GSNC

§ 59B-1. Short title.

This Chapter may be cited as the Uniform Unincorporated Nonprofit Association Act.

History

(2006-226, s. 1.)

NORTH CAROLINA COMMENT

This Chapter is based upon the Uniform Unincorporated Nonprofit Association Act (hereinafter "Uniform Act") and is the result of a study performed by the General Statutes Commission, partly due to S.L. 2004-161, s. 7.1. The Commission filed its report with the General Assembly on May 11, 2006.

Editor's Note. - Session Laws 2006-226, s. 7, provides: "The Revisor of Statutes shall cause to be printed along with this act all relevant portions of the official comments to the Uniform Unincorporated Nonprofit Association Act and all explanatory comments of the drafters of this act as the Revisor deems appropriate."

Permission to include the Official Comments was granted by the National Conference of Commissioners on Uniform State Laws and The American Law Institute. It is believed that the Official Comments will prove of value to the practitioner in understanding and applying the text of this Chapter.

The Official Comments appearing under individual sections in this Chapter have been printed by the publisher as received, without editorial change, and relate to the Chapter as originally enacted. However, not all sections in this Chapter may carry Official Comments. Furthermore, Official Comments may or may not have been received or updated in conjunction with subsequent amendments to this Chapter and, therefore, may not reflect all changes to the sections under which they appear.

Where they appear in this Chapter, "Amended Comment" usually means that an error in the original comment has been corrected by a subsequent amendment, and "Supplemental Comment" pertains to a later development, such as an amendment to the statute text. North Carolina Comments explain where the General Assembly has enacted variations to the text of the Uniform Act.

§ 59B-2. Definitions.

In this Chapter:

"Member" means a person who, under the rules or practices of a nonprofit association, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association.
"Nonprofit association" means an unincorporated organization, other than one created by a trust and other than a limited liability company, consisting of two or more members joined by mutual consent for a common, nonprofit purpose. However, joint tenancy, tenancy in common, or tenancy by the entireties does not by itself establish a nonprofit association, even if the co-owners share use of the property for a nonprofit purpose.
"Person" means an individual, corporation, limited liability company, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
"State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

With respect to relations external to a nonprofit association, whether a person is a member of the organization determines principally a member's responsibility to third parties. Internally, whether a person is a member might determine specified rights and responsibilities, including access to facilities, voting, and obligation to pay dues. This Act is concerned only with determining whether a person is a member for purposes of external relations, such as liabilities to third parties on a contract of the nonprofit association. Therefore, "member" is defined in terms appropriate to these purposes. "Member" includes a person who has sufficient right to participate in the affairs of a nonprofit association so that under common law the person would be considered a co-principal and so liable for contract and tort obligations of the nonprofit association.
A fund-raising device commonly used by many nonprofit organizations is the membership drive. In most cases the contributors are not members for purposes of this Act. They are not authorized to "participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy." Simply because an association calls a person a member does not make the person a member under this Act.
The role of a member in the affairs of an association is described as "may participate in the selection" instead of "may select or elect" the governing board and officers and 'may participate ... in the development of policy" instead of "may determine" policy. This accommodates the Act to a great variation in practices and organizational structures. For example, some nonprofit associations permit the president or chair to name some members of the governing board, such as by naming the chairs of principal committees who are designated ex officio members of the governing board. Similarly, the role in determination of policy is described in general terms. "Persons authorized to manage the affairs of the association" is used in the definition instead of president, executive director, officer, member of governing board, and the like. Given the wide variety of organizational structures of nonprofit associations to which this Act applies and the informality of some of them the more generic term is more appropriate.
"Person" instead of individual is used to make it clear that associations covered by this Act may have individuals, corporations, and other legal entities as members. Unincorporated nonprofit trade associations, for example, commonly have corporations as members. Some national and regional associations of local government officials and agencies have governmental units or agencies as members.
Paragraph (2) defines "nonprofit association." The model American Bar Association acts deal with both for-profit and nonprofit corporations. Unincorporated, for-profit organizations are largely covered by the uniform partnership acts. The differences between for-profit and nonprofit unincorporated organizations are so significant that it would be impractical to cover both in a single act. Therefore, this Act deals only with nonprofit organizations.
A charitable trust is a form of an unincorporated nonprofit legal organization. It is, however, not a nonprofit association within this Act. To the extent that trust law does not supply an answer to a legal problem concerning a charitable trust, a court could look to this Act to develop by analogy a common law answer.
The term "nonprofit association" is used instead of "association" for several reasons. The risk that this Act when placed in a state's code would be construed to apply to both nonprofit and for-profit associations should thus be avoided. Acts dealing with one kind of association when placed in a code have sometimes lost their identification and been inadvertently applied to the other kind where the term "association" alone was used. For example, the New York Joint-Stock Association Act of 1894 used the term "association," which it defined to include only for-profit organizations. "Association" was held in 1938 to include an unincorporated political party and the act applied to it. Richmond County v. Democratic Organization of Richmond County, 1 NYS 2d 349 (1938). Subsequent decisions applied the act to other unincorporated nonprofit organizations. The use of "nonprofit association" instead of merely "association" should also avoid the risk of this Act being improperly used to develop a common law rule by analogy from this Act to apply in a case involving a for-profit association. Roscoe Pound, Common Law and Legislation, 21 Harv. L. Rev. 383 (1908); Robert F. Williams, Statutes as Sources of Law Beyond their Terms in Common Law Cases, 50 Geo. Wash. L. Rev. 554 (1982).Legal issues concerning unincorporated for-profit associations that are not partnerships and so not controlled by a partnership act would be governed by a State's other statutory or common law. Resort to one of the two partnership acts for the purposes of developing a common law rule by analogy would be appropriate. Resort for this purpose to this Act in the case of an unincorporated for-profit association would not be appropriate.
Two or more persons is the common statutory requirement to constitute an unincorporated nonprofit association. New Jersey, on the other hand, requires that there be seven or more members to be an association under its laws. This Act suggests the smaller number - two. Consideration was given to specifying "one" instead of "two." For example, the developer of a condominium may have created a condominium association as an unincorporated nonprofit association. Before any units are sold the developer as owner of all units has all of the memberships in the association. Should it be treated as a nonprofit association under this Act from the beginning? It should not. Can one person be "joined by mutual consent for a common purpose?" To ask the question would seem to be to answer it. If the concern is to give the developer the entity protections provided by this Act, it is very likely that it already has some protection because it is a business corporation. Nevertheless, the number is placed in brackets, in part, to raise the question whether the number should be one or two or even a larger number.
"Nonprofit" is not defined. A common definition - it is an association whose net gains do not inure to the benefit of its members and which makes no distribution to its members, except on dissolution - does not work for all nonprofit associations. Consumer cooperatives, for example, make distributions to their members; but they are not for-profit organizations. Those consumer cooperatives not organized under specific state or federal laws need the benefits of this Act.
The final sentence of paragraph (2) is adapted from Section 201(d)(1) of Uniform Partnership Act (1994). This stresses that more than common ownership and use is required. For example, that three families own a lake cottage and share its use does not make the three families a nonprofit association. Paragraph (2) precludes arrangements that are merely common ownership from being a nonprofit association under this Act.
The definition of "person" in paragraph (3) is a standard NCCUSL definition.
The definition of "State" in paragraph (4) is a standard NCCUSL definition.

