{ "id": 8959935, "name": "MARY CANNON MORRIS, and JOSEPH E. MORRIS, individually and derivatively on behalf of The E.A. MORRIS CHARITABLE FOUNDATION, Plaintiffs v. JOHN S. THOMAS, KATHARINE A. THOMAS, K. BARRY MORGAN, and DOROTHY S. SHAW, Defendants and THE E.A. MORRIS CHARITABLE FOUNDATION, Nominal Defendant, Intervenor and Interested Party Defendants", "name_abbreviation": "Morris v. Thomas", "decision_date": "2003-12-16", "docket_number": "No. COA03-237", "first_page": "680", "last_page": "686", "citations": [ { "type": "official", "cite": "161 N.C. App. 680" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "209 S.E.2d 754", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1974, "pin_cites": [ { "page": "757", "parenthetical": "citation omitted" } ], "opinion_index": 0 }, { "cite": "286 N.C. 148", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8563921 ], "year": 1974, "pin_cites": [ { "page": "153", "parenthetical": "citation omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/286/0148-01" ] }, { "cite": "755 S.W.2d 383", "category": "reporters:state_regional", "reporter": "S.W.2d", "case_ids": [ 11337857, 11337723 ], "year": 1988, "pin_cites": [ { "page": "389" } ], "opinion_index": 0, "case_paths": [ "/sw2d/755/0383-02", "/sw2d/755/0383-01" ] }, { "cite": "81 S.W.3d 546", "category": "reporters:state_regional", "reporter": "S.W.3d", "case_ids": [ 11419296 ], "year": 2002, "pin_cites": [ { "page": "552", "parenthetical": "quoting Champ v. Poelker, 755 S.W.2d 383, 389 (Mo. App. E.D. 1988)" } ], "opinion_index": 0, "case_paths": [ "/sw3d/81/0546-01" ] }, { "cite": "528 S.E.2d 618", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2000, "pin_cites": [ { "parenthetical": "citation omitted" } ], "opinion_index": 0 }, { "cite": "137 N.C. App. 564", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11094799 ], "year": 2000, "pin_cites": [ { "parenthetical": "citation omitted" } ], "opinion_index": 0, "case_paths": [ "/nc-app/137/0564-01" ] }, { "cite": "232 S.E.2d 184", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1977, "opinion_index": 0 }, { "cite": "291 N.C. 451", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8558677 ], "year": 1977, "opinion_index": 0, "case_paths": [ "/nc/291/0451-01" ] }, { "cite": "586 S.E.2d 258", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2003, "pin_cites": [ { "page": "262", "parenthetical": "citing Utilities Comm. v. Edmisten, Atty. General, 291 N.C. 451, 232 S.E.2d 184 (1977)" } ], "opinion_index": 0 }, { "cite": "357 N.C. 483", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 491588 ], "year": 2003, "pin_cites": [ { "page": "487", "parenthetical": "citing Utilities Comm. v. Edmisten, Atty. General, 291 N.C. 451, 232 S.E.2d 184 (1977)" } ], "opinion_index": 0, "case_paths": [ "/nc/357/0483-01" ] }, { "cite": "454 S.E.2d 672", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1995, "pin_cites": [ { "parenthetical": "derivative action against homeowners' association not properly brought where plaintiff does not allege injury to the association or seek to recover on its behalf" } ], "opinion_index": 0 }, { "cite": "118 N.C. App. 161", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11917167 ], "year": 1995, "pin_cites": [ { "parenthetical": "derivative action against homeowners' association not properly brought where plaintiff does not allege injury to the association or seek to recover on its behalf" } ], "opinion_index": 0, "case_paths": [ "/nc-app/118/0161-01" ] }, { "cite": "537 S.E.2d 248", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2000, "pin_cites": [ { "page": "253" } ], "opinion_index": 0 }, { "cite": "140 N.C. App. 390", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 12128021 ], "year": 2000, "pin_cites": [ { "page": "395" } ], "opinion_index": 0, "case_paths": [ "/nc-app/140/0390-01" ] }, { "cite": "568 S.E.2d 191", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2002, "pin_cites": [ { "parenthetical": "citation omitted" } ], "opinion_index": 0 }, { "cite": "356 N.C. 161", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 1511328, 1511428, 1511367, 1511258, 1511166 ], "year": 2002, "pin_cites": [ { "parenthetical": "citation omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/356/0161-02", "/nc/356/0161-01", "/nc/356/0161-04", "/nc/356/0161-05", "/nc/356/0161-03" ] }, { "cite": "552 S.E.2d 220", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2001, "pin_cites": [ { "page": "225" } ], "opinion_index": 0 }, { "cite": "146 N.C. App. 159", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11355165 ], "year": 2001, "pin_cites": [ { "page": "165" } ], "opinion_index": 