Court Opinion

ID: 7361410
Source: CourtListenerOpinion
Date Created: 2022-07-27 23:04:17.576726+00
Date Added: 2024-06-11T16:20:39.173287
License: Public Domain

ANDERSON, J.
While the deeds sought to be can-celled purport to have been authorized by a resolution passed at a meeting in Mobile in the year 1891, it is an undisputed fact, that they were made under and pursuant to a resolution of a bare quorum of directors, at a meeting held at Flint, Michigan in the year' 1896. The evidence also discloses the fact, that at said meeting, the presence of and the participation therein by the respondent, Gass, was necessary to constitute a quorum and to give it legal vitality, and that the vote of Gass secured the passage of the resolution.
The directors of a corporation, are the trustees and managing partners, and the stockholders are the cestui que trust, and have a joint interest in all of the property and effects of the corporation. — Robinson v. Smith, 3 Paige, 222, 232; Cunningham v. Pell, 5 Ib. 607; Slee v. Bloom, 19 Johns 479.
“ ‘If this is the relation, then the rules of law applicable to purchasers ‘by agents and trustees, apply to the purchase in question. There is a manifest impropriety in allowing the same person”to act as the agent of the seller aind to become himself the buyer. There may be, in all such cases, a conflict- between the duty and interest. Acting for the best interests of the corporation, his *528disinterested and unbiased convictions of duty might be to advise against a sale of the entire property to one creditor, or against any sale at all. It is in view of these considerations that, ‘the wise policj' of the law hath put the sting of a .disability into the temptation, as a defensive weapon against the strength of the danger which lies in the situation.’ Even these principles would not, in my judgment, apply in the case, if there had been a quorum without Buell.
“ ‘Now the purchase of property by an agent or trustee, or by any person acting in a fiduciary capacity, is not void áb origine and absolutely. It is voidable only. It is made subject to the right of the principle or beneficiary, in a reasonable time, to say that he is not satisfied with it. It is valid in equity as well as law, unless the parties interested repudiate it, or complain of it; and these may set it aside without showing either fraud or injury. — Bank of old Dominion v. Dubuque Railroad Co., 8 Iowa 227; Davoue v. Fanning, 2 Johns, Ch. 252; Bostwick v. Atkins, 3 Comst. 53, 60; 1 Parsons Cont. 75, 76 and case, in note; 1 Lead* Cases in Eq. 167; MacGregor v. Gardner, 14 Iowa 326, 335.
“ As the principal or panic: interested may confirm the sale, a mere stranger cannot make the objection, that the trustee was the purchaser; or that the sale was irregular. The remedy belongs only ‘to persons who had an interest in the property before the sale, and no other person can apply to set aside' the saléis — Corey v. Wadsworth, 118 Ala. 507, 508; Hawley v. Cramer, 4 Cow. 717, 744; Edmondson, v. Welsh, 27 Ala. 578; Foster v. Goree, 5 Id. 428; Hannah v. Carrington, 18 Ark. 85; Herbert v. Henrick, 16 Ala. 581; Greenleaf v. Queen, 1 Pet. 138; 5 Barr, 97; Wightman v. Doe, 24 Miss. 675.
The directors of a corporation are its agents. Their position implies that confidence is reposed in them. Tfie duties which a director assumes to the corporation and the stockholders thereof, disqualifies him from binding the corporation in a transaction in which he is already interested. — O’Connor Mining & Mfg. Co. v. Coosa Furnace Co., 88 Ala. 630.
In the case at bar, we find the respondent Gass, not *529only a director bnt the salaried secretary and treasurer of the company. Not only interested in the donation, but the sole donee. Could there be a stronger appeal for equitable relief, in the absence of actual fraud, the existence or non-existence of which, we deem unnecessary to discuss in order to adjudicate this controversy
We do not think the complainant is estopped from avoiding these conveyances so far as they pertain to the undisposed of lots. The fact that the houses were erected in view of one of the main streets of Mobile, where some of the directors and stockholders may have seen them, or that Gass told Chaudron, (one of the directors) that some of the lots had been conveyed to him, or that the deeds-were recorded in a county where a minority of'the stockholders, including Gass, resided, Avas not sufficient to charge the company or stockholders with such notice as would bind them by way of estoppel.
We are familiar with the Avell established rule, that,. a corporation may ratify directly or by implication un- • authorized acts of the directors or agents. And that there can be no partial ratification. The acceptance of the fruits of an unauthorized act compels an acceptance of the hardships. But the evidence does not establish any v facts from which a ratification can be implied. On the other hand, we find Cook, (one of the directors) repudiating the matter. Just as soon as Platt informed him of the execution of the fourth deed, Cook and Whitehead repaired to Mobile Avithin a short time after the execution of said fourth deed and at once, instigated investigation, reorganized the directory and took speedy steps to inspect the records and books of the company, Avhich liad been under the exclusive control and in the possession of Gass since the meeting at Flint. An effort Avas .made at the first meeting to get the books. At the second meeting an attorney Avas appointed to investigate the acts of the said Gass and report to the company. At the third meeting, possibly after the attornev had reported, Ave. find the directors repudiating and disaffirming the conveyances of the said Gass, except as to the part he had soicl to innocent purchasers, and lot 18, upon which he had made valuable improvements, and authorized the at*530torney to institute proceedings at once, in case Gass refused upon demand, to reconvey the lots. The fact that they did not repudiate the conveyances to some of the lots, did not maJte the omission of said lots, a partial ratification of the transactions so as to preclude the company from rescinding the contract. The resolution clearly repudiated the transaction, but for equitable reasons, omitted three lots sold to innocent purchasers and one upon which respondent Gass had erected valuable' improvements.
The chancellor erred in holding that the pleas were sufficient and in dismissing the bill.
Reversed and remanded.
McClellan, C J., Tyson and Simpson, J.J., concurring.