Mobile Land Imp. Co. v. Gass

• Decision Date: 05 April 1904
• Parties: MOBILE LAND IMP. CO. v. GASS ET AL.
• Court: Alabama Supreme Court

39 So. 229

142 Ala. 520

MOBILE LAND IMP. CO. v. GASS ET AL.

Supreme Court of Alabama

April 5, 1904

On Rehearing, June 30, 1905.

Appeal from Chancery Court, Mobile County; Thomas H. Smith Chancellor.

Suit by the Mobile Land Improvement Company against H. R. Gass and others. From an adverse decree, complainant appeals. Reversed.

This action was commenced by the Mobile Land Improvement Company by a bill in chancery against H. R. Gass, and was subsequently amended so as to make several parties who purchased the land involved in this suit from him defendants. The bill alleged that the complainant was a corporation under the laws of Alabama, and that the defendant Gass was the secretary and treasurer of the company and also a director from the 16th day of April, 1889, to the 30th day of April 1900; that some of the directors of the company resided in Michigan, and some in Mobile, Ala., and that the residences of the stockholders were similarly distributed; that on the 18th day of November, 1896, the board of directors held a meeting in Flint, Mich., and adopted a resolution authorizing the president to transfer to the defendant Gass three parcels of land belonging to the corporation, each having a front of 50 feet on Michigan avenue, upon condition that he erect upon each parcel of land a two-story dwelling house to cost at a fair value not less than $2,000, and that no deed should be given him until he had begun the erection of a house on the land covered by it. It alleges that the resolution as spread upon the minutes, however, purported to grant five parcels with frontages of 100 feet each, instead of three lots, of land. The bill alleges that there was present at said meeting F. A. Platt, M. P. Cook, I. W. Whitehead, and the defendant H. R. Gass, and that, except for the presence of said Gass there would not have been a quorum of the directors. It alleges that defendant took possession of the lands described in the resolution as spread upon the minutes, and proceeded to erect houses upon them with his own means; that when the bill of complaint was filed he had erected a house upon each of four of the parcels of land, but that each house only occupied a space of 50 feet on Michigan avenue; that all of the houses but one had been disposed of to other defendants for a valuable consideration and without notice, and that said Gass had never rendered any account to the company of the profits arising from the sale of the buildings or lots upon which they were erected; that Gass from time to time obtained deeds executed by the company through F. A. Platt its president, and himself, as secretary of the company. The bill further alleges that the company had not complied with the provisions of law authorizing it to hold directors' meetings outside of the state, and that in April, 1900, the stockholders had repudiated the transaction, and had demanded the cancellation and surrender of the conveyances made to Gass. The bill prays that the defendant H. R. Gass be required to surrender the deeds made to him into the registry of the court to be canceled, but that by its decree the court protect the title of the other defendants, who purchased three of the lots in controversy, and for general relief. The bill attaches copies of each of the four conveyances as exhibits. Each of these conveyances recites that: "Whereas, the board of directors of the Mobile Land Improvement Company did, at a meeting in the city of Mobile on, to wit, the 16th day of February, 1891, adopt the following resolution, viz: 'Be it resolved, that the lands of this company shall be sold as opportunity may afford at prices satisfactory to the president or vice president and secretary of the company, and said officers are authorized to make deed to purchasers in such form and with such conditions and covenants, respectively, as they may deem proper.' " Each conveyance is executed under the corporate seal of the company.

Decree pro confesso was rendered against the defendants other than Gass, but the defendant Gass answered the bill, admitting the corporate capacity of the company, and that it had power to purchase, own, improve, rent, or sell real estate, or interest in real estate, to construct buildings upon real estate, and many other powers. He admitted that the appellant had purchased a large body of real estate, and had adopted a system of by-laws for the regulation and conduct of its affairs. He also admits the election of himself as secretary and treasurer and director of the company, and that he retained these offices down to the 30th day of April, 1900 and, further, that some of the directors resided in Michigan, and some in Mobile, Ala. The defendant, by way of pleas in his answer, sets up in detail a number of meetings of the board of directors held by the company in Michigan prior to the meeting of November 18, 1896, and the fact that many matters of importance to the company were authorized at such meetings, and further shows that practically all of the important business of the company was conducted through meetings of the boards of directors held in Michigan, and that this was well known to all of the stockholders of the company prior to November 18, 1896. He further attaches a map of the lands of the appellant, and shows that they were vacant lands without houses on them, and constituted an open, unfenced, uncultivated plain, without streets or avenues of any kind, and that complainant purchased this tract for the purpose of laying it off into city lots and selling them as residences at a profit; that it had the lots plotted and advertised extensively for sale; that prior to November 18, 1896, the company had this land in the hands of several agents, and had been making strenuous efforts to sell as many of these lots as it could, but had failed to make any sales; that all of the stockholders thought it would greatly enhance the value of the property and facilitate the sale of said lots to get some one to build upon one or more of them, and reside there, believing this would induce others to purchase lots and build residences upon them, and thereby greatly enhance the value of the entire property. With this view the directors at a meeting in Flint, Mich., in April, 1901, authorized their president to enter into negotations with a Mr. King, Mr. Taylor, and Mr. Posey, by which the company was to give them one lot each on Michigan avenue, and to build a plank sidewalk in front thereof, and guaranty the extension of the water mains to the lots selected, if they would, within a specified time, put buildings on these lots to cost not less than $2500, and pay $50 towards laying the water mains; that the company attempted to induce these parties to accept the lands upon these terms, but failed; that at a meeting held March 7, 1893, a committee that had been previously appointed reported on the feasibility of a sale of 400 lots on the company's tract on Michigan avenue, and recommended that three houses should be erected thereon at a cost of not less than $11,000; that each purchaser was to obtain a lot without location, and that the location should then be determined by lot, so that three of the purchasers would obtain a house and lot by his purchase; that the sale was had, but the company did not succeed in selling any of the lots. On account of the long-continued inability of the company to dispose of any of its property at what it deemed proper prices, or to get any residences constructed thereon, the matter of devising some method to facilitate the sale of lots became a constant subject of discussion among the stockholders, and some time in 1895 the defendant suggested to some of the directors that, to locate residences upon the property, he would build at his own expense, and dispose of to bona fide residents, five residences upon the property, if the company would give him ten lots, or their equivalents, in the tract; he to sell the houses without profit and to have the lots not built upon as compensation for his work and risk. This suggestion was considered by all of the directors who discussed it as the most feasible plan that could be suggested to increase the value of the company's property, but the suggestion was not carried out until 1896, at which time the proposition was accepted and a resolution passed giving him 10 lots upon the terms set out in the bill of complaint; that the action of the board of directors in entering into the agreement was known to nearly all of the directors of the company and to many of the stockholders; and that the defendant spoke to a number of them himself about the matter. In the early part of 1897 he commenced the erection of a house upon one of these lots, and when it was completed he took photographs of it, and showed it to several members of the directory. He sent deeds to the president of the company for the parcel of land upon which this house was erected, consisting of 100 feet front on Michigan avenue, and after the deed was obtained he made efforts to sell this property at the actual cost to him of the building without any compensation for the lot, or for his time, trouble, and risk in building and selling the property. He finally sold it to a prominent citizen of Mobile, who occupied it as his residence. As soon as he succeeded in disposing of this building,...