Dalton v. Brush Electric Light Co.

Smith, J. The plaintiff in error seeks the reversal of the judgment rendered against him by the Superior Court of Cincinnati, and the principal ground urged for the reversal is, that the trial court after,the testimony on both sides was fully heard, charged the jury that the plaintiff, on the evidence, was not entitled to recover, and directed them to return a verdict for the defendant. He also declined to give certain special instructions asked for by plaintiff’s counsel. Plaintiff excepted to the instructions as given and refused, and a verdict having been rendered by the jury, as directed by the court, a motion for a new trial was made on those, grounds and was overruled by the court, and exception taken, and a bill of exceptions was allowed, setting out what the evidence on the part of the plaintiff tended to prove, as well as that on the part of the defendant — the charges given and refused, and the exceptions thereto. The petition of the plaintiff avers that the defendant company is a corporation, doing business in this state and city, and that on March 20, 1890, he was duly elected treasurer of said company by the board of directors thereof — 506 — and that he accepted, and immediately entered upon the discharge of its duties, and so continued until August 15, 1890, devoting his time and services to the performance of its duties, from April 1, 1890, to Auugst 15, 1980, continuously, for which the defendant company became bound to pay to him a reasonable compensation for his services, which services are of the value of $200 per month; that the company has not paid him any compensation therefor, and the whole value thereof, $900, with interest from August 15, 1890, is due and unpaid, and he asks judgment therefor. The answer admits that it is a corporation, and that on April 1, 1890, the plaintiff was duly elected treasurer of said company, and denies each and every other allegation of the petition. The bill of exceptions shows that evidence was offered tending to show that at the request of the president cf the defendant company the plaintiff accepted a certificate of the capital stock of the company for one share; that on receipt thereof, he executed, in blank, a transfer and power of attorney upon the back thereof, and returned it to the president of the company, from whom he had received it, never having, in fact, any beneficial interest or ownership in the said stock, and was not otherwise interested in said company; and at the same time, March 20, 1890, he was elected by the board of directors of the company as a director therein, and on the same day was elected to fill the office of treasurer of said company; that he accepted the same, and continued in said office until August 15, 1890, and that he devoted his attention daily to the duties of his office as treasurer, examined accounts, took charge of and deposited moneys, executed checks, conferred with the creditors and with the president of the company in reference to corporate indebtedness, and spent the necessary time each day at the office of the company for the transaction of his official duties. That he called the attention of the president to the matter — 507 — of fixing his compensation several'times, and was informed that it would be attended to, but that itjnever was. Plaintiff also offered in evidence article 10 of the constitution of the company defining the duties of the treasurer of the company, and which duties, the evidence tended to show, had been performed by him, and offered article 4 of the by-laws of the company, which provides that the board of directors shall fix the price of all salaries, and further offered proof tending to show that no salary was or had been fixed by the board for the office of treasurer at the time he entered upon the office, or subsequently during his term,and that no agreement had ever been made as to- the amount of salary that should be paid to the plaintiff; and further, that his resignation as treasurer was accepted about September 1, 1890, he, in consequence of sickness, having ceased to perform its duties from and after August 15, 1890, and that •on August 15, 1890, he forwarded to the company, through its acting president, a bill -for said services from April 1, 1890 to August 15, 1890, at the rate of $200 per month, amounting to $900, which bill -the board declined to pay, He further offered evidence tending to show that his said services so rendered was of the value of from $150 to $250 per month. The defendant then offered evidence tending to show that the plaintiff,as treasurer, did not render the services claimed, and that they were not of the value claimed by him. That the provisions of the constitution and by-laws referred to were in force at the time of his election and during his term, and that no salary for the treasurer had been fixed, and that the plaintiff had not called the attention of the acting president to the fixing of the treasurer’s salary'. At the conclusion of the evidence the defendant company moved the court to instruct the jury to return a verdict for ■the defendant, which he did, refusing to give special charges asked by plaintiff’s counsel, and in accordance with the — 508 — instruction, the jury returned a verdict for defendant. Was this action of the court in directing a verdict for the defendant company right? It must be conceded, we think, that if Mr. Dalton had not been a director of this company at the time of his election to the office of treasurer thereof, and while he held the same, that on the production of his evidence tending