In re Gouverneur Pub. Co.

• Decision Date: 26 February 1909
• Docket Number: 3,042.
• Citation: 168 F. 113
• Parties: In re GOUVERNEUR PUB. CO.
• Court: U.S. District Court — Northern District of New York

168 F. 113

In re GOUVERNEUR PUB. CO.

No. 3,042.

United States District Court, N.D. New York.

February 26, 1909

Malby &amp Lucey, for claimant.

Abbott & Dolan, for objecting creditor and stockholder.

RAY District Judge.

It is unnecessary to go into the facts in detail, as the questions to be decided rest upon three general propositions, and a general statement of the facts is all that is necessary.

The Gouverneur Publishing Company was organized in 1887, and engaged in printing and publishing a newspaper, at times more than one, and job printing. Martin I. Sackett, who had been a schoolteacher, and had accumulated a little money, and possessed some executive and considerable literary ability and who was in accord politically with certain other gentlemen of his political faith who were desirous of controlling a newspaper in that place, was solicited to take stock and engage in the enterprise, which he did. His holdings of stock grew until he became the largest holder of stock, and he was elected secretary and treasurer, and, by common consent and acquiescence, became, and was for about 18 years, the active manager of the corporation, and also the editor of the paper published by it. At the first or about the first meeting of the directors it was proposed that Sackett should receive for his services the sum of $1,200 per annum, and Sackett assented, no one objecting. The evidence justifies the finding, and I find, that this compensation was not for the performance of his official duties, but for the performance of those outside of his official capacity, and done and to be done in managing the business and editing the paper, etc. By the common consent, approval, and acquiescence of the stockholders, directors, and other officers, and with the above understanding, Sackett assumed and entered upon the performance of all these duties, and did the work satisfactorily, so far as appears, for some 18 years, when having been appointed United States consul to Prescott Canada, he severed his connection with the company as manager. During all this time, except signing officially, he conducted the business substantially as if it were his own. He collected subscriptions and bills due, made purchases of machinery and supplies, and payments thereon and therefor, and employed and discharged and paid help and kept the books, etc., and formulated and executed the general policy of the company, all with the general consent and acquiescence of the stockholders and directors and other officers. He drew money from the concern from time to time as he required it for his own use and living expenses, and made such purchases as he saw fit in conducting the business, and whenever the company did not have money on hand for these purposes he advanced it from his own private funds, trusting to subsequent incomes from the business for reimbursement. Other directors were about and in and out of the office, and the books and business and its conduct were open to inquiry and inspection at all times. All that was done was known, or might have been known, except that at one time a rival or competing paper and its business and subscription list were purchased, for the benefit of this company, however, and this, for policy sake, was kept secret for a time, but was subsequently made known and ratified and approved by the board of directors.

There is no question that the company availed itself of and had the benefits of the transaction, such as they were. Eventually, probably, it resulted in no benefit, but temporarily it was an advantage. The books were loosely kept, evidently, but not dishonestly so, and Sackett did not charge up his salary except on one occasion. Receipts and also payments aggregating several thousands of dollars for the 18 years did not go on the books at all. The referee, with infinite labor, has gone over the whole time and compelled an exact accounting of all receipts and disbursements, including salary, and on balancing the account has found actually due to Sackett something like $14,335.74, but he has limited the claim allowed to that first presented, and that to the amount therein claimed, $8,300.52.

The referee gets at the figures in his summary in this way:

Total cash received in business . . .	$ 84,812 01
Received for stock subscription . . .	6,000 00
Total book accounts not collected . . .	7,437 60
	$ 98,249 61
Paid expenses, etc . . .	$90,072 16
Paid plant and other papers, etc . . .	12,987 61
Interest paid . . .	1,400 00
Drawn by Sackett as salary . . .	7,437 60
Balance due as salary . . .	687 98 $112,585 35
Due Sackett charging him with accounts unpaid . . .	$ 14,335 74
The total cash receipts were . . .	$ 90,812 01
Total cash payments, leaving out salary . . .	$104,459 77

Leaving out salary, except that paid entirely, and accounts not collected, and confining ourselves to cash received and disbursed, we find the company owing Sackett about $13,647.76. Other figures of the referee give different results; however, I think the figures above given include salary actually drawn. I am unable to ascertain where any injustice has been done the company or its creditors or stockholders.

