State ex rel. Short v. Benevolent Inv. & Relief Ass'n

• Decision Date: 18 November 1924
• Docket Number: Case Number: 15650
• Citation: 232 P. 35,1924 OK 1043,107 Okla. 228
• Parties: STATE ex rel. SHORT, Atty. Gen., v. BENEVOLENT INV. & RELIEF ASS'N et al.
• Court: Oklahoma Supreme Court

1924 OK 1043

232 P. 35

107 Okla. 228

STATE ex rel. SHORT, Atty. Gen., v. BENEVOLENT INV. & RELIEF ASS'N et al.

Case Number: 15650

Supreme Court of Oklahoma

Decided: November 18, 1924

Syllabus

¶0 1. Corporations--Corporation's Title to Real Estate Though Holding Unauthorized by Charter.

A conveyance of real estate by the owner to a corporation, duly organized under the laws of the territory of Oklahoma, or of the state of Oklahoma, may vest title to such real estate in such corporation although the acquiring or holding of such real estate be beyond the power granted to such corporation by its charter.

2. Escheat--Illegal Holding of Real Estate by Corporation--Bona Fide Conveyance Before Escheat Proceedings.

Although a corporation may have acquired real estate in such a manner as to render it subject to be escheated to the state by a proper action begun for that purpose, yet if such corporation shall, prior to the commencement of such proceeding to escheat, make a bona fide sale or conveyance of said real estate for value, the purchaser at such sale will take good title thereto.

George F. Short Atty. Gen., and John Barry and Leon Hirsh, Asst. Attys. Gen., for plaintiff in error.

Randolph, Haver & Shirk, R. C. Allen, H. M. Gray, Thos. G. Andrews, Clyde L. Andrews, Andrews & Andrews. Nadler & Nadler, Erwin & Erwin, and J. T. Blanton, for defendants in error.

GORDON, J.

¶1 This action was begun in the district court of Lincoln county by the state of Oklahoma, on the relation of the Attorney General, against the Benevolent Investment & Relief Association, and numerous other defendants, having for its purpose the escheat to the state of certain lands consisting of about 40 acres forming what is known as Key West town site. In the action application is made for the appointment of a receiver pendente lite to take charge of the land and of the oil produced from certain wells which have been drilled upon the land. Upon the trial, the district court, after hearing the evidence, denied the application for the appointment of a receiver, and, upon the motion of defendants, dismissed the petition. In the journal entry so dismissing the petition and denying the receivership, the court referred to certain preliminary pleadings and motions filed by defendants as having been treated by the parties as demurrers to the petition, and in such journal entry said motions are by the court sustained. From this action of the court in sustaining the demurrer and motions and in denying the application for the appointment of a receiver the state of Oklahoma has appealed. The defendant, the Benevolent Investment & Relief Association, was a corporation, which obtained its charter from the territory of Oklahoma, on February 18, 1905. Little is known of its transactions until it purchased the land involved here. On the 14th day of January, 1907, this corporation purchased this land from Lemon Petty and Vinnie Petty, his wife, being-- "A piece, parcel, or strip of land forty (40) rods wide and one hundred and sixty (160) rods long off of the east side of the following described land, to wit: Lots one (1) and two (2) and the west half (1-2) of the northwest quarter (1-4) of section twelve (12), township fourteen (14) north of range six (6) east, I. M., and containing 40 acres off the east side of the said 118 and 55-100 acre tract."

¶2 This property after its purchase is referred to as Key West town site. And it is agreed in the briefs of the parties herein that soon after the purchase and prior to the entry of Oklahoma into statehood, the defendant Benevolent Investment & Relief Association, platted the land into town lots and began to sell and dispose of the same. Practically all of this property was disposed of by this corporation prior to the beginning of this action. In fact, it is admitted in the briefs that it has all been disposed of. The property became valuable several years ago by reason of the supposed presence of oil thereunder, and various transfers were made of the lots and valuable oil and gas leases and sales of royalty interests were made, thus necessitating the large number of defendants here. On December 28, 1923, the drilling of an oil well was begun upon this so-called town site; this well began to produce oil on May 10, 1924; this action was begun on July 8 1924. While the record in this case is voluminous, the questions at issue are few. It is contended on the part of the state that that part of the charter of the Benevolent Investment & Relief Association which provides for the holding and selling of real property was void, as being in contravention of the law and public policy at the time the charter was issued. It is further contended by the state that while the corporation had no power to deal in farm land yet, upon the execution of the deed by Lemon Petty to the corporation, title vested in the corporation; that the corporation had no power to divest itself of this title and that therefore such title remained in the corporation until these escheat proceedings began about 17 years thereafter, and that for the purposes of this suit, title is now in the corporation, notwithstanding the purported conveyances executed thereby. The contentions of the state are set forth in five paragraphs of its brief, which are as follows:

