ZARNOCH, J.
One perceptive legal observer has noted that "[n]onprofit associations take many shapes and sizes, and the law that applies to them has traditionally consisted of a vague combination of statutes and common-law principles that create a number of problems for nonprofit associations." Elizabeth S. Miller, Doctoring the Law of Nonprofit Associations with a Band-aid or a Body Cast: A Look at the 1996 and 2008 Uniform Unincorporated Nonprofit Association Acts, 38 Wm. Mitchell L.Rev. 852, 855 (2012). This case is a prime example of those problems.
In 2008, Pikesville Recreation Council ("APRC") hired appellants Kimberly Pinsky and Elizabeth Ann Burman to work in one of its pre-schools for the 2008-2009 school year. At the end of the school year, but before the end of their respective contract terms, PRC terminated Pinsky and Burman and stopped paying them. They sued PRC and the individual officers of PRC in the Circuit Court for Baltimore County to recover the payments still owed to them, plus treble damages, attorney's fees, and costs. After a three-day bench trial, the circuit court entered judgment for Pinsky and Burman against PRC, but rejected the claims against the individual defendants. The court also declined to grant appellants' motions for sanctions and for attorney's fees and costs. They now appeal the adverse judgment with respect to the individual defendants and the court's rulings on sanctions, attorney's fees, and costs.
PRC was an unincorporated nonprofit association that, until 2009, oversaw recreation programs in the Pikesville area. It was governed by an elected Board of Directors ("Board") and operated under a Constitution, Bylaws, and a Policy Manual. PRC conducted various sports and education programs and received most of its funds from registration fees for the programs. Some programs had their own checkbooks, while others used the general PRC bank account. PRC had as many as fifteen checking accounts and took in gross revenues of "$750[,000] to close to a million dollars" a year from the mid-1990s to
Around the time Pinsky and Burman were hired, PRC was facing financial and organizational difficulties. In fact, the Baltimore County Department of Recreation and Parks
Pinsky and Burman received identical letters, dated May 22, 2009, from PRC informing them that they would be terminated effective June 12, 2009.
Pinsky and Burman filed a complaint against PRC
The litigation proceeded to discovery, albeit with some difficulty. The deposition of Engorn, PRC's former treasurer, did not take place as scheduled in October 2010 because Engorn's counsel allegedly failed to inform his client of the deposition.
A bench trial began on May 31, 2011 and continued on November 7 and November 14. Appellants' theory of the case focused on allegations of financial mismanagement by various PRC Board members. Pinsky and Burman testified about their employment with PRC and the amount of their legal fees. The seven individual defendants testified about their own involvement in PRC, and, to the extent that they were knowledgeable, PRC's operations and finances. Overall, the court heard from:
Appellants also called other witnesses who had been involved with PRC in the past. Alan Taylor was the chairman of PRC's soccer program from approximately 1997 through 2008. Taylor worked with and for Snitzer, one of the former PRC presidents, on an informal basis. He testified that there were "a lot of things that bothered" him about how Snitzer ran PRC, such as PRC paying bills for private sports tournaments run by Snitzer's companies and Snitzer occasionally depositing payments intended for PRC into his business accounts.
Allen Pogach was the treasurer of PRC from approximately December 1997 to May 2000. He reviewed PRC's records from after his tenure as treasurer and found what he thought were a "great number" of irregularities in PRC's accounting practices. For example, he testified that PRC's policies required that all checks and withdrawals by a program must bear the signature of the program treasurer and either the chairperson or the vice chairperson. Yet many of the records Pogach reviewed from PRC's soccer program had only Snitzer as the signatory.
Erwin Burtnick, an expert witness in forensic fraud and accounting, also testified on behalf of appellants. He reviewed PRC's records and found, in his view, a number of anomalies. For example, several payments were made from the basketball program's funds to Barber, an at-large Board member and supervisor of the program, for purposes such as "credit card bills" and "a drug program in Florida," or, in other words, "a few things ... that didn't appear to be recreation related items in the program." Burtnick also identified payments to Snitzer that he viewed as questionable. His opinion was that there was a lot of "com[m]ingling of, of private businesses, business accounts, especially those of Mr. Snitzer with the non-profit" PRC. Burtnick concluded that PRC was "totally mismanaged" and that Snitzer and Engorn, as the president and treasurer, respectively, were primarily responsible.
