Wood v. Lost Lake Manufacturing Co.

Thayer, C. J. The appellant’s counsel urged at the hearing two points with much force and reason: First, that the board of directors of the insolvent corporation having fixed and allowed the appellant’s compensation for services as president of the board for the time charged, — @150 a month for the previous thirty-two months, — the allowance so made was conclusive upon the exceptors; second, that the uncontroverted testimony given on the part of the appellant at the trial proved as a matter of law that he was entitled to such allowance, and that it was error on the part of the jury to find thereon that he was only entitled to @800. I was inclined to believe when the question was presented at the argument that the allowance of the appellant’s claim by the board of directors, as shown by the proof, was at least prima facie evidence that he was entitled to the sum allowed. Section 3225, Hill’s Code, provides: “From the first meeting of the directors the powers vested in the corporation are exercised by them, or by their officers or agents, under their direction, except as otherwise specially provided in this chapter. ” My first impression was that an allowance so made would be regarded as correct and valid unless impeached for fraud or collusion.. I find, however, upon an examination of authorities bearing upon the subject, that such an allowance on account of past services cannot legally be made; and some of them go so far as to hold that a board of directors of a corporation cannot contract with one of its own members for compensation unless authorized to do so by the charter of the corporation. In Lone Association v. Stonemetz, 29 Pa. St., the court, by Porter, J., in the concluding part of the opinion, says: “If services of the director become important to the corporation, let him resign and enter its employment like any other man. If it be proper that directors generally should receive compensation, let it be so provided in the organic act which creates the body. Those who commit their money to its care will then do it with their eyes open. Until [24] this be provided there is no reason in law or morals for allowing their property to be taken without their knowledge or consent.” The decision in this case is very pronounced that a resolution passed by a corporation after such services are rendered is without consideration, and imposes no obligation on the corporation which can be enforced by action. So also is the decision in Kilpatrick v. The Penrose Ferry Bridge Co. 49 Pa. St. 118. Both these decisions hold that corporations are not liable for services performed by their officers unless rendered in accordance with an express contract for compensation entered into prior to such performance. The same principle was also adhered to in Cheeney v. L. B. & M. R. W. Co. 68 Ill. 570. In the latter case a director in a railway corporation was appointed a member of the executive committee thereof, and acted as such for a length of time; he was also appointed an agent of the company to transact other of its affairs. He charged for his services in both cases, and presented a claim therefor to the company amounting to $4,000, which was audited by its executive committee, and the board of directors of the corporation at a meeting subsequently held by them appropriated $25,000 to pay this claim and certain other ones. The court in an action to enforce the payment of the said claim held that the claimant was not entitled to recover for the services rendered by him for the company as director; that in order to entitle him to recover com pensation for such services it must have been provided for and fixed in the bylaws, or by resolution of the directors spread upon the minutes of their proceedings before the services were rendered. The court, however, held that the claimant was entitled to recover for services rendered for the company which did not pertain to his duty as such director. This doctrine was recognized as the law and maintained in Graves v. Mono Lake Hydraulic Mining Co., decided by the supreme court of California and reported in the 27 Pac. Rep. 665. From these and a great many other authorities which might be cited, it [25] is evidently a settled rule of law that a director in a corporation acquires no legal claim against it for services performed by him in the discharge of duties pertaining to the office or trust unless a compensation therefor was fixed by a resolution or bylaw of the corporation prior to the performance of the services, and that the auditing and approval of such a claim by the auditing officers of the corporation does not impart to it legal validity. If, however, services are performed by such director for the corporation at its instance and request in regard to matters outside of the duties devolving upon him by virtue of his office or trust, then he is entitled to claim compensation therefor upon a quantum meruit, although none had been fixed by the corporation prior to the performance thereof. The appellant in this case therefore had no standing in court without proving that the compensation for the services claimed by him had been fixed by the corporation in the manner indicated, before they were rendered, or that said services were not germain to the duties of his position of trust, and that he was directed by the corporation to perform them. Otherwise no legal objec tion can be established against the corporation although the services were rendered in the expectation of a remuneration therefor: N. Y. & N. H. R. R. Co. v. Ketcham, 27 Conn. 170. According to this view, which seems to be sustained by an overwhelming weight of authorities, the appellant had no legal right to demand the §4,800 for salary as president of the board of directors, notwithstanding his claim therefor had been approved by the board. It is unnecessary, therefore, to consider the second question presented by the appellant’s counsel, which is above set out, nor the instruction of the court as to the right of the jury to inquire into the merits of the appellant’s claim. The instruction, under the strict rules of law, was more favorable to the appellant than the court was authorized to give. The appellant may have been justly entitled, in [26] morals, to the salary claimed; but, unfortunately for him, the law does not recognize his claim therefor as a legal obligation. The services for which the appellant claimed compensation were a part of the duties of his office, and compensation therefor not having been fixed as suggested, cannot be enforced. The judgment appealed from must, for the reasons mentioned, be affirmed.