Masonic Temple v. Ebert

• Citation: 18 S.E.2d 584,199 S.C. 5
• Decision Date: 02 February 1942
• Docket Number: 15363.
• Parties: MASONIC TEMPLE, Inc., et al. v. EBERT.
• Court: United States State Supreme Court of South Carolina

18 S.E.2d 584

199 S.C. 5

MASONIC TEMPLE, Inc., et al. v. EBERT.

No. 15363.

Supreme Court of South Carolina

February 2, 1942

[Copyrighted Material Omitted]

Haynsworth & Haynsworth, of Greenville, and Blackwell, Sullivan & Wilson, of Laurens, for appellant.

O L. Long, of Laurens, and John W. Crews, of Columbia, for respondents.

E. H HENDERSON, Acting Associate Justice.

The plaintiff, Masonic Temple, Incorporated, is the owner of a lot and building in the Town of Clinton, and this is substantially all of its property.

The officers of the company, on October 29, 1938, gave the plaintiff, W. P. Baldwin, a written instrument called an option, whereby he was constituted an agent to sell the property on the terms there set forth. In an endeavor to dispose of the property the selling agent called upon the defendant, R. E. Ebert, and after several conversations the defendant gave Baldwin $100 for a ten day option on the premises. On January 12, 1939, they met at Clinton and went to the office of R. W. Wade, an attorney, now deceased, for the purpose of having a contract drawn for the sale of the lot and building. Mr. Wade stated that he represented the plaintiff corporation, but it was agreed that this would not interfere with his drawing the contract and representing the defendant in the examination of the title.

B. H. Boyd, the president of the company, was then called to Mr. Wade's office, and an agreement was prepared by Mr. Wade for the sale of the property to the defendant for the sum of $27,000. Another payment of $100 was then made to Baldwin by the defendant, and Ebert gave the plaintiff company a check for $1,300, the balance of $25,500 to be paid on or before February 11, 1939, upon delivery of a deed in fee simple, free of all liens. It was provided in the contract that in the event the plaintiff corporation should fail to deliver the deed the amount paid by Ebert should be refunded.

Prior to the execution of the instrument Mr. Wade stated that before he would be willing to approve the title he desired a resolution of the stockholders of the corporation authorizing the sale, and Mr. Ebert consented to this arrangement. The instrument was then signed by the president and secretary on behalf of the corporation, and by Mr. Ebert personally. Mr. Baldwin, at the foot of the paper, acknowledged receipt of the $200 and agreed to the terms of the contract.

Several days after the instrument had been signed the defendant learned that the income from the rents was much less than had been represented to him, and the taxes and fire insurance considerably more. He immediately went to the office of Mr. Wade, and told him that he had found these discrepancies, that he was unwilling to go forward with the transaction, and wanted it called off. He also discussed the matter of the discrepancies with Baldwin.

The defendant, on January 18, 1939, stopped payment of the $1,300 check, which had not been deposited promptly, and on January 21, 1939, wrote the Masonic Temple, Incorporated, a letter stating that he was anxious to have the contract cancelled on account of the income being less than he had understood it to be. The plaintiff company received the letter on January 23, 1939.

A special meeting of the stockholders of the corporation was held on January 24, 1939, for the purpose of considering and passing upon the sale of the premises. Mr. Boyd, the president, informed the stockholders that the officers had made a contract with the defendant, but that he had received a letter from him requesting that the agreement be cancelled, and reported to them that payment had been stopped on the $1,300 check. It was then moved and carried that the sale to the defendant be approved, and the president and secretary of the company were authorized and empowered to execute a deed conveying the property to the defendant upon payment of the purchase price.

A deed was executed on February 6, 1939, and was tendered the defendant. He refused to accept it, and on June 14, 1939, this action was commenced by Masonic Temple, Incorporated, and Baldwin for the specific performance of the contract.

The defendant, Ebert, in his answer sets up two defenses: That the stockholders of the Masonic Temple had not authorized the execution of such a contract of sale by its officers, and that prior to ratification by the stockholders he had notified the plaintiff company that he was withdrawing the offer set forth in the contract; and that the contract had been obtained by the misrepresentation of material facts by the plaintiff, Baldwin.