0, "case_paths": [ "/nc-app/146/0159-01" ] }, { "cite": "579 S.E.2d 283", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2003, "pin_cites": [ { "parenthetical": "citation omitted" } ], "opinion_index": 0 }, { "cite": "357 N.C. 61", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 491459, 491589, 491854, 491406, 491507, 491834 ], "year": 2003, "pin_cites": [ { "parenthetical": "citation omitted" } ], "opinion_index": 0, "case_paths": [ "/nc/357/0061-02", "/nc/357/0061-06", "/nc/357/0061-01", "/nc/357/0061-04", "/nc/357/0061-05", "/nc/357/0061-03" ] }, { "cite": "574 S.E.2d 55", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2002, "pin_cites": [ { "page": "57" }, { "page": "57" } ], "opinion_index": 0 }, { "cite": "155 N.C. App. 624", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 9251469 ], "weight": 2, "year": 2002, "pin_cites": [ { "page": "626" }, { "page": "627" } ], "opinion_index": 0, "case_paths": [ "/nc-app/155/0624-01" ] }, { "cite": "549 S.E.2d 220", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 2001, "opinion_index": 0 }, { "cite": "353 N.C. 526", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 135779, 135592, 135946, 135951, 135675 ], "year": 2001, "opinion_index": 0, "case_paths": [ "/nc/353/0526-01", "/nc/353/0526-03", "/nc/353/0526-04", "/nc/353/0526-05", "/nc/353/0526-02" ] }, { "cite": "545 S.E.2d 768", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2001, "pin_cites": [ { "page": "772" } ], "opinion_index": 0 }, { "cite": "143 N.C. App. 272", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 11434317 ], "weight": 2, "year": 2001, "pin_cites": [ { "page": "278" } ], "opinion_index": 0, "case_paths": [ "/nc-app/143/0272-01" ] } ], "analysis": { "cardinality": 722, "char_count": 15051, "ocr_confidence": 0.755, "pagerank": { "raw": 7.212501280936662e-08, "percentile": 0.430941147534084 }, "sha256": "60118a562d2f23c3f1d15bf88d105b162185c0053334122912a9c8468fce6938", "simhash": "1:1bf85e7a264a470b", "word_count": 2377 }, "last_updated": "2023-07-14T20:10:07.642184+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Chief Judge EAGLES and Judge McGEE concur." ], "parties": [ "MARY CANNON MORRIS, and JOSEPH E. MORRIS, individually and derivatively on behalf of The E.A. MORRIS CHARITABLE FOUNDATION, Plaintiffs v. JOHN S. THOMAS, KATHARINE A. THOMAS, K. BARRY MORGAN, and DOROTHY S. SHAW, Defendants and THE E.A. MORRIS CHARITABLE FOUNDATION, Nominal Defendant, Intervenor and Interested Party Defendants" ], "opinions": [ { "text": "LEVINSON, Judge.\nPlaintiffs appeal from the entry of summary judgment in favor of defendants. For the reasons that follow, we affirm. The relevant facts are summarized as follows: In 1980 the E.A. Morris Charitable Foundation (\u201cthe Foundation\u201d) was created by Mr. E.A. Morris, for the purpose of supporting \u201ccharitable, religious, educational and scientific\u201d enterprises. Plaintiffs (Mary Morris and Joseph Morris) are E.A. Morris\u2019s wife and son. The Foundation was established with no members and with a five-member board of directors.\nThe initial board of directors consisted of E.A. Morris, his wife Mary Morris, his son Joseph Morris, his daughter Mary Lou Morris, and defendant John Thomas (Thomas), who is not a member of the Morris family. When Mary Lou Morris died in 1994, she was replaced on the board by defendant Barry Morgan, an accountant who had worked for the Foundation and who is not related to the Morris family. In 1998, E.A. Morris died and defendant Dorothy Shaw was elected to the board of directors. In 1999, Thomas\u2019s wife, Katharine Thomas, was added to the board of directors with the unanimous consent of all board members, including the plaintiffs. The board of directors then consisted of Mary and Joseph Morris, John and Katharine Thomas, Shaw, and Morgan. At the annual meeting of the Foundation board of directors on 2 November 2001, the board of directors removed Mary Morris by a four to one vote, and replaced her with E. J. Walker, Jr. At the same meeting, the board of directors removed Joseph Morris from the board by a vote of five to one.\nOn 10 May 2002 plaintiffs filed a complaint against John and Katharine Thomas, Shaw, and Morgan. Plaintiffs asserted that their suit was filed \u201con their own behalf, and derivatively on behalf of the Foundation[.]