## Facts

- Dayton Country Club, a private membership corporation, limited “full golfing privileges” to 375 members to manage access to its single 18-hole golf course.
- The club maintained detailed rules governing eligibility, vacancies, fees, and transfer restrictions for the limited golf-privilege category.
- Thomas E. Magness and Harry E. Redman each held a golf-privilege membership subject to ongoing dues and compliance with club rules.
- After Magness and Redman filed Chapter 7 bankruptcies, the trustee sought to treat the golf memberships as executory contracts and to assume and assign them under 11 U.S.C. § 365 for sale.
- The trustee proposed assignment to persons on the club’s waiting list, existing club members without golf privileges, or members of the public who would become members.
- The club refused to consent to assignment of the golf memberships.

## Issues

1. Whether the golf-privilege membership agreement was an executory contract under 11 U.S.C. § 365.
2. If executory, whether § 365(c)(1), read with § 365(f), permits a Chapter 7 trustee to assume and assign the membership over the club’s objection when applicable nonbankruptcy law excuses the club from accepting performance from an assignee.
3. Whether the appeal as to Redman was moot after the club canceled his membership for nonpayment of dues during the appeal.

## Decision

- The court held the golf-privilege membership was an executory contract because both sides had continuing material obligations.
- The court held § 365(c)(1) barred assumption and assignment without the club’s consent because Ohio law treated the selective membership relationship as nonassignable.
- The court affirmed the order prohibiting assumption and assignment of Magness’s membership.
- The court dismissed Redman’s appeal as moot due to cancellation of his membership for nonpayment of dues.

## Legal Principles

- An agreement is executory under § 365 when both debtor and non-debtor have ongoing material performance obligations.
- Section 365(f) limits enforcement of contractual anti-assignment provisions, but it does not override § 365(c)(1) when applicable nonbankruptcy law excuses the non-debtor from accepting or rendering performance to an entity other than the debtor without consent.
- Under the “hypothetical” reading of § 365(c)(1), if applicable law would bar assignment to a third party, the trustee may not assume (and therefore may not assume and assign) the contract absent the non-debtor’s consent.
- Selective, personal membership relationships governed by state law may be nondelegable and nonassignable, preventing compelled substitution of a new member through bankruptcy administration.

## Conclusion

The Sixth Circuit concluded that although the country club golf membership was an executory contract, § 365(c)(1) prevented the Chapter 7 trustee from assuming and assigning it without the club’s consent because Ohio law excused the club from accepting an assignee in a selective membership relationship; the prohibition was affirmed as to Magness and the appeal was moot as to Redman.


Rieser v. Dayton Country Club Co. (In re Magness), 972 F.2d 689 (6th Cir. 1992)