MBC standing affirmed, Windermere trial to proceed
JEFFERSON CITY – A major procedural hurdle was overcome by the Missouri Baptist Convention (MBC) in its legal battle with five breakaway agencies July 18 when the trial judge affirmed the Convention’s legal standing to bring its contract claims against the five agencies, and rejected a key defense theory that only the Missouri Attorney General could bring such action.
After a two-hour hearing in Cole County Court here, Judge Richard Callahan said he believes the Convention has standing to bring its contract claims against Windermere Baptist Conference Center, The Baptist Home, Missouri Baptist College, The Baptist Foundation and Word & Way and he refused the defendants’ request to dismiss the case for lack of standing rather than allow MBC to proceed to trial Oct. 12.
“The Missouri Court of Appeals has already said that ‘someone has standing to bring an action on behalf of the Convention’” Callahan said.
“But Missouri law 355.141 says only the Attorney General has standing in this case,” argued Jim Shoemake, attorney for three of the breakaway agencies. “That’s who can bring an action.”
Callahan disagreed. He said the Court of Appeals made clear that the Convention can bring such claims, not the Attorney General.
As counsel for The Baptist Home, Windermere and Word & Way since 2000 and 2001, Shoemake helped mastermind the legal rationale for the breakaway boards, including his theory that MBC would have no standing to stop the breakaways, based on 355.141. A second linchpin argument in his rationale was that the MBC could not enforce contract rights because it had no capacity to enter contracts. Shoemake repeated this theory on July 18.
“But the Convention is an unincorporated association and it absolutely lacks capacity to enter into any contract,” Shoemake argued.
“Then why did the Court of Appeals reverse Judge Brown and remand this case for trial?” Callahan asked.
Attorney Charles Hatfield, Jr., of Jefferson City, spoke at the hearing for the MBC, assisted by Kansas City attorneys Michael Whitehead and James Freeman.
Hatfield compared the Convention’s legal position to a donor who contributes money to a college building fund, and receives in return a contract for “naming rights,” or the right to have a family member on the board. Such a contract is enforceable by the donor, and “surely section 141 would not apply to bar the donor’s standing in court and require the Attorney General to bring the case. Donors enforce such designated gifts with restrictions all the time.”
Shoemake argued that such contracts would be void as against public policy, because they are contracts to restrict the exercise of corporate power by the board.
Callahan disagreed that any contract limiting the board’s exercise of rights over the charter, etc., would be void, but he said that such restrictive agreements must be clear to be enforceable.
Clyde Farris, attorney for Missouri Baptist College agreed with Shoemake and argued that a donor could not enforce a promise to have a seat on the board. When pressed by the judge, Farris said that a donor who had been promised a seat on the board but then denied his seat might be entitled to get his gift back, even if he can’t prevent charter changes. The judge made no ruling on this discussion, since the only motions before the court dealt with MBC standing.
“This was an important victory for the Convention and a major setback for the defense,” Whitehead said after the hearing. “Mr. Shoemake’s linchpin argument has been rejected. People who have relied upon Mr. Shoemake’s rationale in 2000 and 2001 should be feeling very uneasy as they realize that the linchpin has been pulled out of their legal case. When the linchpin is gone, the wheels fall off.
“This hearing removed the major remaining procedural hurdle to getting to trial. We are eager for MBC to have its day in court to seek justice to recover these ministries.”
During the hearing, the subject arose as to the claim of the MBC that it is the sole member of each of the five defendant corporations. MBC attorneys have alleged that the Missouri statutory definition of “member” includes a person who votes for trustees in an election on more than one occasion. If MBC is the sole member, it gets certain rights under the law, such as the right to approve charter changes.
Callahan noted that the Windermere charter says “this corporation shall have no members.” The judge commented that MBC would have “an uphill battle” to convince him that the breakaway corporations had “members” in the face of this disclaimer.
Hatfield argued that the statute says a person may be a member, without regard to what a person is called in the articles, if the person has the right to elect trustees. “Person” is defined to include an unincorporated association, like the MBC. The judge said he would wait and see what the evidence is.
“Sole Member status is not crucial to our case, but provides one of several grounds for our claims.” Whitehead observed. “MBC still has contract rights, even as a non-member. We will have our opportunity at trial to present the evidence to support our legal argument that MBC has statutory member rights as well.”