Court Opinion

ID: 9680506
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:32:43.021965+00
Date Added: 2024-06-11T18:17:28.876369
License: Public Domain

*231FRANKS, Justice,
concurring.
I concur with the results reached by the majority but I do not accept the conclusion that T.C.A., § 48-718 authorizes the award of attorneys’ fees in this case. The statute specifically applies to “suits brought on behalf of the corporation for profit.” In my view, the application of this statute to a not-for-profit corporation is an unwarranted extension of the statute.
The majority relies on Bourne v. Williams, 633 S.W.2d 469 (1981), which held T.C.A., § 48-718 authorizes shareholder derivative suits by members of a not-for-profit corporation. The Bourne case unnecessarily distorts the language of the statute since Tennessee law recognizes the right to maintain an action of that nature independent of statute. Knapp v. Golden Cross, 121 Tenn. 212, 118 S.W. 390 (1908). In Knapp, members of an association were held to have standing to sue the association to enjoin the merger with another association on grounds that the merger was ultra vires. See also Range v. Tennessee Burley Tobacco Growers Ass’n, 41 Tenn.App. 667, 298 S.W.2d 545 (1955). Enactment of Tennessee Rules of Civil Procedure did not change the substantive law and T.R.C.P., 23.06, merely recognizes the right of action pronounced in Knapp.
The result of the majority, however, is proper by application of widely accepted common law rules regarding attorney’s fees.
It is well established in the absence of contract, statute or recognized ground of equity, the court is without authority to order an opposing party to pay attorney’s fees. State v. Thomas, 585 S.W.2d 606 (Tenn.1979).
An exception to the rule is where the plaintiff’s suit has created a “fund”, Tennessee United Paint St. v. D.H. Overmyer Whse. Co., 62 Tenn.App. 721, 467 S.W.2d 806 (1971), or has conferred a “substantial benefit” to a class. W. Fletcher, Cyclopedia of the Law of Private Corporations, § 6045 (1980 & Supp.1982). The “substantial benefit” theory as a basis for awarding attorney’s fees was recognized in Grant v. Lookout Mountain Co., 93 Tenn. 691, 28 S.W. 90 (1894), where minority shareholders sued to enjoin the sale of corporate assets. The Supreme Court in Grant held the nature of the action was derivative in that “the stockholder does not bring such a suit because his rights have been directly violated, or because the cause of action is his ... ”, id., at 697, 28 S.W. 90, and concluded since the action was to benefit the corporation, attorney fees should be paid by the corporation. Id., at 698, 28 S.W. 90. In the instant case, the benefit of additional fees ordered paid by the developer accrued to the entire membership.
The instant case is distinguishable from the case cited by the majority of Fifth Third Co. v. Mooreland Estates, Etc., 639 S.W.2d 292 (Tenn.App.1982). In Fifth Third, the developer sued, representing only his own interests, and no pecuniary or other substantial benefits were gained which would inure to the other members. Here, the suit has brought additional funds into the club’s treasury which benefit all of the members. “To award attorney’s fees in such a suit to a plaintiff who has succeeded in establishing a cause of action is not to saddle the unsuccessful party with the expenses but to impose them on the class that has benefited from them and that would have had to pay them had it brought the suit.” Mills v. Electric Auto-Lite Co., 396 U.S. 375, 396-397, 90 S.Ct. 616, 627-628, 24 L.Ed.2d 593 (1970).
In Mills, the minority shareholders brought a suit to set aside a corporate merger for misleading statements in the proxy materials. In finding for the plaintiffs in their claim for attorneys’ fees, the court stated, “the absence of express statutory authorization for an award of attorneys’ fees in a suit under § 14(a) does not preclude such an award in cases of this type.” Id., at 390, 90 S.Ct. at 624.
I would simply base the decision on the authority of Knapp recognizing the standing of the members to maintain the suit and invoke the recovery of a “fund” or the “substantial benefit” theory as the authority for awarding the attorney’s fees.