July 17

When can you collect against the property of individual members of an unincorporated association in Georgia?

When you sue an unincorporated association in Georgia, “No such judgment shall be enforced against the individual property of any member of an unincorporated association unless the member has personally participated in the transaction for which the action was instituted and has been served with process as provided by law.” OCGA ยง9-2-25(d) [see Piney Grove Baptist Church v. Goss]. When the organization is formed for profit purposes, it is deemed a partnership in Georgia, and all members can be held liable for its debts. We will discuss non-profit organizations below.

As to non-profit associations, let’s break this code section (9-2-25) out further so it is easier to understand. In order to collect against an individual member, they should be served with process (and preferably named as a Defendant). Second, the individual must have personally participated in the transaction for which the action was instituted. What does it mean to personally participate in the transaction? There are not many cases to provide guidance in answering this question. Certainly, if an association member signed mortgage documents on behalf of the church, then they would have personally participated in the transaction. If the member assisted in the procurement or negotiation of the terms of the mortgage, then they likely have personally participated. What about if the member voted in favor of taking out the mortgage in question when the issue was put to a vote? I believe this would be considered participation, though I wouldn’t call it a slam dunk. Others have argued that even knowledge of the transaction without objecting to the transaction may be enough to hold a member liable. If you are a creditor of such an origination or church, naming as many members as feasible as defendants would increase your chances of collecting your judgment. Good record keeping may assist in your recovery. We would recommend listing the reasons why a particular member materially participated in the transactions directly in your Complaint.

This article also shows the dangers of becoming a member of an unincorporated association. The costs of forming a corporation or LLC are relatively low in relation to the risks involved in many of these transactions.

If you have any questions about this article, please contact David Stuart by email at jdavidstuart@stuartattorneys.com.

July 16

Can you sue an Unincorporated Association in Georgia?

Surprisingly to me, the answer to this question is YES! I had always thought that, as far as any unincorporated group goes, you could sue the principals of the group doing business as the group name. Turns out, you can sue the group directly . OCGA 9-2-25 states that “Actions may be maintained against and in the name of any unincorporated organization or association for any cause of action for or upon which the plaintiff therein may maintain such an action against the members of the organization or association.” The most common application of suing an unincorporated association are actions against religious groups and churches (there is apparently, I have learned, a significant group of people than think incorporating your church is ungodly), but there are other organizations out there that are not incorporated. We have found instances where title to real estate is held in the name of the unincorporated association, so naming this association as a defendant would allow us greater access to assets that may be used to pay a judgment. Of course, some courts charge an additional filing fee for an additional defendant, and every defendant still must be served with process, so you should make sure it is cost efficient to name an additional entity before moving forward. If you have any questions about this article, please contact David Stuart by email.

December 20

Veil Piercing

Most clients do not understand the costs and risks of pursuing a case to pierce the corporate veil.