MAINE SUPREME JUDICIAL COURT                                                        Reporter of Decisions
Decision: 2016 ME 68
Docket:   BCD-15-287
Argued:   March 3, 2016
Decided:  May 10, 2016

Panel:        SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and
              HUMPHREY, JJ.



                            NATHALIE TAFT ANDREWS et al.

                                                   v.

                             SHEEPSCOT ISLAND COMPANY


GORMAN, J.

         [¶1] After the shareholders of Sheepscot Island Company (SICO) approved

a plan to convert from a for-profit corporation into a nonprofit corporation, several

dissenting shareholders (collectively, the Tafts) sought declaratory and injunctive

relief in the Business and Consumer Docket.1 The court (Murphy, J.) dismissed

the Tafts’ complaint pursuant to M.R. Civ. P. 12(b)(6), concluding that the Tafts

could not make out a claim that SICO’s conversion plan was invalid. The Tafts

appeal, arguing that the court incorrectly applied the law governing corporations

and nonprofit conversions. We disagree and affirm the judgment.



   1
      Because the conversion has not yet occurred, the use of “SICO” in this opinion refers exclusively to
the for-profit corporation. The seven plaintiffs are: Nathalie Taft Andrews, Frederick L. Taft, Eleanor
Taft Ethridge, Alexander T. Taft III, John Christopher Lee Taft, Alexander T. Taft Jr., and Frances
Pinney.
2

                                I. BACKGROUND

      [¶2] The following facts, which we view as admitted for purposes of this

appeal, are drawn from the Tafts’ complaint and the documents attached to the

complaint. See Nadeau v. Frydrych, 2014 ME 154, ¶ 5, 108 A.3d 1254; Moody v.

State Liquor & Lottery Comm’n, 2004 ME 20, ¶¶ 6-11, 843 A.2d 43.

      [¶3] SICO is a Maine corporation that was formed over one hundred years

ago as a for-profit corporation. It owns land and facilities on MacMahan Island,

which is located near the mouth of the Sheepscot River and is part of the town of

Georgetown. There are forty cottages on MacMahan Island. A majority of SICO’s

shares is held by shareholders who own cottages on the island, but there are

numerous shareholders who do not own cottages on the island, including four of

the plaintiffs in this case. SICO issued only one class of shares, and its bylaws do

not distinguish between cottage-owning shareholders and non-cottage-owning

shareholders.

      [¶4] SICO first attempted to convert into a nonprofit corporation in 2005.

After a conversion plan was approved by a majority of shareholders, some

dissenting shareholders, including three of the plaintiffs in this case, challenged the

plan’s validity. The Superior Court (Sagadahoc County, Warren, J.) entered a

summary judgment in their favor, concluding that SICO’s conversion plan did not

comply with 13-C M.R.S.A. § 931(3)(B) (2005), which required such plans to
                                                                                                   3

“include . . . [t]he manner and basis of reclassifying” the corporation’s shares.2

MacMahan Island Ass’n v. Andrews, No. CV-05-61, 2006 WL 6872297

(Me. Super. Nov. 2, 2006). We affirmed the judgment on appeal. MacMahan

Island Ass’n v. Andrews, 2008 ME 52, 943 A.2d 592.

       [¶5] In July of 2014, SICO presented a second nonprofit conversion plan to

its shareholders.       The plan proposed the replacement of SICO’s articles of

incorporation with new articles, which would reclassify all SICO shares into two

classes of memberships: “cottage memberships,” available to cottage-owning

shareholders, and “associate memberships,” available to all shareholders who did

not become cottage members. Both cottage and associate members would be

entitled to vote on matters upon which any members could vote; however, each

cottage member would be entitled to twelve votes, while the associate members

would be entitled to no more than twelve votes collectively. All members, or their

successors or assigns, would retain perpetual liquidation rights in proportion to the

shares they held before the conversion. Both cottage and associate members would

be entitled to receive or contract for SICO’s services and both would retain the

right to access and use community lands and facilities. Associate memberships




   2
     Although the 2005 publication of the Maine Revised Statutes Annotated was in effect at the time,
13-C M.R.S. § 931(3)(B) has not changed. See 13-C M.R.S. § 931(3)(B) (2015).
4

would be non-transferable; as a consequence, each associate membership would

terminate upon the associate member’s death.

