Opinion ID: 1683520
Heading Depth: 1
Heading Rank: 4

Heading: As to the Cross-Appeal

Text: GV contends that the trial judge erred in directing verdicts in favor of Grayson and Warwick on the fraud count. Thus, the issue presented on the cross-appeal is whether a scintilla of evidence was presented at trial to support GV's assertion that a misrepresentation was made by Grayson to the promoters of GV and that the misrepresentation was relied upon by GV, thereby causing GV to be damaged. There is ample evidence of record from which the jury could reasonably conclude that a misrepresentation, however innocent, was made; and, that because of that misrepresentation, GV was unable to exercise the option to purchase the golf course contained in the lease. The evidence shows that Grayson owned the lease on the golf course as of October 27, 1977. Subsequent to that date, he placed his leasehold interest in the golf course property and its accompanying clubhouse facilities for sale at a public auction. The brochures and other materials distributed for the sale included a map of the golf course as it was actually being played at the time of the sale. Unknown to Grayson, or to the purchasers of the lease, Grayson held an accompanying option to purchase 2.7 acres of land which was being used as a golf playing area, but which was not contained in the legal description of the leased property. The lease and option were purchased by Widick and Lepper. They, along with their wives, formed GV Corporation for the express purpose of owning, operating, and maintaining the golf course. GV, with the express permission and consent of Grayson and Warwick, assumed and took an assignment of Widick's and Lepper's bid rights. GV ratified the contract and closed the sale with Grayson. In the process, Widick and Lepper and their wives transferred their ownership rights in GV to four other individuals. The trial judge directed a verdict in favor of Grayson and Warwick on the fraud count, not because there was no misrepresentation, but because the purchase by GV separated GV from the transaction. This analysis is misplaced. A corporation can act only through its officers and agents. Even though promoters or initial incorporators are not technically agents of the corporation to be formed, once the corporation is formed and the new corporation ratifies the acts of its promoters and incorporators, the corporation succeeds to all the rights and remedies, as well as the liabilities, which the promoters and initial incorporators had acquired before incorporation. Although we find no Alabama decisions on this point, we quote with approval the following language from 18 C.J.S. Corporations § 123 (1939): A corporation [here, GV] may maintain an action sounding in tort against one [here, Grayson] who by fraudulent misrepresentations to a promoter [here, Widick and Lepper] has procured a sale of property [here, the golf course] to the corporation [GV], and also, where false and fraudulent representations are made to individuals [Widick and Lepper] to induce them to form a corporation [GV] for the purpose of purchasing property [the golf course] or rights or entering into a contract, and the corporation [GV], when created by such individuals [Widick and Lepper], who become its stockholders and officers, acts upon such representations to its injury, it may maintain an action for fraud. The fact that the incorporators sell their interest in the corporation to others does not create another step that separates the promisor from the promisee. It is the corporation, not the individual incorporators or their assignees, that here asserts its misrepresentation claim. Alternatively, Warwick contends that GV's fraud claim must fail for lack of proof of damages. But Warwick's assertion that it never objected to GV's use of the entire golf course (including the 2.7 contested acres) speaks only to one part of the agreementthe lease of the premises. The other, an equally important part of the agreement, concerns the option to purchase the golf course property at a specified time at a specified price. Because of the disputed acreage, Warwick refused to honor the agreed-upon option. Moreover, Warwick's efforts to evict GV from the property is hardly consistent with the lack of objection to GV's use argument. Because the trial judge erred in directing verdicts in favor of Grayson and Warwick on GV's fraud claim, we reverse the judgment and remand the cause as to that issue. Therefore, on remand, a new trial is ordered on GV's fraud claim. REHEARING GRANTED; OPINION OF SEPTEMBER 21, 1984, WITHDRAWN; OPINION SUBSTITUTED. AFFIRMED AS TO THE APPEAL. REVERSED AND REMANDED AS TO THE CROSS-APPEAL. TORBERT, C.J., and MADDOX, ALMON, SHORES and BEATTY, JJ., concur. FAULKNER, JONES, EMBRY and ADAMS, JJ., concur as to the cross-appeal and dissent as to the appeal.