The definition may reach somewhat beyond decisions of some courts. Either participation in the selection of the leadership or in the development of policy is enough. Both are not required. This broad definition of member ensures that the insulation from liability is provided in all cases in which the common law might have imposed liability on a person, simply because the person was a member.

Section 6 [G.S. 59B-7] nevertheless protects "a person considered to be a member by a nonprofit association" even though the person is not within the definition of member in paragraph (1) [see North Carolina Comment to G.S. 59B-7].

The members must be joined together for a common purpose. Several States provide that they be "joined together for a stated common purpose" (emphasis added). Because of the informality of many ad hoc associations, it is prudent not to impose the requirement that the common purpose be "stated." Very probably, it is the small, informal, ad hoc associations and those third parties affected by them that most need this Act.

It is instructive to note that the drafting committee for the ABA Model Nonprofit Corporation Act finally determined that it could not develop a satisfactory definition of nonprofit. Instead, the act contains rules, regulations, and procedures applicable separately to each of the three kinds of nonprofit corporation - public benefit, mutual benefit, and religious. It does not define the three kinds; it described what they can do and how they may function. Considering the corporation's intended activities and the rules, regulations, and procedures applicable to each of the three different kinds of corporations, a choice is made. Having made a choice, the corporation is bound by the rules, regulations, and procedures prescribed for the kind of nonprofit corporation chosen.

NORTH CAROLINA COMMENT

In subdivision (2), the General Statutes Commission added "and other than a limited liability company" to exclude limited liability companies from the Uniform Act's definition of "nonprofit association." In subdivision (3), the Commission added "limited liability company" to expressly include limited liability companies in the Uniform Act's definition of "person."

§ 59B-3. Supplementary general principles of law and equity.

Principles of law and equity supplement this Chapter unless displaced by a particular provision of it.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

This section is adapted from Uniform Commercial Code Section 1-103[(b)]. The reference in Section 1-103[(b)] to "the law merchant" and its examples of supplementary rules, such as those of principal and agent and estoppel, were deleted as irrelevant or incomplete and unnecessary. This change in language does not manifest any change in substance.
This Act contains no rules concerning governance. However, recourse to rules of governance must be had to apply some of the Act's rules. For example, whether a nonprofit association is liable under a contract made for it by an individual depends on whether the individual had the necessary authority to act as agent. Was the individual given the authority by someone empowered by the nonprofit association to give the authority? To decide a case like this a court must resort to the rules of the nonprofit association or, if there are none applicable or none at all, to the common law or other statutory law of the jurisdiction.
Efforts were made to develop default internal rules of governance - applicable if an association had none or none that were applicable. This effort demonstrated the complexity and difficulty of fashioning rules that would reasonably fit a wide variety of nonprofit associations - large and small, public benefit, mutual benefit, and religious, and of short and indefinite duration. It was thought best to leave this question to other law of the jurisdiction.

§ 59B-4. Title to property; choice of law.

Real and personal property in this State may be acquired, held, encumbered, and transferred by a nonprofit association, whether or not the nonprofit association or a member has any other relationship to this State.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

This section is consistent with Restatement (Second) of Conflict of Laws Section 223 (1971). Section 3 makes a conveyance or devise of land located in a State that has adopted this Act effective even though it would not be effective under the law of the State in which the nonprofit association has its principal office or other significant relationship. No relationship of the nonprofit association other than that the property is situated in the State is required.

NORTH CAROLINA COMMENT

The General Statutes Commission replaced the Uniform Act's catchline "Territorial application" with "Title to property; choice of law" as more descriptive.

CASE NOTES

Church Trustees' Standing In Quiet Title Suit. - Trustees of a church allegedly merged into a successor had standing to bring a quiet title suit against the successor because the trustees' assertion of property rights on behalf of a non-incorporated religious organization only depended on the successor's failure to obtain the consent of all trustees to transfer church property. Burns v. Kingdom Impact Global Ministries, Inc., 251 N.C. App. 724, 797 S.E.2d 21 (2017).

§ 59B-5. Real and personal property; nonprofit association as devisee or beneficiary.

A nonprofit association is a legal entity separate from its members for the purposes of acquiring, holding, encumbering, and transferring real and personal property.
A nonprofit association, in its name, may acquire, hold, encumber, or transfer an estate or interest in real or personal property.
A nonprofit association may be a beneficiary of a trust or contract or a devisee.
Any judgments and executions against a nonprofit association bind its real and personal property in like manner as if it were incorporated.

History

(2006-226, s. 1; 2011-284, s. 59.)