Regarding the pre-school program, Burtnick testified that PRC had the money to pay Pinsky and Burman. Parents of participating children either "paid in advance"
Pinsky and Burman moved for summary judgment at the close of their case, which the court denied. In discussing the motion, the court commented on the potential liability of the PRC officers:
Despite this initial suggestion of liability, the trial judge later indicated that the officers would not be liable in the event that a judgment was entered against PRC alone:
At the end of the third day of the trial, the judge made findings of fact:
The judge next considered the request for treble damages and awarded them:
Finally, the judge summarized the award of damages and costs:
Appellants filed a timely motion to alter or amend the judgment, which the court granted in part and denied in part in an order filed March 1, 2012. The court first denied appellants' request to hold the individual Board members liable. It observed that "[n]o Maryland law and no Maryland case is cited which makes members of a voluntary membership organization who serve as officers or Board members personally liable for payment of contracts executed in the name of the organization," and it "decline[d] to adopt new law in this case."
The court also summarized the evidence before it showing "sloppy management of PRC," including that "[s]ome of the individual defendants testified that they did not understand their participation on the Board to mean financial oversight of PRC." It remained troubled by the payments made by Engorn, the former PRC treasurer, from PRC's accounts to counsel for the individual defendants, as "[t]here was no evidence Mr. Engorn was ever authorized by PRC to pay legal expenses for himself and the other individual defendants from PRC funds." The court concluded, however, that "[t]he mismanagement of PRC's finances in this case did not amount to fraud," and, in any event, that the complaint "alleged neither fraud nor bad faith."
Finally, the court granted the request for an award of attorney's fees and awarded $2,000 for "drafting a Complaint and proceeding to judgment against PRC."
Appellants filed a notice of appeal on March 16, 2012. They specifically appealed:
Additional facts will be discussed below, as necessary.
Appellants present five issues,
We answer the first question in the affirmative and answer the second and third questions in the negative. We therefore reverse in part, affirm in part, and remand for further proceedings.
Non-jury trials are reviewed on both the law and the evidence. Md. Rule 8-131(c). Legal conclusions, such as those
Appellants argue that the individual officers and directors should be held liable for PRC's breach of contract. They claim that there is little Maryland law on point, and they rely on case law from other states in support of their position that individual officers and directors of unincorporated associations are generally not exempt from personal liability for breaches of contract by the association.
Before we determine whether the officers could be liable, we believe it would be helpful to discuss the nature and legal status of an unincorporated association, both here and elsewhere. We then consider whether officers can ever be personally liable for an association's breach of contract.
"Unincorporated associations long have been a problem for the law. They are analogous to partnerships, and yet not partnerships; analogous to corporations, and yet not corporations; analogous to joint tenancies, and yet not joint tenancies; analogous to mutual agencies, and yet not mutual agencies." Cox v. Thee Evergreen Church, 836 S.W.2d 167, 169 n. 3 (Tex. 1992). Although there is no single dominant form of an unincorporated association, they are often defined as an "organization consisting of [two] or more members joined under an agreement that is oral, in a record, or implied from conduct, for one or more common, nonprofit purposes." Rev. Unif. Unincorporated Nonprofit Ass'n Act § 2(8), 6A U.L.A. 175 (2008, 2013 Supp.). The unincorporated association form is most often used for small local organizations, such as local clubs, charitable trusts, and political clubs, though labor and trade unions are also frequently unincorporated. See Howard L. Oleck & Martha E. Stewart, Nonprofit Organizations, Corporations, and Associations 146-47 (1994) (hereinafter Oleck & Stewart).
In this case, PRC had at least some formal organization, as it operated under a Constitution, Bylaws, and a Policy Manual. Membership in PRC was open to "[a]ll Baltimore County residents with an interest in the betterment of Recreation and Parks" and "[a]ll members of any program or organization affiliated with the Pikesville Recreation & Parks Council." Under the Constitution and Bylaws, all members, including directors, were required to pay annual dues of $25 and attend at least half of the PRC meetings in a given year.
