Gilbert v. McLeod Infirmary, 16472

• Decision Date: 09 March 1951
• Docket Number: No. 16472,16472
• Citation: 64 S.E.2d 524,219 S.C. 174,24 A.L.R.2d 71
• Parties: , 24 A.L.R.2d 60 GILBERT et al. v. McLEOD INFIRMARY et al.
• Court: South Carolina Supreme Court

Page 524

64 S.E.2d 524

219 S.C. 174, 24 A.L.R.2d 60

GILBERT et al. v. McLEOD INFIRMARY et al.

No. 16472.

Supreme Court of South Carolina.

March 9, 1951.

Samuel Want, Sam Rogol, LeRoy M. Want, all of Darlington, for appellants.

Scott & Tyson, Willcox, Hardee, Houck & Palmer, Florence, for respondents.

STUKES, Justice.

The McLeod Infirmary is an eleemosynary corporation under the laws of this State and under its charter operates a general hospital of that name and a nurses' training school in the city of Florence; it is the largest such institution in the area and draws patronage from several counties. Under its constitution and by-laws the institution is governed by a life tenure, self-perpetuating Board of Trustees which is composed of not more than sixteen members. It is now provided, however, that two memberships shall re main vacant in honor of the memory of the founder, the date Dr. F. H. McLeod, and his son and successor, the late Dr. James C. McLeod, whose skill and success as surgeons and administrators are well known. At the times hereinafter mentioned the Board consisted of twelve members, with Mr. R. B. Hare, Chairman, and Mr. C. W. Stikeleather, Acting Secretary. The other members were (and are, so far as the record shows) Dr. W. R. Mead, who was and is also superintendent of the hospital, Dr. D. T. Riley, Dr. A. E. Lake, Mr. H. A. Smith, Mr. R. B. Fulton, Mr. M. L. Meadors, Mr. H. K. Gilbert, Mr. C. W. Muldrow, Mr. J. B. Aiken and Mr. F. H. McLeod, III, the last named being also assistant superintendent. Messrs. Gilbert and Meadors, as trustees, are the plaintiffs (now appellants) in this action.

The controversy is concerned with a proposed sale of part of the land of the hospital to Trustee Aiken for $50,000. The hospital plant is located one block from the heart of the business section of the city upon contiguous parcels of land acquired at different times. That in controversy was acquired in 1942 for a consideration of $22,500 and fronts on South Irby Street 151.2 feet and runs back to a depth of 150 feet. On it is an old brick residence, in disrepair but used by the hospital for storage and for residence by one or more internes. Mr. Aiken desires the property to construct thereon an apartment building of twelve stories and penthouse, with offices on the three lower floors. (Pending this action he procured options on two other comparable but smaller lots at much higher prices, which he considered less desirable for his purpose.) The plan is to procure the financing by aid of a mortgage guaranty by Federal Housing Administration and Mr. Aiken's corporation for the purpose, Florence Apartments, Inc., appears to have had cash resources of only $500. The required investment of the sponsor is $75,000, at which the lot might be appraised, and the contemplated mortgage of $594,000 will supply the cost of construction. The application for mortgage insurance in evidence, was executed by Aiken Loan & Security Company, by J. B. Aiken, as mortgagee, and again by J. B. Aiken (sponsor) on behalf of Florence Apartments, Inc., as mortgagor. The attorney for the latter was stated in the application to be R. B. Fulton, also an Infirmary trustee.

Five members of the hospital Board constitute an Executive Committee, of which the Board Chairman also acts as chairman. They, one absent, met on the evening of Oct. 27, 1949 with Mr. Aiken, who was not a member of the committee, and considered the proposal of Mr. A. L. Hardee, attorney (for Mr. Aiken), to purchase the Irby Street property and, after discussion, unanimously approved the sale and authorized the chairman to call a meeting of the Board of Trustees for the next evening, quoting from the minutes, 'For the purpose of receiving the recommendation of the Executive Committee for further discussion and approval of the Board.' Without the written notice thereof provided in the constitution of the corporation for regular meetings the Board met on the next day, which was Oct. 28th, attended by eight of the twelve members and among the eight were Mr. Aiken and Mr. Fulton. Resolution was unanimously adopted authorizing the sale and execution by the Chairman and Secretary of a ninety day option to Mr. Hardee as attorney. The option had been previously prepared, was taken to the meeting and annexed to the resolution as part of it and all present, except Mr. Aiken, signed. At least two members of the Board (the plaintiffs) were out of town at the time of the meeting, had no notice of it or its purpose and were, of course, among the absentees. The minutes contain no note of the disqualification of Mr. Aiken or Mr. Fulton, and there is no record of the vote except that it was unanimous. However, Mr. Aiken did not sign the option; Mr Fulton did. Upon solicitation shortly thereafter two additional trustees signed at the foot of the option. Thus, without Mr. Aiken but including Mr. Fulton and Chairman Hare, nine of the trustees signed the option. Two thereafter rescinded their action and joined the growing opposition. This left seven proponents, including Mr. Hare, who did not vote in the attempted final action, as will be seen.

