Chisholm v. Hyattstown Volunteer Fire Department, Inc.

CATHELL, Judge. Avon B. Chisolm, appellant, was elected to “lifetime” membership in the Hyattstown Volunteer Fire Department, Inc. (HVFD or the Department), appellee, in 1987. In February of 1994, HVFD expelled appellant “for actions detrimental to the best interests of’ the Department. 1 Appellant filed suit against HVFD in the Circuit Court for Montgomery County, challenging his expulsion. Following the presentation of appellant’s case, the circuit court granted a partial motion for judgment in favor of HVFD; at the conclusion of the court trial, the court rendered judgment in favor of HVFD.

Appellant noted a timely appeal; he presents three questions for our review: I. Do corporate by-laws constitute a contract, and did the circuit court therefore err when it ruled that ⁶¹ HVFD’s bylaws were not a contract and, on that basis, granted HVFD’s motion for judgment on counts II [breach of contract] and IV [specific performance]?

II

Did HVFD’s by-laws clearly and unambiguously provide for lifetime members who cannot be dropped from the membership and the circuit court therefore err in ruling that Chisolm could be expelled from that special membership?

III

Was Chisolm’s right to fundamental fairness ... violated by the presence of Douglas Edwards on the trial board? The Relevant Facts HVFD is a nonprofit, nonstock or membership corporation. Its bylaws, in Article IV, Section 4, set forth eight classifications of members. Lifetime membership is a subclass of Special Memberships.

Article IV, Section 5.8.1. provides this description of lifetime membership: Lifetime membership may be conferred by a majority vote of the members present at any regular meeting of the Department, upon any member who has attained fifteen (15) active years in the Hyattstown Volunteer Fire Department, Inc., [sic] Lifetime members shall not be dropped from the rolls of the Department. They shall be granted the privilege of the floor but shall be exempt from the annual payment of dues, have no vote, not hold Department office and not participate in fire/rescue operations unless such member meets the requirements of subsection (A) of this Section. A. Lifetime members may pay the annual dues and, therefore, be entitled to all the benefits and privileges of an active member. Article XV of the bylaws sets forth the procedures by which a member of the Department may be disciplined.

In relevant part, it provides: ⁶² A member may prefer formal charges against any member of the Department ... for any ... cause considered detrimental to the best interest of the Department. A Trial Board consisting of members in good standing of the Department shall be convened to hear and decide formal charges brought against members____ A Trial Board of seven (7) members shall be selected by lottery, with both the charging member and the member being charged in attendance---- After the Trial Board is selected, the Secretary shall notify the members selected, in writing, within five (5) days, with a trial to be held within ten (10) days. A quorum of at least five (5) of those members selected shall proceed with the trial. At no time shall the accused, the accuser, or any family members of those persons be permitted to serve on the Trial Board.

At such hearing the member so charged shall be afforded an opportunity of being heard in their own defense, and may receive assistance in presenting their defense from members of the Department, and shall have the right to bring in witnesses____ Upon hearing the evidence on the charges, the Trial Board shall either find the member not guilty or guilty and if guilty, may impose whatever disciplinary action the Trial Board deems appropriate except for expulsion from the Department. The Trial Board may recommend to the Department membership expulsion from the Department at the next regular meeting of the Department following the completion of the hearing. On December 13, 1993, Scott Testerman, HVFD’s vice president, filed formal charges against appellant. A Trial Board was convened, and that board found appellant “guilty” of misfeasance.

The Trial Board recommended to the general membership that appellant be expelled from the Department, the membership voted to follow that recommendation, and appellant was thereafter expelled from the Department. ⁶³ On April 14, 1995, appellant filed suit against HVFD. His Third Amended Complaint contained four counts that alleged and/or sought: 1) declaratory relief; 2 2) breach of contract; 3) wrongful discharge; and 4) specific performance. Prior to trial, HVFD filed a Motion for Summary Judgment on all issues. At the conclusion of the hearing thereon, the circuit court ruled: I find specifically that ... the provision under “Membership Classes,” paragraph number 8, “Special Membership Classes,” the provision that says, “Lifetime members shall not be dropped from the rolls of the Department,” refers specifically to the fact that they are not required to pay dues; and, therefore, cannot be dropped from the rolls for not paying the dues, and that that is the purpose of the lifetime membership.

I find that Article XV, dealing with discipline, is separate and that the remedy, any of the remedies available under the discipline provisions are available as to any member no matter what their classification is. So on the threshold question, I am finding that he [appellant] was subject to the same provisions as any other member, under the “Discipline” section, including expulsion. The court then ordered the parties to proceed to trial on all of the remaining issues. A three day bench trial commenced on June 3,1996.

