Darknell v. Coeur D'Alene & St. Joe Transp. Co., Ltd.

• Decision Date: 12 April 1910
• Court: Idaho Supreme Court
• Parties: A. A. DARKNELL. Appellant, v. COEUR D'ALENE & ST. JOE TRANSPORTATION CO., LTD., Respondent

108 P. 536

18 Idaho 61

A. A. DARKNELL. Appellant, v. COEUR D'ALENE & ST. JOE TRANSPORTATION CO., LTD., Respondent

Supreme Court of Idaho

April 12, 1910

COMMINGLING CAUSES OF ACTION IN ONE COUNT-JOINDER OF CAUSES OF ACTION-PRIVATE CORPORATION-ULTRA VIRES CONTRACT-ESTOPPEL-PUBLIC POLICY-STATUTE OF FRAUDS.

(Syllabus by the court.)

1. Where two or more causes of action are improperly united and commingled in one count in the complaint, the proper procedure to reach the defect is by motion to require the plaintiff to separately state his several causes of action in different counts.

2. A cause of action arising on an express contract for the payment of a fixed and specified salary may be united in the same action with a cause of action for the same services on an implied contract to pay the reasonable value of such services.

3. Where D. entered into a contract with a corporation whereby it was mutually understood and agreed that in consideration of D. purchasing stock in the corporation and retaining and continuing his ownership in such stock of the corporation the corporation would furnish him employment as assistant general manager as long as D. retained the ownership of such stock, at the same salary that the corporation might or should from time to time pay to one W., its general manager, and D. entered into the employment of the corporation under such contract and continued in the service of the company for about three years, and thereafter sued the corporation to recover his wages at the agreed and stipulated price, the corporation will be bound to pay such salary as was agreed and stipulated, and will be estopped from setting up the plea of ultra vires.

4. ID.-In such case, where the services have already been rendered and the action is one merely to collect the salary already earned, the question as to the power of the corporation to repudiate the contract and discharge the employee does not arise and is not involved.

5. Sound public policy can never run counter to the principles of honest and fair dealing, and the rule of public policy cannot be invoked to defeat the recovery of an honest claim.

6. The statute of frauds (subd. 1, sec. 6009, Rev. Codes) will not prevent the recovery of an agreed and stipulated price contracted to be paid for services and labor which have been rendered by the employee during a period exceeding one year simply because the contract was not reduced to writing.

7. A contract whereby a corporation agrees to employ D. at a specified salary so long as he continues to own and hold his stock in the corporation does not come within the purview of the statute of frauds (subd. 1, sec. 6009, Rev. Codes), on the ground that the same was not in writing, for the reason that such contract is capable of being fully performed completed and terminated within a year.

APPEAL from the District Court of the Eighth Judicial District of the State of Idaho, for the County of Kootenai. Hon. Robert N. Dunn, Judge.

Action by plaintiff to recover wages as stipulated and agreed by contract. Judgment for defendant and the plaintiff appeals. Reversed.

Judgment reversed, and a new trial granted. Costs awarded to appellant.

R. E. McFarland, for Appellant.

Agreements like the one in this case are held to be definite and certain, and therefore binding. (McMullan v. Dickinson Co., 63 Minn. 405, 65 N.W. 661; Pennsylvania Co. v. Dolan, 6 Ind.App. 109, 51 Am. St. 289, 32 N.E. 802; Carnig v. Carr, 167 Mass. 544, 57 Am. St. 488, 46 N.E. 117, 35 L. R. A. 512; Stearns v. Lake Shore & M. S. Ry. Co., 112 Mich. 651, 71 N.W. 148; Carter White-Lead Co. v. Kinlin, 47- Neb. 409, 66 N.W. 536; Henderson v. Spratlen, 44 Colo. 278, 98 P. 14, 19 L. R. A., N. S., 655.)

Where a corporation has entered into a contract in excess of its granted powers and has received the fruits or benefits of the contract, it is estopped from setting up the defense of ultra vires. (5 Thompson on Corp., par. 6016.)

Where the contract has been fully executed on either side, and the party so executing sues to recover the agreed consideration, the other party will be estopped from setting up the defense that the corporation had no power to make the contract. (5 Thompson on Corp., par. 6024; 29 Am. & Eng. Ency. of Law, 2d ed., 50; Clement Bane & Co. v. Michigan Clothing Co., 110 Mich. 458, 68 N.W. 224.)

Robert H. Elder, for Respondent.

Under the terms of this agreement, as set out by plaintiff, it is clear that it was the intention of the parties that the agreement should continue in force for a longer period of time than one year. That being so, the contract is clearly within the statute of frauds. (2 Parsons on Contracts, p. 51; Drummond v. Burrell, 13 Wend. 307; Herrin v. Butters, 20 Me. 119; Biest v. Versteeg Shoe Co., 97 Mo.App. 137, 70 S.W. 1081.)

