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In re Osteopathic Hosp. Ass'n of Del.

Court of Chancery of Delaware, New Castle County

February 13, 1964

In the Matter of the OSTEOPATHIC HOSPITAL ASSOCIATION OF DELAWARE.

Ernest S. Wilson, Jr., of Wilson & Lynam, Wilmington, for petitioner, Edward J. Hill, and The Osteopathic Hospital Assn. of Del.

David F. Anderson, of Berl, Potter & Anderson, Wilmington, for intervenors.

SEITZ, Chancellor:

This decision determines, subject to appeal, the duly elected trustees (as well as new members) of the Osteopathic Hospital Association of Delaware, a Delaware corporation. This is [41 Del.Ch. 425] the latest round in the internecine struggle for control of that corporation.

This litigation arose on a petition requesting the court to order an election of trustees. The court delayed the order, admittedly appropriate, until it determined certain questions as to voting rights of certain individuals. The court struck down one provision

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in the 1961 by-laws but held in effect that they were otherwise validly adopted. See In the matter of The Osteopathic Hospital Association of Del., (Del.Ch.), 191 A.2d 333, affirmed 195 A.2d 759. After disposition of the appeal, a master was appointed to conduct the election of the Board of Trustees. The election resulted in the filing of slates by two factions which I shall identify by the names of the attorneys representing them. The master determined that the Anderson slate received 17 votes. Both the Wilson slate received 17 votes. Both factions filed exceptions to the master's report and this is the decision after hearing thereon.

The Wilson objectors contend that the master improperly rejected four votes cast for their faction (McKelvie, Lipscomb, Sikorski and Allen). Admittedly all four failed to comply with one or more provisions of the corporation's by-law (Article II, 1(B)(1)) defining 'voting members'; three failing to pay the $1,000.00 assessment and the fourth, as well as one or more of the first three not belonging to one or both of the stipulated professional societies. The Wilson objectors say that each of the four complied with all the conditions operative at the times they became members. Since the conditions which the four did not meet at the date of the meeting were either not in effect when they became members of the corporation ($1,000.00 assessment) or were fulfilled as of that time (membership in the two societies), they cannot be made applicable to them by testing their status at the time the election was held. They say that the decision of the master making such requirements applicable to the four constituted an impermissible 'expulsion' from membership, there being no provision so authorizing in either the certificate or by-laws.

I believe the law and certificate permitted those adopting the by-laws to impose additional reasonable conditions precedent to the right to be voting members. Compare 4 Am.Jur., Associations [41 Del.Ch. 426] and Clubs, § 10. The conditions here involved would appear to be reasonable. Clearly, they are continuing conditions applicable to all members who would vote, as the wording of Article II, Sec. 1(D) makes evident. Those who became members prior to the adoption of the 1961 by-law had no vested right to prevent reasonable changes in the condition precedent to future voting membership. The right to amend was clearly reserved. Nor does the operation of the bylaw amount to an 'explusion' in the generally accepted meaning of that term. We are here concerned only in determining which members had a right to vote at the meeting date.

I conclude that the master properly declined to count the votes of the four directors who admittedly had not fulfilled all the 1961 by-law requirements for voting members. This leaves the vote at 18 to 17 in favor of the Anderson faction.

I next consider the Anderson faction's exception to the master's refusal to count the votes of two doctors (Davis and Hobbs) who voted for them. The votes were not counted because the governing corporate by-law provided, inter alia, that to be a member the doctor must also be a member 'in good standing in the Delaware State Osteopathic Society', and the master found in effect that they had not been elected to that Society.

The facts are these: The Constitution of the Society (an unincorporated association) provides, inter alia, that new members are to 'be elected in the manner provided by the By-Laws'. The by-laws provide under the membership heading that application for membership shall be made in writing to the Society and approved by the Society. Under a by-law heading entitled 'Board of Trustees', it is provided in pertinent part:

'Section 1. The Boards of Trustees shall transact all the business of the society between the Annual sessions, at the meeting coincident with the Annual session of the Society, and at other times on the call of the President, and

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shall make all arrangements for the Annual meeting and shall appoint all Standing and Special Committees not otherwise provided for in the By-Laws and shall fill by appointment any vacancy occurring in its own [41 Del.Ch. 427] membership or any ...


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