NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL

AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

DESERT MOUNTAIN CLUB INC., Plaintiff/Appellee,

v.

ERIC GRAHAM, et al., Defendants/Appellants.

No. 1 CA-CV 17-0100

Appeal from the Superior Court in Maricopa County

Nos. CV2014-015333, CV2014-015334, CV2014-015335

(Consolidated)

The Honorable David B. Gass, Judge

AFFIRMED

COUNSEL

Fennemore Craig, PC, Phoenix

By Christopher L. Callahan, Theresa Dwyer, Jennifer L. Blasko

Counsel for Plaintiff/Appellee

Baird Williams & Greer, LLP, Phoenix

By Daryl M. Williams, Annelise M. Dominguez

Counsel for Defendants/Appellants

FILED 4-12-2018
DESERT MOUNTAIN v. GRAHAM et al.

Decision of the Court

2

MEMORANDUM DECISION

Judge Peter B. Swann delivered the decision of the court, in which Presiding 

Judge Jon W. Thompson and Judge James P. Beene joined.

S W A N N, Judge:

¶1 This case concerns a dispute between members of a golf club,

who sought to resign their memberships, and the club, which sued to hold 

the members to their obligations under its bylaws. The superior court 

granted the club summary judgment and the members appeal. We 

conclude that the bylaws did not grant the members a unilateral right to 

resign without obligation, and that the divestiture provisions in the bylaws 

barred resignation pursuant to A.R.S. § 10-3620. We therefore affirm.

FACTS AND PROCEDURAL HISTORY

¶2 Eric and Rhona Graham and Thomas and Barbara Clark

(collectively “Members”) purchased equity memberships from the 

predecessor entity of Desert Mountain Club Inc. (“Club”), a non-profit 

member-owned golf and recreation club located in Scottsdale. The

Members retained their equity memberships when the Club took control in 

December 2010, and signed a Membership Conversion Agreement, stating 

that they would comply with the terms of that Agreement, the Club’s

bylaws, and its rules and regulations. As equity members of the Club, the 

Members had access to its facilities and were eligible to vote at its meetings, 

were responsible for sharing in its deficits, and were entitled to a share of

its assets in the event of dissolution. The Club controlled the total number 

of equity members and the admissions process for new members.

¶3 The Club amended its bylaws in 2010, 2012, 2013, and 2014, 

but the parties agree that the relevant provisions did not change. The 

bylaws expressly allow a member to terminate membership with the Club 

in four ways: (1) resale through the Club, (2) transfer to a purchaser of the 

member’s real property within the Desert Mountain residential 

community, (3) transfer to a Club-approved family member, or (4) 

reissuance to a new person by the Club upon the member’s death. The 

bylaws mention no other means of divestiture.
DESERT MOUNTAIN v. GRAHAM et al.

Decision of the Court

3

¶4 To resell a membership, an existing equity member must 

surrender it to the Club for resale, and must continue to pay all Club dues 

and fees until the membership is sold. Upon resale, the selling member 

may collect the proceeds, but must pay the Club a transfer fee of $65,000 or 

20% of the sale price, whichever is greater. The bylaws give the Club’s 

Board discretion on how to resolve issues with the resale of memberships

and with members who are delinquent on payments.

¶5 The Clarks sent a letter to the Club in late 2013 stating that 

they were resigning as of January 1, 2014, and asserted that the resignation

“terminates [their] obligation to pay dues and assessments.” Likewise, the 

Grahams stopped making payments to the Club in May 2014, asserting in 

an email that they were resigning their membership and therefore had “no 

further obligation” to the Club. Both the Grahams and the Clarks impliedly 

contended that their resignation would relieve them of their obligation to 

pay the transfer fee upon any resale of their membership. In the past, the 

Club had expelled other equity members who stopped paying their dues, 

and relieved them of their obligation to pay the transfer fee. More recently, 

the Club and an equity member who stopped making payments entered a 

settlement agreement that allowed the member to pay a reduced transfer 

fee.

¶6 In December 2014, the Club filed separate lawsuits against the 

Grahams, the Clarks, and Barry and Lori Fabian — a couple who similarly 

attempted to resign their membership in the Club but who are not parties 

to this appeal. The Club moved for summary judgment against the Fabians, 

and the court granted the motion in October 2015. In December 2015, the 

court consolidated the three lawsuits. And in January 2016, shortly after 

receiving favorable judgment against the Fabians, the Club moved for 

summary judgment against the Clarks and the Grahams. The court granted 

the motions, adopting the reasoning of the Fabian court. The Members 

timely appeal.