to-prove his election as treasurer, that he had no substantial interest in the defendant company, and that as such he rendered services worth from $150 to $250 per month, and that on several occasions while rendering the services he called the attention of the president to the matter of fixing his compensation, and was informed that it would be attended to, he was entitled to have the judgment of the jury, on the question whether, on the evidence, he had shown a right to-recover, and if so, how much; that is, whether, in their opinion, on the evidence submitted, the services were-rendered by the plaintiff gratuitously, and without any expectation on his part that he was to be compensated therefor, or whether the defendant, under all the circumstances-shown, did suppose and have reason to so think, that they were gratuitously rendered. In this case there certainly was evidence tending to show that the services were rendered at the request of the company, and with its full knowledge, and that they were valuable, and that plaintiff expected to-be paid therefor. And we think it must be conceded that they were of that character that the jury might properly have found; are usually paid for, as well as those rendered-by a lawyer or other professional man, or by a laborer in the field or shop. Does the fact that the person elected treasurer was at the time and during his term of office, a member of the board of directors, as a matter of law absolve the defendant company from any liability to pay the reasonable value of his-services? If so, the ruling of the court and the direction — 509 — given to the jury were right, and the judgment should be affirmed; but if this is not the case, in our judgment the trial court erred, for then the proper course would have been to submit the matters in issue to the jury, with appropriate instructions. ~~ It must be admitted that the adjudications on this point are not harmonious, but are in direct conflict. For instance, it is held in the case of Kilpatrick v. Bridge Co., 49 Pa., St., 118, that corporations are not liable on a quantum meruit for services performed by their officers. There must be an express contract for compensation, or there can be no recovery. And in Holden v. R. R. Co., 71 Ill., 106, it is held, “that where a director of a railway company is appointed treasurer, he will have no right to claim pay for the same, and the subsequent allowance of a claim in his favor will not entitle him to recover.” And in 118 N. Y., 629, while the syllabus of the case simply is, “that if a stockholder of a corporation becomes an officer thereof, assumes the duty of the office and performs them without any agreement or provision for'compensation, the presumption, in view of his relation and interest, may properly arise that he intends to perform fhe services gratuitously, ” and that the evidence showed in that case that he did so; yet in the opinion of the judge announcing the decision, stronger language bearing on the question before us, is used. Judge Bradley says: “It is well settled that a director of a corporation is not entitled to pay for services performed by him as such, without the aid of a pre-existing provision, expressly giving the right to it. They are the trustees of the stockholders, and as such have the management of the corporate affairs. And to permit them to assert claims for services performed, and then support them by resolution, would enable the directors to unduly appropriate the funds of the corporate enterprise. It would clearly be contrary to sound policy.”- — 510 — On the other hand, it is stated in Thompson on Corporations, section 4704, that: “Such offices as those of secretary, treasurer, and general managing agent, are merely ministerial offices. Their incumbents do not stand on the same footing as directors, nor even as the president in respect to their right to compensation. It is not the rule, as in the case of a director, that the law does not imply a promise to pay for such services, On the contrary, while it can not be said that the law, under all circumstances, will imply such a promise, it may be affirmed on authority that it is not necessary in order for such an officer to recover a reasonable compensation for his services, that there should have been an express agreement that he should be paid for them.” It is true that the case cited to sustain this doctrine is Smith v. Long Island R. R. Co., 102 N. Y., 190, in which case the plaintiff, who sued to recover for services as secretary, was not a director of the company, and in this respect was different from the case at bar. But it is difficult to see why the mere fact that he was a director should of itself operate to prevent him from recovering the reasonable value of his services as treasurer, if the other requisites were shown; that is, that they were rendered under an implied contract that he was to be paid therefor. In Beach, on Corporation, section 285, it is said: “It is not customary to compensate directors for services rendered by them to the company, in the regular course of their duty, and they cannot recover therefor, except upon some express agreement entered into between them and the company before the rendition of the services., or under a previously existing charter or by-law. But for services beyond the scope of their official duty, directors, like other persons, may demand quantum meruit compensation.” Our statute,, section 3252, provides that a corporation, by its regulations, may provide for: “4, the duty and compensation of officers.” And in 42 Ohio St., 579, the court — 511 — held