Ravenswood, S. & G. Ry. Co. v. Woodyard
| Decision Date | 22 April 1899 |
| Parties | RAVENSWOOD, S. & G. RY. CO. v. WOODYARD et al. |
| Court | West Virginia Supreme Court |
Submitted January 12, 1899
Syllabus by the Court.
1. A president or director of a private jointstock corporation can claim no compensation for services, as such, unless allowed by the stockholders.
2. A board of directors of a private jointstock corporation cannot allow compensation to a president or director for services as such, without resolution or by-law of the stockholders made prior to the rendering of such services. An order for such allowance is ultra vires, and void, and may be repudiated by the corporation.
3. An order of a private joint-stock corporation, making an allowance to its president or director for services, as such made at a meeting where he participated in or was president at such allowance, is prima facie fraudulent and void as to the corporation.
4. A president or director of a corporation stands as a trustee for it as to property of it committed to his hands for the purposes of the corporation.
5. Equity has jurisdiction to declare null an order of the board of directors of a corporation that is ultra vires, and obstructs its rights to its property, though that order be void.
Appeal from circuit court, Roane county; Reece Blizzard, Judge.
Bill by the Ravenswood, Spencer & Glenville Railway Company against Harry C. Woodyard and others. Decree for defendants, and plaintiff appeals. Reversed.
H. P Camden, for appellant.
E. W. Wilson and J. W. C. ARMSTRONG, for appellees.
The Ravenswood, Spencer & Glenville Railway Company, a corporation, filed a bill and amended bill in the circuit court of Roane county against the administrator and distributees of William Woodyard, deceased, which were dismissed upon demurrer, and the company appealed.
The bills state, in substance, the following case: Said company was chartered to construct a railroad, and to raise means to do so it executed a mortgage upon its franchise and property to secure certain bonds issues by it for the purpose of being sold in the market. William Woodyard was the president and a director, and, while such, ten of said bonds, for $1,000 each, were committed to his hands as such president to sell for the benefit of the company, and he received them for that purpose, and to account for their proceeds to the company and he did return five of them to the company, but did not sell, or account for, or return, the remaining five bonds, but refused so to do, and converted them to his own use, though it was demanded of him by the company that he should return said bonds out of his private custody to the company; and he died, and the said bonds are in the custody of his administrator, who refuses to surrender them to the company. Said Woodyard, in order to give color of authority to his conversion and appropriation of said bonds, pretended that said company was indebted to him for certain alleged services rendered by him, amounting to $5,000; and said Woodyard, on April 9, 1892, had a meeting of the directors of the company called for the purpose of allowing and approving his said account, and the board did meet and approve the same, and ordered it to be paid; and the said Woodyard had another meeting of the said directors called for August 9, 1892, for the purpose, among other things, of authorizing the appropriation of five of said bonds to the payment of his said account, and the said directors did meet on the last-named date, and passed an order reciting that at the former meeting Woodyard had presented an account for services rendered the said company, amounting to $5,000, which was allowed and ordered to be paid, but, the same not having been paid, that the said Woodyard agreed to accept as payment of said account five of the company's first mortgage bonds, and ordering that "the president of this company deliver to said Woodyard five of the said bonds in payment of his account." Said Woodyard, under said order, kept and appropriated to his own use the said five bonds. Said Woodyard was present at the meetings of the directors when said orders were passed, and signed the same as president. No salary or compensation was ever allowed by the stockholders of the company. Said Woodyard rendered no services, except those rendered by him as president, and there was never any allowance or authority by the stockholders on which he could base a demand for such services. The company claimed that he occupied a position of trust and confidence with reference to it, it being the cestui que trust and Woodyard the trustee, and that it was his special duty, as director and president, to see that the assets and funds were used for such purposes only as the law allows, and he was charged with the duty of protecting it against the fraud, so frequently perpetrated on corporations and their stockholders by the directors, of voting themselves salaries and compensation for pretended services, and applying the funds of the corporation to their payment, and that, as to these particular bonds, he held the double fiduciary relation of officer and special trustee. The bill claimed that all these transactions were, as to said bonds, a fraud against said company, and that said Woodyard did not render any services, as to it, of any kind, except as director and president, and that the company did not owe him anything therefor; that there was no agreement, in advance, or authority, to pay him for such services; that Woodyard was present at the meetings of the said directors when the question of allowing his said account, and of permitting him to appropriate five of said mortgage bonds in payment of the same, was being considered at said meetings of the 9th of April and 9th of August, 1892, and voted in favor of the passage of the orders above stated; that the directors who voted to allow said account, and permit Woodyard to appropriate the bonds in payment thereof, were mere nominal stockholders of the company, and large stockholders and real parties in interest were not represented on the board of directors or at said meetings. George W. Thompson was one of the large stockholders, and the agent of some others, and authorized to protect their interests; and he, on July 29, 1892, by letter to Woodyard, repudiated the action of said directors. Negotiations were pending from that time on to the date of Woodyard's death between Thompson and Woodyard to effect a settlement and adjustment of the matter,--Thompson writing several letters to Woodyard, denying his right to said bonds,...
To continue reading
Request your trial