DISCUSSION

¶7 Summary judgment is proper if “there is no genuine dispute 

as to any material fact and the moving party is entitled to judgment as a 

matter of law.” Ariz. R. Civ. P. 56(a). We review a grant of summary 

judgment de novo, and we view the facts in the light most favorable to the 

non-moving party. St. George v. Plimpton, 241 Ariz. 163, 165, ¶ 11 (App. 

2016). We also review the superior court’s legal conclusions, including its

interpretation of statutes and contracts, de novo. Dreamland Villa Cmty.

Club, Inc. v. Raimey, 224 Ariz. 42, 46, ¶ 17 (App. 2010).
DESERT MOUNTAIN v. GRAHAM et al.

Decision of the Court

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I. THE CLUB’S BYLAWS AND A.R.S § 10-3620 DO NOT GRANT THE 

MEMBERS A UNILATERAL RIGHT TO RESIGN.

¶8 The Members contend that the bylaws allowed them to resign 

from the Club without obligation because the bylaws’ terms do not 

explicitly address resignation and because A.R.S. § 10-3620, which 

specifically permits resignation, is incorporated into the bylaws by 

operation of law. See Qwest Corp. v. City of Chandler, 222 Ariz. 474, 485, ¶ 37 

(App. 2009). Section 10-3620 provides:

A. A member may resign at any time, except as set forth in or 

authorized by the articles of incorporation or bylaws.

B. The 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 prior 

to resignation.

(Emphasis added.)

¶9 The parties do not dispute the bylaws’ terms. Rather, they

disagree over whether the rules on membership divestment are sufficiently 

comprehensive and exclusive to preclude resignation as a matter of contract 

and to invoke the statutory exception to the right of resignation. While the 

bylaws do not use the term “resignation,” we conclude that the bylaws do 

create a comprehensive rule. See Smith v. Melson, Inc., 135 Ariz. 119, 122 

(1983) (holding that “the purpose of an agreement is to be divined from the 

entire instrument and the surrounding circumstances”). By providing a 

specific list of four ways to divest membership, and by requiring members 

to continue to pay dues until they have successfully divested their

membership, the bylaws effectively bar the possibility of simple 

resignation. Any other interpretation would render remaining bylaws 

ineffective by allowing members to avoid the Club’s transfer fee and their 

continuing responsibility for dues. An interpretation that allows members 

to freely resign would also require the Club to place additional financial 

burdens on the remaining members at the discretion of resigning members,

and would render the extensive scheme of rules requiring resale through 

the Club meaningless. See Scholten v. Blackhawk Partners, 184 Ariz. 326, 329

(App. 1995).

¶10 The Members challenge the divestiture provisions of the 

bylaws as burdensome because memberships are not as liquid as they 

would prefer, and the divestiture process is both burdensome and 

expensive. Though these criticisms are well-founded, they only describe 
DESERT MOUNTAIN v. GRAHAM et al.

Decision of the Court

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the contractual arrangement between members and the Club — they do not 

undo it.

¶11 Section 10-3620 does not guarantee a member of a non-profit 

the right to resign without obligation. By its terms, the statute allows 

articles or bylaws to restrict the default right of resignation. The Members 

urge us to interpret the exception “except as provided by the . . . bylaws” to 

apply only to the phrase “at any time,” and not to the right of resignation 

itself. To support their argument, the Members invoke the “last antecedent 

rule,” which “requires that a qualifying phrase be applied to the word or 

phrase immediately preceding [it] as long as there is no contrary intent 

indicated.” Phoenix Control Sys., Inc. v. Ins. Co., 165 Ariz. 31, 34 (1990). But 

here, a plain reading of the statute shows that the exception’s antecedent 

phrase is the entire phrase, “[a] member may resign at any time,” rather 

than the second portion of the antecedent phrase — a phrase within a 

phrase — “at any time.” Separating the sub-phrase “at any time” would

not fit within the scheme of the statute, as nowhere else does § 10-3620 

mention the timing of a resignation, only resignation itself. See Bell v. Indus. 

Comm’n of Ariz., 236 Ariz. 478, 482, ¶ 16 (2015) (reading a statute as a whole). 

And § 10-3620(B), which requires a member to fulfill all obligations 

incurred before resignation, evinces an intent contrary to the Members’ 

proposed course of action. In their view, a resignation would relieve them 

of their obligation to pay the Club’s transfer fee and monthly dues. Nothing 

in the language of the statute or the bylaws suggests that such a result is 

possible without the exercise of discretion by the Club.

