Mallory v. Mallory-Wheeler Co.

• Decision Date: 01 June 1891
• Citation: 61 Conn. 131,23 A. 708
• Parties: MALLORY v. MALLORY-WHEELER CO.
• Court: Connecticut Supreme Court

23 A. 708

61 Conn. 131

MALLORY

v. MALLORY-WHEELER CO.

Supreme Court of Errors of Connecticut.

June 1, 1891.

Appeal from superior court, New Haven county; F. B. Hall, Judge.

This was an action by Frederick B. Mallory against the Mallory-Wheeler Company to recover for salary. From a Judgment for defendant plaintiff appeals. Affirmed.

H. Stoddard and J. W. Bristol, for appellant.

J. W. Ailing, for appellee.

ANDREWS, C. J. The plaintiff in this ease claims to recover the sum of $3,294.44, the balance of salary which he says is due to him for services rendered as chief manager and director of the business of the defendant from the 1st day of January, 1889, to the 1st day of January, 1890. The defendant is a manufacturing corporation, organized under a charter from the general assembly approved March 20, 1884, and an amendment thereto accepted on the 8th day of April, 1885. The corporation succeeded to the business which, prior to said dates, had been carried on by a partnership of the name of Mallory, Wheeler & Co. That partnership was by its articles of agreement to continue only to the 31st day of December, 1887. The same persons who bad been partners in the copartnership became stockholders in the corporation. In connection with the change from the partnership to the corporation a contract was made between the present plaintiff and the corporation, as follows: "Whereas, it is the desire of all parties in interest that Frederick B. Mallory shall continue to act as chief manager and director of the Mallory, Wheeler & Company Corporation in the same manner that he has heretofore acted, and with the same powers that he has heretofore exercised in reference to the business or the copartnership of Mallory, Wheeler & Company: Now, therefore, it is mutually agreed between the said Frederick on the one hand and the said corporation, acting herein by its agent, William H. Andrews, thereto duly authorized, on the other part, as follows, to-wit: The said Frederick, on his part, agrees with said corporation that he will act as chief manager and director of the business of said corporation, and will devote his time and services thereto for the term of three and three-quarters years at a salary and for the compensation of $6, 0110 per annum. And the said corporation on its part hereby agrees with the said Frederick to employ him as chief manager and director of the business of said corporation, with the powers heretofore exercised by him in reference to the management personally of the business of Mallory, Wheeler & Company, for the term of three and three-quarter years as aforesaid, at a salary of $6,000 per annum. In witness whereof said parties have set their names and seals, and to a duplicate of like tenor and date, this 19th day of April, A. D. 1884. The Mallory, Wheeler & Co. Corporation, by its agent, William H. Andrews. Frederick B. Mallory." A contract of the same date and tenor was made between the corporation and William H. Andrews that he should be the assistant treasurer of the corporation for said term of three and three-quarters years, at a salary of $3,500 per annum, and a like contract with Rukard B. Mallory, a brother of the plaintiff, to be the vice-president for the same term, at a salary of $2,500 per annum. These were the only salaried officers in or about the management of the business of the defendant.