OFFICIAL COMMENT

Subsection (a) makes a nonprofit association a legal entity separate from its members for purposes of its dealing with real and personal property. This reverses the common law view that a non-profit association was not a legal entity.
Subsection (b) is based on Section 3-102(8), Uniform Common Interest Act. It reverses the common law rule. Inasmuch as an unincorporated nonprofit association was not a legal entity at common law, it could not acquire, hold, or convey real or personal property. Harold J. Ford, Unincorporated Non-Profit Associations, 1-45 (Oxford Univ. Press (1959); 15 A.L.R. 2d 1451 (1951); Warburton, The Holding of Property by Unincorporated Associations, Conveyancer 318 (September-October 1985).
This strict common law rule has been modified in various ways in most jurisdictions by courts and statutes. For example, courts have held that a gift by will or inter vivos transfer of real property to a nonprofit association is not effective to vest title in the nonprofit association but is effective to vest title in the officers of the association to hold as trustees for the members of the association. Matter of Anderson's Estate, 571 P. 2d 880 (Okla. App. 1977).
Even if a nonprofit association's governing documents provide that it "may not acquire real property," subsection (b) makes effective a transfer of Blackacre to the association. A different result would obviously disrupt real estate titles. The remedy for this violation of internal rules lies not in preventing title from passing but, as with other organizations, in an action by members against their association and its appropriate officers to undo the transaction.
Subsection (c) is a necessary corollary of subsection (b) and, thus, it may be unnecessary. However, several States expressly provide that an unincorporated, nonprofit association may be a legatee, devisee, or beneficiary. See, for example, Md. Estates & Trusts Code Ann. Section 4-301 (1991). Therefore, it is desirable to continue this as an express rule. Subsection (c) applies to both trusts and contracts. Not all state statutes apply expressly to both.

A New York statute specifies that a grant by will of real or personal property to an unincorporated association is effective if within three years after probate of the will the association incorporates. McKinney's N.Y. Estates, Powers, & Trust Law, Section 3-1.3 (1981).

California gives any "unincorporated society or association and every lodge or branch of any such association, and any labor organization" full right to acquire, hold, or transfer any "real estate and other property as may be necessary for the business purposes and objects of the society," and acquire and hold any property not so necessary for 10 years. California Corporations Code, Title 3, Unincorporated Associations, Section 20001 (West 1991).

As is the case with many of the problems created by the view that an unincorporated association is not an entity the statutory solutions are often partial - limited to special circumstances and associations. Subsection (b) solves this problem for all nonprofit associations, for all kinds of transactions, and for both real and personal property.

NORTH CAROLINA COMMENT

The General Statutes Commission placed "in its name" in commas in subsection (b) and added subsection (d), which was adapted from G.S. 1-69.1. Subsection (b) is consistent with the provisions of former G.S. 39-24 and former G.S. 39-25.

Effect of Amendments. - Session Laws 2011-284, s. 59, effective June 24, 2011, deleted "legatee" preceding "devisee" in the section catchline; and, in subsection (c), deleted "a legatee" following "contract" and made minor punctuation changes.

CASE NOTES

§ 59B-6. Statement of authority as to real property.

A nonprofit association may execute and record a statement of authority to transfer an estate or interest in real property in the name of the nonprofit association.
An estate or interest in real property in the name of a nonprofit association may be transferred by a person so authorized in a statement of authority recorded in the office of the register of deeds in the county in which a transfer of the property would be recorded.
A statement of authority must be set forth in a document styled "affidavit" that contains all of the following:
1. The name of the nonprofit association.
2. Reserved for future codification purposes.
3. The street address, and the mailing address if different from the street address, of the nonprofit association, and the county in which it is located, or, if the nonprofit association does not have an address in this State, its address out-of-state.
4. That the association is an unincorporated nonprofit association.
5. The name or office of a person authorized to transfer an estate or interest in real property held in the name of the nonprofit association.
6. That the association has duly authorized the member or agent executing the statement to do so.
A statement of authority must be sworn to and subscribed in the same manner as an affidavit by a member or agent who is not the person authorized to transfer the estate or interest.
The register of deeds shall collect a fee for recording a statement of authority in the amount authorized by G.S. 161-10(a)(1). The register of deeds shall index the name of the nonprofit association and the member or agent signing the statement of authority or any subsequent document relating thereto as Grantor and the name of the appointee as Grantee.
An amendment, including a termination, of a statement of authority must meet the requirements for execution and recording of an original statement. Unless terminated earlier, a recorded statement of authority or its most recent amendment expires by operation of law five years after the date of the most recent recording.
If the record title to real property is in the name of a nonprofit association and the statement of authority is recorded in the office of the register of deeds in the county in which a transfer of real property would be recorded, the authority of the person or officer named in a statement of authority is conclusive in favor of a person who gives value without notice that the person or officer lacks authority.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

This section is based on Uniform Partnership Act(1994) Section 303. California Corporations Code, Title 3, Unincorporated Associations, Section 20002 (West 1991), is similar.
A statement of authority need not be filed to conclude an acquisition of or to hold real property. It is concerned only with the sale, lease, encumbrance, and other transfer of an estate or interest in real property. For this, it should, but need not, be filed. The filing provides important documentation.
Inasmuch as the statement relates to the authority of a person to act for the association in transferring real property, subsection (b) requires that the statement be filed or recorded in the officer where a transfer of the real property would be filed or recorded. This is usually the county in which the real estate is situated. This is where a title search concerning the real estate would be conducted. Uniform Partnership Act (1994) Section 303 provides for central filing, such as with the Secretary of State, but its statement of partnership authority concerns authority of partners generally, not just with respect to real estate.
"Filed" and "recorded" are bracketed to direct an enacting State to choose. In most jurisdictions "recorded" will be the appropriate choice.
Subsection (c)(2) [not enacted in North Carolina] deals with the problem caused by the similarity of names of small local nonprofit associations. There is no duplication of federal tax identification numbers. Therefore, any confusion of identity is avoided by this requirement.
Subsection (c)(5) permits the statement to identify as the person who can act for the association one who holds a particular office, such as president. This designation relieves the association from the need to make additional filings on each change of officers. Under local title standards and practices the transferee and filing or recording office are likely to require a certificate of incumbency if the statement designates the holder of an office.
Subsection (d) is designed to reduce the risk of fraud and to reflect law and practice applicable to other organizations. It requires someone other than the person authorized to deal with the real property to execute the statement of authority on behalf of the nonprofit association. Whether the formalities of execution must conform to those of a deed or an affidavit is left for each State to determine.
Subsection (f) makes a statement inoperative five years after its most recent recording or filing. This prevents a statement whose recording or filing is unknown by the association's current leadership from being effective. Reliance on a filing or recording this old is, in effect, not in good faith.
Subsection (g) is based on Uniform Partnership Act (1994) Section 303(h). Its obvious purpose is to protect good faith purchasers for value without notice who rely on the statement, including those who acquire a security interest in the real property. If the required signatures on the statement, deed, or both are forgeries, the effect of them is not governed by Section 5(g). Instead, Section 2 applies and would invoke the other law of the State. In many States the deed would be a nullity. See Boyer, Hovenkamp, and Kurtz, THE LAW OF PROPERTY, An Introductory Survey (West Pub. Co. 4th ed. 1991).

