Puller v. Royal Casualty Company
| Decision Date | 02 July 1917 |
| Citation | 196 S.W. 755,271 Mo. 369 |
| Parties | EDWIN S. PULLER v. ROYAL CASUALTY COMPANY, Appellant |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. George C Hitchcock, Judge.
Reversed and remanded (with directions).
F. H Bacon for appellant.
(1) Directors of a corporation sustain a fiduciary relation and are trustees, as well as agents, for the stockholders. They are bound to exercise the utmost good faith and contracts between the directors and one of their number are always subject to review and if not absolutely void are voidable if unreasonable, unfair, or produced by the influence of the director contracted with. 9 Cyc. 787; 3 Cook, Corp., sec 658; 1 Morawetz on Corp., sec. 516; Land Co. v. Case, 104 Mo. 572; McNab v. Mfg. Co., 62 Hun, 18, 133 N.Y. 687; Davis v. Davis, 120 N.Y.S. 350, 135 A.D. 206; Carney v. Ins. Co., 162 N.Y. 473, 49 L. R. A. 471; Beers v. Ins. Co., 66 Hun, 75, 20 N.Y.S. 788; Higgins v. Lansingh, 154 Ill. 301; Adams v. Burke, 201 Ill. 399; McNulta v. Bank, 164 Ill. 427. If the vote is really the influence of the officer benefitting thereby, it is void. Greathouse v. Martin, 100 Tex. 99. (2) The burden of proof is on a director who has had dealings with his fellow directors of a corporation to show that the contract is fair. If it is not fair, it is incapable of ratification. 2 Thomp. on Corp., sec. 1231; Laird v. Lubricator Co., 153 Mich. 52, 17 L. R. A. (N. S.) 177; Camacho v. Bank Note Co., 2 A.D. 369, 37 N.Y.S. 725; 3 Cook, Corp. (7 Ed.), sec. 649; Pollitz v. Railroad, 207 N.Y. 113. (3) The contract sued on is materially different from that authorized by the resolution of the directors in that it provided that plaintiff should only give a portion of his time to the service of the company. (4) The alleged contract was clearly made in order to forestall the action of any future board of directors. It covered a period of four years, whereas the directors making the contract were elected for one year only. This contract under the circumstances was in pursuance of a conspiracy on the part of plaintiff and his two associates in their own interest and was therefore void, or, if not void, was voidable. (5) The court wrongfully excluded the statement of the business of the company which was offered for the purpose of showing the unreasonableness of the salary voted plaintiff and as a circumstance tending to show that the contract sued on was not entered into in good faith. (6) The judgment is excessive, even admitting that the contract sued on was valid. (a) The original agreement provided that while the salaries were to continue for the three parties, plaintiff, Sutton and Pickrell, for four years, the salaries might be reduced if in their judgment it was necessary to enable the company to pay the dividend. The three after consultation, by mutual agreement, did reduce their salaries, made a gift of the excess to the company, and yet in the first count of his petition the plaintiff claims that the payment of the reduced rate was not binding upon him. If the reduction was made by the three in mutual consideration of the reduction by the others, or if the difference rebated was a gift to the company, it cannot be recovered in this action. Riera v. Metal Co., 134 A.D. 497. (b) Plaintiff was discharged March 8, 1911, at which time the alleged contract had two years to run. He brought suit March 16, 1911, eight days thereafter, and claimed the entire salary for the two years unexpired term of the contract at the full rate, together with interest from the date of the filing of the suit on the theory that although his salary was payable in monthly installments the discharge made the entire amount at once due and payable. No allowance was made for earnings of plaintiff during the future period and it could not be known what the amount of such earnings would be.
Schnurmacher & Rassieur for respondent.
