R v. Brooke County Bldg.

• Decision Date: 14 September 1926
• Docket Number: (No. 5729)
• Citation: 102 W.Va. 119
• Court: West Virginia Supreme Court
• Parties: R, L. Ramsey v. Brooke County Building & Loan Assn.

102 W.Va. 119

R, L. Ramsey

v.Brooke County Building & Loan Assn.

(No. 5729)

Supreme Court of Appeals of West Virginia.

Submitted September 7, 1926.

Decided September 14, 1926.

1. Corporations Generally Corporation is Not Liable for Con-

tracts Made on Its Behalf by Promoters and Not Subsequently Ratified and Confirmed; if Promoters Employ Attorney to Prepare and Secure Necessary Charter and Constitution and By-Laws and to Assist in Organization of Corporation, and His Services Are Accepted, Law Implies Contract by Corporation to Pay Him Reasonable Compensation.

Generally a corporation is not liable for contracts made on its behalf by its promoters and not subsequently ratified and confirmed in the exercise of its corporate powers; but when an attorney is employed by such promoters to prepare and secure the necessary charter and a constitution and by-laws for the government of the corporation, and to be present and assist in the organization, and his professional services are thus accepted and appropriated, the law implies a contract on the part of the corporation to pay him a reasonable compensation therefor, on which he may maintain an action, (p. 124.)

2. Novation Contract by Corporation With Third Person to

Sell Stock on Commission, in Which He Agrees to Bear Ex- penses From Certain Period, to Which Attorney is Not Party, is Not "Novation" of Contract Implied by Law to Pay Attorney Reasonable Compensation for Assisting in Organizing Corporation, Rendering Such Third Party Liable to Attorney.

And the fact that subsequent to the organization of a corporation it makes a contract with a third person to sell shares of its stock on a commission to be paid him, in consideration whereof he agrees "to bear all expenses, salaries of officers, provide all printed matter, books of record, pass books, cards and files, et cetera," for a specific period, but to which such attorney is not a party, will not work a novation of the contract so as to absolve the corporation from its liability to him and render such third party liable to the attorney for his services, (p. 125.)

3. Attorney and Client On Election to Office of Attorney of

Association, to Which no Salary is Attached, Law Implies Contract to Pay Reasonable Compensation and That Emoluments Pertain to Office Will be Paid, in Default of Which Association is Liable to Attorney.

When a building and loan association elects one to the office of attorney as provided by its constitution and by-laws, and he accepts the office, to which no salary is attached, but upon the terms prescribed by the by-laws, that he is to represent the association in all legal matters, be present at all meetings of the stockholders and directors when required, and to examine and certify titles to the land offered as security for loans, prepare deeds of trust or mortages and report on the same, the by-laws providing that the legal expenses attending such loans shall be borne by the borrowers, the law implies a contract on the part of such corporation to pay a reasonable compensation for the services rendered it, and that the business pertaining to such loans will be referred to him, and the fees and emoluments pertaining to his office chargeable to such borrowers will be collected and turned over to him, in default of which the corporation is liable to such attorney for damages sustained by its breach of duty in the premises, (p. 126.)

4. Contracts -Where Party to Contract Omits or Refuses to

Perform and Renders it Impossible for Other Party to Perform, Party in Default is Liable for Damages.

Where one of the parties to a contract omits or refuses to perform it on his part, and renders it impossible for the other party to perform it on his part, the party in default is liable to the other for the damages sustained by him by such breach, (p. 126.)

Error to Circuit Court, Brooke County.

Action by R. L. Ramsey against the Brooke County Building & Loan Association. Judgment for plaintiff, and defendant brings error.

Affirmed.

Frank A. Chapman and Patrick J. McGuire, for plaintiff in error.

W. S. Wilkin, for defendant in error.

Miller, Judge:

Plaintiff, an attorney at law, sued defendant for alleged professional services rendered prior and subsequent to its organization, and for the value of services which, as its attorney elect, he was entitled to render, but which by the wrongful conduct of its officers and directors he was prevented from performing subsequent to such organization.

On the trial below, on a plea of non assumpsit, plaintiff recovered a verdict and judgment for $850.00, to reverse which, for alleged errors committed therein, the defendant was granted the present writ of error.

In his bill of particulars filed, two specific items on which plaintiff based his right of action were presented, viz:

1. For legal services rendered as attorney for Brooke County Building and Loan Assn., from February 1, 1924, to December 31, 1924, for organization of the company, obtaining its charter and the four amendments thereto, drawing the by-laws, and for other services as such attorney, $700.00.

2. For failure and neglect of the defendant to procure plaintiff to make abstracts of title and deeds of trust and mortgages in fifty loans made by defendant to borrowers and owners of real estate, as provided in his contract of employment,

between the............ day of February, 1924, and

the............ day of December, 1925, by which he

was damaged, $500.00.

But there was credited on this account of $1,200.00, two items as follows: May 1, 1924, $50.00; July 12, 1924, $50,00; total, $100.00; leaving a balance of $1,100.00. But the damages laid in the declaration was $1,000.00.

Plaintiff, by his own and the testimony of two other lawyers competent to give evidence on the value of such services as were rendered, fully supports his claim; and there was no attempt by the defendant to controvert the amount or the value of these services, but only that defendant was liable therefor. The main defense to the first item was that one AY. V. Smith, one of the promoters of the corporation, and who had in fact made payment to plaintiff of the two items of credit, and for the reasons presently to be presented, and not the defendant, was liable to plaintiff for all services covered by the first item of the account; and as to the second item, that as plaintiff had not performed the services, he was not, under the terms of his election or employment as general attorney, entitled to pay for the services not rendered.

The record shows that the charter, previously applied for, was obtained in February, 1924, shortly after which the organization was perfected, by acceptance of the charter and the adoption of by-laws by the stockholders, and the election of a board of directors, and by the subsequent election or appointment by them of the constitutional officers, including the plaintiff as attorney, for the ensuing year as provided therein.

It is conceded that plaintiff prepared the contract, procured the charter, prepared all the preliminary papers, including notices to stockholders, and also that after a study and investigation preparatory thereto, he had drafted the constitution and by-laws subsequently adopted in stockholders meeting, introduced in evidence, and covering some eighteen pages of the printed record; and as already noted, there was no controversy as to the amount or value of these services. And after the organization of the company was thus effected, the evidence shows that plaintiff, in accordance with the duties imposed upon him by the fifth section of the by-laws so adopted, was present when required at all meetings of the stockholders and directors and freely gave his counsel and advice pertaining to all legal matters, including the procure- ment of five several amendments of the charter increasing the capital stock from $50,000.00 to $3,000, 000.00, as finally agreed upon.

In support of the second item of account, covering damages for breach of the contract of employment, as of the first item thereof, plaintiff rested his case, first, on the provisions of said section five of the by-laws, defining and prescribing his rights and duties, substantially as follows: He shall attend all meetings of the stockholders and directors when asked by the president or secretary of the board; make all examinations of titles of the property offered to the association as security for loans, as the board of directors may require, and make a written report of the same; represent the association in all legal proceedings, and shall be the legal adviser of the association, draw up all contracts and legal documents that the board may require, and pass on all contracts entered into by the association or its officers, and perform such other services as the board may require. This second item is...