January 1982.

Becton, Judge. Judge Clark and Judge Whichard concur.

Becton

The record and exhibits in this case document in detail the history of the Mountain Retreat Association (Corporation) from its inception to the present. Much of the history of the Corporation is not necessary for the disposition of the issues before us, however. The facts essential to the resolution of this dispute are set out below.

The Corporation was originally chartered in 1897 by the North Carolina Legislature as a municipal corporation. In 1906, the Corporation became a stock corporation when the legislature amended the Corporation's charter to allow for issuance of $500,000 of common stock and $250,000 of preferred stock. In 1917, some owners of stock transferred their stock, pursuant to a Declaration of Trust, to a body denominated Board of Trustees of Stock. As a result of the transfers, 73 to 74 percent of the outstanding stock was held pursuant to the Declaration of Trust. The Declaration of Trust provided how and from what bodies the Trustees of Stock, numbering from 25 to 50 members, were to be elected. It also provided that the Trustees of Stock "shall have and are vested with full authority and power to change the charter" of the Corporation; that the purpose and intent of the Trust is that the Corporation's property be forever used under the auspices of the Presbyterian Church; and that the Trustees of Stock shall use, hold, vote and control the stock to insure and guarantee accomplishment of such purposes. Over the years, various amendments were made to the charter of the Corporation which affected the manner by which Trustees of Stock were elected. In 1958, the Corporation's charter was amended so that Trustees of Stock could be elected and could serve as the Board of Directors of the Corporation. In 1967, the Legislature terminated all of the Corporation's municipal rights and transferred them to the City of Montreat.

The plaintiff holds one share of stock in the Corporation which he acquired in 1979 by purchasing a lot and the stock certificate. He complains that the present members of the Board of Directors hold their offices illegally in that they were elected by Trustees of Stock who were not themselves properly elected. He argues that because the Trustees were not elected according to the terms of the Trust, all of their acts are null and void, including the election of directors of the Corporation. We do not consider the merits of plaintiff's arguments as we dispose of this case on jurisdictional grounds.

This action was brought pursuant to G.S. 55-71 which provides in pertinent part:

(a) Any shareholder or director of a domestic corporation may commence a summary proceeding in the superior court to determine any controversy with respect to any election or appointment of any director or officer of such corporation, and any shareholder or director of a foreign corporation authorized to transact business in this State shall have the same right with respect to any election held within this State.

This statute allows a summary procedure to be held, without the benefit of service of process, G.S. 55-71(c), whenever there is a dispute surrounding the election of corporate officers or directors. It is remedial in nature and designed to maintain the status quo while the disputes regarding an election are resolved. Thomas v. Baker, 227 N.C. 226, 229, 41 S.E.2d 842, 844 (1947). Further, the statute is applicable to contested elections after the fact and not to prospective elections. Swenson v. Assurance Co., 33 N.C. App. 458, 463, 235 S.E.2d 793, 796 (1977).

The plaintiff seeks to have G.S. 55-71 applied in such a manner as to give him standing to challenge the election of the Trustees of Stock, an entirely separate and independent entity from the Board of Directors of the Corporation. We refuse to do so since the allegations in his petition and the prayer for relief do not fall within the purview of G.S. 55-71. Plaintiff, in his petition, prayed for the following relief, among others:

1. That the Court adjudge that the respondents are not legally holding the office of members of the Board of Trustees

of Stock, and are not legally entitled to manage the affairs of said Mountain Retreat Association as directors or ...


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