Gaul v. Kiel & Arthe Co.

McLaughlin, J.: This action was brought to recover commissions alleged to have been earned under a contract with the • defendant by which, it agreed to pay plaintiff, in addition to a specified salary, six and one-half per cent of the profits “ realized by the defendant in its business ” during the year 1906. Defendant denied that it agreed to pay plaintiff such commissions. At the trial it appeared from the plaintiff’s testimony that prior to January 1, 1906, he was in the employ of the defendant as a salesman at a stated salary; that about that time he proposed to terminate his relations with it, and to induce him to stay another year, the defendant offered him in addition to a specified salary a commission of six and one-half per cent of the profits of the business for the year 1906. From the testimony of'the' defendant’s witnesses Kiel and Arthe, who owned substantially all of the stock of the defendant (Kiel being the president and Arthe the. vice-president and treasurer), the agreement was to pay him five per cent of the profits.' It was conceded, or at least the fact was not disputed, that the profits of the business for the year in question were $3,317.56. It also appeared that Kiel and Arthe each had drawn a salary of $3,500 for the yean, which was charged in the expense account. No proof whatever was offered showing, or tending to show, that the defendant had ever agreed to pay either of them this salary or any salary, and in the absence of such proof the trial court held that the plaintiff was entitled to a commission of either five or six and one-half per cent (whichever the jury found the contract to be) on the conceded profit of $3,317.56 plus the $7,000 drawn out as salaries, or in other Words, on $10.317.56, and the jury- was so instructed, to which an exception was taken. The jury rendered a verdict for $705.64, and the defendant appeals. Whether the plaintiff was entitled to five or six and one-half per' cent was clearly a question of fact and the finding of the jury in plaintiff’s favor cannot be disturbed. Nor do I thin k the court erred in instructing the jury that'the plaintiff was entitled to a commission on not only ■ the conceded profits, but also on the $7,000 drawn out. by- Kiel and Arthe for [623] salaries. As stated, Kiel was president, Arthe vice-president and treasurer of tlie defendant, and they held a majority, of its stock, but because of such facts they had no mpre right to take the defendant’s money than a stranger had. The defendant had to agree to pay them a salary before they were" entitled to use its money for that purpose, and this, like any other agreement, presupposes corporate action. It is a mistaken notion that the officer of a corporation, even though he owns nearly all of the stock, can, in the absence of an agreement, draw any sum whatever as salary. When he assumes the duties of the office and performs them without any agreement or provisión for compensation, the legal presumption is that he performs such services gratuitously. As was said in Mather v. Eureka Mower Co. (118 N. Y. 629) “ If the officer expects to have compensation, and the corporation intends to. pay him for his official services, it may easily be provided for by resolution or agreement before he enters upon his services. This is at all events a salutary rule, as applied to an officer who is a stockholder of the corporation.” In Barril v. Calendar Water-Proofing Co. (50 Hun, 257) it was said: “ The rule has become quite well settled that an officer of a corporation is not entitled to receive compensation, in the absence of an agreement securing it, for his services performed in the legitimate discharge of the duties of his office.” And in Stout v. Security Trust & Life Ins. Co. (82 App. Div. 129): “ It has been our settled policy not to create a liability as against a corporation in favor of an officer who renders services upon the theory of an implied contract, our view being thajt the services will be presumed to be rendered gratuitously unless there is an express contract upon which the right to compensation is based.” (See, also, Eakins v. White Bronze Co., 75 Mich. 568, and Alston Mfg. Co. v. Squair, 105 Ill. App. 238.) Here, as already said, no evidence was offered to show that the defendant had ever agreed to pay either Kiel or Arthe any salary whatever. It is 'suggested, however, that the burden was upon the plaintiff to show that no such agreement had been made. On the contrary, the burden was upon the defendant. It was endeavoring to reduce the profits realized by showing the disbursements made^and obviously only such disbursements as were legally made could be used for that purpose. [624] I am of the opinion that the plaintiff was clearly entitled to commissions on the amounts drawn out as salaries. The jury evidently reached the conclusion -that' the agreement was to pay the plaintiff six and one-half per cent commission, and awarded that amount on the conceded profits, plus the seven thousand dollars drawn out as salaries, but, in computing the amount, it appears they made an error of thirty-five dollars in plaintiff’s favor, and for that reason the judgment and order must be reversed and a new trial ordered unless the plaintiff stipulates to deduct from the verdict the thirty-five dollars; and if süch stipulation be given, then the judgment and order appealed from are affirmed, without costs to either party. .- Clarke and Houghton, JJ., concurred; Ingraham and Laughlin, JJ., dissented in part. "