Hacienda Corp. v. White, s. S90A1216

• Decision Date: 07 February 1991
• Docket Number: Nos. S90A1216,S90A1217 and S90A1218,s. S90A1216
• Parties: HACIENDA CORP. v. WHITE et al. DANIEL v. WHITE et al. WHITE et al. v. WHITE et al.
• Court: Georgia Supreme Court

Page 323

400 S.E.2d 323

260 Ga. 879

HACIENDA CORP. v. WHITE et al.

DANIEL v. WHITE et al.

WHITE et al. v. WHITE et al.

Nos. S90A1216, S90A1217 and S90A1218.

Supreme Court of Georgia.

Feb. 7, 1991.

Reconsideration Denied March 1, 1991.

Carr G. Dodson, Jerry A. Lumley, Jones, Cork & Miller, Macon, for Hacienda Corp. in No. 590A1216.

Ed S. Sell, III, Sell & Melton, Denmark Groover, Jr., Groover & Childs, John T. McGoldrick, Jr., Martin, Snow, Grant & Napier, Macon, for Charles F. White et al. in No. 590A1216.

George C. Grant, John T. McGoldrick, Jr., Martin, Snow, Grant & Napier, Macon, for Tom W. Daniel in No. 590A1217.

Ed S. Sell, III, Sell & Melton, Denmark Groover, Jr., Groover & Childs, Jerry A. Lumley, Jones, Cork & Miller, Macon, for Charles F. White et al. in No. 590A1217.

Denmark Groover, Jr., Groover & Childs, Macon, for Arthur A. White, Sr., et al. in No. 590A1218.

Ed S. Sell, III, Sell & Melton, Jerry A. Lumley, Jones, Cork & Miller, John T. McGoldrick, Jr., Martin, Snow, Grant & Napier, Macon, for Charles F. White et al. in No. 590A1218.

CLARKE, Chief Justice.

This is an appeal from a summary judgment order setting aside a deed from White Valley Farms, Inc., on the ground that the sale was not sanctioned by the necessary corporate authority. For the reasons that follow, we reverse and hold that the deed is not invalid for lack of corporate authority.

In 1979, Arthur White, Sr., ("Arthur White") formed a Georgia corporation, White Valley Farms, Inc. He conveyed to the corporation the land that he had farmed for 33 years. He and his wife, Annie White, held all of the shares of stock. Annie White died in 1983, leaving her shares of stock, 45% of the total shares, to be divided among her children. One of the children, Charles White, was appointed executor of her estate. Although the will was probated, the shares were not distributed to the heirs. In 1986, Arthur White, individually and on behalf of the corporation, sold the corporation's farmland to Hacienda Corporation. A year and a half later, Charles White, acting as executor of his mother's estate, initiated a shareholders' derivative action on behalf of White Valley Farms, Inc. to set aside a deed.

The trial court granted Charles White's motion for partial summary judgment, denied summary judgment motions of Hacienda Corporation and third-party defendant Tom Daniel, and set aside the conveyance.

1. The trial court found that Charles White was entitled to bring a shareholders' derivative action because of the failure of White Valley Farms, Inc., to comply with the provisions of former OCGA § 14-2-231 (Michie, 1988), which requires that minority shareholders receive notification of such a transfer. ¹ We hold that the failure to comply with the provisions of former OCGA § 14-2-231 does not give rise to a shareholder's derivative action.

The purpose of a derivative action is to protect the corporation and its assets. OCGA § 14-2-123. As a shareholder, Charles White would be entitled to bring a derivative action for alleged harm to the corporation. ² He may not, however, bring a derivative action for the corporation's failure to comply with former OCGA § 14-2-231. The effect of noncompliance was to prevent Charles White from receiving notice of a meeting to discuss the sale. If he had been notified and had exercised his right to dissent under OCGA § 14-2-250, he would have been entitled to the fair value of his shares. Quinn v. Cardiovascular Physicians, P.C., 254 Ga. 216, 220, 326 S.E.2d 460 (1985). Thus, the notice requirement of OCGA § 14-2-231 is for the benefit of the minority shareholders. Violation of this provision may not be asserted by the corporation itself to invalidate a transaction. A cause of action for violation of this section belongs to the shareholder and not the corporation.

2. The trial court invalidated the deed and conveyance on the separate ground that Arthur White did not have the requisite authority to execute the deed and found that Hacienda Corporation was not a bona fide purchaser for value. The deed contained no corporate seal nor attestation by a second corporate officer. ³ The trial court found that these defects put Hacienda on notice as to Arthur White's lack of corporate authority.

OCGA § 14-5-7 provides that the presence of a corporate seal and attestation by another corporate officer is "conclusive evidence that said officers signing are duly authorized to execute and deliver the same." The lack of corporate seal and attestation, however, is not conclusive evidence that the corporate officer executing a deed lacks corporate authority to do so.

If there is no corporate seal, the deed will be inadmissible in evidence as proof of title unless accompanied by proof of the officer's authority to act on behalf of the corporation. Such proof may be supplied not only by direct evidence from the minute books but also by evidence that the officer was in active charge of the management of the corporate affairs .... [Pindar, Ga.Real Est.Law, § 19-42 (3rd ed.).]

The undisputed evidence in this case is that Arthur White, Sr., was the sole director of the corporation, the majority shareholder, and its president. As the sole director, he had the authority to manage "the business and affairs" of the corporation. Former OCGA § 14-2-140 (Michie, 1982). As majority shareholder, Arthur White had the authority to consummate the transaction with Hacienda. Former OCGA § 14-2-231(3) (Michie, 1988.)

Arthur White's authority to execute the deed on behalf of the corporation was proved by direct evidence. Therefore, the lack of a corporate seal and attestation of another officer did not invalidate the conveyance. Hence, the lack of a corporate seal and the attestation of another officer did not deprive Hacienda of its status as bona fide purchaser for value. The trial court erred in...