De Soto Corporation v. Roberts Lumber & Grain Co., Inc.

• Decision Date: 29 February 1932
• Docket Number: 31417
• Citation: 174 La. 620,141 So. 78
• Parties: DE SOTO CORPORATION v. ROBERTS LUMBER & GRAIN CO., Inc., et al
• Court: Louisiana Supreme Court

141 So. 78

174 La. 620

DE SOTO CORPORATION v. ROBERTS LUMBER & GRAIN CO., Inc., et al

No. 31417

Supreme Court of Louisiana

February 29, 1932

Rehearing Denied March 30, 1932

Appeal from Eleventh Judicial District Court, Parish of De Soto John B. Hill, Judge.

Suit by the De Soto Corporation against the Roberts Lumber & Grain Company, Incorporated, and others. From a judgment in favor of plaintiff, defendants appeal.

Affirmed.

Albert P. Garland, of Shreveport, for appellants.

Lee &amp Williams, of Mansfield, and Lee, Gilmer & Lee, of Shreveport, for appellee.

BRUNOT J.

OPINION

BRUNOT, J.

The plaintiff is the record owner of the property involved in this litigation. It filed a slander of title suit coupled with a demand for damages. The defendants, in their answer, assert ownership of the property, thereby converting the suit into a petitory action. The De Soto Corporation was adjudged to be the owner and in the lawful possession of the property, and the demands of the Roberts Lumber & Grain Company Inc., et al. were rejected at their costs. From this judgment, the defendants appealed.

The trial judge, in an exhaustive and well-considered opinion, has accurately reviewed the facts of the case and has correctly applied the law applicable to the established facts. We quote from his opinion, with approval, as follows:

"The defendant corporation was organized in May, 1915, the incorporators being seven in number, four of whom were residents of Caddo Parish, Louisiana, and three of the State of Kansas. In February, 1916 the Defendant corporation Roberts Lumber & Grain Co., purchased from the Bank of Commerce the lands involved in this litigation, together with other lands, the recited consideration being $ 51,500.00, represented by one note of the vendee, secured by vendor's lien and mortgage upon the property sold.

"The consideration of the deed from the Bank of Commerce to the defendant corporation, that is the mortgage note, was pledged to the Bank to secure ordinary notes of the corporation, together with other indebtedness of the corporation and was so held and pledged from 1916 to 1924, when it was surrendered for cancellation, upon the then indebtedness of the defendant corporation being paid out of a loan made by E. P. Lee to T. G. Roberts.

"Prior to that time the defendant corporation, acting through T. G. Roberts its president, executed a deed to T. G. Roberts, individually, covering the property involved in this litigation. The deed in question was made under authority of a resolution of the board of directors wherein it was recited that all members of the Board were present. This deed was duly recorded in the records of DeSoto Parish, Louisiana, and remained unchallenged on the conveyance records thereof over eight years. In August 1924 T. G. Roberts then the record owner of said lands executed a mortgage to E. P. Lee for $ 20,000.00, which was deposited in the Bank of Commerce & Trust Co., successors to Bank of Commerce, to the credit of the defendant corporation, and $ 15,000.00 of said amount used to discharge the indebtedness of said defendant corporation to said bank. Later the said T. G. Roberts executed a second mortgage in favor of the Bank for $ 30,000.00 on said lands to secure an indebtedness due by him and by the Roberts Lumber Company, which was assumed by Roberts to said Bank. This mortgage note has remained in the hands of the Bank until this time to secure the indebtedness of the said Roberts to the Bank.

"In 1926 Roberts having defaulted in payment of interest due E. P. Lee the note held by Lee was foreclosed on, but the suit dismissed when other parties purchased the notes. In 1928, the said Roberts having defaulted in his obligation to the Bank on its second mortgage, suit was instituted on said note, but discovering there was an error in the description of the lands in the second mortgage, the Bank purchased the first mortgage notes issued by Roberts to Lee in 1924, and instituted foreclosure proceedings on the same, having dismissed the suit foreclosing upon the second mortgage. This last proceeding was filed on August 6, 1928, and the properties sold to the Bank at public outcry for $ 22,000.00. The Bank later transferred the properties to the plaintiff herein.

"A short time prior to the filing of the foreclosure proceedings by the Bank, the individual defendants, who were all stockholders of the Roberts Lumber & Grain Co. Ltd., defendant herein, apparently for the first time became interested in the affairs of the corporation, by filing suit against T. G. Roberts, the president thereof, seeking to set aside the sale by the defendant corporation to himself, for numerous reasons set forth in their answer, herein, as well as a suit which was filed in June 1928 in the District Court of Caddo Parish, Louisiana.

"From the time the defendant corporation was organized in 1915, to June, 1928, it does not appear that any of these individual defendants had anything to do with the management of the corporationor seemed to have any interest in its affairs -- this being shown by the evidence taken herein, that they never attended directors or stockholders meetings, but left the entire management and control of the defendant corporation to the said T. G. Roberts, president, and the resident stockholders and officers. All of the resolutions of the director's meetings appear to have been signed by T. G. Roberts, E. C. Barlett and Mrs. L. M. McCormack, who lived in Caddo Parish, Louisiana, the domicile of the corporation. This fact alone makes it clear that the affairs of the corporation were left in the hands of the four directors herein named, without protest from the others until the year 1928.

"Now these nonresident stockholders are seeking to set aside the deed to T. G. Roberts, made in 1920, to the prejudice of the plaintiff herein, for the various reasons set forth in their answer.

"The deed from the defendant corporation to its president acting through himself, is valid upon its face because made upon a resolution annexed to the deed, which recited that it was unanimously passed at a meeting of the board of directors of the corporation, with all members present, and third parties, in the Court's opinion, had a right to rely upon its recitations. Even if the same were not valid, it was only voidable, and in order for the corporation to set the same aside it should not be guilty of laches, but should have acted to disaffirm the same within a reasonable time. Also the corporation received the benefits of the loan made by Roberts and has not offered to refund the same, as this money was used to pay its indebtedness.

"The deed in question was entirely regular and the Court does not think the contrary can be shown to the prejudice of third persons. In Thompson on Corporations, 3rd Edition Vol. 2, p. 711, paragraph 1268, it is said:

"'As a rule, illegality or irregularity in a directors meeting cannot be set up to defeat the right of innocent third parties dealing with the corporation, for, in the absence of notice to the contrary, they have a right to assume that the proceedings were legal and regular, that notice was given, that a quorum was present, that the meeting was called in the mode prescribed by the charter and bylaws. A purchaser for value and without notice of irregularity, was held to acquire a good title, where the number of directors who authorized the contract to be made was less than the number required to constitute a quorum.

"'There is always a presumption in favor of a quorum and regularity of proceedings.'

"In Fletcher on Corporations, Par. 1891, citing inter alia Ross v. Crockett, 14 La.Ann. 811, it is said:

"'Presumption in favor of meeting -- Whenever an act purports to have been authorized by the board of directors, it will be presumed, until the contrary is shown, that they acted at a meeting, that proper notice of the meeting was given to all the directors, that a...