01-30-2007Two of six parts of a lawsuit filed against the Oakwood Corp. board of directors will continue in Kosciusko Superior Court I.
The suit, filed by Dr. Donald Blosser and Howard Brembeck, consisted of six counts, but four were dismissed Jan. 10 by Superior Court I Judge Duane Huffer.
The two remaining counts in the suit are Count I, breach of contract, and Count V, the petition to record Oakwood as a charitable trust.
The first count alleges the board of directors tried to eliminate members without approval and without filing the amendment with the Indiana Secretary of State. Blosser, who was a board and foundation member, feels he was illegally removed from his position by the board of directors.
The suit states, “There is presently a dispute between petitioner Blosser and defendants as to whether petitioner Blosser is a member, as to whether as a member petitioner Blosser has any say in governance for the corporation, and as to whether defendants are duly elected directors of the corporation.”
The lawsuit also alleges that the board acted inconsistently “with the corporation’s articles, bylaws and Indiana code” constituting “breaches of contract with the members.
“The actions include but are not limited to: (1) unlawfully purporting to eliminate the members and install themselves as a permanent, self-selecting, self-perpetuating an unaccountable governing body of the corporation; (2) wasting the assets of the corporation by dissipating endowment funds, incurring ongoing operating losses, and selling and mortgaging corporate assets to find such operating losses; (3) failing to discuss gifts with potential donors, solely to maintain their own entrenched positions of control within the corporation; (4) violating the representations made to Mr. Brembeck and others in order to obtain contributions; and (5) seeking, obtaining and approving the Anderson Note, the Anderson Mortgage and Anderson Deed of Trust.”
The second count that will continue in the court system claims that a donation from Brembeck’s parents was not used in the manner specified in the trust agreement.
“Mr. (Howard S.) and Mrs. (Myra) Brembeck made their contributions to the corporation in trust for the specific and restricted purpose of constructing and operating the Oakwood Inn and the Oakwood Academy, and funding the corporation’s operations, based on representations, understandings and agreements of both parties that the Oakwood Inn and Academy would be operated in trust as a perpetual memorial to Mr. Brembeck’s parents, and based on the 1998 Gift Agreement as to the Oakwood Academy, for the benefit of the local community, on an ecumenical and non-sectarian basis. Many other donors made contributions of time and money to the corporation based on the same representations and understandings.
“At all relevant times, as a result of the foregoing, the Oakwood Inn, the Oakwood Academy building, the Program Center, and other assets of the corporation have been the subject of a public charitable trust for the benefit of Lake Wawasee, Syracuse and surrounding communities.
“At all relevant times the corporation has been the trustee of such trust and the corporation and its board of directors have been subject to fiduciary duties as the persons and corporation responsible for administering the assets of the trust in accordance with its terms.
“The Oakwood Inn, the Oakwood Academy building, the Program Center and other properties of the corporation and their fixtures and furnishings individually and collectively constitute assets of the trust.”
Last week, Brembeck and Blosser filed an “amended verified joint petition (1) for the removal of directors, (2) to docket public charitable trust, and (3) for other relief.”
The complaint alleges that the current board, against the corporation’s bylaws, by making themselves the “permanent, self-electing, self-perpetuating, and unaccountable governing body of the corporation.”
The suit goes on to explain that the Brembecks’ donation of an $8 million trust was made with the understanding that the Oakwood Inn would be operated as a “non-denominational religious-oriented retreat, inn, conference center and restaurant.”
The Brembecks were assured “that the Oakwood Inn would be an integral part of the corporation’s plan to develop Oakwood Park as a community spiritual and cultural resource. Based on the publicity surrounding the Brembeck contribution, numerous other contributors came forward to donate money for the same purpose. The corporation raised substantial amounts of money from community donors based on similar assurances and representations as to its plans for the Oakwood Inn.”
In all, the Brembecks reportedly donated more than $15 million for the Oakwood projects.
“... As a result of the directors’ failure to manage to affairs of the corporation in a prudent manner, the corporation began to experience significant financial losses.”
After the corporation started to lose money, Brembeck offered to contribute up to $1 million to help reduce or eliminate debt as long as the corporation had directors resign and elect more capable directors.
“Several members in 2004 made known their views that the directors should accept the contribution from Mr. Brembeck. The board of directors voted on or about Oct. 29, 2004, to accept Mr. Brembeck’s offer. ... After the Oct. 29, 2004, board meeting, one or more directors resigned in reliance on that vote and carried out the decision at that meeting. The Oct. 29, 2004, vote was then purportedly reversed in a meeting on or about Nov. 21, 2004, and Mr. Harlan Steffen, who had earlier voted with the majority in favor of accepting the gift, was voted out of office as president. This action was in violation of statute and the corporation’s bylaws because notice of such meeting, including its purpose, was not given.
“Under the circumstances then existing for the corporation, acceptance of Mr. Brembeck’s proposal would have been in the best interests of the corporation. The defendants, however, breached their fiduciary duty to the corporation and did not consider and act on the proposal in good faith, but rejected it because accepting the proposal would jeopardize their positions as directors.”
The case will be heard in Kosciusko Superior Court. No trial date has been set.