\u201d Plaintiffs alleged that their removal from the Foundation\u2019s board of directors had been \u201cunlawful\u201d and also alleged wrongdoing by defendants in regards to various other actions taken by the Foundation\u2019s board of directors. Plaintiffs asserted that defendants had engaged in a \u201cconspiracy\u201d; that Thomas had used the Foundation for his \u201cpersonal enhancement and benefit\u201d; and that defendants had breached their fiduciary duty to the Foundation. They sought reinstatement as members of the board of directors, removal of defendants from the board, and other relief. On 26 June 2002 plaintiffs filed an amended complaint adding the Foundation as a \u201cnominal party whose interests are aligned with the Plaintiffs\u2019 side of this action\u201d and reiterating that their action was brought \u201cin part on behalf of the E.A. Morris Charitable Foundation.\u201d\nOn 12 July 2002 defendants filed an answer and motion to dismiss, asserting that, pursuant to N.C.G.S. \u00a7 Chapter 55A, plaintiffs lacked standing to bring either a derivative action on behalf of the Foundation or individual claims on their own behalf. On 16 July 2002 the Foundation filed an answer stating that it was investigating the allegations of the complaint, and requesting a stay of proceedings until their investigation was complete. The Foundation also sought dismissal of plaintiffs\u2019 complaint for lack of standing to bring a derivative action and for failure to state a claim for relief. The Foundation submitted affidavits, the Foundation\u2019s articles of incorporation and bylaws, the amended bylaws, the minutes of board meetings, and other documents pertinent to plaintiffs\u2019 allegations. On 22 July 2002 the Foundation filed an alternate motion to intervene, alleging that the Foundation was a necessary party and that plaintiffs had not properly added the Foundation to the action. The Foundation also filed an amended answer on 22 July 2002, seeking dismissal on the grounds that plaintiffs (1) lacked standing to bring a derivative action, and (2) had not stated \u201cany individual claims cognizable under North Carolina law.\u201d Plaintiffs filed a motion on 23 July 2002 opposing the Foundation\u2019s \u201cactive, non-neutral participation\u201d in the case, and seeking a protective order barring the Foundation from active participation in the action. On 27 August 2002 the trial court entered an order directing, inter alia, that:\n1. The Foundation\u2019s motion to intervene was granted.\n2. The plaintiffs\u2019 motion for a preliminary injunction was denied.\n3. Plaintiffs objection to the Foundation\u2019s participation was overruled, and their request for a protective order was denied.\n4. The defendants\u2019 motions to dismiss were denied \u201cwithout prejudice to summary judgment motions at the appropriate time.\u201d\n5. The Foundation\u2019s motion for a stay was granted.\nOn 18 October 2002 the Foundation moved for summary judgment, attaching affidavits, documents, and the Foundation\u2019s committee report summarizing the investigation into plaintiffs\u2019 allegations. The report concluded that plaintiffs\u2019 claims had no merit and that the best interests of the Foundation would be served by dismissal of the lawsuit. On 22 October 2002 plaintiffs filed an objection to the report and moved the court to reconsider their motion to bar the Foundation from \u201cactive non-neutral\u201d participation in the lawsuit. The individual defendants also filed a motion for summary judgment.\nOn 28 October 2002 a hearing was conducted on the defendants\u2019 and the Foundation\u2019s motions for summary judgment. The trial court ruled from the bench that the issue of standing was dispositive of the summary judgment motions, and that defendants\u2019 motions for summary judgment should be granted. An order was entered on 4 November 2002 granting summary judgment for defendants and ruling that the Foundation\u2019s summary judgment motion was mooted by the granting of summary judgment in favor of defendants. The order denied plaintiffs\u2019 motion for reconsideration of the Foundation\u2019s participation and their objection to the Foundation\u2019s committee report. From this order, plaintiffs appeal.\nStandard of Review\nSummary judgment is properly granted \u201cif the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.\u201d N.C.G.S. \u00a7 1A-1, Rule 56(c) (2003). Summary judgment is proper if the plaintiff lacks standing to bring suit. See Northeast Concerned Citizens, Inc. v. City of Hickory, 143 N.C. App. 272, 545 S.E.2d 768, disc. review denied, 353 N.C. 526, 549 S.E.2d 220 (2001).