The Callawassie Island Members Club v. Frey

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

The Callawassie Island Members Club, Inc., Respondent,

v.

Michael J. Frey and Grace I. Frey, Defendants,

Of whom Michael J. Frey is the Appellant.

Appellate Case No. 2015-000002

Appeal From Beaufort County
J. Ernest Kinard, Jr., Circuit Court Judge

Unpublished Opinion No. 2018-UP-179
Submitted September 1, 2017 – Filed May 2, 2018

AFFIRMED IN PART, REVERSED IN PART, AND
REMANDED

Ian S. Ford and Neil Davis Thomson, both of Ford
Wallace Thomson LLC, of Charleston, for Appellant.

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; and James
Andrew Yoho, of Carlock Copeland & Stair, LLP, of
Charleston, for Respondent.
PER CURIAM: Michael J. Frey appeals the circuit court's order granting
summary judgment to The Callawassie Island Members Club, Inc. (CIMC). He
argues the circuit court erred in (1) failing to apply the "scintilla of evidence"
standard to CIMC's motion for summary judgment, (2) disregarding the
voluminous evidence he presented in opposing CIMC's motion for summary
judgment, (3) awarding damages under incorrect contract provisions and under
incorrect interpretations of the applicable documents, (4) granting summary
judgment in favor of CIMC on his counterclaims when he submitted evidence
raising numerous issues of material fact, and (5) granting summary judgment
prematurely because he did not have a full and fair opportunity to complete
discovery. We affirm in part, reverse in part, and remand.1

Disregarding Evidence

Frey argues the circuit court disregarded genuine issues of material fact and,
therefore, erred in granting summary judgment in favor of CIMC. We have
addressed Frey's specific arguments below.

i. Contract

Frey first contends CIMC failed to prove a contract existed because he applied for
membership in a different organization, the Callawassie Island Club, Inc. (CIC).
We hold a question of fact does not exist as to whether Frey was a member of
CIMC. The evidence in the record supports the circuit court's finding that Frey's
membership in CIC transferred to CIMC upon the sale of the club. The 1994 Plan
for the Offering of Memberships (Plan) expressly contemplated the transfer of
CIC's assets to the members, which occurred in 2001 when CIMC assumed
control. Frey also continued paying dues and receiving the benefits of membership
well after CIMC took control of the club.

ii. Governing Documents

Frey contends the circuit court disregarded (1) the differences among resigned,
terminated, and expelled members; (2) the abundant evidence that he had been
expelled by CIMC, which included testimony from CIMC's representatives and
other club members regarding the expulsion process and documents showing

1
We decide this case without oral argument pursuant to Rule 215, SCACR.
CIMC had previously expelled other members; (3) evidence that the governing
documents had been improperly changed by CIMC to prohibit people from exiting
the club; and (4) the abundant evidence that he had no obligation beyond his equity
interest in his club membership.

a. Resignation

Frey contends there are genuine disputes as to (1) which governing documents are
controlling and (2) the interpretation and application of the governing documents
as they relate to his obligation to pay dues.

This court recently considered the same issues in The Callawassie Island Members
Club, Inc. v. Dennis. 417 S.C. 610, 790 S.E.2d 435 (Ct. App. 2016), cert. granted
(S.C. Sup. Ct. Order dated September 8, 2017). There, this court noted the 1994
general club rules (GCRs) provided that a member could terminate membership in
the club by delivering written notice of termination to the club's secretary but would
remain liable for any unpaid club account, membership dues, and charges. Id. at
616, 790 S.E.2d at 438. However, this court found this language different from that
in other documents. Id. at 616–17, 790 S.E.2d at 438. This court stated,

[U]nlike the 1994 GCRs, the 1994 CIC Plan and Bylaws
provide resigned members are obligated to continue to
pay dues until their memberships are reissued. Further
ambiguity is found . . . in the 2009 GCRs, which provide
that members who have terminated their club
memberships remain liable for unpaid dues until their
membership is sold. The term "unpaid" is not defined in
the documents. It is unclear whether the language
relating to unpaid dues refers to unpaid dues owed at the
time of resignation or unpaid dues accruing before and
after resignation.

