National Loan & Inv. Co. v. Rockland Co., 1,128.

• Decision Date: 17 April 1899
• Docket Number: 1,128.
• Citation: 94 F. 335
• Parties: NATIONAL LOAN & INVESTMENT CO. v. ROCKLAND CO.
• Court: U.S. Court of Appeals — Eighth Circuit

94 F. 335

NATIONAL LOAN & INVESTMENT CO. v. ROCKLAND CO.

No. 1,128.

United States Court of Appeals, Eighth Circuit.

April 17, 1899

George D. Emery (Charles A. Willard, on the brief), for plaintiff in error.

M. H Boutelle (N. H. Chase, on the brief), for defendant in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This is an action on a promissory note for $3,747.64, dated October 1, 1896, signed, 'The National Loan and Investment Company, by S. P. Howard, Vice Pres., A. B. Hush, Sec. and Treas.,' payable to the order of Henry S. Jenkins, and indorsed by him to the defendant in error, the Rockland Company, a corporation, which brought the action and alleged these facts. The National Loan & Investment Company, the plaintiff in error, is a corporation; and it answered the complaint of the Rockland Company that it never made the note, and that it was without consideration and void. A jury was waived, and the case was tried by a referee, who made a special finding of the facts and of his conclusions of law. Exceptions were filed to these findings and conclusions, but they were overruled, and a judgment was rendered against the plaintiff in error for the amount of the note and interest.

It is assigned as error that the referee admitted in evidence the note in suit, and other notes of which this was the last renewal, over the objections of the investment company that they were incompetent, that no authority had been shown for either of the officers to execute them, and that no consideration for them had been proved. But the notes themselves were prima facie evidence of a valuable consideration. They recited that they were made for value received. When these objections were made, the defendant in error had proved that these notes bore the genuine signatures of the vice president and treasurer of the corporation, that the payee named in them was its president, and that the investment company was incorporated by the terms of its articles to buy, own, sell, and deal in all kinds of property, and to do any lawful business necessary or expedient for this purpose. A private trading corporation has the implied power to issue promissory notes. The signatures of its officers thereon are presumptive evidence of their authority to make negotiable paper on its behalf. The acts of the officers of corporations, within the scope of their powers, are prima facie evidence of the acts requisite to give them the necessary authority. One who purchases the notes of a corporation may rely upon the presumption that its officers have discharged their duty, and have not exceeded their authority in executing them, and the law will not deprive him of this presumption when he presents them to the courts. Merchants' Nat. Bank of Gardiner v Citizens' Gaslight Co., 159 Mass. 505, 507, 508, 34 N.E. 1083; City of Lincoln v. Sun Vapor Street-Light Co. 8 C.C.A. 253, 257, 59 F. 756, 760, and 19 U.S.App. 431, 438; Thomp. Corp. Secs. 5730, 5741.

Another error alleged is that, in the absence of any evidence in support of such a finding, the referee found the facts set forth in the second paragraph below, which we quote from his report, and the court overruled an exception to that finding.

'(1) That the incorporators of said defendant, the National Loan & Investment Company, were Valentine G. Hush, Henry S. Jenkins, Alfred B. Hush, and Stephen B. Howard, and that, at the time of the agreement or understanding next hereinafter referred to, said incorporators owned the entire capital stock of said corporation. (2) The subsequent to the organization of said corporation, and at or about the time of the commencement of its corporate business, an informal meeting of said incorporators was held, whereat all of said incorporators were present, and whereat it was understood and agreed by and between all thereof that the officers of said corporation should receive from said corporation reasonable compensation for the services performed by them as such officers; and said agreement was not spread on the corporate records, save and excepting as it may appear to have been contemplated in the by-law next referred to. That no resolution was adopted, either by the incorporators or board of directors, fixing the amount of the salaries of the officers in advance.'

An examination of the record, however, discloses the fact that the defendant in error cannot be permitted to urge this objection. Its counsel expressly requested the referee to make this finding. Parties cannot avail themselves of errors which they have themselves committed, or which they have induced the referee or judge who tried their case to make. Walton v. Railway Co., 6 C.C.A. 223, 225, 56 F. 1006, 1008; Chase v. Driver, 92 F. 780; Long v. Fox, 100 Ill. 43, 50; Nitche v. Earle, 117 Ind. 270, 275, 19 N.E. 749; Dunning v. West, 66 Ill. 366, 367; Noble v. Blount, 77 Mo. 235; Holmes v. Braidwood, 82 Mo. 610, 617; Price v. Town of Breckenridge, 92 Mo. 378, 387, 5 S.W. 20; Fairbanks v. Long, 91 Mo. 628, 633, 4 S.W. 499.

It is contended that the facts found by the referee do not warrant his conclusion of law that the defendant in error was entitled to a judgment upon the note. The position here urged is that the note was given for back pay voted to the president of the corporation by the board of directors of which he was a member, that this was an attempt to create a debt of the company by a mere vote of the board without any consideration, and that this act was beyond the powers of the directors and void. The directors of a corporation are trustees for its stockholders. They represent and act for the owners of its stock. Ordinarily the employment of a servant by a corporation raises the implication of a contract to pay fair wages or a reasonable salary for the service rendered because it is the custom to pay such compensation, and men rarely sacrifice their time and expend their labor or their money in the service of others without reward. Directors of corporations, however, usually serve without wages or salary. They are generally financially interested in the success of the corporation they represent, and their service as directors secures its reward in the benefit which it confers upon the stock which they own. In other words, the custom is to pay the ordinary employes of corporations for the services they render, but it is the custom of directors of corporations to serve gratuitously, without compensation or the expectation of it. The presumption of law follows the custom. From the employment of an ordinary servant, the law implies a contract to pay him. From the service of a director, the implication is that he serves gratuitously. The latter presumption prevails, in the absence of an understanding or an agreement to the contrary, when directors are discharging the duties of other offices of the corporation to which they are chosen by the directory, such as those of president, secretary, and treasurer. Moreover, as the members of boards of directors act in a fiduciary capacity, they are without the power or authority to dispose of the property of the corporation without consideration. Consequently they may not lawfully vote back pay to an officer who has been serving the corporation voluntarily without any agreement that he shall receive any reward for the discharge of his duties. It is beyond their powers to create a debt of the corporation by their mere vote or resolution. Some authorities have gone so far as to hold that officers of a...