\nPlaintiffs\u2019 complaint asserted that their action was brought derivatively on behalf of the Foundation, as well as individually on their own behalf. However, plaintiffs did not assign error to the trial court\u2019s order of summary judgment as pertains to their purported individual claims. N.C.R. App. P. 10(a) of the Rules of Appellate Procedure provides, in pertinent part, that \u201cexcept as otherwise provided herein, the scope of review on appeal is confined to a consideration of those assignments of error set out in the record on appeal in accordance with this Rule 10.\u201d Moreover, plaintiffs do not present any arguments on appeal regarding their alleged individual claims against defendants. Questions not presented and discussed in a party\u2019s brief are deemed abandoned. N.C.R. App. P. 28(a). We conclude that plaintiffs have abandoned and failed to preserve for appellate review any issues pertaining to their individual claims against defendants. Accordingly, we consider plaintiffs\u2019 arguments only as regards their derivative claims.\nPlaintiffs\u2019 Standing to Bring a Derivative Action\nIn the instant case, the trial court ruled that plaintiffs lacked standing to pursue derivative claims on behalf of the Foundation. The trial court ruled correctly in this regard.\n\u201cStanding refers to whether a party has a sufficient stake in an otherwise justiciable controversy such that he or she may properly seek adjudication of the matter.\u201d American Woodland Indus., Inc. v. Tolson, 155 N.C. App. 624, 626, 574 S.E.2d 55, 57 (2002), disc. review denied, 357 N.C. 61, 579 S.E.2d 283 (2003) (citation omitted). \u201cStanding is a necessary prerequisite to a court\u2019s proper exercise of subject matter jurisdiction.\u201d Creek Pointe Homeowner\u2019s Ass\u2019n v. Happ, 146 N.C. App. 159, 165, 552 S.E.2d 220, 225 (2001), disc. review denied, 356 N.C. 161, 568 S.E.2d 191 (2002) (citation omitted). \u201cAdditionally, plaintiffs have the burden of proving that standing exists.\u201d Tolson, 155 N.C. App. at 627, 574 S.E.2d at 57.\nThe issue herein is whether plaintiffs had standing to bring a derivative action against defendants. \u201cA \u2018derivative proceeding\u2019 is a civil action brought.. .\u2018in the right of\u2019 a corporation,... while an individual action is . . . [brought] to enforce a right which belongs to [plaintiff] personally.\u201d Norman v. Nash Johnson & Sons\u2019 Farms, Inc., 140 N.C. App. 390, 395, 537 S.E.2d 248, 253 (2000). See Stewart v. Kopp, 118 N.C. App. 161, 454 S.E.2d 672 (1995) (derivative action against homeowners\u2019 association not properly brought where plaintiff does not allege injury to the association or seek to recover on its behalf).\nThe E.A. Morris Charitable Foundation is a non profit corporation, and thus is governed by the North Carolina Nonprofit Corporation Act. N.C.G.S. \u00a7 55A-1-01 (2003). Standing to bring a derivative suit against a non profit corporation is addressed in N.C.G.S. \u00a7 55A-7-40(a) (2003), which provides in relevant part:\nAn action may be brought in a superior court of this State, . . . in the right of any domestic or foreign corporation by any member or director, provided that, in the case of an action by a member, ... it shall appear, that each plaintiff-member was a member at the time of the transaction of which he complains.\nPlaintiffs assert that the statutory authority granted to \u201cany member or director\u201d to bring a derivative suit necessarily includes former members of the board of directors. However, \u201c[w]here the language of a statute is clear and unambiguous, there is no room for judicial construction and the courts must construe the statute using its plain meaning.\u201d McKinney v. Richitelli, 357 N.C. 483, 487, 586 S.E.2d 258, 262 (2003) (citing Utilities Comm. v. Edmisten, Atty. General, 291 N.C. 451, 232 S.E.2d 184 (1977)). \u201cA term is ambiguous if it has more than one meaning, and a layman would be unable to determine which meaning is intended.\u201d In re Estate of Montgomery, 137 N.C. App. 564, 567 n3, 528 S.E.2d 618, 620 n3 (2000) (citation omitted). We discern no term or phrase in G.S. \u00a7 55A-7-40(a) whose meaning is unclear. Though it would have been very easy to do so, the legislature did not include language allowing former directors to file a derivative action.\nFurther, if we accepted plaintiffs\u2019 argument, that the phrase \u201cany member or director\u201d should be interpreted to include former directors, we would then need to determine whether this meant all former directors, even those who last served on the board of directors ten years previously, or whether some other restrictions were appropriate. The question of how recently one would have to have served on a board of directors has no obvious answer. It is readily apparent that the answer cannot be merely that the director must have been on the board \u201cat the time of the transaction of which he complains\u201d because the statute expressly applies that restriction only to members. Nor does the statute provide any guidance on which former directors might be authorized to bring suit.