Overland Automobile Co. v. Cleveland

• Decision Date: 17 March 1923
• Docket Number: (No. 8775.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 250 S.W. 453
• Parties: OVERLAND AUTOMOBILE CO. v. CLEVELAND.
• Court: Texas Court of Appeals

250 S.W. 453

OVERLAND AUTOMOBILE CO. v. CLEVELAND.

(No. 8775.)^*

Court of Civil Appeals of Texas. Dallas.

March 17, 1923.

Rehearing Denied April 14, 1923.

Appeal from District Court, Dallas County; E. B. Muse, Judge.

Action by T. K. Cleveland against the Overland Automobile Company. Judgment for plaintiff, and defendant appeals. Affirmed.

W. B. Hamilton, of Dallas, for appellant.

J. D. Kugle and Wm. M. Cramer, both of Dallas, for appellee.

HAMILTON, J.

On August 15, 1917, appellant, a corporation domiciled in Dallas, Tex., made appellee, one of its former employés, then residing in Abilene, Tex., a proposition of employment by letter of that date. Appellee in response to the offer went to Dallas and accepted it. The contract thus formed between the parties was to the effect that appellee should go to Sherman, Tex., and there take the position of office man in appellant's business, which was distributing Overland automobiles. Appellee thereupon went to Sherman and took up his duties under the employment. Under the contract he had charge of retail sales, of sales of accessories, and also charge of the records, including accounts. His compensation was fixed at a salary of $125 per month and 20 per cent. of the profits of the business at Sherman. The business at Sherman, although operated under the name of Overland-Sherman Company as an independent subdistributor, was to be, and, in fact, it seems, was virtually, although confidentially, a branch of appellant.

On the 1st day of November, 1917, the Sherman business obtained a corporation charter from the state of Texas. The incorporators, as disclosed by the articles of incorporation, were appellee, a coemployé at Sherman, G. C. Griffin, and the officers of appellant in Dallas. The capital stock was $5,000. It was divided into 50 shares, valued at $100 each. Appellant furnished all the capital stock in automobiles valued at $5,000, wholesale price. Stock certificates were issued to appellee, Griffin, and two of appellant's officers as follows: 9 shares stood in appellee's name, 15 shares in Griffin's name, and 13 shares in the name of each of said two officers of appellant. No stock was issued in the name of appellant's third officer, who was one of the organizers and one of the first board of directors, he having died before the stock was issued. Each of the four in whose names the stock certificates were issued executed notes to appellant for the respective amounts of stock issued to them. The amount of the note thus given by appellee was $900, and his certificate was transferred to appellant and held by it with the note, which was also done in the instance of the note made by each of the others.

Appellee performed his duties after the organization of the corporation substantially as he had agreed before, his official position under the corporate organization being secretary-treasurer. The president and general manager of the appellant testified that one of the first steps taken after the letter was written to appellee, making him an offer of $125 per month and 20 per cent. of the profits, which offer he accepted, was to organize the business. It was organized by canceling the contract then existing and organizing the corporation, to the capital stock of which appellee and Griffin subscribed 24 shares and the officers of appellant 26 shares of the total 50 shares as above stated.

On May 20, 1918, appellant, over its corporate signature by its president, addressed the following letter to appellee:

"We have decided, owing to the unsatisfactory manner in which the business at Sherman has been conducted, to ask for the resignation of both yourself and Mr. Griffin, this resignation to be effective June 1, 1918, and a complete reorganization of this company will be effected. In the meantime Mr. John M. Hendricks, personal representative of the interest of the Overland Automobile Company of Dallas, will be in complete charge. Settlements between the Overland-Sherman Motor Company and yourself and Mr. Griffin will be made as soon after June 1st as the affairs of the Overland-Sherman Motor Company can be satisfactorily closed up."

Other letters from appellant to appellee of previous dates directing the policy of the business, and giving specific instructions, were signed by the corporate name of appellant, as that above copied. They were the expressions of the Dallas corporation, not of individuals or officers of the Sherman corporation as distinguished from the Dallas corporation. Appellee's replies were all addressed to the Dallas corporation, and not to individuals or officers of the Sherman corporation. In none of these transactions by correspondence was the Sherman corporation recognized by either party.

The first directors' meeting was held October 5, 1917. At that meeting the appellee's salary was fixed by the board at $125 per month. At a subsequent meeting of the board of directors on February 7, 1918, appellee's salary was increased to $150 per month, and, in addition to this sum, he was authorized to draw $25 per month, which was to be charged against profits earned and due him at the end of the fiscal year.

Various exceptions to the petition setting up appellee's right of recovery were interposed by appellant. They were overruled, and the procedure below in those instances is made the basis of several propositions presented to this court.

It is first contended that the appellee could not recover the 20 per cent. of the profits which he alleged himself entitled to receive under the contract of employment, because a contract of such nature made prior to the formation of a corporation cannot be a valid basis for the disbursement of profits, and is against public policy, ultra vires, and void; the only lawful distribution of a corporation's profits being according to...