Subsection (c)(3) may present a problem for small, ad-hoc nonprofit associations. They may have no fixed office address. They may meet in the homes of their leaders. However, if they distribute literature or file petitions they are likely to have a mailing address.

Subsection (c)(4) informs those relying on the statement of the precise character of the organization. Knowing that the organization is an unincorporated nonprofit association may cause the person dealing with the organization to act differently.

NORTH CAROLINA COMMENT

The General Statutes Commission inserted "of the register of deeds" in subsection (b) to identify the office in which a transfer of real property would be recorded.

The Commission made several changes in subsection (c). To assist the registers of deeds, the Commission modified the introductory language of the subsection by requiring a statement of authority to be set out in a document entitled "affidavit." The Commission deleted subdivision (2) (the Uniform Act's requirement for a federal tax identification number) due to concerns over identity theft and the belief that the requirement was not useful in any event. In subdivision (3), the Commission conformed the requirement for an address, in part, to similar requirements in this State's statutes regulating other entities. In subdivision (5), the Commission changed "title" to "office" in light of the references to "officer" in subsection (g) and G.S. 59B-13. The Commission added subdivision (6).

The Commission modified subsection (d) by requiring a statement of authority to be sworn to and subscribed in the same manner as an affidavit and by narrowing the subsection to specify execution by a "member or agent" rather than a "person."

In subsection (e), the Commission identified the officer authorized to collect the fee for recording a statement of authority, made the collection of the fee mandatory rather than permissive, inserted the cross-reference to the recording fee "authorized by G.S. 161-10(a)(1)," and added indexing instructions.

In subsection (f), the Commission replaced the Uniform Act's references to "cancellation," "cancelled," and "is cancelled" with "termination," "terminated," and "expires."

In subsection (g), the Commission inserted the reference to the "register of deeds" to identify the office in which a transfer of real property would be recorded and added "or officer" for more precision.

CASE NOTES

Controlling Effect of G.S. 1-69.1. - This section was enacted in 1939. The amendment to G.S. 1-69.1, which added the requirement of an allegation of G.S. 66-68 (repealed) recordation before suit may be brought by an unincorporated association in its common name, was enacted effective 1 October 1975. In the face of any irreconcilable conflict between the provisions of these two statutes, G.S. 1-69.1, being the later enactment, will control or be regarded as a qualification of the earlier statute. Cherokee Home Demonstration Club v. Oxendine, 100 N.C. App. 622, 397 S.E.2d 643 (1990).

Requirements of G.S. 1-69.1 are mandatory and failure to satisfy them is not exonerated by this section. Cherokee Home Demonstration Club v. Oxendine, 100 N.C. App. 622, 397 S.E.2d 643 (1990).

§ 59B-7. Liability of members or other persons.

A nonprofit association is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities.
A person is not liable for the contract, tort, or other obligations of a nonprofit association merely because the person is a member, is authorized to participate in the management of the affairs of the nonprofit association, or is referred to as a "member" by the nonprofit association.
Reserved for future codification purposes.
A tortious act or omission of a member or other person for which a nonprofit association is liable is not imputed to a person merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is referred to as a "member" by the nonprofit association.
A member of, or a person referred to as a "member" by, a nonprofit association may assert a claim against or on behalf of the nonprofit association. A nonprofit association may assert a claim against a member or a person referred to as a "member" by the nonprofit association.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

At common law a nonprofit association was not a legal entity separate from its members. Borrowing from the law of partnership, the common law viewed a nonprofit association as an aggregate of its members. The members are co-principals. Subsection (a) changes that. It makes a nonprofit association a legal entity separate from its members for purposes of contract and tort.
This Act does not deal with liability of members or other persons acting for a nonprofit association for their own conduct. With respect to contract and tort Section 6 leaves that to the other law of the jurisdiction enacting this Act.
Subsections (b) through (e) are applications to common cases of the basic principle in subsection (a). Because a nonprofit association is made a separate legal entity, its members are not co-principals. Consequently they are not liable on contracts or for torts for which the association is liable. Subsection (b) specifies that result with respect to contracts.
Subsection (b) applies the principle in subsection (a) to relieve members and others from vicarious liability for the contracts of a nonprofit association.
Subsections (a) and (b) eliminate a risk that existed under common law. An agent makes an implied warranty of authority to the other contracting party. If the purported principal does not exist, the agent obviously breaches the warranty. Because an unincorporated nonprofit association was not a legal entity; one purporting to act for it breached this implied warranty. Smith & Edwards v. Golden Spike Little League, 577 P. 2d 132, 134 (Utah 1978). Subsection (b) treats a nonprofit association as a legal entity; therefore, an agent who acts for it within her authority does not breach the warranty.

6. "Merely" because a person is a member does not make the person liable on an association's contract. This formulation means that there are special circumstances that may result in liability. For example, a member may expressly become a party to a contract with the nonprofit association. Subsection (b) relieves members only of their vicarious liability. Liability for one's own conduct is left to the other law of the jurisdiction.

An agent with authority from a nonprofit association who negotiates a contract without disclosing the agent's representative status is liable on the contract. Under agency law an agent acting within the agent's scope of authority for an undisclosed or partially disclosed principal is personally liable on the contract along with the principal, unless the other contracting party agrees not to hold the agent liable. Restatement (Second) Of Agency 320-322; Reuschlein and Gregory, Agency & Partnership 161-163 (West 2d ed. 1990).