II. THE CLUB DID NOT VIOLATE A.R.S. § 10-3610 BECAUSE ITS 

BYLAWS PERMITTED IT TO TREAT ITS MEMBERS 

DIFFERENTLY.

¶12 The Members next contend that A.R.S. § 10-3610 mandates 

equal treatment for all members of a non-profit, and that by permitting 

others to resign or settle, but suing the Members for attempting to do the 

same, the Club has arbitrarily treated its members differently and has 

therefore violated the statute.

¶13 The parties agree that the Members stopped paying their dues 

and fees and sent letters to the Club’s Board asserting that they had 

resigned their memberships. They also agree that the Club treated former 

members differently under similar circumstances. For example, there is no 

dispute that the Club expelled two members for delinquency when they 

stopped paying their dues, and that those members were not required to 

pay the Club’s $65,000 transfer fee upon expulsion. The parties also agree 
DESERT MOUNTAIN v. GRAHAM et al.

Decision of the Court

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that the Club entered a settlement agreement by which another member

was only required to pay $37,000 (including $17,000 in outstanding dues 

and $20,000 towards a transfer fee) upon divestment.

¶14 Such disparate treatment, however, was permitted under the 

bylaws and § 10-3610, which provides that “[a]ll members have the same 

rights and obligations with respect to . . . transfer, unless the . . . bylaws 

establish classes of membership with different rights or obligations or 

otherwise provide.” This section, like § 10-3620(A), makes the non-profit’s 

bylaws the higher authority. See Terence W. Thompson et al., 7 Ariz. Prac., 

Corporate Practice App’x D (2016) (noting that the Legislature modified this 

statute to clarify that bylaws may provide for different rights for its 

members even if different classes are not created).

¶15 Here, the bylaws gave the Club’s Board discretion on how to 

enforce delinquent or non-payments, including by expulsion or “any and 

all other remedies allowed by law.” The Club therefore had discretion to 

redress some members’ delinquent payments with expulsion, and others’ 

— like the Members’ — with a lawsuit to collect its dues and transfer fee. 

And although the Members argue that such a change in treatment indicated

that the bylaws did not actually prohibit resignation, the change was

indicative only of how the Club enforced the rule, which was subject to

change under its discretion.

¶16 Relying on Capital Options Invest. v. Goldberg Bros. 

Commodities, 958 F.2d 186, 189 (7th Cir. 1992), the Members also argue that, 

while the Club has discretion to discipline its members, the question of 

whether it exercised its discretion arbitrarily by filing lawsuits against some 

members and not others “raises a factual issue.” But the parties do not 

dispute any material facts regarding the former members’ divestment, only 

the characterization of those facts — whether the former members were 

allowed to resign or whether they just received more lenient consequences 

for their non-payment. Even if the facts are characterized as the Members 

suggest, the fact remains that the Club had a clear financial interest in 

recovering its dues and transfer fees, and its exercise of business discretion 

is protected — not prohibited — by the bylaws. See id. (“Contractual 

discretion must be exercised reasonably and not arbitrarily or 

capriciously.”);see also United Dairymen of Ariz. v. Schugg, 212 Ariz. 133, 140–

41, ¶ 32 (App. 2006) (“Absent an abuse of discretion, business judgments 

will be respected by the courts.”).
DESERT MOUNTAIN v. GRAHAM et al.

Decision of the Court

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III. THE CLUB’S BYLAWS GOVERN SUBSTANTIVE RIGHTS LIKE 

THE RESIGNATION OF ITS MEMBERS.

¶17 Citing A.R.S. § 10-3206, the Members finally argue that the 

Club’s bylaws cannot restrict member resignation because “[s]uch 

unlimited dominion is not the province of corporate bylaws.” But § 10-

3206(B), which provides that “bylaws . . . may contain any provision for 

regulating and managing the affairs of the corporation,” does not limit the 

dominion of bylaws to the extent that the Members suggest. See Thompson 

et al., 7 Ariz. Prac., Corporate Practice § 13:103 (offering an example form for 

nonprofit bylaws that includes restrictions on termination and transfer of 

membership). Because “managing the affairs” of the Club includes 

controlling its collection of dues and fees, as well as the total number of 

equity members, and because of the contractual nature in which the 

Members agreed to the bylaws, we hold that the Club’s bylaws govern the 

resignation of its members.

CONCLUSION

¶18 For the foregoing reasons, we affirm the superior court’s grant 

of summary judgment. The Club is entitled to costs and attorney’s fees 

incurred on appeal upon compliance with ARCAP 21.