Talbot v. James

259 S.C.73, 190 S.E.2d 759 (1972)


Ps owned a tract of land fronting on U.S.Highway 17, in Myrtle Beach, S.C. The appellants were approached by D with a proposal that the tract of land be used for the erection thereon of an apartment complex. After preliminary talks and negotiations, the parties on January 12, 1963, entered into a written agreement thereabout. P agreed that the Corporation will erect and operate an apartment complex. Ps agreed to convey the land to the Corporation and D agreed to be responsible for everything regarding the complex. It was also agreed that upon the formation of the Corporation, P were to receive 50% of the stock of the Corporation in consideration for their transfer of the land to it. This was to be the absolute limit of the contribution of the appellants. D was to receive 50% of the stock of the Corporation in consideration of his efforts on its behalf. D obtained the services of an architectural firm, preliminary plans and sketches of the proposed apartment complex were made, commitments for the Federal Housing Administration and acceptable mortgagee with regard to financing. The Corporation was formed and a charter issued on November 5, 1963. 20 shares were issued with D receiving 10, C.N. Talbot receiving 1 and Mrs. Talbot receiving 9. At a meeting, D was elected president, his wife secretary, Mr. Talbot vice-president, and Mrs. Talbot was elected a treasurer. P and D were elected directors. At a meeting on November 5, 1963, the corporation accepted an offer by the Ps to transfer the tract of land in exchange for 10 shares and the property was of a value of $44,000.00. At the same meeting, a resolution was adopted accepting an offer of D to transfer to the Corporation in exchange for 10 shares of no par value stock, at a valuation of $44,000.00 the following: FHA agrees to insure a mortgage loan in the amount of $850,700.00 on a parcel of land in question here, provided that 66 apartments are constructed thereon.; a Commitment from United Mortgagee Servicing Corp. agreeing to make a mortgage in the amount of $850,700.00; certain developed contracts; the use of finances and credit developed by D. The next day, the board of directors passed a resolution allowing the corporation to borrow the money from United Mortgagee Servicing Corp. and authorized D to make, execute and deliver documents required for completion of the loan transaction. On November 6, 1963, James Construction Co. entered into a contract with Chicora Apartments, Inc. The contract sum was to be the actual cost of construction plus a fee equal to $20,000.00 but in no event, was the contract price, including the fee, to exceed $736,000.00. Attached to the contract was a Trade Payment Breakdown which made an allowance for overhead expenses in the amount of $31,589.00, but that sum was to be paid by means other than cash. In 1968, Ps began questioning the disbursements of the mortgage funds by the D. They demanded to examine corporate records but were refused. The case was referred to the Master in Equity for Horry County who after taking the testimony, filed a report in which he found that D was not entitled to general overhead expenses and profits arising out of the construction contract with Chirora Apartments Inc., and recommended judgment in favor of Chirora Apartments, Inc against him in the amount of $25,025.31. Ds appealed. On the appeal, the presiding judge issued an order reversing the findings of the Master and ordered judgment in favor of respondents. This appeal followed.