Id. Based on this ambiguous language in the governing documents regarding "the
issue of whether Appellants were obligated to pay dues post-resignation," this court
reversed the grant of summary judgment to CIMC. Id. at 617, 790 S.E.2d at 438.

The same governing documents at issue in Dennis were used in this case. Like in
Dennis, the 1994 Bylaws, the 1994 Plan, and subsequent revisions to the Plan
consistently stated that resigned members had to continue paying dues until their
memberships were reissued. However, the 1994 and 2001 GCRs provided that a
person who terminated his or her membership in the club would remain liable for
any unpaid club account, membership dues and charges. The 2007 and 2009 GCRs
added in that the member would remain liable for these "unpaid" charges "until the
membership was sold."

When all of the governing documents are reviewed, an ambiguity exists regarding
the obligation of a resigning member to continue paying dues post-resignation.
Some of the documents state a member is responsible for paying dues until the
membership is reissued, while others state the member is only responsible for
"unpaid" dues, and the meaning of "unpaid" is not clear from the documents. See
id. at 617, 790 S.E.2d at 438 ("The term 'unpaid' is not defined in the documents.
It is unclear whether the language relating to unpaid dues refers to unpaid dues
owed at the time of resignation or unpaid dues accruing before and after
resignation.").

Although Frey's brief essentially focuses on his belief that he was expelled from
the club, there is some evidence that he attempted to resign his membership. In his
answer, he not only sought a finding that he was expelled from the club but also
contended that his resignation should be deemed effective. Additionally, in its
answer to interrogatories filed by Frey, CIMC stated it had in its possession a
purported resignation from Frey. See Hancock v. Mid-South Mgmt. Co., 381 S.C.
326, 330, 673 S.E.2d 801, 803 (2009) (stating the nonmoving party is only
required to submit a mere scintilla of evidence to withstand a motion for summary
judgment in cases applying the preponderance of the evidence burden of proof). In
light of this evidence and the ambiguity of the provisions governing the obligation
of resigned members to continue paying dues, summary judgment was improper.
See HK New Plan Exch. Prop. Owner I, LLC v. Coker, 375 S.C. 18, 23, 649 S.E.2d
181, 184 (Ct. App. 2007) ("[When] a contract is unclear, or is ambiguous and
capable of more than one construction, the parties' intentions are matters of fact to
be submitted to a jury."); see also Cafe Assocs., Ltd. v. Gerngross, 305 S.C. 6, 9,
406 S.E.2d 162, 164 (1991) ("As a general rule, written contracts are to be
construed by the [c]ourt[,] but [when] a contract is ambiguous or capable of more
than one construction, the question of what the parties intended becomes one of
fact, and the question should be submitted to the jury.").

b. Expulsion

Frey also contends that his liability for unpaid dues ended after four months of
delinquency by the mandatory process of expulsion.
The Dennis court also addressed this issue and focused on the mandatory expulsion
language of the 2001 GCRs and the testimony of the membership coordinator for
CIC and CIMC, who stated she understood the expulsion provision to mean that
after four months of delinquency, a member would lose his or her membership.
417 S.C. at 617, 790 S.E.2d at 439. This court stated,

We acknowledge that section 13.3.1 provides club
members may be suspended; however, in light of the
subsequent mandatory expulsion language and the
conflicting evidence presented as to the club's actual
suspension and expulsion practices, we agree with
Appellants that the language of the GCRs presented an
ambiguity as to whether Appellants were entitled to
expulsion and thus exposed to a maximum liability of
four months' of unpaid dues (plus any accrued expenses).
[When] there is some ambiguity in the governing
documents as to whether expelled members are still
liable for dues accruing after expulsion, summary
judgment is inappropriate.