      [¶6] At SICO’s annual shareholders’ meeting in August of 2014, the Tafts

voted against the plan and preserved their rights as dissenters, but the majority of

the shareholders voted to approve the plan.

      [¶7] On December 23, 2014, the Tafts filed a complaint against SICO

claiming that the nonprofit conversion plan should be invalidated because it “fails

to reclassify all shares of the corporation equally” in violation of both 13-C M.R.S.

§ 601(1) (2015) and statutes governing nonprofit conversion, specifically,

13-C M.R.S. § 931 (2015).       They attached various documents related to the

proposed conversion, including the conversion plan itself. The Tafts sought a

declaratory judgment invalidating the plan and a permanent injunction barring its

implementation.    On SICO’s motion, the trial court (Business and Consumer

Docket, Murphy, J.) dismissed the Tafts’ complaint with prejudice pursuant to

M.R. Civ. P. 12(b)(6). The court reasoned that SICO’s plan complied with the

plain terms of the nonprofit conversion statute and that there is no requirement that

shares be reclassified into “equal” memberships in the resulting nonprofit entity.

This appeal followed.
                                                                                  5

                                II. DISCUSSION

A.    Standards of Review

      [¶8] When we review a trial court’s grant of a motion to dismiss for failure

to state a claim upon which relief can be granted, “we view the facts alleged in the

complaint as if they were admitted.” Frydrych, 2014 ME 154, ¶ 5, 108 A.3d 1254

(quotation marks omitted).     We also consider “documents referred to in the

complaint . . . when the authenticity of such documents is not challenged.” Moody,

2004 ME 20, ¶ 11, 843 A.2d 43. “We review the legal sufficiency of the complaint

de novo and view the complaint in the light most favorable to the plaintiff to

determine whether it sets forth elements of a cause of action or alleges facts that

would entitle the plaintiff to relief pursuant to some legal theory.” Frydrych,

2014 ME 154, ¶ 5, 108 A.3d 1254 (quotation marks omitted).

      [¶9] To determine the legal sufficiency of the Tafts’ complaint, we must

consider relevant provisions of the Maine Business Corporation Act, 13-C M.R.S.

§§ 101-1702 (2015), including the provisions that specifically govern nonprofit

conversion, 13-C M.R.S. §§ 931-936.        Interpreting statutes de novo, we first

“examine the plain meaning of the language to avoid absurd, illogical or

inconsistent results.” Wong v. Hawk, 2012 ME 125, ¶ 8, 55 A.3d 425 (quotation

marks omitted). Because the statutes at issue in this case are not ambiguous, we do
6

not look beyond their plain language. See, e.g., Strout v. Cent. Me. Med. Ctr.,

2014 ME 77, ¶ 10, 94 A.3d 786.

B.    Compliance with the Nonprofit Conversion Statute

      [¶10] Pursuant to 13-C M.R.S. § 931(1), “[a] domestic business corporation

may become a domestic nonprofit corporation pursuant to a plan of nonprofit

conversion.” Section 931(3) sets forth the elements that must be included in a

domestic nonprofit conversion plan:

      A. The terms and conditions of the conversion;

      B. The manner and basis of reclassifying the shares of the corporation
      following its conversion into memberships, if any, or securities,
      obligations, rights to acquire memberships or securities, cash, other
      property or any combination thereof; [and]

      C. Any desired amendments to the articles of incorporation of the
      corporation following its conversion.

      [¶11] Section 931(3) is broad, but its language is not ambiguous. It contains

no express limitations on the actual manner of reclassification or the basis on

which shares may be reclassified, providing only that the plan “must include . . .