From the organization of the corporation in April, 1884, until May 17, 1889, the plaintiff was one of its directors, was its president, and was the chief manager of its business, receiving the salary named in the contract. The said Rukard B. Mallory and the said William H. Andrews had also been directors, and had been, respectively, in the offices, and had received the salaries above named. There were five directors in all. The others were John S. Davenport and Franklin B. Dexter. At a meeting of the directors of the corporation holden on the 29th day of October, 1887, a vote was passed in these words: "Voted that Wm. H. Andrews be appointed the agent of the company to execute an agreement with Frederick B. Mallory, extending and keeping in force the corporation's contract with him as chief manager and director of the business of the Mallory-Wheeler Company for a further term of five years from January 1, 1888." It was also voted "that F. B. Mallory be appointed the agent of this company to execute an agreement with Rukard B. Mallory, extending and keeping in force the corporation's contract with him as vice-president of the Mallory-Wheeier Company for a further term of five years from January 1, 1888." It was also voted "that F. B. Mallory be appointed the agent of this company to execute an agreement with Wm. H. Andrews extending and keeping in force the corporation's contract with him as assistant treasurer of the business of the Mallory-Wheeler Company for a further term of rive years from January I, 1888." Pursuant to the votes so passed a contract was made with the plaintiff on the 31st day of October, 1887, as follows: "In accordance with a vote of the directors of the Mallory-Wheeler Company of October 29, 1887, it is hereby mutually agreed between Frederick B. Mallory on the one hand, and the said company, acting herein by William H. Andrews, its agent thereto duly authorized, on the other, that the corporation's contract with said Frederick B. Mallory as chief manager and director be extended and kept in force for a further term of five years from January 1, 1888. The Mallory Wheeler Company, by its agent, William H. Andrews. Frederick B. Mallory." A renewal of the contract with the said Rukard B. Mallory and with the said William H. Andrews was made at about the same date, renewing the contract of each for the further term of five years from the 1st day of January, 1888. At the annual meeting of the corporation holden in May, 1889, the stockholders elected a new board of directors. It is alleged, and admitted by a demurrer, that the new board of directors was chosen by a majority of the stockholders with the intent and design to disregard said contracts of renewal; and on the 14th day of May. 1889, the new board of directors passed the following vote: "Resolved, that in the opinion of this board the so-called renewal of October 29, 1887, of the contract made with F. B. Mallory by Willlain H. Andrews, as agent of this company, is void and of no binding value, and that the said F. B. Mallory no longer be permitted to act as manager or exercise any other rights than appertain to any stockholder; and the secretary is hereby instructed to sent him forthwith a copy of this resolution." Since the passing of this resolution the plaintiff has not performed any of the duties of said office of chief manager, though, as be avers, he has at all times been willing and has offered so to do. It is the salary from the said 17th day of May to the end of the year which he claims in this suit.

These are the controlling facts as set forth in the record. The questions presented are whether or not the contract of renewal made with the plaintiff on the 31st day of October, 1887, was void; and, if not void, was it voidable at the option of the corporation? The first one is not very important in this case, because, if it was voidable only, it has been avoided in an unequivocal manner by the action of the board of new directors, acting by the direction of the stockholders. The contract of renewal must, of course, be considered in connection with the vote of the directors appointing an agent to make the renewal. The contract depends on that vote. The vote appointing the agent to make the contract, and the making of the contract, are the successive steps in one transaction. The latter cannot be valid if the former is invalid. That vote consists of three parts; and while in the present inquiry only the part which appointed Mr. Andrews to be the agent of the corporation to make the renewal with the plaintiff is directly involved, it is impossible to consider that part by itself. The vote as it is set forth in the record purports to be one vote, and not three separate votes. It seems to have been passed as a whole, and as a single expression of the will. But whether this action of the directors be regarded as one vote or as three separate votes can make no real difference. If there were three votes, they were all passed at the same meeting. They were related to each other, and all had reference to one common object,—the continuing the same persons in the management of the business of the corporation who were then managing it; so that the three separate votes, or the three parts of one vote, must all be taken together in order to ascertain what influences operated to procure the passage of any one of them, and to determine their effect when passed. It is not necessary to suppose that there was any formal agreement beforehand between the three directors interested that these three votes should all be passed. It is altogether likely that there was no such agreement. But the votes were all before the directors' meeting at the same time. These three directors were all present. They were each interested in the common object to be attained by their passage. No one of these votes could be passed without the affirmative voice of one of these directors. The three votes were all passed; and as to each of these directors the vote was speedily followed by a contract of renewal. In the result, the affirmative action of any one of them became the affirmative action of them all. The case, then, in its full outline, is one where a majority of the directors, each being a salaried officer of the corporation, and together being all its salaried officers, appointed one of themselves to be the agent of the corporation to make a contract with one or more of the others, and then one of the latter to be the agent of the corporation to make a contract with the one named as the agent in the first instance, continuing in force agreements...