The Constitution and Bylaws govern the management of PRC and provide:
The governing documents thus appear to draw a distinction between officers and at-large members. Yet the Bylaws also show that the individuals responsible for PRC's business, including program oversight, are all seven members of the Board. At the very least, five of the seven named positions are officers; arguably, all seven are officers. None of the six appellees have raised any legal objections regarding their status as officers. Thus, for the purposes of our analysis and the distinction between officers and members of an organization, discussed at pp. 571-72, 78 A.3d at 482-83, infra, we assume without deciding that the six individual appellees, as members of the Executive Board, were all officers of PRC.
Determining the legal status of unincorporated associations in Maryland raises some initial questions: Can they sue and be sued? Can they contract?
At common law, an unincorporated association was not a separate legal entity from its members. See United Mine Workers of America v. Coronado Coal Co., 259 U.S. 344, 385, 42 S.Ct. 570, 66 L.Ed. 975 (1922); Littleton v. Wells & McComas Council, 98 Md. 453, 455, 56 A. 798 (1904); Restatement (Second) of Judgments § 61 cmt. a (1982). Because an unincorporated association had no legal existence, it could not contract, sue, or be sued.
Over time, however, as the number of unincorporated associations grew, many courts and legislatures decided that they should be treated as separate legal entities from their members.
At the beginning of the twentieth century, the Court of Appeals of Maryland held that unincorporated associations could sue and be sued in their own names. Littleton, 98 Md. at 456, 56 A. 798. The Court reached this conclusion in interpreting a provision of the State's corporation law, which at the time provided that "it shall be sufficient in any suit, pleading or process, either at law or in equity, or before any [J]ustice of the [P]eace, by or against any joint stock company or association, to describe the said joint stock company or association by the name or title by which it is commonly known, or by or under which its business is transacted." Id. at 455, 56 A. 798 (quoting Chapter 471, Sec. 215, Laws of 1868 (then codified at 1888 Code, Art. 23, Sec. 301)).
Maryland law still reflects the Court's conclusions in Littleton: an unincorporated association can sue and be sued, and a judgment against the association alone does not reach the assets of its members. See CJP § 6-406(a) (providing "sue or be sued" status); CJP § 11-105 (stating that a money judgment against an unincorporated association "is enforceable only against the assets of the group as an entity, but not against the assets of any member"). The "sue or be sued" provision has been a part of Maryland statutes since 1918, when the Legislature added it to the corporation statutes.
Although no law explicitly permits unincorporated associations to enter into contracts, a review of Maryland case law indicates that this is a long-recognized and uncontroversial power.
Recognizing that unincorporated associations have the power to sue, be sued, and contract in Maryland, we next consider whether the individuals who make up those organizations could be exposed to liability for the association's actions. We first review the limited body of Maryland cases and statutes relevant to individual liability before turning to case law from other states for guidance on both the principles for liability and examples of their application.
We pause to clarify an important point: because the individual appellees all appear to be officers of PRC, rather than mere members, the following analysis applies only to those members of an organization who are charged with the organization's operations and decision-making, such as the officers and directors. Appellants do not argue that all of the members of PRC are liable for the breach of contract; instead, they focus on the organization's officers and directors. We similarly limit our inquiry to the members who are responsible for the operation of the organization.
At common law, officers of an unincorporated association were personally liable for the debts of the association.
Since the Court of Appeals' decision in Littleton, 98 Md. at 456, 56 A. 798, and the Legislature's subsequent enactment of the legislative predecessors to CJP § 11-105, a judgment rendered solely against an association does not, on its own, expose the association's officers to liability. Yet CJP § 11-105 does not address whether the officers, if named personally, can be held liable in actions also brought against the association. Similarly, CJP § 6-406 does not address the individual liability of officers: it simply permits unincorporated associations to sue or be sued and does not mention any changes to the rights and liabilities of individual officers.
Generally, statutes authorizing an association to sue and be sued are cumulative, meaning they do "not preclude a plaintiff from pursuing his common law right to proceed against each individual member
Similarly, we conclude that CJP § 6-406 is merely cumulative and does not eliminate potential liability for individual officers. Had the Legislature intended to eliminate liability for individual officers entirely, it would have said so.
