these provisions compels the conclusion that New York has determined that non-profit corporate associations such as the PAA and CIDAA are to be given the utmost latitude in the regulation and management of their intracorporate affairs.
Only the most abusive and obnoxious by-law provision could properly invite a court's intrusion into what is essentially a business thicket. Ordinarily, the contracting parties, not the courts, must weigh and evaluate the wisdom of their corporate agreements and regulations. Having voluntarily submitted to the rule of the corporate majority, all members are thereby bound and are barred from seeking judicial redress unless the corporate rule or action complained of contravenes the certificate of incorporation, New York law or a strong public policy of that state. In re Haebler v. New York Produce Exchange, 149 N.Y. 414, 44 N.E. 87 (1896); People ex rel. Gray v. Erie County Medical Society, 24 Barb. 570 (1857); Cabana v. Holstein-Friesian Association of America, 196 App. Div. 842, 188 N.Y.S. 277 (4th Dept. 1921), aff'd, 233 N.Y. 644, 135 N.E. 953 (1922); Associated General Contractors of America v. Lapardo Brothers Excavation Contractors, Inc., 43 Misc. 2d 825, 252 N.Y.S. 2d 486 (Sup. Ct. 1964); Stein v. Marks, 44 Misc. 140, 89 N.Y.S. 921 (Sup. Ct. 1904).
Plaintiffs cite several New York cases to support their contention that Article III, Section 3.2 of the by-laws should not be given judicial sanction. We begin our examination with Ewald v. Medical Society of New York County, 144 App. Div. 82, 128 N.Y.S. 886 (1st Dept. 1911). Plaintiff was a member of a medical society who had been suspended for making a professional misrepresentation. While under the order of suspension, additional charges for falsification were preferred against plaintiff, who was restored to active membership by the society for the purpose of trial upon the new charges and probable expulsion from membership. When plaintiff received notice of his restoration, he promptly resigned. The society, however, rejected his resignation, citing a by-law provision which disallowed resignation by any member against whom there were pending charges. The court agreed with the society that the ability to discipline its members would be rendered inoperative if a member guilty of misconduct could escape proper discipline by the simple expedient of resigning.
In People ex rel. Hass v. New York Motor Boat Club, 70 Misc. 603, 129 N.Y.S. 365 (Sup. Ct. 1911), the sole limitation upon the right of a member of the club to resign was indebtedness to the club. Plaintiff had tendered his written resignation, but the club board of directors adopted a resolution urging him to reconsider his resignation. Plaintiff then withdrew his resignation, but the board and the club membership subsequently voted to approve the resignation. Plaintiff sued for reinstatement into the club, but the court ruled that once plaintiff had submitted his resignation, acceptance by the club was a perfunctory act so that resignation was effective immediately upon submission. Only non-payment of dues, said the court, could have presented the club with a discretionary consideration, but plaintiff was not in arrears. Therefore, nothing could forestall the effectiveness of plaintiff's resignation once tendered. By implication, of course, the court was of the opinion that club indebtedness was a valid reason for disallowing voluntary withdrawal from the club. A similar proviso against withdrawal by a member indebted to the organization was upheld in Associated General Contractors of America, Inc. v. Lapardo Brothers Excavation Contractors, Inc., 43 Misc. 2d 825, 252 N.Y.S. 2d 486 (Sup. Ct. 1964).
Plaintiffs contend that this trilogy of New York cases demonstrates the necessity of adequate standards for permitting voluntary withdrawal from non-profit corporations. But the postulating of "standards" carries with it the suggestion of a "right" to withdraw voluntarily, created ex nihilo, capable only of a vague description, and ostensibly having no ascertainable source in the law. The only rights existing in these cases were those created by the private law of the parties, insofar as such contract rights did not exceed statutory bounds or conscionable reaches. Plaintiffs do not, as they cannot, urge the invalidity of Article III, Section 3.2 on the ground that it contravenes the New York Not-For-Profit Corporation Law. The Court's only task, therefore, is to inquire whether the hardship imposed by this provision is unconscionably disproportionate to the benefit derived by the corporate whole through its enforcement. And in all these cases, the courts must take into account the purpose of the corporation as well as the purpose of the challenged provision and alternative, fairer means by which that purpose may have been achieved. Seen in this light, the New York cases cited by plaintiff do not offer standards for voluntary withdrawal, as "standards" implies a pre-existing right, but instead uphold substantial limitations upon a right to terminate membership which is otherwise guaranteed by the by-laws of the corporation. See also Associated Press v. Emmett, 45 F. Supp. 907 (S.D. Cal. 1942); Haynes v. Annandale Golf Club, 4 Cal. 2d 28, 47 P. 2d 470 (1935).
The purpose of the PAA and the CIDAA is clearly stated in the by-laws, Article II, Section 2.1, quoted heretofore. The benefits of mass advertising as opposed to individual efforts are so self-evident that it would be purposeless to explore them. These advantages were just as obvious to the 160 Chrysler and Plymouth dealers in the New York, New Jersey and Connecticut area during the early years they coalesced to form the PAA and CIDAA. Nor does the Court feel compelled to belabor the obvious fact that the promise of each to join was an incentive for all to assent to mutual cooperation. Indeed, it was a powerful incentive, as any nonassociating dealer would reap the harvest of the Associations' labors without shouldering his fair share of the costs. The same would be equally true of those who joined but later seceded. To prevent a potential flood-tide of withdrawals the Associations adopted Article III, Section 3.2. Although no standards for obtaining permission by a majority for voluntary withdrawal are enunciated, it is hard to imagine what inequitable development would justify such action by the membership. The contribution of each dealer is contingent upon his sales, which presumably bear at least a reasonable relationship to the advertising conducted by the Associations. Moreover, if a dealer were permitted to withdraw, it would be impossible to deny him the mass advertising benefits enjoyed by the remaining members. True, a nonassociated neighboring franchise presently profits by the regional advertising of the Associations without contributing a pro rata share toward its expense. But plaintiffs' withdrawal would only enlarge, perhaps double, the number of nonassociated Chrysler-Plymouth dealers. The potential domino effect is obvious. And each dealer could legitimately forward the same arguments in favor of withdrawal as those offered now. In essence, plaintiffs are trapped in the illogic of arguing that the free advertising benefits available to any unassociated competitor(s) are substantial enough to justify plaintiffs' withdrawal, but the benefits enjoyed by plaintiffs are too remote and speculative to prevent withdrawal. Certainly, both propositions cannot stand at once.
A single New York case is closely in point, as it demonstrates that those who voluntarily bind themselves perpetually to a project of mutual benefit and cooperation cannot disavow their contractual obligation to other members of their association, especially where the benefits necessarily continue after participation has otherwise ended. In Troy Iron and Nail Factory v. Corning, 45 Barb. 231 (N.Y. 1864), members of the Wyant's Kill Improvement Association sued to recover dues assessed against nonpaying members. The Association was a trust founded for the improvement of a stream by increasing head water and regulating its flow for the supply of bordering mills and other establishments. The articles of association provided that members could resign only by terminating ownership and occupation of the land along the stream. The defendant nonpaying member claimed that he was dissatisfied with the benefits of the improvements made, and objected specifically to the purchase of a large lake upstream. The court refused to substitute its judgment for that of the contracting parties as to the value of the bargain struck by the members at the inception of the corporation. The court observed the obvious inequity in allowing secession from the Association if improvement benefits could not practically be discontinued:
They had no right voluntarily to abandon the association and refuse to perform the duties and obligations imposed upon them, and they could only relieve themselves from the contract they had entered into by a sale of their property.
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