Hambaugh v. Lookout Mountain Development Co.
| Decision Date | 20 September 1929 |
| Docket Number | 6753. |
| Citation | 149 S.E. 781,169 Ga. 90 |
| Parties | HAMBAUGH v. LOOKOUT MOUNTAIN DEVELOPMENT CO. |
| Court | Georgia Supreme Court |
Error from Superior Court, Chattooga County; Jas. Maddox, Judge.
Petition by Lookout Mountain Development Company against Nisbet Hambaugh. Judgment for plaintiff, and defendant brings error. Affirmed.
The Lookout Mountain Development Company, a corporation chartered by the superior court of Chattooga county, Ga., as plaintiff filed a petition against Nisbet Hambaugh, alleged to be a resident of Birmingham, Ala., and alleged substantially the following: On October 13, 1925, H. H. Pounds as president and G. M. Carden as secretary, of said company, assuming to act for said company, executed and delivered to A. A. Chapman and J. N. Cheney a certain instrument purporting to be a mortgage deed or deed of trust, "by which they undertook to convey to said Chapman and Cheney the lands as therein described, *** located in said Chattooga County, Georgia, and Cherokee and De Kalb Counties, Alabama, to secure an alleged indebtedness of $27,000 as therein recited, and to mature on or about October 13, 1929, and in which instrument certain harsh and drastic powers and privileges were incorporated providing that upon failure to pay any installment of principal, interest, or taxes as the same accrued, that the holder of said instrument should have the option of declaring all of said indebtedness due and collectible, and foreclose said instrument by advertising the property once a week for four weeks, and selling the same at public outcry in said Chattooga County, Georgia." A copy of said instrument is attached to the petition as Exhibit No. 1. It is alleged that said instrument is not the legal and duly authorized act or obligation of petitioner as a corporation and is not binding upon it, that the harsh and drastic powers and privileges granted by said instrument were not granted or authorized by petitioner as a corporation, and that the execution of same by the officers aforesaid was an ultra vires act and not binding upon petitioner for the reasons (a) That petitioner as a corporation was organized for the purpose and has been doing business of buying, selling, renting, leasing, and developing the real estate located on Lookout Mountain and its sole assets and property consist of said lands and improvements and betterments placed thereon. (b) That under the by-laws of the company the entire management and control of its affairs is vested in its stockholders and board of directors. (c) That the giving of the said instrument was never submitted to or authorized by either the stockholders of said corporation or the directors thereof, and the execution and delivery of same was never authorized by either the stockholders or directors. (d) That the charter of the corporation and the general laws of the state do not authorize its president and secretary to incumber and convey its assets, and especially its real estate, without authority given them by the stockholders and directors. (e) That the charter of the corporation and the general laws of the state do not empower the president and secretary to execute an instrument in the name of the corporation, creating in the creditor as holder of the instrument a right to declare the indebtedness secured due and collectible upon default in payment of any interest, etc., or a power of selling said property after advertisement for four weeks, and thus divesting the corporation of its assets without the process of law. (f) That the president and secretary of said corporation executed and delivered said instrument without the knowledge or consent of either the stockholders or directors, and without ever submitting it to either of these bodies, and without obtaining any resolution authorizing such action or the incorporation therein of the harsh and drastic provisions therein contained.
Hambaugh is advertising in the Summerville News, published in Chattooga county, Ga., for sale on the first Tuesday in May 1928, the lands located in Chattooga county, Ga., as described in said instrument, and sets forth in said advertisement that Chapman and Cheney "have for value duly transferred, in terms of the law, all of their rights, title, and interest in said debt and said loan deed to Nisbet Hambaugh," and that "said Lookout Mountain Development Company has defaulted therein the whole sum declared due." Hambaugh claims that default was made in the payment of the installment of interest maturing on October 13, 1927, and is attempting to exercise the harsh and drastic powers set out in said instrument, and has declared all of said indebtedness due and payable, although the principal of said indebtedness does not mature until October 13, 1929. He is seeking to sell the lands described in said instrument, and has declined to accept the installments of interest past due with accumulated interest, which petitioner has tendered him; he stating at the time of tender that he did not purchase and take a transfer of the mortgage with the intention of collecting it, but with the purpose of obtaining all the lands conveyed therein, by which he expected to realize large profits in the sum of $200,000. The proposed sale will be illegal, for the further reason that under the terms of the trade by which Hambaugh secured the transfer of the mortgage or deed of trust from Chapman and Cheney, he pledged said instrument and the transfer thereof as security to guarantee the removal by him of a described mortgage on property in Birmingham, Ala., received by Chapman and Cheney in the trade, and these parties still held said instrument as security, and it is therefore not held by Hambaugh so as to authorize him to proceed thereunder; that the advertisement does not recite that Chapman and Cheney have sold and conveyed to Hambaugh any right, title, or interest they may have had in the lands covered by the instrument, but merely recites that said parties have transferred their right, title, and interest in said debt and said loan deed, which transfer would not authorize the defendant...
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