Newberry v. Barth, Incorporated

252 N.W.2d 711 (1977)

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Nature of the Case

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Facts

Barth, Incorporated was organized under the provisions of Chapter 491, The Code, 1950. An apartment complex was its principal asset. It was purchased from Florence Barth and her husband Paul Barth who died July 29, 1968. Florence had listed it for sale for a sale price of $220,000 terms 'cash or possible $45,000 down.' The listing agreement disclosed the owner as 'Barth, Inc.' Florence testified she thought she had the authority to list the property on behalf of the corporation. The articles of incorporation were a matter of record in Black Hawk county recorder's office and in the office of the Secretary of State. Extensive corporate control was placed in the hands of the FHA, as a sole preferred stockholder. The FHA guaranteed or insured the corporate indebtedness for the purchase price of the apartment complex. The corporation could not take the following actions without prior consent of the preferred shareholders: (1) pay for repairs from a reserve fund, (2) remodel, reconstruct or demolish the apartment house, (3) rent apartments below a fixed rate, (4) carry out any basic change in corporate structure such as consolidation, merger, and voluntary liquidation, (5) amend the articles of incorporation, and (6) assign, transfer, dispose of or encumber any real or personal property, 'except as permitted by the terms of the mortgage.' Florence was permitted to draw $133.28 per month. The articles authorized five preferred shares and 490 common shares. The common shares were owned by Paul Barth, president, 233 shares; Florence Barth, secretary-treasurer, 232 shares; and Addison P. Clark, vice-president, 25 shares. After Paul Barth's death, the office of president was left vacant. Florence was his beneficiary. P thought Florence owned the property. P and Florence signed a contract for sale in the apartment complex. Florence never said a word about the FHA approval needed for the sale. P sued Ds for specific performance. D claimed Florence was the agent for D. Trial court found both defendants were bound by the sales transaction and ordered both to specifically perform the contract. The court held that the articles of incorporation give two-thirds of its common stockholders the right to amend the articles or to dissolve the corporation. Preferred stock may be redeemed at par upon the termination of the mortgage insurance which could certainly be done as a part of this transaction. The court concluded that D in every material respect is Florence and that her act in contracting to sell the apartments is binding upon D. D appealed.