"First. A corporation organized under the laws of Oklahoma Territory could not be granted the authority to deal in farm lands.

"Second: That the charter grant of power to wit, the articles of incorporation of the Benevolent Investment & Relief Association, not giving to it the right to do a town site business, an attempt upon the part of said corporation to do a town-site business was ultra vires in the strictest sense of the word.

"Third. That where a contract or conveyance attempted to be made by a corporation is ultra vires in the strictest sense of the word on account of a total lack of authority and capacity on the part of the corporation, no rights may be claimed under or by virtue of said contract or conveyance.

"Fourth. That under the provisions of section 11321, Comp. Stats. 1921, land held by a corporation in contravention of section 2, article 22, of the Constitution, is illegal and unlawful and is subject to escheat to the state of Oklahoma.

"Fifth. That estoppel or laches does not run against the state in escheat proceedings."

¶3 These propositions are further limited in the brief of plaintiff in error to two questions, which are: First, Has the Benevolent corporation transferred title to the various town lots in Key West? Second, may the state question the ultra vires acts of this corporation? On the other hand, it is contended by defendants in error, that the power granted in the charter to acquire, own, and sell farm lands was not in violation of any statute law of the territory of Oklahoma, and that the charter did not violate public policy in this respect. Further, that when this charter was granted, the right had been given by the territorial Legislature to a corporation to acquire lands for town-site purposes and for additions to town sites, with the right to plat subdivisions and sell such lands. That the land in question was purchased for town-site purposes and was subdivided and platted and sold as a town site; that the language of the charter is broad enough to authorize such dealings in land. It is further contended by defendants that if that portion of the charter above specified was void and conferred no right upon the corporation to buy this land, yet when the corporation did purchase the land, it had the power to sell the same and divest itself of title before and up to the time of a proceeding to escheat by the state was begun. It is contended that the law authorizing escheats, as it now stands upon the statute books, is void, in that it seeks to amend an act of the Legislature which has heretofore been declared void by the courts of this state, and that for this reason the proceedings here must fail as being unauthorized by law. The purposes for which the corporation in question was organized as expressed in its charter were:

"To transact a benefit loan and investment business on the association plans, to bargain and sell, have and hold lease and assign, transfer and exchange real and personal property embracing farm and farm supplies, stores, and store house supplies. To carry on a general wholesale and retail commercial business. To operate farms and parts thereof and to do work of charity."

¶4 It is contended by plaintiff in error that at the time this corporation was organized, the territory of Oklahoma did not permit the organization of corporations for the purpose of dealing in or owning farm lands, and that though the statutes provided that corporations might organize with the power of "locating, laying out, improving town sites, and buying and selling real estate therefor, including the sale and conveyance of the same in lots, subdivisions, or otherwise," yet the language of the charter was not such as would include this right. From the action of the corporation it appears that the land involved here was purchased for town-site purposes, and certain it is that it was platted and laid off into lots and blocks, with streets and alleys looking to the formation of a town site. But whether the corporation had the power to hold the land as farm land or whether the language of the charter would properly be so construed as to give it the right to do a town-site business or to plat the land and sell it in the form of lots, is not material here in view of our conclusion upon what we deem to be the controlling principle in this case. The principal question presented is that touching the power of the defendant corporation to transfer title to land taken by it as a result of a conveyance though the taking was in violation of the Constitution and laws of the state. If, on the one hand, it acquired title notwithstanding a prohibition of law, and had no power to divest itself of...