The cause was referred to Mr. R. E. Babb, as Special Referee, who filed a report with his findings of facts; and he concluded from the facts that there was no unqualified withdrawal from the contract by Ebert, such as would release him from the terms of the agreement; that the defendant by his conduct waived any legal right he may have had to withdraw from the transaction before ratification by the stockholders; and that the defendant should be estopped to claim that he had a right to withdraw; and as a consequence held that there was a binding contract between the parties.

The Special Referee also concluded from the facts found that the defendant had failed to avail himself of the means at hand to ascertain the true facts, and cannot be heard to say that he was deceived by the misrepresentations.

Upon exceptions by the defendant, his Honor, the Circuit Judge, held that the Special Referee had correctly decided the issues of law and fact, the report was confirmed in all particulars, and it was held that the plaintiffs were entitled to specific performance of the contract. Judge Dennis further held that there was no fraud; that the defendant did not rely upon the misrepresentations; and that he was not misled by them.

Though there are twenty-one exceptions to the circuit decree, we think that the appeal may be determined by the answer to two questions: Was there ever a binding contract between the parties? Were there such misrepresentations on the part of the plaintiffs as would warrant a Court of Equity in refusing specific performance?

First, Was there a binding contract?

When the contract was executed on January 12, 1939, it had not been authorized by the stockholders of the corporation. Section 7705 of the Code provides that a corporation such as this one, with the consent of the holders of two-thirds of the total number of shares outstanding, may sell all or substantially all of its property, and that before such sale the consent shall be obtained at a meeting of the stockholders.

To constitute a valid contract of sale in the circumstances here the consent of the stockholders was necessary. Until that consent was given, the signing of the contract by Ebert was only in the nature of an offer, which could be made effective by the acceptance of the stockholders. It is clear, in the ordinary case, that an offer may be withdrawn at any time before its acceptance, by notice given to that effect to the other party. So here, we think, at any time before the assent of the stockholders, the defendant had the legal right to withdraw his offer by properly notifying the plaintiff corporation of his intention to do so.

Though the facts in the case of Finklea v. Carolina Farms Co., 196 S.C. 466, 13 S.E.2d 596, 598, are different, the statement of principles of law there announced throws light upon the present situation. In that case G. T. Walker submitted an offer to the president of the corporation of $1,000 for an option to purchase all of the lands of the company. At a meeting of the stockholders called to consider the proposal, consent of the holders of two-thirds of the shares was not obtained. It was declared by the Court:

" Doubtless Mr. Walker made his offer in the utmost good faith, but he was bound to realize, not only because he was presumed to know the requirements of the law, but because he was definitely put on notice that his offer was subject to the approval of the stockholders; and of course in that case he ran the risk of someone's making a higher and better offer, in which event he could not expect his offer to be accepted. And there can be no contract unless there is both an offer and an acceptance. Hence in the case at bar there was no contract.

"The fundamental basis of a suit for specific performance is that there is a contract between the parties.

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"And it will be borne in mind here that the defendant is a corporation, and the record shows that the property in question constituted all of its real estate and at least substantially all of its assets. Clearly then if the officers of the company had attempted to sell the property without the approval of the stockholders any option or conveyance would have been ineffective."

And the following was quoted from 58 C.J., 945, 946: "Specific performance of a contract of a corporation may be decreed in a proper case, but not where the contract *** was entered into on behalf of the corporation by a particular officer without proper authorization, ratification, or approval."

Many authorities hold that prior to ratification by the principal, the other party to the contract has a right to withdraw.

In Fletcher's Cyclopedia of the Law of Private Corporations Volume 2, Section 765, we find this statement: "It has been held in England, and there is dictum to the same effect in this country in some of the cases, that where a person assumes to enter into a contract for another without authority, the other party to the contract cannot withdraw so as to prevent a subsequent ratification by the person for whom the pretended agent acts. But this view is contrary to the settled principles of law and of the weight of authority. Until the...