Gary Haiser Et Al. v. Michael McClung Et Al.

This case involves two consolidated actions brought by opposing boards of directors of a residential development community club, with each board claiming legitimacy. The plaintiffs to the original action were owners of real property in the development who held a special meeting in September 2011 in order to elect a new board of directors for the community club. The previous board of directors and defendants to the original action contested the validity of the election, claiming that none of the counted votes were cast by members in good standing. The defendants subsequently met in November 2011 and again in March 2012 to ratify their positions on the community club board of directors. In December 2011, the “new” board of directors, purportedly elected in September 2011, filed a declaratory judgment action against the original board of directors in the Cumberland County Chancery Court, requesting that the court declare which board of directors was legally in control. The complaint also requested that the court declare whether the purported developer properly possessed developer’s rights and that the court award damages to the new board for breach of fiduciary duties by the original board. In April 2012, the original board filed a separate declaratory judgment action against the new board in the Cumberland County Chancery Court, making similar allegations and requesting a declaratory judgment, an injunction preventing the new board from acting on behalf of the community club, and damages for conversion. The trial court consolidated the two actions in July 2012 and conducted a bench trial on the matter over the course of seven non-consecutive days in 2015 and 2016. At the conclusion of trial, the court determined that the new board was prevented from challenging the developer’s status due to a statute of limitations. The trial court further determined that neither board was legitimately in control and appointed a special master to conduct an accounting of dues and a supervised election. The trial court also directed each side to pay its own attorney’s fees, ordering the boards to repay to the community club any funds used to pay attorney’s fees. The original board was re-elected during the supervised election, and the special master determined that both sides had paid attorney’s fees from their respective annual assessments collected. The trial court conducted a hearing on the parties’ objections to 08/29/2018 2 the special master’s report before adopting the master’s findings in total. The trial court thereby affirmed the original directors as current directors; ordered those directors to repay $54,157.41 to the community club funds; and ordered the plaintiffs to repay $143,513.55 to the community club funds. The plaintiffs have appealed. Determining that the trial court improperly relied upon a statute of limitations that is inapplicable to the plaintiffs’ action, we reverse the trial court’s judgment and remand for further proceedings consistent with this opinion. We further reverse the trial court’s alternative rulings for lack of evidentiary basis.