Fillebrown v. Haywood

• Decision Date: 28 February 1906
• Citation: 190 Mass. 472,77 N.E. 45
• Parties: FILLEBROWN et al. v. HAYWOOD et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

190 Mass. 472

77 N.E. 45

FILLEBROWN et al. v. HAYWOOD et al.

Supreme Judicial Court of Massachusetts, Suffolk.

February 28, 1906

COUNSEL

Alfred Hemenway, Walter S. Pinkham, John Wells Farley, and George W Anderson, for appellants.

OPINION

BRALEY J.

In accordance with a stipulation of the parties, the first paragraph of the findings of fact are to be taken as true. If so, it follows that during a period of nearly 2 1/2 years in which the defendant was treasurer of the corporation her salary was annually increased by vote of the board of directors, until it reached an amount which the plaintiffs claim to have been largely disproportionate to the value of any services rendered. But if the amount of compensation compared with her actual duties seems to be unduly large, yet it is stated in these findings that she and the directors acting in good faith regarded the salary as a fair valuation of her services to the company, which during this time was doing a profitable and extensive business. Being a domestic corporation, and no vote of the stockholders or by-law appearing which limited their power, the directors had authority to establish a reasonable salary for the services of the treasurer. Pub. St. 1882, c. 106, § 23; Tripp v. Swanzey Mfg. Co., 13 Pick. 291; Von Arnim v. American Tube Works, 188 Mass. 515, 74 N.E. 680. That she was a member of the board, which also included her daughter, would not invalidate its action, for there is no evidence of any purpose to unlawfully appropriate corporate profits under the guise of salary, the abstraction of which would impair either the solvency of the company, or the right of minority stockholders to a reasonable division of surplus earnings in dividends. Gay v. Fair, 175 Mass. 521, 527, 56 N.E. 708; Von Arnim v. American Tube Works, ubi supra. If the money thus obtained had been wrongfully taken, the corporation, or upon its bankruptcy the plaintiffs, could recover back any excess beyond such sum as would have afforded a reasonable remuneration during the time she performed the duties of the office. But as no fraud, actual or constructive, is found, and the transaction was entered into honestly, the defendant is not obliged to make any reimbursement. Fort Payne Rolling Mills v. Hill, 174 Mass. 224, 54 N.E. 532; Marlborough Association v. Peters, 179 Mass. 61, 60 N.E. 396; King v. Cram, 185 Mass. 103, 104, 69 N.E. 1049.

The question, however, of most consequence remains for consideration, concerning which the stipulation further provides that the facts set forth in the second paragraph of the findings are to be deemed true, unless modified or reversed by the evidence which has been reported on this part of the appeal. Unless plainly wrong, these findings are to be considered as conclusive. Skehill v. Abbott, 184 Mass. 145, 147, 68 N.E. 37. After the period of service had expired to which reference already has been made, the defendant having resigned her offices as treasurer and director sold her stock in the corporation to one Cable, who then was not only treasurer and president, but with the acquiescence of the directors also acted as manager of the corporation with a general control of its affairs. If thereafter there was any failure on the part of the board of directors to properly discharge the functions of their office, this delinquency is not shown to have been brought to the knowledge of the defendant. Upon the purchase of this stock he made a large money payment, and gave his promissory notes for the balance, so divided that one of them should mature at the beginning of each month for a period of five years. It was undisputed that upon these notes as they severally matured at least the sum of $13,000 was paid by checks drawn by him from time to time on the treasury of the corporation. The books of account disclose in detail the number and amount of these checks, and a balance was always struck by crediting as expense a lump sum sufficient to offset the debit items. In his dealings with the defendant, although in a few instances when he caused the checks to be made payable to the order of the bookkeeper who indorsed them either to himself or to the defendant, and upon one occasion when the check was made payable directly to her order, this course of dealing was uniformly followed. An examination properly conducted would have shown that when the defendant received these monthly payments as between himself and the company his account would have appeared to have been constantly overdrawn, but she had no actual knowledge of this condition of affairs, or that the money she was receiving came clandestinely from the corporation rather than lawfully from him. The plaintiffs strenuously contend that, notwithstanding this, the form of the check should have suggested to her that he was misappropriating the funds of the company, and therefore she should be charged with constructive notice that he was using corporate assets for the payment of his maturing notes.

The early doctrine on this subject, so far as it relates to negotiable paper, is found in Ayer v. Hutchins, 4 Mass. 370, 372, 3 Am. Dec. 232, and in Thompson v. Hale, 6 Pick. 259, 261, where it is said that circumstances which ordinarily would excite the suspicions of a reasonably prudent and careful man were sufficient to put the party receiving negotiable paper not overdue upon his inquiry as to suspicious defects or infirmity of title in the prior holder. See, also, Cone v. Baldwin, 12 Pick. 545, 546. The rule thus formulated gave way later to what has been called the modern doctrine, that neither knowledge of suspicious circumstances, nor doubts as to the genuineness of the title, nor gross negligence on the part of the taker, either singly or together, were sufficient to defeat his recovery, unless amounting to proof of want of good faith. Smith v. Livingston, 111 Mass. 342; Freeman's National Bank v. Savery, 127 Mass. 75, 79, 34 Am. Rep. 345; Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 66 N.E. 646, 97 Am. St. Rep. 426; Massachusetts National Bank v. Snow, 187 Mass. 159, 72 N.E. 959; Goodman v. Harvey, 4 A. & E. 870; Murray v. Lardner, 2 Wall. 110, 17 L.Ed. 857; Hotchkiss v. National Shoe & Leather Bank, 21 Wall. 354, 22 L.Ed. 645; Lytle v. Lansing, 147 U.S. 59, 13 S.Ct. 254, 37 L.Ed. 78; Jones v. Gorden, L. R. 2 App. Cases, 616, 628, 629. See, also, Jones v. Smith, 1 Hare, 43.

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