[t]he manner and basis of reclassifying the shares of the corporation following its

conversion.”    13-C M.R.S. § 931(3)(B).          Accordingly, when a business

corporation’s conversion into a nonprofit corporation becomes effective, “[t]he

shares of the corporation are reclassified into memberships, securities, obligations,

rights to acquire memberships or securities or into cash or other property in
                                                                                                     7

accordance with the plan of conversion.” 13-C M.R.S. § 935(1)(E) (emphasis

added).

         [¶12]   “[W]e do not read exceptions, limitations, or conditions into an

otherwise clear and unambiguous statute,” Adoption of M.A., 2007 ME 123, ¶ 9,

930 A.2d 1088, and we agree with the official comment to the applicable section of

the Model Business Corporation Act, which confirms that the nonprofit conversion

statute “imposes virtually no restrictions or limitations on the terms and conditions

of a nonprofit conversion,” Model Bus. Corp. Act § 9.30 cmt. 2 (Am. Bar Ass’n

2008).3 SICO’s conversion plan tracks the requirements of the statute, describing

in detail the terms and conditions of the conversion and the manner and basis of

reclassifying the SICO shares, and it includes new articles of incorporation to

replace SICO’s articles of incorporation when the articles of nonprofit conversion

become effective. We therefore conclude that SICO’s conversion plan complies

with the plain terms of section 931(3).

C.       Applicability of 13-C M.R.S. § 601(1)

         [¶13] The Tafts further argue, however, that SICO’s conversion plan is

unlawful because it does not comply with 13-C M.R.S. § 601(1), a provision of the


     3
     The Legislature modeled the Maine Business Corporation Act, 13-C §§ 101-1702 (2015), after the
Model Business Corporation Act. See P.L. 2001, ch. 640, §§ A-1 to B-7 (effective July 1, 2003). Indeed,
“Maine’s [nonprofit conversion] statute is nearly identical to section 9.30” of the Model Business
Corporation Act. Model Bus. Corp. Act § 9.30 annot. (Am. Bar Ass’n 2008).
8

Maine Business Corporation Act found outside the nonprofit conversion statute.

Section 601(1) provides, in relevant part: “Except to the extent varied as permitted

by this section, all shares of a class or series must have terms, including

preferences, rights and limitations that are identical with those of other shares of

the same class or series.” (Emphasis added.) The Tafts contend that SICO’s

nonprofit conversion plan runs afoul of section 601(1) because it proposes the

reclassification of SICO’s shares into two different types of memberships with

disparate rights.

      [¶14] This contention is unpersuasive for several reasons. First, at all times,

SICO’s corporate share structure has complied with section 601(1).             At the

moment the conversion occurs, SICO ceases to exist but, until that time, all of its

shares have been and are identical.

      [¶15] By law, articles of nonprofit conversion become effective on the date

and at the time of filing with the Secretary of State, unless a later effective date is

specified in the document. 13-C M.R.S. §§ 125, 933(3). Pursuant to SICO’s

conversion plan, its new articles of incorporation, which would implement the

plan’s reclassification of SICO’s shares into cottage and associate memberships,

would take effect ten days after the filing of the articles of nonprofit conversion.

See 13-C M.R.S. § 931(3)(B) (requiring a conversion plan to include “[t]he manner

and basis of reclassifying the shares of the corporation following its conversion”
                                                                                                           9

(emphasis added)). Until the conversion plan becomes effective, only one class of

shares exists. Thus, SICO’s shareholders approved a plan that proposed disparate

types of memberships in a nonprofit entity. Approval of the plan, however, did not

create disparate classes of shares.

        [¶16]     Second, neither section 601 nor the nonprofit conversion statute

contains any indication that section 601(1) applies once a conversion takes effect.

Section 601 places limitations on a “corporation’s” share structure, 13-C M.R.S.

