decided: April 28, 1981.
WILLIAM J. MCDONALD, APPELLANT
LAKE HAUTO CLUB ET AL., APPELLEES
Appeal from the Order of the Court of Common Pleas of the Fifty-Sixth Judicial District, Carbon County, in case of William J. McDonald v. Lake Hauto Club, Board of Directors of Lake Hauto Club, Rosemary Lebo, Eugene Wato, Theresa Dvorsky, Steven Koomar, Rex Martine, Norman Kujawa, George Durilla, Robert Bennett and Ed Wise, No. 8 April Term, 1978, in Equity.
William E. McDonald, for appellant.
Robert Lazorchick, with him William Z. Scott, Jr., for appellees.
Judges Mencer, MacPhail and Palladino, sitting as a panel of three. Opinion by Judge Mencer. Judge Wilkinson, Jr. did not participate in the decision in this case.
[ 59 Pa. Commw. Page 37]
William J. McDonald (appellant) has appealed from a decision of the Carbon County Court of Common Pleas which denied injunctive relief in his action against the Lake Hauto Club and its board of directors. We affirm.
The Lake Hauto Club is a nonprofit corporation which owns and operates Lake Hauto, a private recreational area. In 1975, the Lake Hauto Club adopted the folowing rules concerning the use of boats on its lake:
1. Craft must be registered with the club prior to launching on Lake Hauto annually and must display the Lake Hauto registration emblem. . . .
6. Power boats are restricted to a maximum length of 17 feet with a horsepower not to exceed 85 H.P. Power boats registered and operated on Lake Hauto prior to 1975 are excluded.
The appellant has been a member of the Lake Hauto Club for over 20 years. In 1977, he purchased a "Silverline" watercraft with a length of 16 feet 3 inches and an inboard motor. The appellant registered the boat with the Lake Hauto Club and operated it on the lake for several months. The boat motor was described on the registration application as "Equivalent 85 H.P."
[ 59 Pa. Commw. Page 38]
In August 1977, the Lake Hauto Club revoked the registration of the appellant's boat after an inspection revealed that the manufacturer's rating of the boat motor was 120 horsepower, well in excess of the 85-horsepower maximum established by the club rules. The appellant instituted this action in equity to compel the Lake Hauto Club to permit him to register his boat and to use it on the lake. The court below denied relief and the case was appealed under Section 762(a)(5) of the Judicial Code, 42 Pa. C.S. § 762(a)(5).
We agree with Judge Lavelle of the Court of Common Pleas of Carbon County, writing in this case, that the courts should avoid needless interference in the affairs of private corporations:
[I]t is a well established legal principle that courts should not substitute their judgment for that of the directors of a corporation and will not interfere with the internal management of a corporation unless the acts complained of constitute fraud, bad faith or gross mismanagement or are unlawful or ultra vires. 8A P.L.E. Corporation[s] § 322. Chambers v. Beaver-Advance Corp., 392 Pa. 481, 489, 140 A.2d 808, 812 (1958), Bowman v. Gum, Inc., 327 Pa. 403, 409-410, 193 A. 271, 274 (1937), Gettemy v. Homestead Assoc. of Westmoreland, 29 [West.] 7, 11-12 (1946), aff'd 356 Pa. 475, 52 A.2d 325 (1947). Morris v. Somerset Co. Memorial Park, Inc., 21 Som. 87, 93 (1962). Likewise, courts will not declare a by-law of a corporation invalid unless it is clearly unreasonable. Stewart v. Monongahela Valley Country Club, 177 Pa. Super. 632, 639-640, 112 A.2d 444, 448 (1955).
McDonald v. Lake Hauto Club, 7 Carbon L.J. 245, 251-52 (1980).
[ 59 Pa. Commw. Page 39]
The appellant has not challenged the power of the Lake Hauto Club to regulate the size of boats which can be used on its private lake; this exercise of corporate power is clearly within the limits of the charter. Similarly, the appellant has not seriously contended that the 85-horsepower limit is itself unreasonable; some cutoff point could be established and the choice of 85 horsepower was not inherently improper. Instead, the appellant has asserted that the club's method of measuring horsepower is unreasonable and that the rule was applied to him in an arbitrary manner. The evidence produced, however, fails to support these assertions.
The Lake Hauto Club uses the engine manufacturer's horsepower rating to determine whether a boat will be permitted on the lake. While it is true that other methods of measuring horsepower could be adopted, this method provides a quick and efficient way to enforce the regulations.
In this case, the Court is not unmindful that the horsepower rule was promulgated by lay members for lay members of the club and it is lay members who must interpret and enforce it. If 'horsepower' as used in the rule should be interpreted as plaintiff contends, an extremely heavy burden would be placed on the defendants to determine each and every boat's actual horsepower rating. Actual horsepower output is subject to such variables as the type of drive mechanism involved, the type of propeller used, hull design and load in the boat. An expert in power boats would have to be employed by the defendants to test each and every boat before registration could be permitted. Under our interpretation of the rule, lay persons can simply look at the theoretical horsepower of the engine as it is stated by the engine's manufacturer.
[ 59 Pa. Commw. Page 40]
state involvement with the Lake Hauto Club prevents judicial interference. See Moose Lodge No. 107 v. Irvis, 407 U.S. 163 (1972).
And Now, this 28th day of April, 1981, the order of the Court of Common Pleas of Carbon County in the above captioned case, dated February 28, 1980, is hereby affirmed.
Judge Wilkinson, Jr. did not participate in the decision in this case.