CORPORATIONS-DISSOLUTION -RIGHTS OF MEMBERS OF NONPROFIT CORPORATION ON DISTRIBUTION OF ASSETS

Authors

John W. Hupp S.Ed., University of Michigan Law SchoolFollow

Abstract

Defendant association was incorporated in 1921 on a nonstock basis for the purpose of maintaining a club for social enjoyment. The association never maintained such a club, however, but rather operated a plan whereby "funeral benefits" were paid to the heirs of deceased members. At a special meeting on March 7, 1946, a plan was adopted for final distribution of the assets of the association among its members "on a basis for each month a member has been a member of the association." At a subsequent meeting, the members unanimously adopted a resolution to divide the association funds among its members or their heirs "in accordance with action taken March 7, 1946." The trustees of the association subsequently agreed that the first distribution of funds be made on a basis of 95 cents per month for the period during which a member had been "continuously beneficial." This plan was to be submitted to the entire membership for approval, but prior to the date of this meeting, plaintiffs, members of the association, filed a bill in equity praying that the defendant association be enjoined from distributing its assets except in accordance with state statute, which, plaintiffs contended, required equal distribution among members at the time of dissolution, irrespective of the length of time of membership. The association then filed a petition for dissolution with a prayer that a distribution based on the plan proposed by the trustees be approved. This petition was consolidated with the equity proceeding, and the chancellor dismissed the bill in equity and held that the plan of distribution adopted at the meeting of March 7, 1946, and subsequently approved without opposition, was binding on all members. On appeal, held, reversed. Unequal distribution of the assets of a nonstock, nonprofit corporation is not valid unless authorized by the articles or bylaws of the corporation being dissolved, and the trustees' distribution plan was never adopted as a bylaw, since it differed from the distribution basis contained in the resolution that the membership had adopted. De Champlain v. P. & R. Home Association, (Pa. Super. Ct. 1952) 90 A. (2d) 603.

Recommended Citation

John W. Hupp S.Ed., CORPORATIONS-DISSOLUTION -RIGHTS OF MEMBERS OF NONPROFIT CORPORATION ON DISTRIBUTION OF ASSETS, 51 Mich. L. Rev. 594 (1953).
Available at: https://repository.law.umich.edu/mlr/vol51/iss4/13