Courts have pierced the corporate veil of nonprofit corporations. Comment, Piercing the Nonprofit Corporation Veil, 66 Marq. L. Rev. 134 (1984). Section 6 makes a nonprofit association a legal entity for these purposes. Therefore, as a matter of its other law a jurisdiction enacting this Act may appropriately apply this doctrine to a nonprofit association. In Macaluso v. Jenkins , 95 Ill. App. 3d 461, 420 N.E.2d 251 (1981), the president of a nonprofit corporation was found to have so commingled its funds and assets with his own and those of a business corporation he controlled and have treated them as his own for his benefit that the corporate veil must be pierced to promote justice. He was found liable for a debt contracted in the name of the nonprofit corporation. See also Harry G. Henn & John R. Alexander, Law of Corporations , pp 344-352 (West 3d ed. 1983); Alfred F. Conard, Corporations in Perspective , pp 424-433 (Foundation Press, 1976).

7. An example of a partial statutory solution of members' liability for contracts of a nonprofit association is California Corporations Code, Title 3, Nonprofit Associations, Section 21100 (West 1991). It relieves members from liability for "debts or liabilities contracted or incurred by the association in the acquisition of lands or leases or the purchase, leasing, designing, planning, architectural supervision, erection, contraction, repair, or furnishing of buildings or other structures, to be used for purposes of the association." As noted earlier, partial and uncoordinated statutory solutions of common law problems are typical.

8. Subsection (c) [combined in this section into subsection (b)] applies the principle in subsection (a) to relieve members and others from liability for torts for which the nonprofit association is liable. Inasmuch as Section 6 [this section] provides that a member is not a co-principal, the member cannot be considered to be an employer of the employee who committed the tort. Again, only relief from vicarious liability is provided.

Liability of a member or other person who acts for the nonprofit association is governed by other law of the jurisdiction. That an employer is liable for a tort committed by its employee does not excuse the employee.

9. The immunity from vicarious liability provided by subsections (b) and (c) [combined in this section into subsection (b)] does not depend on the remedy sought. Whether it is for damages for breach of contract or tort, unjust enrichment, or the like the immunity is provided.

10. Since the mid 1980's all States have enacted laws providing officers, board members, and other volunteers some protection from liability for their own negligence. The statutes vary greatly as to who is covered, for what conduct protection is given, and the conditions imposed for the freedom from liability. Some apply only to nonprofit corporations. State Liability Laws for Charitable Organizations and Volunteers (Nonprofit Risk Management & Insurance Institute, 1990); Developments, Nonprofit Corporations, 105 Harv. L. Rev. 1578, 1685-1696 (1992). This means that members and volunteers involved with unincorporated nonprofit associations do not obtain protection under those state statutes."

The 1987 Texas act, for example, relieves directors, officers, and other volunteers from liability for simple negligence that causes death, damage, or injury if the volunteer acted in the scope of her duties for a charitable organization exempt under Internal Revenue Code Section 501(c)(3) or (4). The act also limits the amounts that may be recovered from an employee or the organization if the organization carries requisite liability insurance. The constitutionality of the provision relieving volunteers from liability has been questioned under Article I, Section 13 of the Texas Constitution - the Open Courts provision. Note, The Constitutionality of the Charitable Immunity and Liability Act 1987, 40 Baylor L. Rev. 657 (1988). Some statutes premise all relief upon the organization having specified liability insurance.

Section 6 [this section] does not affect these statutes. As noted earlier Section 6 [this section] deals only with vicarious liability. These statutes concern liability for one's own conduct.

11. Although not a concern of Section 6 [this section], perhaps it should be noted that nonprofit organizations have been held liable for tortious acts and omissions not only of employees but also of members. In Guyton v. Howard, 525 So. 2d 918 (Fl. App. 1988) a nonprofit organization was held liable for the negligence of members who acted for the organization in conducting an initiation that resulted in injury.

12. Subsection (d) applies the principle in subsection (a) to reverse the common law rule that the negligence of an employee of an association is imputed to its members. A member as co-principal was vicariously responsible for an employee's conduct within the scope of the employee's duties. Section 6, however, makes the nonprofit association a legal entity. Thus, a member is not a co-principal and the employee's negligence is not imputed to a member.

Because the employee's negligence is not imputed, the member's suit against the nonprofit association for negligence by the employee is not subject to the defense of contributory negligence.

Some courts treated large nonprofit associations as entities for some purposes and so did not impute the negligence of an employee to a member. Therefore, a member could recover from the association. Marshall v. International Longshoreman's and Warehouseman's Union , 57 Cal. 2d 781, 371 p. 2d 987 (1962); Judson A. Crane, Liability of an Unincorporated Association for Tortious Injury to a Member , 16 Vand L Rev 319, 323 (1963).

13. Subsection (e) applies the principle in subsection (a) to reverse the common law rule that a member may not sue the member's unincorporated nonprofit association. A member as co-principal is logically a defendant as well as a plaintiff in such an action. The logic is that one may not sue oneself.

Subsection (a) makes an unincorporated nonprofit a legal entity. Therefore, a member is separate from the nonprofit association. There is thus no logical obstacle to either suing the other. A nonprofit association may, for example, sue a member for delinquent dues. See, for example, Section 6.13 ABA Nonprofit Corporation Act (1987)

14. The Texas Supreme Court recently overruled the common law rule and held that a member may sue the unincorporated nonprofit association of which the person is a member. Cox v. Thee Evergreen Church , 836 S.W.2d 167 (Tex. 1992). The court also overturned the Texas common law rule that the negligence of an employee is imputed to a member. The court referred to a statute authorizing a nonprofit association to sue and be sued and other Texas statutes giving entity status for limited purposes to unincorporated nonprofit associations. It did not, however, rely on them in overturning the historic common law rule. It simply found the old rule not suitable for present times. The court also followed recent developments in other courts.

15. Section 6 [this section] relieves from vicarious liability not only members but also certain others. Persons who are "authorized to participate in the management of the affairs of the nonprofit association" are protected. Persons within this group - largely directors and officers, however denominated - are likely also to be members as defined in Section 1(1) [G.S. 59B-2(1)], and protected as such. If they are not members (i.e., not co-principals) they should not be found liable at common law. Section 6 [this section] extends protection to this group out of abundant caution. It is possible that a court might misapply the common law rationale for liability to hold a non-member manager vicariously liable. Section 6 [this section] prevents that somewhat remote possibility.

