Court Opinion

ID: 7927345
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:42:07.170186+00
Date Added: 2024-06-11T16:31:38.799512
License: Public Domain

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 mem*592bers (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 by the majority, at common law, unincorporated associations were not legal entities and could not sue and be sued. Thus, a member of such an association could not bind the association because the association was a nonentity. As a result, through application of the principles of agency, the law regarded all members as being agents of each other, i.e., each member was a co-principal and co-agent. Without that conclusion, there would have been no person or other entity to be held responsible for breach of any contract entered into by an unincorporated association.
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 *593creditors 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.
Any money judgment against such association or joint stock company shall be enforceable only against such association or joint stock company as an entity and against its assets, and shall not be enforceable against any individual member or shareholder or his assets.
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 *594evidenced 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.1
I reach the same conclusion on an alternative ground. The majority relies on cases in which courts applied principles of agency but comes to an erroneous conclusion on the facts before us. As noted above, at common law, before unincorporated associations were recognized as legal entities, courts applied agency principles. I recognize that some courts have continued to do that, in the absence of an applicable statute or rule, in states that do recognize unincorporated associations as legal entities. Courts that apply those principles in a state which recognizes an unincorporated association as a legal entity regard the association as the agent and the individual member or officer as the principal. See, e.g., Karl Rove & Co. *595v. Thornburgh, 39 F.3d 1273 (5th Cir.1994) (applying Texas and Pennsylvania law). I do not quarrel with that approach in this case. I disagree with the result when it is applied to the facts before us. When the nonprofit association exists for the benefit of the members, such as political action committees, or when the members form an unincorporated association to pursue action for their own benefit, the association may be acting on behalf of each member in attaining those goals. When a nonprofit unincorporated association exists to aid the public and not the members, as a matter of fact, the member is acting on behalf of the association, the latter being the principal.
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 acknowledge that the Rev. Unif. Unincorporated Nonprofit Ass’n Act, § 8, 6A, U.L.A. 175 (2008, 2013 Supp.), makes it “clear that individual members are immunized.” Majority opinion, page 572, fn. 22, 78 A.3d at 483-84, fn. 22. Under the Uniform Act the liability of a nonprofit *596unincorporated association does not become a debt of a “member or manager solely because the member acts as a member or the manager acts as a manager.” In my view, the proper application of the principles of agency will produce, in essence, the same result.2 If a member, factually, is acting as a principal and the association as the member’s agent, the member may be liable under general agency/contract principles. Unlike the days when an unincorporated association was not a legal entity, members are not presumed to be co-agents and co-principals. It is a question of fact. Here, the individual appellees were acting as agents of the association, not as principals to the contracts. See the discussion at part II, majority opinion, in which the majority concludes that the individual appellees were not the employers of the appellants.
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.
*597On 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.
Several cases purporting to support contractual liability of individual members of an unincorporated association were decided when, under the applicable law, unincorporated associations were not recognized as legal entities. See, e.g., Shortlidge v. Gutoski, 125 N.H. 510, 484 A.2d 1083 (1984); Vorachek v. Anderson, 54 N.D. 891, 211 N.W. 984 (1927); Medlin v. Ebenezer Methodist Church, 132 S.C. 498, 129 S.E. 830 (1925); Cousin v. Taylor, 115 Or. 472, 239 P. 96 (1925); Fast v. Kahan, 206 Kan. 682, 481 P.2d 958 (1971). In some cases, the issue is not discussed, and the time consuming task of researching the statutes in those jurisdictions is required. In at least one case finding liability of individual members of an unincorporated association, the action against individual members was expressly permitted by a statute or judicial rule of procedure.3 Zimmerman v. Prior, 46 Cal.App. 40, 188 P. 836 *598(1920). In many cases decided after unincorporated associations were recognized as legal entities in the relevant jurisdiction, the association was acting for and on behalf of the individual member. See, e.g., Karl Rove & Co., supra; Victory Committee v. Genesis Convention Center of City of Gary, 597 N.E.2d 361 (Ind.Ct.App.1992). I do not quarrel with the result in those cases on their facts.
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 *599association 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 was imputed to the injured member. In Schlosser and Cox, the Courts held that the member could sue the association.
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 plaintiffs 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 *600for 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.

. In 1975, by virtue of Chapter 378, § 2, Laws of 1975, Art. 23, § 138 was repealed and its provisions were split and re-enacted as §§ 6-406 and 11-105, now appearing at Md.Code (1974, 2013 Repl.Vol.), Courts and Judicial Proceedings Article ("CJP”). Section 6-406 appears under the heading of "personal jurisdiction, venue, process and practice” (Title 6), and under the subheading of "practice, in general.” (Subtitle 4). Section 11-105 appears under the heading of "judgments" (Title 11), and under the subheading of "miscellaneous.” (Subtitle 1). CJP § 6-406 provides:
(a) An unincorporated association, joint stock company, or other group which has a recognized group name may sue or be sued in the group name on any cause of action affecting the common property, rights, and liabilities of the group.
(b) An action under this section:
(1) Has the same force and effect with respect to the common property, rights, and liabilities of the group as if all members of the group were joined; and
(2) Does not abate because of any change of membership in the group or its dissolution.
Section 11-105 provides:
In any cause of action affecting the common property, rights, and liabilities of an unincorporated association, joint stock company, or other group which has a recognized group name, a money judgment against the group is enforceable only against the assets of the group as an entity, but not against the assets of any member.
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.

. In 1995, Texas enacted the Uniform Unincorporated Nonprofit Association Act. In MT Falkin Investments, LLC v. Chisholm Trail Elks, 400 S.W.3d 658 (Tex.App.2013), the court, citing the statute, reached a result contrary to that reached in Karl Rove & Co.

. It is not clear whether the referenced section was a statute or procedural rule.