Altavista Cotton Mills Inc v. Lane

• Decision Date: 15 June 1922
• Citation: 112 S.E. 637
• Court: Virginia Supreme Court
• Parties: ALTAVISTA COTTON MILLS, Inc. v. LANE.

112 S.E. 637

ALTAVISTA COTTON MILLS, Inc.

v.LANE.

Supreme Court of Appeals of Virginia.

June 15, 1922.

Error to Circuit Court, Campbell County.

Suit by H. L. Lane against the Altavista Cotton Mills, Incorporated. Judgment for plaintiff, and defendant brings error. Affirmed in part, and reversed in part.

Volney E. Howard and Wilson & Manson, all of Lynchburg, for plaintiff in error.

Harrison & Long and Caskie & Caskie, all of Lynchburg, for defendant in error.

WEST, J. H. L. Lane brought suit against the Altavista Cotton Mills, Incorporated, to recover $40,000 for services rendered in financing the corporation. The jury returned a verdict in favor of the plaintiff for $25,000, on which a judgment was entered in the circuit court of Campbell county for $25,000, with interest thereon from the 15th day of May, 1916, and costs. To that judgment a writ of error was awarded.

For convenience the parties will be designated as plaintiff and defendant with respect to their positions in the trial court.

In the summer of 1910 A. C. Hutchinson, a cotton mill man of Charlotte, N. C, came to Altavista, Va., and organized the Altavista Cotton Mills, Incorporated, with a capital stock of $300,000, divided into 1, 500 shares each of common and preferred stock, at $100 per share. Hutchinson was elected president and John E. Lane, a brother of the plaintiff, vice president, although he was not a subscriber to stock in the company. Hutchinson subscribed $17,500, and entered into contracts with J. H. Mayes and Fred H. White, Southern representatives of New England manufacturers of cotton mill machinery, for the purchase of such machinery, on condition that the manufacturers would accept one-third of the cost of the same in stock of the company. The Altavista Land & Improvement Company, of which the plaintiff was the largest stockholder, donated a site for the proposed mill and subscribed for $50,000 of the stock of the defendant company; but the plaintiff did not subscribe in his own name for any stock in said company.

Hutchinson endeavored to sell the stock of the company, and succeeded in inducing a few of his friends in North Carolina to subscribe for small amounts aggregating $5,000 to $6,000. Plans were drawn, and the construction of the buildings begun, but, due to a lack of funds, in December, 1910. it was suspended. Hutchinson spent the winter of 1910-1911 in an effort to sell the stock of the mill, and, making a failure thus to finance the company, became despondent, and committed suicide in April, 1911.

A meeting of the subscribers was held on April 24, 1911, for a general discussion of the affairs of the company, John W. Hutchinson, a son of A. C. Hutchinson, deceased, representing his father's interest and the other Charlotte, N. C, subscribers. C. E. Hutchin son, brother of the deceased, and an experienced cotton mill man, was also present. Failing in their efforts at this conference to induce the plaintiff to undertake to finance the corporation, C. E. Hutchinson was offered a salary of $10,000 a year to accept the presidency and undertake to finance it. This proposition was declined by Hutchinson.

The annual meeting of the stockholders was held May 10, 1911, at which all of the stock subscribed for was represented. At this meeting the plaintiff, H. L. Lane, was unanimously urged to finance the company and act as president. The stockholders present discussed with him the question of compensation for his services, should he undertake the work, and the sentiment of the meeting was that he should receive compensation on a basis of 10 per cent on the capitalization of the company, or a reasonable annual salary. The plaintiff refused to undertake the burden of financing the company, or of acting as president. Before the meeting adjourned for dinner the following board of directors was elected: J. E. Lane, H. L. Lane, J. H. Mayes, Fred H. White, A. B. Percy, T. V. Elson, and A. G. Bell—all of whom were present at the stockholders' meeting, though neither one was personally a subscriber to the stock of the company.

