Louisville Building Ass'n v. Hegan

• Decision Date: 01 March 1899
• Citation: 49 S.W. 796
• Parties: LOUISVILLE BUILDING ASS'N v. HEGAN et al. SAME v. HEGAN.
• Court: Kentucky Court of Appeals

49 S.W. 796

LOUISVILLE BUILDING ASS'N v. HEGAN et al.

SAME v. HEGAN. ^[1]

Court of Appeals of Kentucky.

March 1, 1899

Appeals from circuit court, Jefferson county, law and equity division.

"Not to be officially reported."

Actions by Hegan Bros. and S.W. Hegan against the Louisville Building Association to recover commissions for selling real estate. Judgment for plaintiffs, and defendant appeals. Reversed.

Barnett Miller & Barnett, for appellant.

Phelps & Thum, for appellees.

HOBSON J.

Appellant was organized on December 14, 1870, by Theodore Harris, W. B Cecil, J. T. Ward, S.W. Hegan, E. C. Hegan, and several others, for the purpose of buying a large body of land west of Louisville, and selling it out in lots. Mr. Harris was president of the company, and E. C. and S.W. Hegan were among the directors, the chatter providing that the business of the association should be managed by seven directors, that the board of directors should choose one of their number for president, and might employ what other agents or servants they deemed "necessary to conduct the business of the association, and compensate them therefor." The association did not succeed in selling the land as soon as they expected, and about the year 1877, while Theodore Harris was president, and S.W. Hegan was secretary, and both were directors of the corporation, a verbal arrangement was made between them, by which it was agreed that Hegan should have a commission of $50 on each lot he sold for the association. Under this arrangement, he sold a number of lots, and Harris signed and delivered to him notes for the commission, signing the notes with the corporate name, by himself as president. Two of these notes Hegan paid by his own check, as secretary drawn on the association's funds. The rest he kept until January 13, 1891, when they were sued on in the first of the above actions, in the name of Hegan Bros., a firm composed of himself and E. C. Hegan, to whom, at his request, the notes had been made payable. Some time in the year 1878, the exact date not being given, a written contract was made between Harris and S.W. Hegan by which it was agreed that Hegan should have, as commission on all lots he sold for the association, $125 per lot, or 41 2/3 per cent. of the price of the lots as they were sold, at $300 each. When this contract was made, they both held the same official position in the company as before, and were, in effect, the officers who were running it. Under this contract, S.W. Hegan sold, in the years 1878 and 1879, a number of lots, but he did not sell any more lots until, perhaps, in the year 1887. After the association had sold off all the land but about 85 acres, this was sold in a lump to the West View Company, for $100,000, in the year 1885. In the second of the above actions, brought at the same time as the other, S.W. Hegan seeks to recover his commissions at 41 2/3 per cent. for the lots sold by him, the amount of these sales being, as he alleges, $9,634.92; and in this action he also asks compensation at the same rate on the $100,000 sale to the West View Company. In November, 1884, a dividend was declared to the stockholders; another, on January 17, 1888; another, July 6, 1888; another, January 9, 1889; another, July 6, 1889. Though S.W. Hegan was present at all these meetings, and drew his part of the dividends, he set up no claim against the company until the last dividend was declared in July, 1889, and then nearly all the assets of the corporation had been distributed to the stockholders, he and Harris having all this time been president and secretary of the company, and two of its directors.

It is contended for appellant that a director of a corporation cannot make a contract with one of his fellow directors, by which he acquires interests inconsistent with the interests of the corporation. There is a great deal of authority to this effect, the reason of the rule...