Indeed, in the realm of tort law, individual officers and decision-making members can be held liable for torts committed within or by an unincorporated association. The Court of Appeals found two committee chairmen of an unincorporated association liable, in addition to the association, on a tort claim because they directed and planned the "all-star professional wrestling match" at which the plaintiff was injured.
Maryland case law also indicates that officers can be held liable for their association's breach of contract.
Because the Maryland cases and statutes demonstrate only that an officer may be liable for an association's breach of contract, we turn to the case law of other states for a better understanding of when officers are personally liable. Because the majority of states have not enacted comprehensive statutes on unincorporated associations,
The gist of out-of-state cases is that individual liability depends in part on whether the association is organized for profit. Karl Rove & Co. v. Thornburgh, 39 F.3d 1273, 1285 (5th Cir.1994). See generally Ash v. Guie, 97 Pa. 493, 499 (Pa.1881) (surveying British cases on profit
An officer must be shown to have "authorized, assented to, or ratified the contract in question" in order to find him personally liable for the association's breach of contract. Karl Rove & Co., 39 F.3d at 1284; see also Vorachek v. Anderson, 54 N.D. 891, 211 N.W. 984, 985 (1927) (establishing liability requires showing that an officer "has actually or constructively assented to or ratified the contract upon which the liability is predicated"); Victory Committee v. Genesis Convention Center of City of Gary, 597 N.E.2d 361, 364 (Ind.Ct.App.1992) (officers of a "not-for-profit unincorporated association are liable for the obligations incurred by the association under a contract if the [officers] authorize the contract or subsequently ratify its terms.") Because ratification, authorization, and assent can take many forms, we discuss below some cases where courts have found that ratification did or did not occur.
For example, the Fifth Circuit considered officer liability in the context of a contract dispute between an unincorporated political campaign committee and a company that provided direct mail fundraising services for the campaign. Karl Rove & Co., 39 F.3d at 1276. After the candidate lost the election, his campaign committee failed to pay the company some of the money owed to it under the contract, and the company sued the committee, the candidate, and the treasurer for breach of contract. Id. Applying Pennsylvania and Texas law, the Fifth Circuit found that although the candidate was not named in the contract and did not sign it, he was capable of incurring personal liability for the committee's debts under the contract. Id. at 1291. The court next determined that the candidate was in fact liable because he assented to the contract: he knew that his campaign committee "would and did contract for direct mail fundraising services and [thus] approved, at least tacitly, the [c]ommittee's decision to enter into" the contract. Id. at 1295.
In Victory Committee v. Genesis Convention Center of City of Gary, 597 N.E.2d
An individual's ratification of the contract typically amounts to liability, absent contract terms to the contrary. In Shortlidge v. Gutoski, 125 N.H. 510, 484 A.2d 1083, 1085 (1984), the New Hampshire Supreme Court considered whether the vice president of an unincorporated taxpayers association was personally liable for the association's failure to pay for legal services. The vice president had, on behalf of the association, contracted with the plaintiff, who sued only the vice president when he failed to receive full payment for his services. Id. Observing that this was an issue of first impression in New Hampshire, the court applied the common law principle of liability for "members ... who have authorized, assented to, or ratified the underlying transaction and thereby have become liable for the association's debts." Id. at 1086. The court remanded the case for further fact-finding on the exact terms of the contract, which was apparently an oral agreement. Id. at 1086. The court observed, however, that absent any evidence that the plaintiff agreed "to look exclusively to the funds expected to be raised by the taxpayers association for his compensation and not to the personal funds of the defendant or any other member of the association," it "would find the defendant personally liable" because he "assented to and ratified the plaintiff's employment contract."
If an officer clearly disapproves of the contract, liability will not attach. For example, in Will v. View Place Civic Ass'n, 61 Ohio Misc.2d 476, 580 N.E.2d 87, 92 (Ohio Ct.Com.P1.1989), the trial court declined to enforce a contract against two members of an unincorporated association. The court determined that the members were not officers, and they had manifested an intent not to be bound by the contract, including writing letters and renouncing their membership in the association. Id. However, the decision to not ratify an action must be clear. In Fed. Deposit Ins. Corp. v. Tyree, 698 S.W.2d 353, 354 (Tenn. Ct.App.1985), the chairman of the nonprofit campaign committee "Tennesseans for Tyree" signed two promissory notes on behalf of the committee. The Federal Deposit Insurance Corporation ("FDIC") later sought to collect on the notes and sued
Our research has revealed only a few out-of-state cases where officers of an unincorporated association were found to not be personally liable for the association's breach of contract despite evidence of ratification of the contract. These cases tend to rely on the theory that the individual defendants had not made any personal promise to be liable on the contract.
