Mountain Top Youth Camp, Inc. v. Lyon

202 S.E.2d 498 (1974) 20 N.C. App. 694

MOUNTAIN TOP YOUTH CAMP, INC.
v.
Gale W. LYON et al.

No. 7417SC13.

Court of Appeals of North Carolina.

February 20, 1974.

Harry Rockwell and John R. Hughes, Greensboro, for plaintiff appellee.

William L. Nelson, Nelson, Clayton & Boyles, Winston-Salem, for defendant appellant.

HEDRICK, Judge.

By their three assignments of error, defendants contend the court erred in its findings and conclusions that the defendants had failed to show that a valuable consideration passed from defendants and that the defendant Gale Lyon had no implied or inherent authority as President of the plaintiff corporation to convey the property of the plaintiff corporation to himself. We do not agree.

The purchase or lease of the property of a corporation by an officer or director of a corporation renders the transaction voidable, not void, and such transaction will be upheld only when open, fair, and for sufficient consideration. 19 C.J.S. Corporations § 775, p. 137. "The presumption is against the validity of such contract, and when it is attacked the purchaser or lessee must show that it is fair and free from oppression, imposition, and actual or constructive fraud. Firmly established in our jurisprudence is the doctrine that a person occupying a place of trust should not put himself in a position in which self-interest conflicts with any duty he owes to those for whom he acts; and as a general rule he will not be permitted to make a profit by purchasing or leasing the property of those toward whom he occupies a fiduciary relation without affirmatively showing full disclosure and fair dealing." Hospital v. Nicholson, 189 N.C. 44, 49, 126 S.E. 94, 97 (1924). See also, Underwood v. Stafford, 270 N.C. 700, 155 S.E.2d 211 (1967); Mfg. Co. v. Bell, 193 N.C. 367, 137 S.E. 132 (1927).

In Mfg. Co. v. Bell, supra, at p. 371, 137 S.E. 132, our Supreme Court succinctly stated several principles of law which govern the determination of the validity/invalidity of a deed made by a corporation to its officers or directors. These principles are as follows:

"1. The conveyance of the property must be authorized by the corporation or ratified by it.

2. The law presumes that such conveyances are invalid and imposes upon the purchaser the burden of establishing that the purchase is fair, open, and free from imposition, undue advantage, actual or constructive fraud.

3. Such conveyances will not be declared void as a matter of law, but it is a question for the jury to determine upon all the evidence as to whether the vitiating elements enter into the particular transaction."

In the instant case the record reveals that the trial court made findings of fact (1) that defendant Gale Lyon was not authorized by the corporate plaintiff, its board of directors, or any other party to transfer the parcel of land in question to himself and his wife; (2) that the board of directors had no knowledge of this transaction until the same was discovered by chance more than three years after it occurred; (3) that the transaction was not thereafter ratified by the board of directors of the corporation; (4) that there was no believable evidence that adequate consideration had passed from defendants to the corporate plaintiff; (5) "that said execution of said instrument was done and maintained in secrecy and with the intention of concealment of the entire transaction." A careful review of the evidence presented in this case discloses that these findings are supported by plenary, competent evidence and thus, are binding upon this court. Cogdill v. Highway Comm. and Westfeldt v. Highway Comm., 279 N.C. 313, 182 S.E.2d 373 (1971); Nichols v. Insurance Co., 12 N.C.App. 116, 182 S.E.2d 585 (1971).

These findings, when viewed in light of the principles enunciated in Hospital v. Nicholson, supra, and Mfg. Co. v. Bell, supra, are sufficient to support the conclusions of the trial court that the transfer from plaintiff to defendants Gale and Nancy Lyon was unauthorized and unratified and that this conveyance from plaintiff to defendants Gale and Nancy Lyon and the subsequent conveyance to their minor daughter Martha must be declared null and void and set aside.

The judgment of the trial court is

Affirmed.

CAMPBELL and BALEY, JJ., concur.