\nWe conclude that the statute plainly restricts standing to bring a derivative action to the members and directors of a nonprofit corporation. Thus, \u201cby statute, \u2018only members, directors, or the Attorney General have standing to challenge ultra vires acts of a not-for-profit corporation.\u2019 \u201d Blue Cross & Blue Shield of Mo. v. Nixon, 81 S.W.3d 546, 552 (Mo. App. W.D. 2002) (quoting Champ v. Poelker, 755 S.W.2d 383, 389 (Mo. App. E.D. 1988)).\nIt is conceded by the parties herein that the Foundation had no members. Therefore, the statutory provisions governing a member\u2019s standing to bring a suit are of no relevance. It is also uncontroverted that plaintiffs were not on the Foundation\u2019s board of directors when they filed their complaint; indeed, the complaint alleges that their removal was \u201cunlawful\u201d. We conclude that, inasmuch as plaintiffs were not directors when their complaint was filed, they lacked standing to bring a derivative action.\nPlaintiffs argue that this result would permit a renegade board of directors to expel board members who challenge unlawful or unethical actions, thereby placing the corporation beyond the reach of a derivative action by the former directors. However, we note that the Attorney General has authority to bring an action to restrain a nonprofit corporation from taking ultra vires or otherwise unlawful actions. See N.C.G.S. \u00a7\u00a7 55A-3-04; 55A-3-05; 55A-14-30 (2003). Moreover, even assuming, arguendo, that the standing requirements of G.S. \u00a7 55A-7-40(a) place plaintiffs in a difficult position, it is not the prerogative of this Court to change the law. \u201c[W]hen public policy requires a change in a constitutionally valid statute, it is the duty of the Legislature and not the courts to make that change.\" State v. Camp, 286 N.C. 148, 153, 209 S.E.2d 754, 757 (1974) (citation omitted).\nWe conclude the trial court properly determined the plaintiffs lack standing to bring a derivative action, and that the court did not err by granting summary judgment for defendants. \u201cBecause Defendants were entitled to summary judgment on the ground Plaintiff lacked standing, we need not address Plaintiff\u2019s additional assignments of error.\u201d Northeast Concerned Citizens, 143 N.C. App. at 278, 545 S.E.2d at 772. Accordingly, the trial court\u2019s order is\nAffirmed.\nChief Judge EAGLES and Judge McGEE concur.", "type": "majority", "author": "LEVINSON, Judge." } ], "attorneys": [ "Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Mack Sperling, Charles E. Coble and Hubert Humphrey, for plaintiff-appellants.", "Teague, Campbell, Dennis & Gorham, L.L.P., by George W. Dennis, III and Jacob H. Wellman, for defendant-appellees John S. Thomas, Katharine Thomas, K. Barry Morgan, and Dorothy S. Shaw.", "Robinson, Bradshaw & Hinson, P.A., by Robert W. Fuller and Thomas P. Holdemess, for defendant-appellee The E.A. Morris Charitable Foundation." ], "corrections": "", "head_matter": "MARY CANNON MORRIS, and JOSEPH E. MORRIS, individually and derivatively on behalf of The E.A. MORRIS CHARITABLE FOUNDATION, Plaintiffs v. JOHN S. THOMAS, KATHARINE A. THOMAS, K. BARRY MORGAN, and DOROTHY S. SHAW, Defendants and THE E.A. MORRIS CHARITABLE FOUNDATION, Nominal Defendant, Intervenor and Interested Party Defendants\nNo. COA03-237\n(Filed 16 December 2003)\nCorporations\u2014 nonprofit \u2014 standing to file derivative action\u2014 former directors\nThe trial court correctly determined that plaintiffs lacked standing to bring a derivative action against a charitable foundation because they were not directors when the suit was filed. N.C.G.S. \u00a7 55A-7-40(a).\nAppeal by plaintiffs from order entered 4 November 2002 by Judge Catherine C. Eagles in Guilford County Superior Court. Heard in the Court of Appeals 17 November 2003.\nBrooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., by Mack Sperling, Charles E. Coble and Hubert Humphrey, for plaintiff-appellants.\nTeague, Campbell, Dennis & Gorham, L.L.P., by George W. Dennis, III and Jacob H. Wellman, for defendant-appellees John S. Thomas, Katharine Thomas, K. Barry Morgan, and Dorothy S. Shaw.\nRobinson, Bradshaw & Hinson, P.A., by Robert W. Fuller and Thomas P. Holdemess, for defendant-appellee The E.A. Morris Charitable Foundation." }, "file_name": "0680-01", "first_page_order": 710, "last_page_order": 716 }