Id.
The circuit court did not ground personal liability on a showing that the individuals were officers who authorized, assented to, or ratified the contract. Thus, the court erred and a remand is in order for the circuit court to apply this legal principle. This case would also benefit from additional factfinding on several matters. For example, at no point did appellees testify about whether they authorized, assented to, or ratified the employment contracts.
We therefore reverse the circuit court's finding of no contractual liability for the individual appellees for the approximately $9,500 in unpaid wages and we remand for further proceedings.
Appellants obtained a judgment against PRC for treble damages, attorney's fees, and costs under the Maryland Wage Payment and Collection Act ("Payment and Collection Act"), LE § 3-507.1(b) (now LE § 3-507.2(b)).
An "employer" is defined as "any person who employs an individual in the State or a successor of the person." LE § 3-501(b). Whether or not a given person or entity is an employer under the Payment and Collection Act is governed by the "economic reality" test. Campusano v. Lusitano Const. LLC, 208 Md.App. 29, 38, 56 A.3d 303 (2012). The economic reality test for an alleged employer's "control" over an employee examines "whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records." Id. at 39-40, 56 A.3d 303 (quoting Newell v. Runnels, 407 Md. 578, 651, 967 A.2d 729 (2009)).
In their complaint, appellants alleged that PRC "entered into separate Employment Agreements with each of the Plaintiffs." Their allegations regarding the individual defendants were limited to: (1) naming them as members of the Board of Directors and (2) stating that the defendants "wrongfully and materially breach[ed] the aforesaid Employment Agreements by failing and refusing to pay the Plaintiffs their compensation in full." At trial, appellants did not present any evidence showing that the officers met any of the factors of the "economic reality"
Appellants also seek the imposition of additional attorney's fees and costs. The court awarded $2,000 in attorney's fees for "drafting a Complaint and proceeding to judgment against PRC" and "$200.00 in reasonable and necessary costs." LE § 3-507.2 is a fee-shifting statute which "permit[s] a trial court, in its discretion, to award attorneys' fees, and such discretion, consistent with the intent of the General Assembly, is to be exercised liberally in favor of awarding fees, at least in appropriate cases." Friolo v. Frankel, 403 Md. 443, 456-57, 942 A.2d 1242 (2008) (Quotations omitted). Because the individual appellees are not "employers" under the Payment and Collection Act, they are not subject to the award of attorney's fees and costs. We therefore find no abuse of discretion in the court's modest award of fees and costs for a wage collection action and default judgment against PRC alone.
Finally, appellants argue that the circuit court erred in not awarding sanctions against appellees' counsel for (1) failing to notify appellants' counsel that Engorn, the former PRC treasurer, would not attend a scheduled deposition, and (2) failing to participate in court-ordered mediation. When ruling on discovery disputes and determining if sanctions should be imposed, trial courts exercise "very broad discretion" that is reversed on appeal only in the presence of an abuse of that discretion. North River Ins. Co. v. Mayor and City Council of Baltimore, 343 Md. 34, 47, 680 A.2d 480 (1996).
Appellants' first challenge, regarding sanctions for the deposition, may not be properly before us because the circuit court never expressly ruled on the motion. See Md. Rule 8-131(a). In addition, because the deposition eventually took place four months later, in February 2011, appellants were not deprived of the discovery material they sought through the deposition. Thus, the circuit court would not have abused its discretion even if it had expressly denied the sanctions motion. Appellants' second challenge, regarding sanctions for mediation, also fails. Appellants sought sanctions in the amount of their respective daily wages and counsel fees. The court denied the motion in a written order and stated that it "kn[e]w of no authority that would allow [it] to enter sanctions against anyone for the failure to attend mediation." We find no abuse of discretion here. While a court has the discretion to enter sanctions, including, for example, sanctions that amount to default judgment, see Station Maintenance Solutions, Inc. v. Two Farms, Inc., 209 Md.App. 464, 486, 60 A.3d 72 (2013), its inherent discretion never requires it to do so. Indeed, a court may not award sanctions as an effort to "shift litigation expenses based on relative fault," which seems to be
For all of these reasons we affirm in part and reverse in part the judgment of the circuit court and remand for further proceedings.