§ 601(1)-(4), and “[c]orporation . . . means a corporation for profit or with shares,”

13-C M.R.S. § 102(4). Because nonprofit corporations do “not have or issue

shares of stock,” 13-B M.R.S. § 407 (2015), section 601 can only apply to

for-profit corporations.           Nothing in section 601 or the nonprofit conversion

statute—or in any other portion of the Maine Business Corporation Act—imposes

a similar limitation on memberships in a nonprofit corporation or on the nonprofit

conversion plan itself.4



   4
      For the same reasons, we are not persuaded by the Tafts’ arguments that (1) section 601(1) should
apply to memberships in a nonprofit corporation because conversions are “fundamentally similar” to
corporate mergers, or (2) that, for SICO’s plan to be valid, each “separate class[] of shares” would have to
have voted in favor of the plan. If a corporation has multiple classes of shares, “approval of the plan of
nonprofit conversion requires the approval of each separate voting group by a majority of the votes
entitled to be cast on the nonprofit conversion by that voting group.” 13-C M.R.S. § 932(6). Because
SICO has only one class of shares, no “separate classes of shares” exist, and section 932(6) does not
apply. A majority of SICO’s shareholders voted to approve the conversion plan pursuant to 13-C M.R.S.
§ 932(5), which “requires the approval of the shareholders by a majority of all the votes entitled to be cast
on the plan by the shareholders.”
10

      [¶17] Third, even if, as the Tafts argue, section 601(1) continues to apply to

a nonprofit corporation as a “general principle” of Maine corporate law, SICO’s

proposed nonprofit membership arrangement would comply with the statute. That

is because, although the plan’s new articles of incorporation do distinguish

between two membership “classes,” they do not contemplate any differences in

terms among members of the same class.

      [¶18] Finally, section 601 itself contains an exception to the rule of equal

treatment, stating that “[a]ny of the terms of shares may vary among holders of the

same class or series of shares as long as the variations are expressly set forth in the

articles of incorporation.”     13-C M.R.S. § 601(6).          The new articles of

incorporation, which would implement the conversion plan’s provisions, expressly

set forth the terms applying to all members.

      [¶19] With this conversion plan, which provides all current shareholders a

choice to become members of the new nonprofit corporation or to exercise their

appraisal rights and receive the fair value of their shares, SICO has cured the

deficiency we saw in SICO’s first nonprofit conversion plan.             In Andrews,

we described the terms of the first conversion plan as follows:

      Pursuant to the plan, shareholders who do not own cottages would not
      have any right to share in any liquidation, sale, or other realization of
      the assets of the corporation. Non-cottage owners would lose any
      equity interest in [SICO’s] assets. All shares of [SICO] would be
      deemed surrendered, but the owners of each of the forty cottages on
                                                                                  11

      MacMahan Island would be entitled to one cottage membership in the
      new [nonprofit entity].

2008 ME 52, ¶ 8, 943 A.2d 592. On those facts, we held that the trial court did not

err in concluding that the first plan was invalid “[b]ecause the plan for nonprofit

conversion did not include any provision for the reclassification of the shares of

the for-profit corporation following conversion, as required by” section 931(3)(B).

Id. ¶ 2 (emphasis added). In contrast, the conversion plan at issue in this case does

include a provision for the reclassification of the for-profit corporation’s shares;

also, all persons who held shares in the for-profit corporation—including those

who do not own cottages on the island—retain perpetual liquidation rights, and

thereby retain their proportional equity interest in the corporation’s assets.

D.    Control of Corporate Assets

      [¶20] We recognize that, based on our holding today, SICO shareholders

who are eligible only to become associate members—and who choose to do so—

will have little control over the management of the assets in which they retain

perpetual liquidation rights. Such a result occurs whenever a corporation’s board

of directors proposes a fundamental change in corporate status and the

shareholders vote to approve the proposed change by a less-than-unanimous vote.