A verbal contract, which by its terms or by the understanding of the parties is not to be performed within a year, although subject to a defeasance by the happening of a certain event which might or might not occur within that time, is within the statute of frauds. (Wilson v. Ray, 13 Ind. 1; Wash. Steam Packet Co. v. Sickles, 5 Wall. 580, 18 L.Ed. 550.)

The contract is ultra vires and against public policy. The law requires the control and management to be vested in a board of directors, but this contract would prevent any board of directors from removing the appellant, and would therefore prevent them from managing and controlling the corporate affairs. (West v. Camden, 135 U.S. 507, 10 S.Ct. 838, 34 L.Ed. 254; Guernsey v. Cook, 120 Mass. 501; Noel v. Drake, 28 Kan. 265, 42 Am. Rep. 162.)

Its tendency, if not its direct result, is to foist upon the stockholders officers not desired, to take from the assets moneys for salaries not earned, to deny to the officers in a business transaction of the corporation that freedom of judgment necessary to successful results. Contracts having such tendencies have generally been held void. (Bliss v. Matteson, 45 N.Y. 22; West v. Camden, supra; Fuller v. Dame, 18 Pick. 472; Bollman v. Loomis, 41 Conn. 581; Woodruff v. Wentworth, 133 Mass. 309; Lum v. Clark, 56 Minn. 278, 57 N.W. 662; Bishop on Contracts, sec. 525; Meguire v. Corwine, 101 U.S. 108, 25 L.Ed. 899; Bestor v. Wathen, 60 Ill. 138; Bensinger v. Kantzler, 112 Ill.App. 293; Hampton v. Buchanan, 51 Wash. 155, 98 P. 374.)

A contract which is made by a corporation, and which is unlawful and void because it is beyond the scope of its corporate powers, does not by being carried into execution become lawful and valid, and the proper remedy of the party aggrieved is by disaffirming the contract and suing to recover as on a quantum meruit, the value of that which the defendant has actually received the benefit. (Pittsburg C. & St. L. R. Co. v. Keokuk Bridge Co., 131 U.S. 371, 9 S.Ct. 770, 33 L.Ed. 157; Patten v. Hicks, 43 Cal. 509; Murphy v. DeHaan, 116 Iowa 61, 89 N.W. 100.)

Nothing that has been done under a contract of a corporation which is beyond the scope of its corporate powers can give validity to said contract. (O'Brien v. Wheelock, 184 U.S. 450, 22 S.Ct. 354, 46 L.Ed. 636; Penn. Co. v. Dolan, 6 Ind.App. 109, 32 N.E. 802; Harrington v. Kansas City Cable Ry. Co., 60 Mo.App. 223; Brighton v. Lake Shore etc. R. R. Co., 103 Mich. 420, 61 N.W. 550.)

AILSHIE, J. Sullivan, C. J., and Stewart, J., concur.

OPINION

AILSHIE, J.

This action was commenced for the recovery of judgment for services rendered by the plaintiff to the defendant corporation. An amended complaint was filed and a demurrer to that complaint was sustained. A second amended complaint was filed, and it was upon that complaint that the cause went to trial. It was alleged by the plaintiff that on the first day of April, 1905, he purchased thirty shares of the capital stock of the defendant corporation, and that he thereupon and on the same day entered into the contract with the defendant upon which this action is based. Paragraph 5 of the second amended complaint alleges the nature and character of the contract upon which the action is founded, and is as follows:

"That on, to wit, the first day of April, 1905, and after plaintiff had purchased said shares of stock, said plaintiff and defendant entered into an oral agreement, upon the terms whereof defendant agreed to employ and did employ plaintiff as the assistant general manager of said defendant, and agreed and promised to pay to plaintiff for his services as said assistant general manager, for such period of time as plaintiff should retain his said shares of stock, the same salary from time to time paid to and received by said J. C. White as such general manager, and thereupon, to wit, on the first day of April, 1905, plaintiff entered in the employ of said defendant under and by virtue of said oral agreement, and performed services for said defendant as such assistant general manager at the monthly salary of one hundred dollars ($ 100), until the 6th day of October, 1905, when said defendant commenced to pay, and ever since said last-mentioned date to the present time, has paid to said J. C. White, as such general manager, the salary of three thousand dollars ($ 3,000) per annum, by reason whereof and under the terms and conditions of said oral agreement plaintiff became and was entitled to receive for his services as assistant general manager the sum of three thousand dollars ($ 3,000) per annum from the 6th day of October, 1905."

It is further alleged that under and by virtue of the contract set out in paragraph 5 the plaintiff performed services for the defendant as assistant general manager from the first day of April, 1905, up to and including the 6th day of October 1905, at the monthly salary of $ 100, and that from the 6th day of October, 1905, up to and...