Summary
The Ohio Supreme Court affirmed a writ of quo warranto dissolving a nonprofit mosque corporation, holding that the failure to maintain membership records and hold annual meetings (R.C. 1702.13, 1702.16) constituted a surrender of corporate rights under R.C. 2733.02(C) and 2733.20. The court found these statutory violations caused internal paralysis and the loss of access to charitable funds, justifying dissolution and the appointment of a receiver to oversee a successor entity. The dissent argued the causal link was insufficient and warned the decision sets a precedent allowing dissident factions to force dissolution of nonprofits.
Topics
Practice areas
Questions Presented
- Whether the attorney general is entitled to a writ of quo warranto dissolving the corporation due to failure to comply with corporate formalities, specifically failure to hold annual meetings, maintain membership records, and keep books and records of account.
- Whether the statute of limitations bars the quo warranto action.
- Whether the corporation's failure to adhere to formalities caused the loss of control over charitable funds, amounting to a surrender of corporate rights.
Holdings
- The court held that the corporation's failure to hold annual meetings, maintain membership records, and keep books and records of account constituted a surrender of corporate rights and privileges, warranting dissolution under R.C. 2733.20.
Key quotations
“Had the corporation adhered to the requisite formalities, there would have been a mechanism in place for addressing concerns, leadership would have been clearly established, and there would have been no question as to who had control over the funds.” (36)
“R.C. 1702.16 plainly requires annual meetings; it merely grants corporations flexibility in determining the manner in which the meetings will be conducted.” (26)
“Without a defined voting membership, regular meetings, and up-to-date membership roster, the authority of the board, and thus the legitimacy of the corporation itself, is no longer supported through recordable action.” (35)
Factual background
Omar Ibn El Khattab Mosque, Inc. is an Ohio nonprofit corporation formed in 2007. It failed to hold annual meetings or maintain membership records. In 2011, a dispute arose between factions of the congregation, leading to the election of competing boards of directors. The corporation's bank accounts were frozen, and $432,313.19 in charitable funds were interpleaded with the court. The corporation has been unable to access these funds since 2011, and the competing factions have been engaged in continuous litigation.
Procedural history
The corporation experienced internal disputes leading to competing boards of directors. The factions litigated in common pleas court, which dismissed the case for lack of subject-matter jurisdiction because quo warranto must be brought by the attorney general. The appellate court affirmed the dismissal but stayed the case. The Khan/Ball faction attempted to bring a quo warranto action but was dismissed for lack of standing. The Ohio Supreme Court affirmed that private individuals lack standing. The attorney general then brought this quo warranto action in the Tenth District, which granted the writ and dissolved the corporation.
Remand instructions
The matter is remanded to the court of appeals for the appointment of trustees. The appellate court shall then return the case to the court of common pleas to oversee the winding down of the corporation and the establishment of a successor entity, with discretion to appoint a receiver or trustees.