In those circumstances, dissenting shareholders are presented with a choice: they

may leave the corporation, exercise statutory appraisal rights, and thereby receive
12

the fair monetary value of the shares they hold in the corporation, see 13-C M.R.S.

§§ 1301-1341 (2015), or they may stay in the corporation and acquiesce to the will

of the majority.

      [¶21] Sections 1301 to 1341 of the Maine Business Corporation Act govern

appraisal rights. In the event of various corporate actions including conversion to

nonprofit status, “[a] shareholder is entitled to appraisal rights and to obtain

payment of the fair value of that shareholder’s shares.” 13-C M.R.S. § 1302. “Fair

value” is statutorily defined as follows:

      4. Fair value. “Fair value” means the value of a corporation’s shares
      determined:

             A. Immediately before the effectuation of the corporate action
             to which a shareholder objects;

             B. Using customary and current valuation concepts and
             techniques generally employed for similar businesses in the
             context of the transaction requiring appraisal; and

             C. Without discounting for lack of marketability or minority
             status except, if appropriate, for amendments to the
             corporation’s articles of incorporation pursuant to section 1302,
             subsection 5.

13-C M.R.S. § 1301(4). If the Tafts were to exercise appraisal rights, with the

value of their shares being determined by a court if disputed, see 13-C M.R.S.

§§ 1302, 1327, 1331, any property rights associated with their shares, e.g., the right
                                                                                                       13

to use docks, community buildings, etc., will have to be considered in determining

the value of the shares.5

        [¶22]      We described the development of the appraisal remedy in

In re Valuation of Common Stock of McLoon Oil Co.:

        The traditional rule through much of the 19th century was that any
        corporate transaction that changed the rights of common shareholders
        required unanimous consent. The appraisal remedy for dissenting
        shareholders evolved as it became clear that unanimous consent was
        inconsistent with the growth and development of large business
        enterprises. By the bargain struck in enacting an appraisal statute, the
        shareholder who disapproves of a proposed merger or other major
        corporate change gives up his right of veto in exchange for the right to
        be bought out—not at market value, but at “fair value.”

565 A.2d 997, 1004 (Me. 1989). Other courts have noted the shift toward a

majority rule approach and concomitant proliferation of appraisal rights statutes.

See Stringer v. Car Data Sys., Inc., 841 P.2d 1183, 1184 (Or. 1992) (“Legislatures,

courts, and commentators found that the right of a single shareholder to veto

business transactions trammeled the concept of corporate democracy. . . .

[The appraisal] remedy is designed to provide statutory protection to those


   5
      Concerning “customary and current valuation concepts,” the official comment to the applicable
section of the Model Business Corporation Act acknowledges that “different transactions and different
contexts may warrant different valuation methodologies,” and provides, “For example, if the
corporation’s assets include undeveloped real estate that is located in a prime commercial area, the court
should consider the value that would be attributed to the real estate as commercial development property
in a comparable transaction.” Model Bus. Corp. Act § 13.01 cmt. 2 (Am. Bar Ass’n 2008). The method
of determining the “value” of the shares must necessarily include not just “market value,” but also “all
other elements that may be legitimately considered.” Chicago Corp. v. Munds, 172 A. 452, 453 (Del. Ch.
1934).
14

minority shareholders who do not concur with the decision of the majority

shareholders.”); Yanow v. Teal Indus., Inc., 422 A.2d 311, 316 n.5 (Conn. 1979)

(“[T]he view that majoritarian decision-making must take precedence over the

dissent of a minority shareholder . . . reflect[s] a social policy of preferring

corporate democracy and flexibility over the common-law notion of vested

shareholder rights.”); Schenley Indus., Inc. v. Curtis, 152 A.2d 300, 301

(Del. 1959) (“[I]t became necessary to protect the [shareholders’] contractual rights

. . . by providing for the appraisement of their stock and the payment to them of the

full value thereof in money.”); Chicago Corp. v. Munds, 172 A. 452, 455 (Del Ch.

