#314-O, Hamilton v. 7611 Maple Avenue Cooperative, Inc. (February 19, 1998) (Panel: Stevens, Kristian, Huson)

The shareholder (SH) in a cooperative association (Coop) complained that the Coop was improperly charging him attorney fees, improperly amending its rules, failing to give notice of meetings, failing to provide minutes of meetings, and failing to provide copies of its financial records.

The evidence at the hearing showed that the SH fell behind in his payments to the Coop, and it filed an action for eviction against him in court.  The parties then settled, and agreed to a Consent Judgment by the court.  The consent judgment did not include an award of attorney fees to the Coop.  The Coop then began billing the SH for the costs of its attorney's fees for collecting the payments, approximately $1100.  The Occupancy Agreement the SH signed contains a provision to the effect that the SH agrees to pay the Coop's attorney's fees if it hires one to collect unpaid debts owed by the SH; the same Agreement also provides that if the Agreement conflicts with the Bylaws, then the Bylaws control.  The Bylaws, in turn, allow for the collection of attorney's fees for a legal proceeding "as may be determined by the Court."  The Bylaws also allow the board of directors to amend the house rules and Occupancy Agreement by majority vote, without the approval of the Coop members.

The hearing panel first ruled that the Occupancy Agreement was in conflict with the Bylaws as to when the members became liable for attorneys fees.  The Bylaws control, and provide for liability for fees only if such fees are awarded by a court, and the Consent Judgment did not include any.  Therefore, since the SH was current in his fees and did not owe the attorney's fees, he was in good standing with the Coop.

The panel then held that the Coop could amend the Occupancy Agreement upon a simple vote of a majority of the board of directors, as provided by the Bylaws, and therefore did not need to call any meeting of the membership.  The Bylaws do not require that the Coop board give any notice to the members of board meetings, and unlike other common ownership communities there is no law requiring that cooperative board meetings be open to the members.  The SH also complained that he was not given copies of the board's minutes or of general membership meetings, but the Bylaws do not require that, and there is no requirement in Maryland or Montgomery County law that minutes of cooperative boards of directors be available to the members; however, the Maryland Corporations Act, Section 2-512, requires that minutes be made available for inspection, and the hearing panel recommended that the Coop give notice to the members of how they can arrange to inspect the minutes.  On the issue of whether the Coop must provide its financial records to the SH, the panel noted that the Bylaws require that the records be made available for inspection on request, and the panel recommended that the Coop notify its members on how they can arrange for such an inspection.

The panel noted that the SH's wife, who is also a shareholder in the Coop, was present at the hearing although she declined to join the dispute as a party.  The panel ruled that "as a matter of equity for the cooperative", the SH's wife was not allowed to relitigate any of the issues raised in this dispute even though she was not a party, because she was a joint owner of the SH's share and was present at the hearing.

The panel ordered the Coop to deem the SH to be a member in good standing, and ordered the Coop to refund to him or credit to his account any funds he paid that it charged or credited to the attorney's fees account.