At the close of appellant’s case, the Department made a motion for judgment. The court granted the Department’s motion as to counts 2) breach of contract; 3) wrongful discharge; and 4) specific performance. The court reserved ruling upon count 1, which sought a declaratory judgment “that the actions of the ⁶⁴ Trial Board are null and void, [and] that the actions of the ... Department ..., in expelling him from membership in the department [were] illegal.” In pertinent part, Judge Scrivener ruled: I do not find that Mr. Chisolm was an employee of the Hyattstown Volunteer Fire Department and, therefore, cannot be subject to a wrongful discharge action since there is no employer-employee relationship.

With respect to counts 2 and 4, breach of contract and specific performance, I find that there is no contract in this case. So, therefore, there can be no breach of contract or specific performance. I do not find that- the bylaws constitute any kind of contract which would give rise to an action either for breach of contract or specific performance under this case. I am denying the motion with respect to count 1.1 will hear from the defense witnesses on that.

Following the presentation by HVFD, the court ruled: I have consistently ruled ... that the Courtfs] role in this trial is to determine whether or not the actual procedures that were followed were fair and reasonable and whether or not essential fairness was preserved throughout the proceedings [before the Trial Board]; both as to what the bylaws say should be done and what in fact was done in this case. I do not find that there is any bad faith on the part of anyone.... I think each of them was acting in good faith. And, certainly, the Court is aware that this was not a criminal proceeding, nor was the proceeding in front of the trial board a criminal proceeding.

Many of the procedural safeguards which we would certainly require in a criminal case are not present in this case. ⁶⁵ In summary, I find that fundamental fairness was preserved in the procedures that were followed by the Hyatts-town Volunteer Fire Department. I am not holding them to the same standard I would if it were a court proceeding. And mindful of all of the testimony and exhibits which I have reviewed thoroughly throughout this trial, I am going to deny [the] relief requested by the plaintiff [appellant]. I do believe that fundamental fairness was preserved throughout that procedure.

On July 5, 1996, appellant filed a timely Notice of Appeal. Do HVFD’s bylaws constitute a contract that will support a claim for breach of contract and specific performance? Appellant contends that HVFD’s bylaws constitute a contract between the Department and its members, and, therefore, the circuit court erred in granting the Department’s motion for judgment as to the counts that alleged a breach of contract, count 2, and sought specific performance, count 4. 3 Appellant cites three cases in support of his assertion that the Department’s bylaws constitute an enforceable contract between HVFD and its members: Chevy Chase Sav. & Loan v. State, 306 Md. 384 , 509 A.2d 670 (1986); Spence v. Medical Mut. Liab.

Ins. Soc’y, 65 Md.App. 410 , 500 A.2d 1066 (1985), cert. denied, 305 Md. 621 , 505 A.2d 1342 (1986); and Anne Arundel Gen. Hosp. v. O’Brien, 49 Md.App. 362 , 432 A.2d 483 (1981). These cases are, however, inapposite.

Two of the three involve for-profit corporations, and, more significant, all three involve an underlying contract between the parties and the effect of the corporate bylaws upon that contract. See Chevy Chase, 306 Md. at 400 , 509 A.2d 670 (“Corporate bylaws, particularly those of a mutual insurer, form part of the contract between the corporation and its policyholders or members.” (emphasis added)); Spence, 65 Md.App. at 419 , 500 ⁶⁶ A.2d 1066 (“A mutual insurance company’s charter and bylaws form part of the contract of insurance, regardless of whether they are referred to in the policy.” (emphasis added)); O’Brien, 49 Md.App. at 370 , 432 A.2d 483 (hospital was not required to follow hearing procedures contained in bylaws in terminating exclusive contractual privileges of doctors). None of these cases supports the proposition that the corporate bylaws of a nonprofit membership corporation constitute an enforceable contract between the corporation and its members. Appellant also directs our attention to 8 Fletcher Cyclopedia Corporations § 4198 (1993).

In pertinent part, that section reads: In regard to the general relation between the corporation and the stockholder or member, it is the general rule that the bylaws which are in existence at the inception of the relation enter into the contract between the corporation and its stockholders or members or, in the case of a mutual association or fraternal benefit society, the contract between the members, and become an integral part of the contract as a matter of law, or, at least, are in the nature and have the force and effect of a contract, regulating the rights among the members and between the corporation and the members ____ A bylaw is not, however, a contract in the strict sense in which the word is sometimes used as designating a formal agreement. [Footnotes omitted.] While this section does imply that bylaws either constitute a contract or have the force and effect of a contract between the corporation and its members, it does not support the proposition that the expulsion of a member by the corporation gives rise to a cause of action for breach of contract or specific performance. By way of relief, appellant principally sought money damages, reinstatement in the Department, and counsel fees. Appellant has not, however, pointed us to any authority that ⁶⁷ will support his recovery of money damages from the Department upon a theory of breach of contract or specific performance, nor has our research uncovered any. This is because “[t]he obligations imposed by the bylaws of a corporation upon its officers are not such as rest wholly in contract for the breach of which there is an adequate legal remedy.” 18A Am.