Section 6 [this section] also extends protection to a person who is not within the definition of "member" in Section 1(1) [G.S. 59B-2(1)] but is "considered to be a member by the nonprofit association." [see North Carolina Comment.] A person within this clause is one who does not have the relationship to the nonprofit association that would permit a finding under the common law that the person is a co-principal. Also the person is not a director, officer, or manager within the preceding phrase. That a person not within the two preceding phrases but within the third phrase might be found vicariously liable seems quite remote. Nevertheless, Section 6 [this section] accords this person protection.

As noted earlier, Section 6 [this section] concerns vicarious liability only. Liability for one's own conduct is covered by other law of the enacting jurisdiction.

NORTH CAROLINA COMMENT

The Uniform Act in this section provides protection for a nonprofit association's members from tort and contract liability based solely on membership status. The General Statutes Commission extended this protection to cover liability based solely on membership status for the nonprofit association's other legal obligations, such as taxes and penalties. The Commission restructured the section in the process.

Throughout this section, the Commission substituted the phrase "person referred to as a member" for the Uniform Act's phrase "person considered to be a member" to eliminate possible ambiguity created by the use of the word "consider." As the Official Comment makes clear, the phrase was intended to refer to persons who do not meet the definition of "member" but are referred to by the nonprofit association as "members" to recognize their contributions (such as a financial donation) to the association.

In subsection (e), the Commission expanded the Uniform Act's provision by changing "a claim against the nonprofit association" to "a claim against or on behalf of the nonprofit association."

§ 59B-8. Capacity to assert and defend; standing.

A nonprofit association, in its name, may institute, defend, intervene, or participate in a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or any other form of alternative dispute resolution.
A nonprofit association may assert a claim in its name on behalf of its members or persons referred to as "members" by the nonprofit association if one or more of them have standing to assert a claim in their own right, the interests the nonprofit association seeks to protect are germane to its purposes, and neither the claim asserted nor the relief requested requires the participation of a member or a person referred to as a "member" by the nonprofit association.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

Subsection (a) broadly recognizes the right of a nonprofit association to participate as an entity in judicial, administrative, and governmental proceedings, and in arbitration and mediation on behalf of it and its members. It may sue and be sued. Many States have enacted statutes granting unincorporated associations these rights. Many have rejected the argument that these acts made an unincorporated nonprofit association a separate legal entity for other purposes.
Ohio Rev. Code Ann. Section 1745.01 (Baldwin 1991) provides that an unincorporated association may "sue or be sued as an entity under the name by which it is commonly known and called." This formulation has an element that subsection (a) does not have - a description of the association name to be used. Maryland requires that the unincorporated association have a "group name." Md. Estates & Trust Code Ann. Section 6-406(a) - (1991). As some of the informal nonprofit associations may not have fixed on a name but need the benefit of the rule, subsection (a) does not require that it have a name.
Subsection (b) describes an association's standing to represent the interests of its members in the proceeding. It is the federal standing rule. Hunt v. Washington Apple Advertising Commn, 432 U.S. 333, 343, 97 S. Ct. 2434, 53, L. Ed. 2d 383 (1977). A nonprofit association must meet the three requirements only if it seeks to represent the interest of its members. If the suit concerns only the nonprofit association's interests, subsection (b) does not apply.
If participation of individual members is required, the nonprofit association does not have standing. If the injury for which a claim is made or the remedy sought is different for different members, their participation through testimony and presenting other evidence is required. The typical case in which a nonprofit association has standing is where it seeks only a declaration, injunction, or some form of prospective relief for injury to its members. Warth v. Seldin, 422 U.S. 490, 515, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975).
Subsection (b) does not require the nonprofit association to show that it suffered harm or has some interest to protect to have standing to represent the interests of its members. Warth v. Seldin, 422 U.S. 490, 511 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975). Some States require an association to have an interest to protect which is separate from that of its members. One court found that the probable loss of members if it did not take action on their behalf was a sufficient interest to protect to give it standing to represent its members. This approach certainly diminishes greatly the burden of satisfying the requirement. States have further modified the old standing rule. Recently many States have adopted the three-pronged federal rule, which is the rule in subsection (b).

This section does not re-state rules of joinder because they will be governed by the jurisdiction's other law.

NORTH CAROLINA COMMENT

Subsection (a) replaces G.S. 1-69.1 for nonprofit associations.

In subsection (b), the General Statutes Commission added the references to persons referred to as "members" by the nonprofit association.

§ 59B-9. Effect of judgment or order.

A judgment or order against a nonprofit association is not by itself a judgment or order against a member, a person referred to as a "member" by the nonprofit association, or a person authorized to participate in the management of the affairs of the nonprofit association.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

This section is consistent with Restatement (Second) of Judgments, Section 61(2), which provides: "If under applicable law an unincorporated association is treated as a jural entity distinct from its members, a judgment for or against the association has the same effects with respect to the association and its members as a judgment for or against a corporation . . . ."
Section 8 [this section] applies not only to judgment[s] but also to orders, such as an award rendered in arbitration or an injunction.
Section 8 [this section] reverses the common law rule. Under the common law's aggregate view of an unincorporated association, members, as co-principals, were individually liable for obligations of the association.
Some States changed the common law rule by statute. Ohio, for example, provides that the property of an unincorporated association is subject to judgment, execution, and other process and that a money judgment against the association may be "enforced only against the association as an entity" and not "against a member." Ohio Rev. Code Ann., Section 1745.02 (Baldwin 1991).
That a judgment against a nonprofit association is also not a judgment against one authorized to manage the affairs of the association recognizes fully the entity status of a nonprofit association.
An obvious corollary of this section is that a judgment against a nonprofit association may not be satisfied against a member unless there is also a judgment against the member.

NORTH CAROLINA COMMENT

The General Statutes Commission added the reference to a person referred to as a "member" by a nonprofit association.

§ 59B-10. Disposition of personal property of inactive nonprofit association.

