Jul 17

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

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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 §9-2-25(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.