Alabama College v. Harman

• Decision Date: 14 June 1937
• Docket Number: 7 Div. 461
• Citation: 175 So. 394,234 Ala. 446
• Parties: ALABAMA COLLEGE v. HARMAN.
• Court: Alabama Supreme Court

175 So. 394

234 Ala. 446

ALABAMA COLLEGE v. HARMAN.

7 Div. 461

Supreme Court of Alabama

June 14, 1937

Rehearing Denied June 24, 1937

Appeal from Circuit Court, Shelby County; W.W. Wallace, Judge.

Bill for declaratory judgment by Alabama College against A.F Harman. From the decree, complainant appeals, and respondent cross-assigns error.

Affirmed in part, and reversed and rendered in part.

Horace C. Wilkinson, of Birmingham, for appellant.

L.H Ellis, of Columbiana, for appellee.

KNIGHT Justice.

A bill for declaratory judgment.

The appellant is a corporation, incorporated for educational purposes by an act of the General Assembly of Alabama Approved February 21, 1893 (Gen.Acts, 1892-93, p. 1002), and its principal place of business is at Montevallo, in Shelby county, Ala. Since its original incorporation, the name of appellant has been changed several times. When first incorporated, its corporate name was the Alabama Girls' Industrial School. By the original act of incorporation, it was provided in section 4 thereof (page 1003):

"That the board of trustees of said institute, and their successors in office be, and the same are hereby declared to be a body politic and corporate, and shall have a common seal, shall sue and be sued, contract and be contracted with, and may own, purchase, sell and convey property, both real and personal."

By section 9 of the original act (page 1005) it was provided:

"That as it is the object of this act to establish said industrial school for white girls, with as small an outlay, annually as is consistent with the object to be attained, the said trustees shall prepare a general plan of said school, together with all the necessary departments, dormitories and out houses; also an estimate of the cost of necessary school furniture, including cost of buildings and department appliances, and shall build and establish in any one year, unless said building shall be secured by donation to the State, only such houses, dormitories and departments as they may deem for the best interest of said institution and of greatest practical importance."

While there have been a number of amendatory acts, the Legislature, with painstaking care, preserved and confirmed unto the corporation all the rights and privileges granted in the original charter.

By an act of the Legislature, approved September 8, 1923 (Acts 1923, p. 255), the name of the corporation was changed to Alabama College, and by that name, it was declared to be, "and shall remain a body corporate" with the right to sue and contract, acquire and hold real and personal property, and have and exercise all the powers of a corporation established to carry on a state educational institution of higher learning, and shall succeed to all the rights, privileges, emoluments, benefits, interest, and titles heretofore at any time vested in said "Alabama Girls' Industrial School," the "Alabama Girls' Technical Institute," and "Alabama Technical Institute and College for Women," respectively.

Section 2 of the same act (page 257), as did former acts, placed the management and control of the corporation in a board of trustees, and provided for their appointment or selection.

It is a matter of common knowledge that this school has, from a very insignificant beginning, grown and developed into one of the state's greatest educational institutions.

It appears from the bill that the college is badly in need of and proposes to erect a co-operative house dormitory, "designed to house one hundred and fifty-six students and provide them with light housekeeping arrangements; that the erection and construction of said house dormitory is absolutely essential to enable said corporation to carry out the purposes for which it was organized"; that for the lack of such accommodations more than a hundred and fifty students, who desire to enter the institution, cannot do so.

It further appears from the bill that the trustees on May 28, 1936, at a regular meeting of the board, unanimously adopted a resolution to proceed with the construction of a co-operative house dormitory, designed to house 156 students, as soon as financial arrangements could be made.

It appears from the averments of the bill that the cost of such a dormitory will be approximately $200,000; that the corporation proposes to finance the construction of the dormitory by issuing its bonds in the sum of $200,000, bearing interest at the rate of 4 per cent. per annum, maturing serially. The complainant--corporation--proposes to secure the payment of the bonds, as they mature, by pledging all or so much of the student fees that it collects, together with rentals it will receive from said dormitory, "to pay the interest on said bonds and to amortize said loan and to meet the annual retirement." This pledge to also include fees to be collected from students attending summer schools, if necessary.

It also appears from the bill that the corporation proposes to build said dormitory on lands now owned by it, which were acquired with funds furnished it by the state of Alabama, or if this land is not suitable for the purpose, then the corporation proposes to erect the dormitory on adjacent land to be purchased by it with a part of the proceeds of said bonds. The complainant--corporation purposes also to execute a mortgage on the land on which the dormitory will be erected "as further and additional security for the payment of the principal and interest on said bonds."

It appears that the complainant--corporation, to carry out the general purposes above stated, and pursuant to duly adopted resolutions of the board of trustees, has caused the bonds to be prepared, and is awaiting the signature of the respondent, president of said corporation, his signature being essential to the validity of said bonds, and their due issuance. That said respondent declines to execute said bonds as president of said corporation, and declines to execute any written instrument pledging the student fees and dormitory rentals, because he is advised that he has no lawful right or legal authority to do so. The said respondent also declines to execute a mortgage or deed of trust, either on property now owned by Alabama College, on which it is proposed to erect the said dormitory, or on property which the complainant--corporation proposes to purchase with a part of the proceeds of said bonds, upon the ground that the Alabama College has no lawful right or legal authority, either to pledge the student fees, or dormitory rentals to pay interest and principal on said bonds, or to secure said bonds by the execution of a mortgage or deed of trust on the property owned by Alabama College, or on lands to be acquired with a part of the proceeds of said bonds.

The bill concludes: "And your petitioner avers that unless said A.F. Harman is required to execute said bonds and said written instrument, that it will be unable to obtain the funds with which to erect said co-operative house dormitory, and will be unable to fully carry out the objects for which it was organized."

The prayer of the bill is for a declaratory judgment, adjudging it to be the duty of the respondent, "as President of Alabama College, a corporation, to affix his signature, as President of said corporation," to said bonds, and to affix his signature to an instrument in writing pledging certain student fees, collected by said Alabama College from students attending said institution, and all rentals collected from said dormitory, to the payment of interest and principal on said bonds; and to affix his signature to a mortgage or deed of trust on the real property on which the dormitory may be erected. And that the court by mandamus, or other appropriate writ, enforce the performance of said duties.

Dr. Harman answered the bill admitting it was his duty, as president of the corporation, to execute the bonds, the written instrument of pledge, and the mortgage, if it was lawful for him to do so, but he, upon advice of counsel, was of the opinion the complainant--corporation was without lawful right to issue said bonds, and to pledge, as security therefor, the designated future revenues of the college, and to mortgage any of its real estate, whether then owned, or to be acquired with funds to be derived from the sale of said bonds.

The court on submission held that the complainant had the legal right to construct the said dormitory, and to issue bonds to finance the construction; the right to execute a mortgage or deed of trust upon the property upon which the dormitory may be situated, in the event it is erected on land now belonging to said college, for the purpose of paying the principal and interest on said bonds; and that the complainant, for the purpose of securing a building site, had the right to purchase the necessary land, and to pay for such land out of the proceeds of said bonds, and it had the right to execute a mortgage or deed of trust on such land for the purpose of securing payment of said bonds. But that complainant had no right or power to pledge as security for the payment of said bonds any student fees or dormitory rentals collected by it.

From this decree, both complainant and respondent have filed appeals to this court.

The legal status of ...