Id. at 617–18, 790 S.E.2d at 439.

Like in Dennis, the record contains the testimony of the membership coordinator, as
well as the following provision from the 2001 GCRs:

Any 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.

(Emphases added). There is evidence in the record that Frey had been suspended
by CIMC before the initiation of CIMC's action against him. The record contains a
November 2011 list of suspended members that included Frey. Also, CIMC's
General Manager stated in an affidavit that CIMC had "been forced, owing to non-
payment, to suspend" the membership rights and privileges of Frey. However, the
above provision from the 2001 GCRs was amended in 2007 and the mandatory
expulsion language was removed. It states as follows:
Any 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) month period following
suspension may be expelled from the Club.

(Emphases added). Pursuant to this revision, CIMC would not have been obligated
to expel Frey despite his suspension. However, Frey contends the governing
documents were improperly changed by CIMC to prohibit people from exiting the
club. He points to the following provision, which prohibits modification of the
governing documents unless a majority of the members vote in favor of it:

2007 and 2012 Plan:

The Board of Directors may, in its sole discretion, amend
or modify this Plan from time to time, so long as such
amendments or modifications do not materially and
adversely affect the rights of the Equity Members. Any
amendment or modification which materially and
adversely affects the rights of the Equity Members must
be approved by a majority of the votes held by the Equity
Members so affected.

Frey stated in an affidavit that he never voted to change the requirement that a
member must be expelled after four months of suspension and stated he was not
aware of any vote to do so. Viewing this evidence in the light most favorable to
Frey, there is a genuine issue of material fact regarding whether the governing
documents were improperly changed and whether the mandatory expulsion
provision was still in effect at the time of Frey's suspension from the club. See
Hancock, 381 S.C. at 330, 673 S.E.2d at 803 (stating the nonmoving party is only
required to submit a mere scintilla of evidence to withstand a motion for summary
judgment in cases applying the preponderance of the evidence burden of proof).
Thus, summary judgment to CIMC was improper. See Dennis, 417 S.C. at 618,
790 S.E.2d at 439 ("[When] there is some ambiguity in the governing documents
as to whether expelled members are still liable for dues accruing after expulsion,
summary judgment is inappropriate."); see also Cafe Assocs., Ltd., 305 S.C. at 9,
406 S.E.2d at 164 ("As a general rule, written contracts are to be construed by the
[c]ourt[,] but [when] a contract is ambiguous or capable of more than one
construction, the question of what the parties intended becomes one of fact, and the
question should be submitted to the jury.").
iii. Nonprofit Corporation Act

According to Frey, permitting CIMC to continue to levy dues, fees, assessments,
and other charges against him is a violation of the South Carolina Nonprofit
Corporation Act of 1994 (the Act) because it eliminates a person's right to resign
from a nonprofit organization; it also conflicts with the governing documents,
which do not state a member is responsible for dues and other charges after
termination or expulsion. Frey argues CIMC "cannot expel someone, bar them
from all Club facilities, keep their equity contribution—and still demand that they
pay dues, fees, assessments, and other charges for years to come."

We find the provision at issue from the Act, section 33-31-620 of the South
Carolina Code (2006), does not require resigned members to continue paying dues
that accrue after they resign. See § 33-31-620 (stating "[a] member may resign at
any time" and "[t]he resignation of a member does not relieve the member from
any obligations the member may have to the corporation as a result of obligations
incurred or commitments made before resignation"); see also Dennis, 417 S.C. at
618, 790 S.E.2d at 439 ("Section 33-31-620 obligates resigned members to pay any
dues incurred before resignation. This section does not require resigned members
to continue to pay any dues that accrue after resignation. To do so, we believe,
would create an unreasonable situation in which clubs could refuse to allow a
member to ever terminate [his or her] membership obligations."); id. at 619, 790
S.E.2d at 439 ("[S]ection 33-31-620 protects club members from such continuing
liability after resignation.").