After dinner J. H. Mayes, John Hutchinson, J. E. Lane, H. L. Lane, and F. H. White, who represented nearly all of the shares of stock which had been subscribed for, met in a room at the hotel in Altavista, where the plaintiff was urged to reconsider his refusal, and the same proposition was made to him which had been made to C. E. Hutchinson. Plaintiff refused to accept this proposition, but finally consented to undertake the financing of the company with the understanding and agreement that he was to have full charge of the finances of the company, and, if he were successful in financing it, the company should pay him "a reasonable sum for his services, " and with the further understanding, since he was to receive pay for his services, that he would not accept the presidency or serve as a director of the company, to which latter position he had that day been elected. This being one of the propositions submitted to him by the stockholders at their morning meeting, the matter was considered settled. Plaintiff thereupon announced that Lane Bros. & Co., a corporation owned principally by him, would subscribe for $10,000 of the stock, and that his brother, J. E. Lane, would subscribe for a like amount.

At the close of the conference at the hotel, a directors' meeting was held, all the directors being present. It was reported to this meeting that H. L. Lane had agreed to undertake to finance the defendant company, and those who were present in the conference at the hotel went over with the full board what they had discussed and agreedupon in the conference. H. L. Lane resigned the position of director, and R. L. Cummock was elected in his stead, and was also elected vice president and general manager at an annual salary of $5,000. Cummock was invited into the meeting and stated he was a manufacturer, but made no "profession of being a financier, " and he was advised that the financing had been arranged and was in the hands of H. L. Lane.

The defendant relies upon six assignments of error, as follows: The action of the court:

(1) In granting instruction No. 1 offered by the plaintiff.

(2) In giving plaintiff's instruction No. 2 and refusing to give defendant's instruction No. 6.

(3) In refusing to give defendant's instruction No. 4, as offered, and the giving of the instruction as amended.

(4) In refusing to give instruction No. 1 offered by the defendant.

(5) In refusing to set aside the verdict because it is contrary to the law and the evidence.

(6) In entering judgment in favor of the plaintiff for the sum of $25,000 with interest thereon from May 15, 1916, though the verdict returned November 18, 1920, did not allow interest.

The following are the instructions offered by the plaintiff and given by the court:

(1) "The court instructs the jury that, if they believe from the evidence that the plaintiff had a contract as alleged, whether expressed or implied, with the defendant company, to finance the said company, and that the plaintiff performed the said contract on his part, and the said company received and enjoyed the benefits thereof, he is entitled to recover."

(2) "The court instructs the jury that, if you find for the plaintiff, you shall assess his damages at such sum as you think his services are reasonably worth to the defendant company, not exceeding the sum of $40,000."

The following are the instructions offered by the defendant:

(1) "The court instructs the jury that though they may believe from the evidence that the plaintiff had an agreement with some or all of the directors of the defendant company for compensation for his services, yet if they shall further believe from the evidence that by plaintiff's suggestion or direction no record was made of such agreement on the minutes of the board of directors, and that since May 10, 1911, when it is alleged such agreement was made, a number of the present holders of the stock of the defendant company have purchased their stock in ignorance of any claim of the plaintiff for compensation, then to enforce plaintiffs claim would operate a fraud upon such stockholders, and they must find a verdict for the defendant company."

(2) "The court instructs the jury that, if they believe from the evidence that the plaintiff, in performing the services for the defendant company for which he sues in this action, was prompted thereto by the motive of con serving his own individual interests growing out of his holdings of stock in Lane Bros. & Co. and in Altavista Land & Improvement Company, who, in turn, held stock in the defendant company, or if they shall believe from the evidence that such services, when rendered by interested parties, are customarily rendered without compensation, in the absence of an express contract for compensation, then the mere fact of his rendering said services was not sufficient to put the defendant company on notice that the acceptance of said service at his hands would imply an obligation on its part to pay for the same."

(3) "The court instructs the jury that the mere acceptance of service or accommodation by one at the hands of another does not necessarily imply an obligation on the latter to pay the former for the service. In order to imply such obligation, the service or accommodation must be of such a character and be rendered under such circumstances (in the absence of a specific contract) as to put the latter reasonably on notice that compensation would be required. In other words, the nature of the service or accommodation and the circumstances under which the same is given must be such as to make the latter conscious, in reason, that an acceptance thereof would imply a promise to pay for the same."

(4) "The court instructs the jury that, though they may believe from the evidence that the plaintiff entered into a valid contract or understanding with the defendant, by which it was agreed between them that any compensation he...