Dissenting opinion by EYLER, JAMES R., J.
JAMES R. EYLER, J., dissenting.
I respectfully disagree with the conclusion reached by the majority with respect to question I, whether the individual defendants/appellees are liable. I agree with the conclusions reached by the majority with respect to question II, the applicability of the Wage Payment and Collection Law, and question III, the refusal to award sanctions.
At the outset, it is important to focus on what is before us so that it can be distinguished from what is not before us. During the relevant time period, the Pikesville Recreation Council ("PRC") was a nonprofit unincorporated association which offered recreational services to youths in the Pikesville area. PRC was structured; it had a constitution, bylaws, and a policy manual. PRC was engaged in community recreational activities and was recognized by the Baltimore County Department of Recreation and Parks. Membership in the PRC was open to all County residents who volunteered and who had an interest in encouraging recreational activities by youths.
PRC was not a partnership, joint venture, or business association in which the members participated for business or pecuniary reasons. The majority recognizes that whether an unincorporated association is nonprofit is relevant, but I conclude that the nature of the nonprofit entity is also relevant. Importantly, PRC was a nonprofit entity in which the members (including officers and board members) participated for the public good, not for their personal gain or to further an agenda personal to them, such as the promotion of a political candidate, a religion, or a "cause." PRC was not a labor union, social club, religious association, or political action committee. PRC was a structured entity with many members; it was not a de facto sole proprietorship. The individual appellees were unpaid volunteers. I make these points because it serves to distinguish many of the cases upholding personal liability of officers or members.
The cause of action at issue is breach of contract. There is no claim of fraud, bad faith, or any other tort.
The circuit court ruled that the individual appellees were not liable as a matter of law. I conclude that the circuit court was correct based on (1) the effect of Maryland statutes, and (2) in the alternative, application of the following contract and agency principles.
Under general principles of agency and contract, an agent acting within the scope of agency for a disclosed principal is not liable on a contract entered into on behalf of the principal, but the principal is liable on that contract. Walton v. Mariner Health of Maryland, Inc., 391 Md. 643, 655-656, 894 A.2d 584 (2006). As discussed
In 1904, the Court of Appeals, interpreting a statute that had been enacted in 1868, chapter 471, § 215, Laws of 1868 (codified at 1888 Code, Art. 23, § 301), held that creditors could sue and serve process on an unincorporated association. As noted by the majority, the Court also observed that creditors could sue the association's members. It is unclear whether creditors could sue both or sue in the alternative. The opinion is silent on that point. Littleton v. Wells & McComas Council, 98 Md. 453, 455, 56 A. 798 (1904). In a suit against an unincorporated association, a judgment affected only its common property. Id. at 456, 56 A. 798.
In 1918, the General Assembly enacted Chapter 419, § 88-I, Laws of 1918, quoted at pages 569-70, 78 A.3d at 482, of the majority opinion. In pertinent part, the statute provided that an unincorporated association could sue or be sued in its name "in any action affecting the common property, rights and liabilities of such association or organization; ... such action shall have the same force and effect, as regards the common property, rights and liabilities of such association or organization only, as if it were prosecuted by or against all the members thereof...." It also provided that an action would not abate by reason of a change in the membership. This statute, without material change, appeared at Md.Code (1924), Art. 23, § 104, Md.Code (1939), Art. 23, § 123, and Md.Code (1951), Art. 23, § 138.
In 1965, the General Assembly enacted Chapter 561, Laws of 1965, which, in my view, either clarified the General Assembly's original intent, as expressed in 1918, or changed the law. The following language was added as the last sentence in the section.
Prior to the 1965 amendment, the statute provided that any action against an unincorporated association affected only the common property and liabilities. While admittedly the amendment could have been clearer, there was no need to add the sentence quoted above if it was intended only to provide that a creditor could sue an association and reach the association's common property without suing the association's members. That was already stated. In my view, the amendment evidenced a legislative intent that the mere status of member or officer acting as an agent for a disclosed legally cognizable principal within the scope of agency would not serve as a basis for liability to creditors.