Counterclaims

i. Breach of Contract

Frey argues there was sufficient evidence to support his breach of contract
counterclaim, including that he established CIMC improperly amended material
provisions of the governing documents to prevent members from leaving the club.
Because of the interrelated nature between Frey's breach of contract counterclaim
and CIMC's breach of contract claim and, as stated above, the fact that relevant
provisions of the governing documents are ambiguous, we reverse the circuit
court's grant of summary judgment to CIMC. See Hancock, 381 S.C. at 330, 673
S.E.2d at 803 (stating the nonmoving party is only required to submit a mere
scintilla of evidence to withstand a motion for summary judgment in cases
applying the preponderance of the evidence burden of proof).
ii. Negligent Misrepresentation

Frey stated in his brief that he is not maintaining "that the prior entity, [CIC], by
and through its governing documents, conveyed these false representations."
Instead, Frey argues "[t]he false representations occurred after the Club took over
in 2001" and consisted of CIMC providing "methods for certain members to exit
the Club without owing more than their equity contribution." This evidence is
insufficient to support Frey's negligent misrepresentation counterclaim because
allowing certain members to leave the club is not a false representation and it was
not made to Frey. See Sauner v. Pub. Serv. Auth. of S.C., 354 S.C. 397, 407, 581
S.E.2d 161, 166 (2003) ("To establish liability for negligent misrepresentation, the
plaintiff must show "(1) the defendant made a false representation to the
plaintiff . . . ." (emphases added)). Therefore, the circuit court did not err in
granting summary judgment to CIMC on this counterclaim. See Rule 56(c),
SCRCP (stating summary judgment is proper when "there is no genuine issue as to
any material fact and . . . the moving party is entitled to a judgment as a matter of
law").

iii. Section 33-31-621(d)

Frey argues the circuit court erred in dismissing his statutory violation claim
because CIMC brought its breach of contract action after the one-year statute of
limitations of section 33-31-621(d) of the South Carolina Code (2006), which
states, "A proceeding challenging an expulsion, suspension, or termination,
including a proceeding in which defective notice is alleged, must be commenced
within one year after the effective date of the expulsion, suspension, or
termination."

The circuit court did not address this issue in its order granting summary judgment
to CIMC and Frey did not raise it in his motion to reconsider. Therefore, it is
unpreserved. See Elam v. S.C. Dep't of Transp., 361 S.C. 9, 23, 602 S.E.2d 772,
779–80 (2004) ("Issues and arguments are preserved for appellate review only
when they are raised to and ruled on by the lower court.").

Attorney's Fees

Because of our reversal of the grant of summary judgment to CIMC, we also
reverse the award of attorney's fees to CIMC. 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.").

Remaining Issues

Based upon our reversal of the grant of summary judgment, the court need not
address Frey's remaining issues on appeal. See Futch v. McAllister Towing of
Georgetown, Inc., 335 S.C. 598, 613, 518 S.E.2d 591, 598 (1999) (holding an
appellate court need not address remaining issues when the resolution of prior
issue is dispositive).2

Conclusion

We affirm the circuit court's grant of summary judgment to CIMC on Frey's
negligent misrepresentation counterclaim. We reverse the circuit court's grant of
summary judgment to CIMC on its claims against Frey and the accompanying
award of damages, the grant of summary judgment to CIMC on Frey's breach of
contract claim, and the award of attorney's fees. Finally, we remand to the circuit
court for trial.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

LOCKEMY, C.J., and HUFF and HILL, JJ., concur.

2
CIMC also raises several additional sustaining grounds, which we decline to
address. See I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 420 n.9, 526
S.E.2d 716, 723 n.9 (2000) ("The appellate court may or may not wish to address
such [additional sustaining] grounds when it reverses the lower court's decision.").