If a nonprofit association has been inactive for three years or longer, or a different period specified in a document of the nonprofit association, a person in possession or control of personal property of the nonprofit association may transfer custody of the property:

If a document of the nonprofit association or document of gift specifies a person to whom transfer is to be made under these circumstances, to that person; or
If no person is so specified, to a nonprofit association, nonprofit corporation, or other nonprofit entity pursuing broadly similar purposes, or to a government or governmental subdivision, agency, or instrumentality.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

Section 9 [this section] is not a dissolution rule. An inactive nonprofit association may not be one that has dissolved. It may have just stopped functioning and have taken no formal steps to dissolve. It might possibly be revived.
"Inactive" is not defined. A nonprofit association that has accomplished its purpose, such as seeking approval in a school bond election, is very likely inactive. A nonprofit association that has stopped pursuing its purposes, collecting dues, holding elections of officers and board members, and conducting meetings, and has no employees would seem to be inactive.
Section 9 [this section] applies only to personal property - tangible and intangible. Unclaimed property acts also apply to both kinds of personal property. All States have some form of unclaimed property act. Therefore, the relationship of these acts to this Act must be examined.
It is the custody of and not the title to the property that is transferred. To whatever purpose the property was dedicated while in the hands of the transferor, it remains so dedicated in the hands of the transferee. Identification of the persons to whom the property may be transferred and cy pres principles recognize that the purpose to which the transferee may put the property need not be precisely that to which it was initially dedicated. For example, the initial purpose may no longer be viable.
Section 9 [this section] does not address what should be done with real property of an inactive nonprofit association. This seems justified. A nonprofit association owning real property of significant value is unlikely to become inactive. In the rare case that it does, the assistance of a court may be obtained in making appropriate disposition of the real property, primarily to ensure good title.
To obtain a Section 501(c)(3) tax classification as a nonprofit association an association must specify a distribution of assets on dissolution that satisfies the Internal Revenue Code. To avoid the interpretation that Section 9 might be construed to override an approved distribution provision in an association's governing document the primacy of that distribution provision is expressly recognized in paragraph (1).
If there is no bylaw or other controlling document the person may transfer the custody of the personal property to another nonprofit organization or a government or governmental entity. The nonprofit organization need not have the same nonprofit purpose as the inactive one. It is enough that the transferee's purpose is "broadly similar." This requirement should not be construed narrowly. Otherwise, the risk of potential litigation over the transferor's choice will frustrate the section's purpose to provide a safe harbor.
Inasmuch as the transfer is made without consideration and the association almost certainly rendered insolvent, creditors of a nonprofit association would be protected by the Uniform Fraudulent Transfer Act Sections 4(a) and 5 [G.S. 39-23.4(a) and G.S. 39-23.5] and similar statutes. Whether they would also be protected if the transfer is made to the administrator of an unclaimed property statute depends on the terms of a jurisdiction's act. Uniform Unclaimed Property Act (1981) Sections 20 and 24 contemplate that a creditor may proceed against property in the hands of the administrator if the creditor claims an interest in the property, such as a security interest or judgment lien. It is less clear that Section 15 of the 1995 Act recognizes this action. However, a general creditor without some claim against the property would not be protected. It is unlikely that an inactive nonprofit association would have both unpaid creditors and a significant amount of property. Therefore, the two issues discussed above are unlikely to arise.
The person in possession or control is not required to give notice of the proposed transfer to anyone. An examination of to whom notice might reasonably be given reveals the difficulty with such a requirement. Almost by definition an inactive nonprofit association has no current members.

Section 9 [this section] gives a person in possession or control of personal property of a nonprofit association an opportunity to be relieved of responsibility for it. Compliance with the section provides a safe harbor.

"Inactive" does not describe a nonprofit association whose sole purpose is to act should a specific problem arise. That there has been no activity because the problem has not arisen does not make the standby organization "inactive."

A three year period of inactivity is suggested. It is unlikely that a nonprofit association that has been inactive for that period will begin functioning again. Thus, it is prudent to transfer custody of its assets to someone likely to make appropriate use of them. While it is unlikely that a nonprofit association would deal with this issue, if its document does provide a shorter or longer period, that period governs.

The Uniform Unclaimed Property Act (1995) applies to certain intangible and tangible personal property. If the property has been unclaimed by the owner for five or more years it is presumed abandoned. Intangible property, such as checking and savings accounts and uncollected dividends, is the main concern of these Acts. The obligor, such as a bank or other financial institution and corporation, is directed to report and turn over the property to the state administrator.

The only tangible personal property to which the Uniform Unclaimed Property Act (1995) applies, according to Section 3, is that in "a safe deposit box or any other safekeeping repository." Many States have additional statutes that apply to property abandoned in airport, bus, and railroad lockers and the like. Tangible personal property of an inactive nonprofit association in the control or possession of a member or other person is not likely to be in these places. Therefore, overlap of this Act with the other state acts with respect to tangible personal property is likely to be very limited.

Property of an inactive nonprofit association is likely to be in the possession or control of a former member, board member, officer, or employee. Especially with respect to intangible property, their relation to the property is unlike that of those regulated by the unclaimed property acts. They are custodians or fiduciaries and not obligors. Those upon whom duties are imposed by the unclaimed property acts are obligors on such intangible property as bank accounts, money orders, life insurance policies, and utility deposits. The person acting under Section 9 is very unlikely to be in the position of an obligor on such intangible property. In summary, there appears to be limited overlap.

Other special statutes may apply, such as laws governing unexpended campaign funds. Texas, for example, permits a person to retain political contributions for six years after the person is no longer an office-holder or candidate. It gives the person six choices of transferees, including a "recognized tax exempt charitable organization formed for educational, religious or scientific purposes." Tex. Code Ann. Elections Section 251.012(d) and (e) (Vernon's 1986). Minnesota provides that if an unincorporated religious society "ceases to exist or to maintain its organization" title to its real and personal property vests in the "next higher governing or supervisory" body of the same denomination. Minn. Stat. Ann. Section 315.37 (West 1992).

There is no limitation with respect to the choice of a government or governmental entity.

NORTH CAROLINA COMMENT

In subsection (a), the General Statutes Commission added the reference to "document of gift" to cover restricted gifts. In subsection (b), the Commission added the reference to a nonprofit entity other than a nonprofit association or nonprofit corporation.

§ 59B-11. Appointment of agent to receive service of process.