It is clear that there was a fair understanding with the creditors in the very beginning that Sackett should have $1,200 per year for his services outside of his official duties as director and secretary and treasurer. A binding contract for compensation for such services to one who is at the time an officer or a director in the corporation may be made without any formal resolution. Whatever may have been said in prior cases, this is now the settled law of the state of New York and of the United States courts. Bagley v. Carthage, W. & S.H.R. Co., 165 N.Y. 179, 182, 58 N.E. 895; Corinne Mill Canal & Stock Company v. Toponce, 152 U.S. 405, 407, 409, 14 Sup.Ct. 632, 38 L.Ed. 493; Bogart v. N.Y. & L.I.R. Co., 118 A.D. 50, 54, 102 N.Y.Supp. 1093; Jackson v. N.Y.C.R.R. Co., 2 Thomp. & C. 653, affirmed on opinion below, 58 N.Y. 623. See, also, Henry v. R. & B.R. Co., 27 Vt. 435, and Bartlett v. M.R. Co., 151 Mass. 433, 24 N.E. 780.

In Bagley v. C., W. & S.H.R.R. Co., supra, the plaintiff was a director in and the president of the defendant company, and claimed to recover for services performed for the company outside his official duties. There was no resolution of the board of directors employing the plaintiff or directing him to perform the services. The syllabus of the case is as follows.

'The president and director of a corporation who renders services thereto outside of his official duties, upon an employment of the directors upon a promise of compensation, is entitled to receive the value of such services and the expenses incurred during their rendition, although he is not entitled by the bylaws to any salary for his official services, and there is no express resolution of the board of directors containing an agreement to employ and to compensate him.'

The court held, on pages 181, 182, of 165 N.Y., on page 896 of 58 N.E.:

'It is true that he was not entitled by the defendant's by-laws to any salary for his official services, and that there was no express resolution containing an agreement to employ and to compensate him. But those facts are by no means conclusive upon the question. The fact that no salary was attached to the office which he held merely rendered it all the more essential to establish that the services in question were beyond the range of his official duties and their character. The issue upon that head was settled by the verdict and its subsequent affirmance.

'Neither is it essential to the plaintiff's right of recovery that he should have been employed under a formal resolution of the board. It is sufficient if, from the nature of the employment, the importance of the subject-matter, and the action of the directors of the corporation, the inference is authorized of the employment as alleged. Jackson v. N.Y.C. Railroad Co., 2 Thomp. & C. 653, affirmed here upon the opinion below, 58 N.Y. 623. The principle of the right of recovery in such cases was recognized in the case cited. See, also, Outterson v. F.L. Paper Co., 66 Hun, 629, 20 N.Y.Supp. 980; McDowell v. N.Y. & S.B.R.R. Co., 12 N.Y.St.Rep. 877; Corinne Mill C. & S. Co. v. Toponce, 152 U.S. 405, 14 Sup.Ct. 632, 38 L.Ed. 493; Henry v. R. & B.Ry. Co., 27 Vt. 435.

'It is the general rule that a director, assuming office as such without any agreement as to compensation, is presumed to render his official services gratuitously; for he assumes thereby, in a sense, a trust relation towards the company, and it would be against sound policy to permit him to assert claims for services which were within the line of his duties. But, when he is employed to perform services for the benefit of the corporation which are not within that line, there is not the same reason for denying him the right to be compensated. So far from there being any objection to the employment by a board of directors of one of their number as their agent to do something in the interest and for the benefit of the corporation which, collectively, it would be impossible or inconvenient for them to do, it may often happen, from the nature of the business to be done or in the situation of affairs, that it is essentially preferable and advantageous to do so.'

In Corinne Mill Canal & Stock Co. v. Toponce, supra, the plaintiff was a director in and the vice president of the company (defendant below). It was conceded that there was no express resolution or contract for the rendition of the services. The court said:

'It is conceded that there was no express contract or authority for compensation, and it

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