(1) While the services of a director in the line of his duties as such are presumed to be gratuitous, the directors may bind the corporation by a contract for employment of an officer, agent or employee, notwithstanding that such employee is also a director. Coal Co. v. Watson, 107 Mo.App. 451; Taussing v. Railroad, 166 Mo. 28; Funsten v. Com. Co., 67 Mo.App. 557; 2 Thompson on Corp. (2 Ed.), sec. 1747; Wickersham v. Crittenden, 110 Cal. 332; Clark v. Coal Co., 86 Iowa 436. (2) The presumption of law is that the president of the corporation was acting within his authority and that the contract was regular and valid. Jones v. Williams, 139 Mo. 1; Coal Co. v. Watson, 107 Mo.App. 451. (3) Appellant relies on the agreement between the three promoters to fix, or to attempt to fix, their salaries, subject to the decision of the board of directors, as being unlawful in itself. Such is not the law. Authorities cited under point one; Fillbrown v. Hayward, 190 Mass. 472. (4) A corporation may, by formal vote of its board of directors, or by any suitable act, the same as an individual, ratify an agreement made by its promoters. 3 Cook on Corp. (6 Ed.), sec. 707, p. 2212; Bond v. Pike, 111 N.W. 916; Pittsburgh Co. v. Quintrell, 91 Tenn. 693; McDonough v. Bank, 34 Tex. 309; Battelle v. Northwestern Co., 37 Minn. 1889; Browning v. Company, 5 H. & N. 856; Mesinger v. Mesinger Co., 44 A.D. 26; Chase v. Redfield Co., 12 S.D. 529; Coal Co. v. Watson, 107 Mo.App. 451. (5) A corporation may make a valid contract of employment for a longer period than the tenure of office of its directors. Jones v. Williams, 139 Mo. 1. A contract for "permanent employment" is not illegal. Revere v. Copper Co., 15 Pick. 351; Hobbs v. Elec. Co., 74 Mich. 550; Pennsylvania Co. v. Dolan, 6 Ind.App. 109; Lead Co. v. Kimlin, 47 Neb. 409. A contract that employment should be steady and constant as long as plaintiff should do his work properly, the consideration for which, in part, was a settlement for personal injury, is valid. Harrington v. Cable Ry., 60 Mo.App. 223; Retzer v. Packing Co., 58 Mo.App. 264. A contract for employment for life under the above conditions was upheld in Boggs v. Laundry Co., 86 Mo.App. 616. Even a contract of a corporation imposing an obligation in perpetuity will be upheld, where the intention to do so is unequivocally expressed. Printing Co. v. Compendius Co., 150 Mo.App. 391. (6) A corporation cannot take advantage of an agreement among its officers to accept a reduction in salary, which agreement has not been communicated or assented to by them. Thompson Co. v. Brook, 14 N.Y.S. 370. Such agreement must be with the company and not among the promoters. Bank v. Elliott, 55 Iowa 104. The payment of a part of an undisputed debt cannot liquidate the whole. Head v. Ins. Co., 241 Mo. 403; Wetmore v. Crouch, 150 Mo. 671; Swofford v. Goss, 65 Mo.App. 55; Klausmann v. Schoenlau, 32 Mo.App. 357. (7) Respondent's damage for breach of his contract is, prima-facie, the amount promised to be paid him by the contract. Tenzer v. Gillmore, 114 Mo.App. 210; Ross v. Pants Co., 170 Mo.App. 291; Boland v. Quarry Co., 127 Mo. 520. (8) The court rightfully excluded the alleged statement of the defendant, first, because it was not identified by any witness nor testified to as being correct; and, second, because the future success or failure of a corporation just beginning business cannot affect a contract entered into at the beginning of such business. Whether it turns out to be advantageous or disadvantageous to the company is immaterial. Trendly v. Traction Co., 241 Mo. 73.
The plaintiff brought this suit in the circuit court of the city of St. Louis against the defendant, to recover a balance of $ 1,233.86 salary, alleged to be due him under a certain contract made by them on March 22, 1909, and for the sum of $ 12,203.22 damages, claimed for an alleged breach of said contract. The petition was in two counts; the first was for the recovery of the salary, and the second for the damages for the breach thereof. The trial resulted in a judgment for the plaintiff for the sums sued for and interest, amounting to $ 14,316.42. After ineffectually moving for a new trial and arrest of judgment, the defendant appealed the cause to this court.
The first count of the petition in substance alleged that the plaintiff and defendant, on March 22, 1909, entered into a written agreement whereby the latter employed the former as general counsel and manager of its claim department for a period of four years from said date, at $ 350 per month for the first year, $ 450 per month the second year, and $ 500 per month for the third and fourth years; that immediately after the contract was made he entered upon the performance of his duties and continued to perform them until March 7, 1911; that according to the terms of the agreement, defendant became indebted to him for such services in the sum of $ 9,400.53, on account of which it paid him $ 8,166.67, and judgment is prayed for the balance of $ 1,233.86.
The second count alleges the same contract and performance by plaintiff until March 7, 1911, and on that day the defendant wrongfully discharged him, without cause, and a refusal to further permit plaintiff to render the services covered by the contract. The prayer was for judgment in the sum of $ 12,203.22.
The answer consists of a general denial; an admission that the contract set forth in the petition was signed by defendant's president, J. D. Sutton; a denial that it was authorized by the board of directors in the form in which it was executed; that the directors were elected for only one year; that notice of a special meeting of the board, to be held March 22, 1909, was given to all...
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