in regard to associations organized under section 3630, ■which contains no special provision as to compensation of officers, that the trustees,unless specially invested with the additional capacity and authority of officers or agents,are limited in their claims to compensation to'such sums as will reasonably compensate them for the time and expense in going to, attending and returning from their official meetings, and for their services while in session. In the case of Rogers v. R. R. Co,, 22 Minn., 25, where the plaintiff brought an action to recover compensation for services claimed to iiave been rendered by him as secretary of the company, but his compensation had not been fixed as required by the by-laws, and where he also sought to recover the value of services rendered by him to the company as land commissioner and as attorney, while he was acting as a director of the company, and without any special contract, it was held that he was entitled to recover for all such services on the quantum mernit. And in 29 Kansas, 311, it was held that where the directors of a corporation appoint one of their number to act as treasurer, secretary or other ministerial officer of the- corporation, he is, prima facie, entitled to reasonable compensation for his services as such officer. The judge who announced the decision of the court in the case of Gardner v. Butler, 30 N. J. Eq., 723, uses this language, which, it seems to us, states the law clearly and correctly on the general question: “The directors of a corporation shall not be permitted to enter into engagements in which they have a personal interest, conflicting with the interests of those whom they are bound by fiduciary duty to protect, and that no consideration of their apparent or intrinsic fairness will induce a court, either of law or equity, to enforce them against the resisting cestue que trusts is well settled. ” * * * “The rule is that the trustee cannot fortify himself by a contract with himself for his own benefit, and set it up either — 512 — at law or in equity as a valid obligation. It is of no binding-force as a contract, and tbe cestui que trust may repudiate it at will. The agreement, therefore, which the directors-made with themselves, must be pronounced to be illegal, and can furnish no support to their defense as contracts. But while the express undertaking is without legal force, the-directors of a company have a right to serve it in the capacity of officers, agents or employes, and for such services the-law will enable them to receive a just and reasonable compensation. The law restrains them from making a contract when their own gain intervenes between their exercise of' judgment and their duties as trustees; but it does not operate-to deprive the company of the service of those who,in many cases, may alone possess the skill requisite to the successful management and control of the corporate business, and who may have the chiefest interest in its prosperity. Stockholders, because they are directors, are not compelled to commit the business of the company to strangers or else-render their own service gratuitously. No claim which they may make against their company can acquire any support or validity7 from the fact that they have expressly sanctioned it; it must rest exclusively upon its fairness and justice, and be enforced upon the quantum meruit. Such is the full scope and effect of the rule, and the extent to which the transaction is annulled as will be found by an examination of the cases.” The general doctrine as to a recovery on an implied contract by an officer of a corporation for extra services is well stated in the opinion of Morton, Judge, in the decision of Paw v. Bank, 130 Mass., 395: ‘‘A bank or other corporation may be bound by an implied contract in the same manner as an individual may. But in any case, the mere fact that valuable services are rendered for the benefit of a party, does not make him liable, upon an implied promise to pay for them. II often' happens that persons render services which all parties understand to be gratuitous. Thus, directors of banks and of many other corporations usually receive no compensation. In such cases, however valuable the services may be, the law does not raise an implied contract to pay the party who receives the benefit — 513 — of them. To render such party liable as a debtor under an implied promise, it must be shown, not only that the services were valuable, but also’ that they were rendered under such circumstances as to -raise the fair presumption that the parties intended and understood that they were to be paid for; or, at least, that the circumstances were such that a reasonable man in the same situation with the person who receives and is benefited by them, would and ought to understand that compensation was to be paid for them. 6 Allen, 207.” 3 C. C., 291. In this conflict of adjudication, we are of the opinion that the fact that Mr. Dalton was a director of this corporation when he was elected as treasurer thereof, and while he served as such, and that he had no express contract with the company at the time of his election that he was to be paid for his services, would not preclude him from receiving the fair and reasonable value of his services, if they were valuable, and were rendered under such circumstances as showed that it was the intention of both parties that he was to be compensated therefor. And as there was evidence tending to show this, the action of the trial court in directing a verdict for the defendant was erroneous, and for this reason the judgment will be reversed.