A nonprofit association may file in the office of the Secretary of State a statement appointing an agent authorized to receive service of process, notice, or demand required or permitted by law to be served on a nonprofit association.
A statement appointing an agent must set forth all of the following:
1. The name of the nonprofit association.
2. Reserved for future codification purposes.
3. The street address, and the mailing address if different from the street address, of the nonprofit association, and the county in which it is located, or, if the nonprofit association does not have an address in this State, its address out-of-state.
4. The name of the person in this State authorized to receive service of process and the person's address, including the street address, in this State.
A statement appointing an agent must be signed and acknowledged by a person authorized to manage the affairs of a nonprofit association. The statement must also be signed and acknowledged by the person appointed agent, who thereby accepts the appointment. The appointed agent may resign by filing a resignation in the office of the Secretary of State and giving written notice to the nonprofit association at its last known address.
The sole duty of the appointed agent to the nonprofit association is to forward to the nonprofit association at its last known address any notice, process, or demand that is served on the appointed agent.
The Secretary of State is not an agent for service of any process, notice, or demand on any nonprofit association.
The Secretary of State shall collect the following fees when the documents described in this subsection are delivered to the Secretary of State for filing:
1. Statement appointing an agent to receive service of process $5.00 (2) Amendment of statement appointing an agent 5.00 (3) Cancellation of statement appointing an agent 5.00 (4) Agent's statement of resignation No fee
An amendment to or cancellation of a statement appointing an agent to receive service of process must meet the requirements for execution of an original statement.

Document Fee

History

(2006-226, s. 1.)

OFFICIAL COMMENT

This section authorizes but does not require a nonprofit association to file a statement authorizing an agent to receive service of process. It is, of course, not the equivalent of filing articles of incorporation. However, some nonprofit associations may find it prudent to file. Filing may assure that the nonprofit association's leadership gets prompt notice of any lawsuit filed against it. Also, depending upon the jurisdiction's other laws, filing gives some public notice of the nonprofit association's existence and address.
Central filing with a state official is provided. This is where parties will seek information of this kind and where this is commonly publicly filed.
The format of this section is very much like Section 5 [G.S. 59B-6], which concerns a statement of authority with respect to property. Because one requires local and [the] other central filing they are not combined.

NORTH CAROLINA COMMENT

The General Statutes Commission modified this section in subsection (a) by adding the reference to "notice, or demand required or permitted by law to be served on a nonprofit association." In subsection (b), the Commission deleted the Uniform Act's requirement for a federal tax identification number due to concerns over identity theft and the belief that the requirement was not useful in any event and conformed the requirement for an address, in part, to similar requirements for the statutes regulating other entities. The Commission modified subsection (c) by requiring that the agent give "written" notice of the agent's resignation to the nonprofit association "at its last known address." The Commission also added subsections (d) and (e) and substituted a fee schedule for the Uniform Act's fee provision. The filing fees in subsection (f) are the same as those for similar documents filed by nonprofit corporations and business entities.

§ 59B-12. Claim not abated by change.

A claim for relief against a nonprofit association does not abate merely because of a change in its members or persons authorized to manage the affairs of the nonprofit association.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

This provision reverses the common law rule of partnerships, which courts often extended to unincorporated nonprofit associations. Uniform Partnership Act (1994) Sections 29 and 31(4). This Act's entity approach requires this change of the old common law rule. Similar provisions are found in many state statutes. See, for example, Ohio Rev. Code Ann., Corporations, Section 1745.04 (Baldwin 1991); Md. Ann. Code art. 6-406(a)(2); and 12 Vt. Stat. Ann. Section 815 (Equity Pub. 1973). Uniform Partnership Act (1994) adopts an entity approach and so changes the old rule. See Sections 603(a) 701, and 801 of 1994 Act.

§ 59B-13. Venue.

For purposes of venue, a nonprofit association is a resident of a county in which it has an office or maintains a place of operation or, if on due inquiry no office or place of operation can be found, in which any officer resides.

History

(2006-226, s. 1.)

OFFICIAL COMMENT

Venue, unlike service of process, is treated by statute. See for example Mont. Code Ann. Section 25-2-118(1) (1991); 28 USCA1391. A criterion used by all States for fixing venue is the county of residence of the defendant. Most States specify as many as eight additional grounds for venue, including the county in which the real estate that is the subject of the suit is situated and the county in which the act causing, in whole or in part, the personal injury or other tort occurred. None of these additional criteria present a special problem with respect to an unincorporated nonprofit association.
If an aggregate view of a nonprofit association were taken, the association is resident in any county in which a member resides. See Wright, Miller, & Cooper, 15 Federal Procedure & Practice 3812 (1986). Conforming to the entity view of an association, Section 12 rejects the common law view.
Section 12 [this section] makes a nonprofit association a resident of any county . . . in which it has an office. If it has an office in five counties, for example, it may be sued in any of the five counties.

This section is bracketed because some States have already satisfactorily solved this problem.

States have by statute modified the common law rule. Illinois, for example, provides that "a voluntary unincorporated association sued in its own name is a resident of any county in which it has an office or if on due inquiry no office can be found, in which any officer resides." Ill. Code Civ. Prac. Section 2-102(c).

. . .

NORTH CAROLINA COMMENT

The General Statutes Commission modified this section by expanding a nonprofit association's residence for venue purposes to include the county in which the nonprofit association maintains a place of operation or in which any officer resides.

Section 13 of the Uniform Act (Summons and complaint; service on whom) was omitted as unnecessary.

§ 59B-14. Uniformity of application and construction.

This Chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this Chapter among states enacting it.

History

(2006-226, s. 1.)

§ 59B-15. Effect as to conveyances by trustees; prior deeds validated.

Nothing in this Chapter changes the law with reference to the holding and conveyance of land by the trustees of churches under Chapter 61 of the General Statutes where the land is conveyed to and held by the trustees.
All deeds executed before January 1, 2007, in conformity with former G.S. 39-24 and former G.S. 39-25 are declared to be sufficient to pass title to real estate.

History

(1939, c. 133, ss. 3, 4; 2006-226, s. 2(b).)

NORTH CAROLINA COMMENT

This section is not in the Uniform Act. It is derived from former G.S. 39-26 and former G.S. 39-27.

Cross References. - As to power of trustees of a religious body to convey property, see G.S. 61-4.

Editor's Note. - This section was formerly numbered G.S. 39-26 and 39-27. It was recodified as G.S. 59B-15 by Session Laws 2006-226, s. 2(b).