Agitation pro and con followed and at the regular monthly meeting of the Board in December, of which the usual and required notice was mailed each member, there was a full attendance, including Messrs. Aiken and Fulton. The Medical Staff of the hospital had meanwhile unanimously joined in a written petition of protest against the sale of the property and the Chief of Shaff, Dr. Mobley, appeared before the Board and presented the petition. The propriety of the former action was argued at length, the meeting lasting about three hours. Mr. Fulton seconded a motion to ratify and confirm the sale; a motion to table it failed by a vote of six to five, the chairman voting. The motion to approve and ratify was then carried by a vote of six to four. Mr. Fulton voted with the majority. Mr. Aiken and Chairman Hare did not vote.

On the last stated vote the action depends. It is conceded, in effect, by all that the action at the former, poorly attended special meeting on Oct. 28th, of which the constitutionally required notice was not given, was ineffectual. Mr. Hare testified in the trial of the case on circuit that he did not vote because he thought it unnecessary; that had he voted, it would have been with the apparent majority. Of course, the important fact is that he did not vote. Appellants meet respondents' effort to now count Mr. Hare's vote, to make the result seven to four, by uncontradicted testimony that three of the other members whose votes were counted in the six would vote oppositely, or at least not approve the sale, if the question were newly presented. They are Trustees Smith, Lake and Muldrow. The force, if any, of these contentions need not be determined. In view of the testimony with respect to Mr. Fulton's longstanding business association with Mr. Aiken and his professional representation of the projected building corporation, he should have disqualified himself from participation in the consideration of the proposal and should not have voted thereon; this reduces the favorable vote to five which is half of the trustees who were qualified to vote, manifestly not a majority of the Board and but a bare majority of the members voting. All of this is important in the light of the governing law which will be stated hereinafter. In view of it we need not examine appellants' interesting argument that a simple majority of the trustees voting is insufficient to authorize the sale of the corporation's real estate.

The Court is fully aware of the high character and standing of Mr. Fulton at the bar, but because of the facts which have been mentioned we think he should have disqualified himself, as said, and refrained from voting. Not only did he vote; he engaged in the debate and was further active to the extent of making motions.

In the record are also minutes of a special meeting of the Board on Jan. 13, 1950, attended by all members, including Messrs. Aiken and Fulton. Nineteen members of the Medical Staff also attended. The material portion of the minutes follows: 'There was considerable discussion by several members of the Medical Staff and the Board of Trustees regarding future plans for the McLeod Infirmary and regarding the sale of the lot fronting Irby Street. There was no business officially transacted at this meeting.' Finally in the record are minutes of a meeting of the Board on February 3, 1950, which was attended by all of the members except Mr. Aiken. The record of the only positive action taken at this meeting is here copied from the minutes. 'Mr. Fulton moved that the Chairman and Secretary of the Board be assigned to choose an attorney at their discretion and file an answer to the complaint of the Plaintiffs, Mr. M. L. Meadors and Mr. H. K. Gilbert. Mr. Meadors moved to amend Mr. Fulton's motion so that the attorney selected would be other than the attorney representing Mr. Aiken or Aiken Investment Company. Mr. Meadors' motion to amend was seconded and failed to pass. The motion of Mr. Fulton was then voted upon and passed.'

Conveyance had meanwhile been executed on Jan. 6, 1950 by the Chairman and Secretary of the Board in behalf of the Infirmary to Aiken Investment Company, a corporation, and delivered to Mr. Hardee, as attorney, as was check for $50,000 of Aiken Investment Company to McLeod Infirmary. He addressed a letter or even date to the Infirmary and to the Aiken Company in which it was recited that the delivery to him was in escrow upon the condition that the Aiken Company might require delivery of the deed to it if unable to find, quoting, 'another acceptable location' within thirty days.

Unless there is confusion in the record for appeal, we have accurately referred in the foregoing to three separate Aiken corporations.

Lis pendens in this action was filed Jan. 11, 1950, whereupon and...