KANSAS CITY, Mo. (BP)-–An appeals judge questioned whether the Windermere corporate breakaway “passes the smell test” during oral arguments Nov. 25 in the Missouri Baptist Convention’s bid to recover the conference center property purchased 50 years ago.
Judge Joe Dandurand, a member of a three-judge panel of the Missouri Court of Appeals, Western Division, made the comment during arguments by Windermere’s attorney, Jim Shoemake. Windermere had not been “hijacked,” Shoemake was arguing, but had been transferred freely by the convention after it had approved corporate articles printed in the MBC annual meeting’s “daily bulletin” in 2000.
“How many people at a convention like that would even read a printed legal document, let alone understand it?” Dandurand asked. “This doesn’t even pass the smell test, does it?”
Shoemake did not directly respond to the “smell test” comment but continued to argue that the convention’s messengers had the chance to read the articles, which plainly did not contain a clause requiring MBC approval of future amendments.
Windermere was one of five former MBC subsidiary corporations which broke from the MBC in 2000-01 by changing their charters to create self-perpetuating boards. The organizations then aligned themselves with a new breakaway state convention, the Baptist General Convention of Missouri headed by Jim Hill, who was the Missouri Baptist Convention’s executive director at the time of all five breakaway attempts. Hill’s brother, Jerry, and Springfield, Mo., businessman Bill Jester created Windermere Development Company, LLC, which claims ownership of 1,000 acres of Windermere land that is in dispute.
The other breakaway entities are the Baptist Home retirement center, the Word & Way newsjournal, the Baptist Foundation and Missouri Baptist College.
Another judge on the Nov. 25 appeals panel, James Welsh, asked: “Do you think it would be fair to say that most Missouri Baptists were surprised by the way things turned out with this new corporation?” “Yes,” Shoemake answered, “that would probably be a fair characterization.”
Welsh also asked whether the dispute could have been avoided if the MBC had placed a clause in the articles giving the MBC the right to approve charter amendments. Shoemake said the judge was correct that such a clause would have avoided the litigation, but the MBC had left out that clause.
MBC lead counsel Michael Whitehead opened his arguments by telling the court that Windermere had been “hijacked” by “corporate insiders,” among them a former executive director (Jim Hill) who intentionally left out of the articles of incorporation the clause that would have expressly required MBC approval of future amendments. “The insiders’ scheme worked like a charm,” Whitehead said -– except they overlooked the fact that the Non-Profit Code recognizes that the right to elect directors is a fundamental right, which cannot be eliminated by amendment without MBC consent.
“The right to vote for directors is the way a parent organization keeps control of a subsidiary ministry corporation,” Whitehead said. “MBC set up this subsidiary with the right to elect trustees clearly stated in the articles. No other clause was required to protect this fundamental right from unauthorized amendment.
“The trial court essentially re-wrote two statutes to impose non-existent limitations on MBC’s rights,” Whitehead said of the Cole County Circuit Court. “After 50 years, MBC loses its $50-million-dollar camp in only three months after transferring it to this subsidiary, and the trial court says we have no legal recourse. And that’s why we are here.”
The convention transferred the 1,300-acre Baptist camp to the new Windermere subsidiary in April 2001. Three months later, on July 30, 2001, the subsidiary trustees amended the articles to eliminate the convention’s voting rights.
Whitehead showed charts on easels to the court during his arguments, containing the text of the state statutes at issue and the text of two articles in the original charter. The articles chart had color highlighting of words stating that Windermere trustees would be elected by the MBC. The chart of section 355.066 highlighted the definition of the word “member” as a person who has the right to elect directors, and included a nonprofit association like the MBC, within the meaning of the term “person.”
“Didn’t the articles also have a clause that said the corporation shall have no members?” Welsh asked. Yes, Whitehead replied, the articles had such a clause, but it was not a controlling factor, because the statutory definition included the phrase “without regard to what a person may be called in the articles….” In other words, the definition makes election rights the operative fact in determining whether a corporation has “members,” even if there is a “no members” clause.
“If you put the label ‘pickles’ on a jar of peanut butter, that doesn’t make it pickles,” Whitehead quipped. “The law looks at function over form, and the function of electing trustees is made controlling over a mistaken label.”
Dandurand asked Whitehead about the fact that Jim Hill, the MBC’s former executive director, was the person who drafted the articles of incorporation, who put in the “no members” clause and who left out the amendment approval clause. Whitehead answered that the executive was the MBC’s employee when he acted as incorporator, but he had cooperated with other “corporate insiders” both before and after the incorporation to shepherd the breakaway. “Today the executive heads a competing state Baptist convention and has family ties to a developer who has purchased 1,000 acres of the former Windermere land,” Whitehead said. “His misconduct helps explain what was left out, but the key fact for this court is what was left in. The articles still say MBC has the right to elect trustees and that right cannot be removed by amendment without the member’s approval.”
MBC co-counsel G. Stanton Masters presented a three-minute rebuttal after Shoemake spoke. Shoemake said that the member definition had an exception for persons who were “delegates,” and he said MBC messengers fit the definition of delegates. Masters said this argument confused the governance of the MBC with the governance of Windermere. “The original charter says MBC as an entity has the right to elect trustees, not individual messengers to the MBC meeting. The definition of delegates is persons who vote at a representative assembly. The trial court admitted there is no Windermere assembly, so there can be no Windermere delegates.”
The relief requested by the MBC was that the appeals court would reverse the trial court’s March 4 ruling and find instead that the MBC election rights were protected from amendment either by the membership statute or by section 355.586, which protects non-member rights. Either way, any amendment without MBC approval would be void. The convention would be entitled to get back its subsidiary corporation or get back its camp property. The trial court would then be responsible to oversee the return of control to the MBC, along with the cancelation of liens, mortgages and conveyances which have occurred since July 30, 2001.
Whitehead said a decision by the three-judge panel may be handed down within a couple of months.
Reported by The Pathway, newsjournal of the Missouri Baptist Convention.