1934) (“In compensation for the lost right[,] a provision was written into the

modern statutes giving the dissenting stockholder the option completely to retire

from the enterprise and receive the value of his stock in money.”).

      [¶23] Here, the Tafts may choose to demand the fair monetary value of their

property interest pursuant to the appraisal rights statutes, or proceed on terms

known to them: little control over the management of the corporation’s assets, but

a right to receive their proportional share of those assets in the event of future

dissolution and liquidation.       The nonprofit conversion statute expressly

contemplates this result, stating that when a conversion becomes effective,

“the shareholders are entitled only to the rights provided in the plan of nonprofit

conversion or to any [appraisal] rights they may have.” 13-C M.R.S. § 935(1)(E).
                                                                                                         15

         [¶24] This appraisal rights “compromise,” Model Bus. Corp. Act § 13.01

cmt. 1 (Am. Bar Ass’n 2008), means that in the face of a fundamental corporate

change, dissenting shareholders may choose to preserve the property rights they

hold in the corporation’s assets.                Absent noncompliance with the governing

statutes, fraud, or the like, however, they do not possess a statutory or other right to

veto a fundamental corporate change that has been approved by a majority of the

shareholders.6 See 13-C M.R.S. § 1341; Zimpritch, Maine Corporation Law &

Practice §§ 13.1 at 506-07, 13.7 at 525-26 (3d ed. 2015) (discussing the scope of

section 1341’s limitation on remedies other than appraisal).

                                         III. CONCLUSION

         [¶25] Neither section 601(1) nor the nonprofit conversion statute prohibits a

business corporation’s nonprofit conversion plan from reclassifying the

   6
       In 1862, the Massachusetts Supreme Judicial Court explained,

         [E]very person who becomes a member of a corporation aggregate by purchasing and
         holding shares agrees by necessary implication that he will be bound by all acts and
         proceedings . . . which shall be adopted or sanctioned by a vote of the majority of the
         corporation, duly taken and ascertained according to law. . . . A holder of shares in an
         incorporated body, so far as his individual rights and interests may be involved in the
         doings of the corporation, acting within the legitimate sphere of its corporate power, has
         no other legal control over them than that which he can exercise by his single vote in the
         meetings of the company. To this extent, he has parted with his personal right or privilege
         to regulate the disposition of that portion of his property which he has invested in the
         capital stock of the corporation, and surrendered it to the will of a majority of his fellow
         corporators.

Durfee v. Old Colony & Fall River R.R. Co., 87 Mass. (5 Allen) 230, 242 (Mass. 1862). See also
Inhabitants of Waldoborough v. Knox & Lincoln R.R. Co., 84 Me. 469, 471, 24 A. 942 (1892) (“When
there are differences of opinion, aggregate bodies . . . must act by majorities, or they can not act at all.
It is true that this doctrine subjects minorities to the will of majorities; but it is equally true that the
contrary doctrine subjects majorities to the will of minorities . . . .”).
16

corporation’s shares into membership classes with disparate rights. Because the

Tafts have not alleged facts that, viewed as admitted, make out a claim that SICO’s

conversion plan is invalid or that they are entitled to declaratory or injunctive

relief, the trial court correctly dismissed their complaint pursuant to M.R.

Civ. P. 12(b)(6).

        The entry is:

                           Judgment affirmed.



On the briefs:

        Albert G. Ayre, Esq., and John A. Turcotte, Esq., Ainsworth,
        Thelin & Raftice, P.A., South Portland, for appellants Nathalie
        Taft Andrews et al.

        Paul McDonald, Esq., and Eben M. Albert, Esq., Bernstein
        Shur, Portland, for appellee Sheepscot Island Company


At oral argument:

        John A. Turcotte, Esq., for appellants Nathalie Taft Andrews et
        al.

        Paul McDonald, Esq., for appellee Sheepscot Island Company



Business and Consumer Docket docket number CV-2015-6
FOR CLERK REFERENCE ONLY
