Sandy Gordon Rounds, John F. Gordon, Richard Gordon and Margaret W. Gordon v. Mallets Bay Club, Inc. and James McGarry, 157 A.3d 1101

Background

In 1998 George Gordon sold his Malletts Bay Club (MBC) property to J. Douglas Johnson; seven of Gordon’s 23 MBC shares were issued to Johnson and the remaining 16 were placed with MBC president/transfer agent James McGarry “until further directive by [Gordon] or, if necessary, pursuant to the order of a court of competent jurisdiction.”
MBC amended its bylaws in 1992 to require a seller to transfer all of his/her MBC shares when selling property and to give the club a right of first refusal; Gordon opposed that amendment and later indicated an intent to challenge it.
Gordon demanded return of the 16 shares in 1998 and again his heirs (the plaintiffs) demanded issuance of those shares in 2011; McGarry and MBC refused, asserting the 1992 bylaw left no transferable shares and that a court order was required.
Plaintiffs sued for breach of contract and breach of fiduciary duty against McGarry and sought a declaratory judgment that MBC waived its right to enforce the bylaw by signing the 1998 Waiver and Agreement permitting the sale to Johnson.
The trial court granted plaintiffs summary judgment on the waiver theory and on McGarry’s alleged duty to transfer on demand; the Vermont Supreme Court reversed, holding the transfer agreement required court adjudication as an alternative and that MBC did not waive enforcement of the bylaw; the court remanded unresolved questions about the validity of the 1992 bylaw vote.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Stock Transfer Agreement required McGarry to deliver the 16 shares on plaintiffs’ demand	The Agreement made McGarry the transfer agent and directed him to hold the 16 shares only until Gordon or his successors demanded them — so he must issue on demand	The Agreement placed the shares in McGarry’s control subject to Gordon’s future directive or a court order; the “if necessary” clause contemplates judicial resolution	Court held McGarry was not required to deliver on demand; he could relinquish only by agreement or a court order, so no breach of contract or fiduciary duty on summary judgment
Whether MBC waived enforcement of the 1992 bylaw by signing the Waiver and Agreement for the Gordon–Johnson sale	The Waiver and Agreement approving the sale constituted a waiver of MBC’s right to insist Gordon transfer all shares under the 1992 amendment	The Waiver merely waived MBC’s right of first refusal for that sale and provided for escrow of the 16 shares pending resolution; the documents must be read together	Court held MBC did not waive its right to enforce the 1992 bylaw by executing the Waiver and Agreement
Whether plaintiffs’ claims are barred by the statute of limitations	Plaintiffs argued the limitations period began with defendants’ 2011 refusals to transfer	Defendants asserted earlier events (1998 letters, actions) could trigger the limitations period	Court did not need to resolve statute-of-limitations because plaintiffs’ claims failed on the merits; trial-court statute-of-limitations ruling not reached on appeal
Whether the validity of the 1992 bylaw amendment was decided by this appeal	Plaintiffs sought a declaration that the amendment was invalid and that the 16 shares belong to them	Defendants maintained the amendment was valid and enforceable; and that the escrow arrangement left resolution to agreement or court order	Court did not resolve the merits of the bylaw-vote validity claim; remanded for adjudication of that outstanding issue

Key Cases Cited

In re All Metals Recycling, Inc., 197 Vt. 481, 107 A.3d 895 (2014) (summary judgment reviewed de novo)
Bacon v. Lascelles, 165 Vt. 214, 678 A.2d 902 (1996) (summary judgment standard and requirements)
Dep’t of Corr. v. Matrix Health Sys., P.C., 183 Vt. 348, 950 A.2d 1201 (2008) (contract interpretation is a question of law reviewed without deference)
Southwick v. City of Rutland, 190 Vt. 106, 35 A.3d 113 (2011) (give effect to parties’ expressed intent in writing)
Hamelin v. Simpson Paper (Vt.) Co., 167 Vt. 17, 702 A.2d 86 (1997) (unambiguous contract language controls)
In re West, 165 Vt. 445, 685 A.2d 1099 (1996) (avoid constructions rendering contract provisions meaningless)
Isbrandtsen v. North Branch Corp., 150 Vt. 575, 556 A.2d 81 (1988) (surrounding circumstances are admissible to determine ambiguity)
O’Brien Bros.’ P’Ship, LLP v. Plociennik, 182 Vt. 409, 940 A.2d 692 (2007) (instruments executed together on same subject should be construed together)