Even the cases concluding that the individual member in question was liable as a principal recognize that the individual would not have been held liable if the individual had expressly indicated an intention not to be liable. See Karl Rove & Co., 39 F.3d at 1295; Will v. View Place Civic Ass'n, 61 Ohio Misc.2d 476, 484, 580 N.E.2d 87 (Ohio Ct.Com.Pl.1989); Shortlidge v. Gutoski, 125 N.H. 510, 484 A.2d 1083, 1085 (1984) (court observed that individual members would not have been liable if the evidence had indicated that the plaintiff had agreed to look only to the funds of the association). Here, PRC was a large organization with many members and a structured existence. The employment agreements clearly stated that appellants were employed by PRC and PRC was responsible for payment. Among other provisions, the agreements provided that PRC "shall pay the employee," PRC "hires the employee," the employee "will devote full time, attention, and energies to the business of" PRC, PRC "shall reimburse Employee for all business expenses," and contractual remedies for breach belonged to PRC. There is no evidence, documentary or testimonial, that appellants believed the individual appellees would be liable for their wages.
The majority rely heavily on Miller v. Loyal Order of Moose Lodge No. 358, 179 Md. 530, 20 A.2d 156 (1941). The Lodge entered into an agreement with Morris Miller, doing business as Miller Bros. Shows, pursuant to which Miller Bros. Shows was to provide a certain exhibit for a Labor Day celebration. The contract was executed on behalf of the Miller entity as follows: "Miller Bros. Inc, By Wm. C. Murray, Gen. Agt., Party of the first part." Miller Bros. Shows did not perform under the contract, and the Lodge filed suit against Maurice Miller individually. Id. at 531, 20 A.2d 156. At trial, a judgment was entered in favor of the Lodge.
Maurice Miller testified that Miller Bros. Shows was not incorporated and that he took over operation of the shows after his father, Morris Miller, died. Morris Miller died prior to execution of the contract with the Lodge. Maurice Miller testified that "for all practical purposes at the time of the signing of the contract in this case and ever since, he had been Miller Bros. Shows." Id. at 534, 20 A.2d 156. Maurice Miller acknowledged that Wm. C. Murray was his agent. Id. at 532, 20 A.2d 156.
On appeal, Maurice Miller contended (1) there was no legally sufficient evidence that he had approved the contract and (2) the Lodge lacked capacity to bring suit. Id. at 535, 20 A.2d 156. The Court, in concluding that there was sufficient evidence to find that Maurice Miller had approved the contract, stated: "The fact that the appellant testified that Murray negotiated agreements as a general agent for the firm, that appellant testified that he was the show, and Murray by letter notified the [the Moose Lodge] that he had talked over long distance with the boss and `everything is Okay'" Id. With respect to the second issue, the Court stated that the Moose Lodge, an unincorporated association, could sue and be sued in its own name, quoting Flack's Code [1939], Art. 23, § 123. Id.
As is apparent from the above, Miller functioned as a sole proprietorship, and Miller Bros. Shows was not held out to the Lodge as an unincorporated association. There was no issue as to liability of the Lodge, which was an unincorporated association. Moreover, Miller was decided in 1941, before the 1965 statutory amendment, discussed above.
I agree with the cases cited at pages 579-81, 78 A.3d at 487-89, of the majority opinion, i.e., Little Rock Furniture Mfg. Co. v. Kavanaugh, 111 Ark. 575, 164 S.W. 289 (1914) (no liability when there was no evidence that plaintiff had a right to expect that officers would be personally liable and knew that they were acting in a representative capacity); Austin-W. Rd. Mach. Co. v. Veal, 115 F.2d 112, 113 (5th Cir.1940) (same); Empire City Job Print v. Harbord, 244 A.D. 6, 277 N.Y.S. 795 (1935) (no liability when plaintiff has knowledge that individual members of unincorporated association did not extend personal credit). See also Krall v. Light, 240 Mo.App. 480, 210 S.W.2d 739, 745 (1948) (an individual member of an unincorporated association who signs as an officer is not liable for association's debt absent a personal promise). These cases applied agency principles properly and reached the correct result on the facts. The tort cases relied on by the majority are not on point. The cases simply apply general tort principles that result in tort liability when an individual commits tortious acts. See Lawson v. Clawson, 177 Md. 333, 9 A.2d 755 (1939); Lyons v. American Legion Realty, 172 Ohio St. 331, 175 N.E.2d 733 (1961). The same principles apply to corporations, i.e., corporate law does not immunize the tortfeasor. A tortious act results in liability even if an individual is an agent for a properly formed corporation, absent statutory restrictions on liability. I note that, in Maryland, individuals who are members or officers of charitable or civic unincorporated associations have immunity from liability for simple negligence if the association carries liability insurance in specified amounts. CJP § 5-406.
