Title: Cadden v. Ladd

State: alabama

Issuer: Alabama Supreme Court

Document:

358 So. 2d 437 (1978)
William E. CADDEN et al. and Lt. Col. A. M. Adams et al.
v.
G. Russell LADD, III, et al.
SC 2795.

Supreme Court of Alabama.
April 28, 1978.
*438 Mitchell G. Lattof, of Diamond, Lattof & Gardner, Mobile, for appellants.
Louis E. Braswell and Edward S. Sledge, III, Mobile, for appellees.
MADDOX, Justice.
This appeal is from a judgment of the Circuit Court of Mobile declaring that the action taken by trustees of U.M.S. Alumni and Parents Association to abolish the mandatory military program at University Military School and to change the name of the school to UMS Preparatory School, was not beyond their power.
U.M.S. Alumni and Parents Association, Inc. filed its certificate of incorporation for record on January 16, 1946. Pertinent portions of the certificate read:
After a hearing the trial court found:
We affirm.
The general rule is that courts will not interfere with the internal business management of corporate assets by the board of directors. This rule applies except in a case of fraud or maladministration, which is destructive or injurious to the corporation. Cherry Investment Corp. v. Folsom, 273 Ala. 575, 143 So. 2d 181 (1962).
Furthermore, the charter of a corporation, read in connection with the general laws applicable to it, is the measure of its powers.
If the power to act in a particular fashion is stated expressly in the charter, or is necessarily incidental to the express powers stated, then the courts have no authority to substitute the judgment of the directors with their own. Cf. Alabama City, G. & A. Ry. Co. v. Kyle, 202 Ala. 552, 81 So. 54 (1918); See also, 19 C.J.S. Corporations § 743, pp. 83-84. Cf. Phinizy v. Anniston City Land Co., 195 Ala. 656, 71 So. 469 (1916); Waldrop v. Martin, 237 Ala. 556, 188 So. 59 (1939). This, of course, assumes that the charter does not grant powers which contravene state law. Cf. Security Trust & Savings Bank v. Marion County Banking Co., 287 Ala. 507, 253 So. 2d 17 (1971). Chewacla Lime Works v. Dismukes, Frierson & Co., 87 Ala. 344, 6 So. 122 (1888).
The Certificate of Incorporation of U.M.S. Alumni and Parents Association, Inc. does not contain an express clause authorizing the deletion of the mandatory military program, nor does it expressly grant the directors the power to change the name of the institution. But the question is: Are these powers necessarily incidental to the objects for which the corporation was created? The trial judge answered the question in the affirmative. We find that he did not err.
In Patterson & Edey Lumber Co. v. Bank of Mobile, 203 Ala. 536, 84 So. 721 (1919), the Supreme Court stated that the phrase "necessarily incident to the powers for carrying out the objects of the charter" was not intended to indicate that the acts should be "indispensably necessary to the purposes of the corporation, but only that they should be necessary in the sense of being appropriate and suitable for the purposes for which the corporation was organized." 203 Ala. at 538, 84 So.  at 722.
The charter of the corporation does not expressly or impliedly prohibit the directors from changing the name of the school or *440 from dropping the mandatory military program. Therefore, we affirm the decree of the trial court which determined that the trustees did not exceed their powers.
AFFIRMED.
TORBERT, C. J., and JONES, SHORES and BEATTY, JJ., concur.