Whalen v. Pleasant Hill Water Ass'n

891 So. 2d 250, 2004 Miss. App. LEXIS 776, 2004 WL 1774850
CourtCourt of Appeals of Mississippi
DecidedAugust 10, 2004
DocketNo. 2003-CA-00338-COA
StatusPublished
Cited by1 cases

This text of 891 So. 2d 250 (Whalen v. Pleasant Hill Water Ass'n) is published on Counsel Stack Legal Research, covering Court of Appeals of Mississippi primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Whalen v. Pleasant Hill Water Ass'n, 891 So. 2d 250, 2004 Miss. App. LEXIS 776, 2004 WL 1774850 (Mich. Ct. App. 2004).

Opinion

KING, C.J.,

for the Court.

¶ 1. David C. Whalen brought suit in the DeSoto County Chancery Court against Pleasant Hill Water Association, Inc. (PHWA), a non-profit corporation, the City of Olive Branch, Mississippi, and the City of Southaven, Mississippi. Whalen claimed that the agreement to dissolve PHWA and transfer its assets to the respective cities was void because members were allowed to vote by proxy. Whalen filed an amended complaint in which sixty-one members of the water association joined as plaintiffs. Following trial, the chancellor ruled that the evidence failed to prove an individual cause of action by any of the plaintiffs. He also ruled that the plaintiffs had failed to make a demand on the corporation prior to filing suit and lacked standing to sue derivatively.

¶ 2. Whalen appeals and raises the following issues which we quote verbatim:

I. Do Appellants have standing?

II. Did Appellee Pleasant Hill Water Association fail to afford due process to the Appellants?

III. Is there a need for the appointment • of a receiver?

FACTS

¶ 3. Pleasant Hill Water Association, Inc. is a non-profit corporation rural water [252]*252association, which provides potable water to its members residing within its certificated area. The certificated area “lies in north DeSoto County, Mississippi between the cities of Olive Branch and Southaven.”

¶ 4. PHWA’s membership exceeds 2,000, and includes both domestic and commercial members. Since its inception in the 1960s, PHWA has never issued a membership certificate. However, Article V, Section 1 of its bylaws states that “the holders of membership certificates of this corporation are its members.” PHWA has a longstanding practice of maintaining a customer list of individual household and. corporate accounts, which is accepted as its membership roster.

¶ 5. Because of rapid population growth within its certificated area, the PHWA Board of Trustees determined that it was time for water to be provided by the municipalities rather than the water association.

¶ 6. On April 23, 2002, PHWA negotiated an agreement with the cities of Olive Branch and Southaven to transfer to them its assets. This agreement was contingent upon the approval of the PHWA membership and the aldermen of the respective cities.

¶ 7. On February 25, 2002, PHWA members were given notice of a special meeting, to be held on March 19, 2002, the purpose of which was to vote on whether to dissolve PHWA pursuant to the proposed agreement with Olive Branch and Southaven. Whalen was among the members who attended that meeting.

¶ 8. Whalen stated that he had spoken with the president of PHWA’s Board of Trustees about the proposed agreement and the issues surrounding the proposal prior to the special meeting and acknowledged being fully aware of the meeting’s purpose. Members attending the March 19 meeting were required to sign a registration sheet to cast a vote at the meeting. After questions by the members had been addressed, a vote was taken on a motion to approve the proposed agreement. Of the 194 members present and registered to vote, 130 votes were cast in favor of the proposed agreement and sixty-four votes were cast against the agreement.

¶ 9. At some point, Whalen discovered that a proxy vote had been counted on behalf of a PHWA member. The record does not reflect that Whalen contested this issue at the special meeting.

¶ 10. On March 20, 2002, Whalen contacted several members of the board of trustees regarding alleged improprieties in the voting procedures. He claimed that proxy voting had been permitted in contravention of the bylaws.

¶ 11. According to Whalen, he spoke .with William Scott, a member of the board of trustees. Scott indicated that the matter would be reviewed. Upon review of the allegations, Scott came to the conclusion that the allegation of improper voting was not well founded. At trial, Scott indicated that the voting procedures used at the special meeting were the same procedures which had been in place and used by PHWA for many years. Scott testified that even if the alleged proxy vote was thrown out, there would still be more than a two-thirds majority in favor of the proposed agreement.

¶ 12. Whalen was informed by the president of PHWA’s Board of Trustees that there would not be another vote taken. Whalen made no written demand for another vote, or any other type of corrective action of the board of trustees regarding the allegations.

¶ 13. On April 30, 2002, Whalen filed suit requesting (1) a declaratory judgment that the vote was void and (2) that a [253]*253receiver be appointed to supervise a new vote. The chancellor denied these requests.

¶ 14. In the judgment filed on January 28, 2003, the chancellor determined that there was no merit to the allegation of proxy voting and that the trustees followed the procedures which had been adopted and utilized for all prior meetings of the water association.

¶ 15. Whalen now appeals the chancery court’s decision.

STANDARD OF REVIEW

¶ 16. A chancellor’s findings “will not be disturbed when supported by substantial evidence unless the chancellor abused his discretion, was manifestly wrong or clearly erroneous or applied an erroneous legal standard.” Longanecker v. Diamondhead Country Club, 760 So.2d 764(¶ 7) (Miss.2000).

ISSUES AND ANALYSIS

I.

Does Whalen have standing to sue?

¶ 17. Whalen claims that he and the other named plaintiffs have standing to sue because they were adversely impacted by the actions of PHWA. The plaintiffs’ allegations include: (1) that the cost for water usage will increase, (2) that the Summershill Fire Department will suffer loss because dues collected on its behalf by PHWA will no longer be collected in connection with the water bills, (3) that some members of PHWA will lose their jobs, and (4) that the ability to have influence regarding water services will diminish.

¶ 18. James Harris, water systems operator for PHWA, fire chief and president of the board of the Summershill Fire Department, testified that the decision to dissolve PHWA affected him individually because he would lose his job if this agreement were allowed to stand and that he would have to pay more for water. Harris also stated that the fire department would lose money because the water association collects fees for the fire department and. the fire department would have to hire someone to collect these fees which is not feasible. The trial judge held that Harris had not proven that he had any contract with PHWA that was breached, nor was there any tort committed by PHWA against Harris.

¶ 19. Herbert. Hunt, commissioner of Summershill Fire Department, testified as well. . Hunt also stated that his water rates would increase and that the fire department would have to hire someone to collect its fees which had been previously collected by PHWA.

¶ 20. Whalen testified that irregular voting procedures occurred at the special meeting. He stated that proxy voting had occurred, which should not have been allowed. Whalen stated that he would lose his job due to PHWA’s agreement with the cities of Olive Branch and Southaven.

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