In some of the tort cases cited by the majority, the question was whether a member could sue his/her unincorporated association in tort based on the negligence of a member, an issue even further removed from the one before us. See Schlosser v. Grand Lodge of Brotherhood of Railroad Trainmen, 94 Md. 362, 50 A. 1048 (1902); Cox v. Thee Evergreen Church, 836 S.W.2d 167 (Tex.1992). At common law, a member could not sue the association because, under agency principles, all members were both principal and agent and the negligence of the tortfeasor
Laflin & Rand Powder Co. v. Sinsheimer, 46 Md. 315, 321-322 (1877), and Cranson v. Int'l Business Machines Corp., 234 Md. 477, 489, 200 A.2d 33 (1964), are not on point and marginally relevant, if at all. To the extent they are relevant, they support the view expressed in this dissent. In both cases, the Court declined to treat defectively organized corporations as unincorporated associations and found no liability on the part of members or officers when the creditor had no factual reason to rely on the liability of individuals. Cf. Stone v. Guth, 232 Mo.App. 217, 102 S.W.2d 738 (1937) (defendant purported to be a corporation but was not; non-participating officers and members not liable for plaintiff's wages).
The remaining cases cited by the majority are not instructive. In Snowden v. Crown Cork & Seal Co. of Baltimore City, 114 Md. 650, 80 A. 510 (1911), the issue was whether an inter vivos gift to an unincorporated association was valid. The Court concluded that it was. In Heleniak v. Blue Ridge Ins. Co., 162 A.D.2d 1041, 557 N.Y.S.2d 229 (1990), the question was whether there was a duty to defend the individual named insured, who was a member of an unincorporated association, under a homeowners policy. Jenkinson v. Wysner, 125 Mich. 89, 83 N.W. 1012 (1900) involved a suit on a lease. The facts are unclear, but the was prior litigation in which certain issues were not contested. In the case cited, the court held that principles of res judicata applied.
Finally, I note that there are sound public policy considerations supporting potential liability by those who join together for their benefit. It is the opposite with respect to volunteers who give their time and talents for the public good, not for their personal benefit. Under the majority holding, I cannot conceive why a reasonable person would agree to volunteer time and talent to a nonprofit unincorporated association, even if the activities, without question, are solely in the public interest.
I respectfully dissent.
Chapter 419, Laws of 1918. The statute's emphasis on "the common property, rights and liabilities of such association or organization only" is arguably a precursor to the protection from judgments afforded to individual members afforded by the legislative predecessors to CJP § 11-105. Comments to the Restatement (Second) of Judgments § 61 (1982) appear to suggest that a statute like the 1918 legislation and its successors changes the common law to confer liability on the entity and "immunity" on the members. See cmts. a, b. Such a conclusion appears to ignore the text of the Maryland statute. Maryland's general law on unincorporated associations, unlike the Uniform Act, does not make it clear that individual members are immunized. See Rev. Unif. Unincorporated Nonprofit Ass'n Act § 8, 6A U.L.A. 175 (2008, 2013 Supp.). However, the General Assembly, in piecemeal fashion, has enacted a number of immunity provisions that could protect members of unincorporated associations established for specific purposes. See n. 43, infra.
Cal.Civ.Proc.Code § 388 (Deering 1915) (cited in Zimmerman v. Prior, 46 Cal.App. 40, 188 P. 836, 837 (1920)).
Section 11-105 provides:
As is apparent, § 6-406 states that the action affects the common property, rights and liabilities of the group, without the need for what is now § 11-105.