Jur.2d Corporations § 331 (1985). 4 Thus, the circuit court did not err in concluding that the bylaws did not constitute an enforceable contract. Moreover, regardless of whether or not the Department’s bylaws constituted a “contract,” the reinstatement of appellant in the Department was not realizable by way of an action for breach of contract or specific performance. Rather, the proper remedy would be a writ of mandamus. Nearly a century ago, in the case of a law student who was expelled from what was then the law school of Baltimore University, the Court of Appeals opined: Of course if one voluntarily becomes a member of an incorporated society or association whose by-laws provide for expulsion for specified causes the right of amotion [to be removed] is clearly established in the corporate body and may be duly exercised in the manner and for the purposes prescribed---- Want of notice has always been regarded as sufficient ground for invoking the aid of mandamus in cases of membership in corporations organized for the purpose of business or profit.

And now it is generally held that the same rule also applies to the restoration to membership in a private corporation when no pecuniary interests are involved____ But in addition to this it is clear the plaintiff has no other adequate remedy at law. He asks and seeks not damages but a restoration to his right to attend the school.... An action for breach of contract cannot, ⁶⁸ therefore, be considered an adequate remedy. Nor can he have, as suggested, a bill for specific performance, so long as he has an adequate remedy at law to wit, the writ of mandamus.

Baltimore Univ. v. Colton, 98 Md. 623, 636 , 57 A. 14 (1904) (citations omitted). Similarly, Fletcher Cyclopedia of Corporations also states that the remedy of an expelled member is a writ of mandamus: By the overwhelming weight of authority, if a member of a corporation is wrongfully expelled without sufficient cause, or without a hearing, or without reasonable notice and an opportunity to be heard, or without compliance with the provisions of the charter and bylaws, mandamus will lie to compel the corporation to restore the member to membership. 12A Fletcher Cyclopedia of Corporations § 5705 (1993) (footnote omitted). Generally speaking mandamus or a proceeding in the nature of mandamus is available as a remedy to a member wrongfully expelled from an incorporated [organization]. Probably most of these decisions are based on the principle set forth in Lahiff v. St. Joseph’s Total Abstinence & Benev.

Soc., [ 76 Conn. 648 , 57 A. 692 (1904) ], that a corporation chartered by the state has privileges and powers expressly granted by it and hence the duties devolved upon any corporation are regarded as being of a public character. T.W. Cousens, Annotation, Suspension or Expulsion from Social Club or Similar Society and the Remedies Therefor, 20 A.L.R.2d 344 , 393 (1951) (footnotes omitted) (citations omitted); accord 18A Am.Jur.2d Corporations § 947 (1985) (“Generally speaking, mandamus or a proceeding in the nature of mandamus is available as a remedy to a member wrongfully excluded or expelled from a corporation.” (footnote omitted)); see generally 14 M.L.E. Mandamus §§ 51-55 (1961, 1997 Cum.Supp.). ⁶⁹ Writing for the Court of Appeals in Freeman v. Local 1802, Am. Fed’n of State, County & Mun. Employees, 318 Md. 684, 692 , 569 A.2d 1244 (1990), Judge Eldridge quoted with approval the summary of the law on the writ of mandamus contained in George’s Creek Coal & Iron Co. v. Allegany County Comm’rs, 59 Md. 255, 259 (1883): “Mandamus is a most valuable and essential remedy in the administration of justice, but it can only be resorted to to supply the want of some more appropriate ordinary remedy.

Its office, as generally used, is to compel corporations, inferior tribunals, or public offi cers to perform their functions, or some particular duty imposed upon them, which, in its nature, is imperative, and to the performance of which the party applying for the writ has a clear legal right. The process is extraordinary, and if the right be doubtful, or the duty discretionary, or of a nature to require the exercise of judgment, or if there be any ordinary adequate legal remedy to which the party applying could have recourse, this writ will not be granted.” While we take no position as to whether appellant would have been entitled to a writ of mandamus in the case sub judice, as set forth by the Court of Appeals some ninety-three years ago in Colton, an expelled member of a corporation who seeks reinstatement, as does appellant, cannot accomplish that end by way of claims for breach of contract or specific performance. Accordingly, we hold that the circuit court did not err when it granted judgment in favor of the Department on these two counts. 5 Under HYFD’s bylaws, can a lifetime member be expelled? The circuit court, based upon its interpretation of the bylaws, ruled that lifetime members of the Department “can ⁷⁰ not be dropped from the rolls for not paying the dues,” but could be expelled otherwise under the disciplinary procedures set forth in Article XV.

Appellant avers that, although he could be subjected to discipline under Article XV of the bylaws, he could not be expelled from membership given his status as a lifetime member, because the definition of a lifetime member contained in Article IV, Section 5.8.1 states, “Lifetime members shall not be dropped from the