Caho v. Norfolk & Southern Railway Co.

CoNNOR, J., after stating the case: The defendants having joined in the demurrer, if the complaint states a cause of action against either of them, it must be overruled. Clonant v. Barnard, 103 N. C., 315; Blackimore v. Winders, 144 N. C., 212. If, therefore, a cause of action is stated against the Pamlico, Oriental and Western Railroad Company, we may not inquire whether any is stated against its codefend-ants who joined in the demurrer, but must adjudge that they answer over. It is proper to say that no ground of demurrer is stated Avhich does not apply to all of the defendants. Is any cause of action stated against the Pamlico, Oriental and Western Railroad Company ? While a number of grounds of demurrer are set forth, they all involve the same objection— that no cause of action is stated, for that there is no averment that any salary was affixed to the office of president prior to 27 February, 1906. The authorities cited by counsel for defendants amply sustain his contention that, in the .absence *24 of an express promise, made prior to the performance of the service, an officer of a corporation cannot maintain an action for compensation — that he cannot sue upon a quantum meruit. “An officer has no right to compensation for services except by express agreement preceding the services rendered.” It is said: “Officers of modern business corporations are usually awarded a salary, either by express provision of the charter or by-laws of the corporation or by resolution of the board of directors. In such cases they are, of course, entitled to recover the^ compensation so fixed or agreed upon.” 21 Am. and Eng. Enc., 906. “An agreement by the board of directors to pay an officer or director for past services, where there was no prior agreement to that effect, is without consideration and is not binding on the corporation. But where there was a prior agreement for _ compensation, a vote of the directors, after the services were rendered, to pay for the same is valid and binding.” Ib., 908; 10 Cyc., 921. “Where official or other services are-rendered to the corporation upon the previous understanding that compensation is to be paid therefor, it may be recovered upon the implied promise ; but, on the contrary, if there be no such previous promise made by the stockholders or directors at any authorized meeting, any undertaking of the directors or stockholders to pay for such past services is without consideration and void.” 2 Beach Priv. Corp., sec. 722; Martindale v. Wilson-Cass Co., 134 Pa. St., 348 (19 Am. St. Rep., 706); Womack Priv. Corp., 472. The authorities are uniform. If the law were otherwise, stockholders and creditors of corporations would have no protection against confiscation of the corporate property by reckless extravagance or corrupt combination of officers and directors to impose debts and liabilities for past services. A stockholder would never be able to know the value of his stock, or a creditor the amount of debts for which the corporation is liable. Where power is conferred by the charter upon directors to elect officers and fix their salaries, the power must *25 be exercised at tbe same time and not left open for future adjustment.- It is but just to all persons concerned that the expenses incident to operating the business of the corporation, so far as salaries are concerned, shall be fixed and made a matter of record. This complaint presents a striking illustration of the wisdom of the law. Without questioning the motives of anyone, it is manifest that the value of the corporate property will be greatly lessened by fixing upon it nearly $10,000 for “salary and fees” to the president, running through a period of fourteen years. The difficulty which confronts the defendants is that the plaintiff alleges that the services were rendered and the amounts expended at the request of the corporation, and that it expressly promised and agreed to pay the amount. The cause of action is upon an express contract and promise made, not by the directors, but by the corporation. If, as alleged, the company — the stockholders — requested the plaintiff to render the service as president .and attorney, and promised to pay the specific amount named, we cannot see any good reason why he may not recover. The contract is not ultra vires. While it is true that an officer of a corporation cannot charge for extra services, except upon an express promise preceding their rendition, we can see no reason, unless a fraud upon creditors, why the stockholders, by a unanimous vote, may not make such a contract as plaintiff sets out. However imprudent it may be, if all of the parties interested make the contract, the court may not refuse to enforce it. The plaintiff’s cause of action receives no force or validity from the action of the board of directors on 21 February, 1906. If the company was liable, as alleged, by reason of a previous request and express promise to pay, it required no action by the directors to “approve and allow” the claim. If there was no such request and promise, the action of the board is without consideration and void. *26 The demurrer must be overruled and the defendants answer over. The judgment of his Honor is Affirmed.