West Point Telephone & Telegraph Co. v. Rose

Whitfield, <7., delivered the opinion of the court. Appellee was a stockholder, director, and acted as secretary for the promoters of the appellant corporation prior to its existence as a corporation. While so acting as secretary, he claims to have rendered services valuable and necessary, both as secretary and otherwise, for a period of fifteen and one-half months,' intended by him for the benefit of the future corporation, and which he says he expected to be paid for by the corporation. Although acting as secretary, he never procured those acting as directors to adopt any resolution providing for payment of any of these services at any rate, though certainly it was easy to have had this done, if it was the purpose that he should be paid. Appellee does not himself testify that the other persons acting as directors ever understood or agreed that he was to be paid anything. On the contrary, there is positive testimony that the agreement was that no salaries were to be paid any of the officers for the first year. The clear preponderance of the testimony—its overwhelming drift and effect—is, not only that no express contract was made to pay appellee, but that the express understanding was that no salaries were to be paid any officer for the first year. Sections 484 et seq., 1 Thompson on Corporations, deal with the case of strangers to a corporation who have made contracts with the promoters, and the rule there, even, is stated to be that ordinarily such contracts cannot be enforced against the subsequently formed corporation. So far as contract is concerned, there is no privity between the subsequently formed corporation and such strangers. 1 Thompson on Corporations, secs. 480-489. It is said in the exhaustive note to Oakes v. Water Co. (N. Y. App.), 26 L. R. A., 544, s.c. 38 N. E., 461, that the “most recent cases agree that, unless the corporation has adopted a contract made for it by its promoters, no liability is imposed upon it by reason of such contract. ’ ’ [64] It is, indeed, said in section 484, 1 Thompson on Corporations (cited by appellee’s counsel), that it has been ruled that where, after the charter and before the organization of a corporation, services are rendered which are necessary to complete the organization, and, after it has been perfected-, the corporation elects to take the benefits of such services, knowing they were rendered with the understanding that compensation was to be made, it will be held liable to pay for the services, upon the ground that it must take the burden with the benefit, but that no promise to pay would be implied from the fact that such services were rendered at the request of any number of the corporators less than a majority. But counsel’s citation does not avail, for several reasons: (1) The section is dealing with suits brought by strangers, on contracts made with promoters, against the subsequently formed corporation, for services rendered after charter; (2) nearly all these services were rendered before charter; (3) there is no “understanding” or “request” of any number of promoters even, that these services, except those as secretary, should be rendered. This is a suit by appellee, as secretary chiefly, and falls within the rule clearly and emphatically announced by Judge Thompson in Pfeiffer v. Brake Co., 44 Mo. App., 62, where he sajrs: “The cases hold, with great unanimity, that the directors of a corporation are not entitled to compensation for their services as directors, unless by statute, by-law, or prior action of the stockholders; that the law does not imply a promise on the part of the corporation to pay for such services,” citing a multitude of authorities, and then adding: “This rule has been extended to services rendered by officers of corporations which are regarded as naturally incident to their duties as directors, ’ ’ citing many cases directly in point. The supreme court of Pennsylvania, in Kilpatrick v. Bridge Co., 49 Pa. St., 118, says: “The offices of a corporation are generally filled by the chief promoters of the corporation, whose interest in the stock is supposed to be a motive for [65] executing the duties of the office without compensation, and this presumption prevails until overcome by express prearrangement of salary.” We think the overwhelming weight of the evidence is that there was an express agreement that no officers should be paid salaries for the first year. The resolution as to the $150 sufficiently shows on its face that it was an offer by way of compromise, and there is other unexcluded testimony to that effect. All this testimony should have been excluded. It follows that a remittitur cannot be permitted here, but the judgment must be reversed. We are not, under the proof, called on to say anything as to the doctrine that where a corporation receives the benefit of services essentially necessary to its existence or maintenance, rendered by third parties, or by promoters, without any express contract, it will be liable in quantum meruit, in equity, at least. Shackelford v. Railroad Co., 37 Miss., 202, holds that to be the true doctrine, as do the authorities cited in note to Ten Eyck v. Railroad Co. (Mich.), 3 Law. Rep. Ann., 378, s.c. 41 N. W., 905; Alger, Promoters Corp., secs. 223, 224; 1 Thomp. Corp., secs. 484, 485; and the supreme court of New Hampshire and Vermont (Low v. Railroad Co., 45 N. H., 370, 375; Hall v. Railroad Co., 28 Vt., 401). And, while this doctrine has been criticized (Alger, Promoters Corp., sec. 224), we understand it to be the law of Shackelford v. Railroad Co., supra, and the sound doctrine. In such case the corporation would seem to be liable, not on ratification or implied contract, but on the doctrine of estoppel. See note to Oakes v. Water Co. (N. Y. App.), 26 Law. Rep. Ann., 548, s.c. 38 N. E., 461; 1 Thomp. Corp., sec. 480. Without, however, deciding anything as to this last proposition, that the liability arises from estoppel properly, we hold that appellee fails on the proof as to compensation for services as secretary and otherwise. Judgment is reversed, verdict set aside and cause remanded.