The Winfield Mortgage & Trust Company v. Robinson

• Decision Date: 07 June 1913
• Docket Number: 18,238
• Citation: 89 Kan. 842,132 P. 979
• Court: Kansas Supreme Court
• Parties: THE WINFIELD MORTGAGE & TRUST COMPANY, Appellee, v. W. C. ROBINSON, Appellant

132 P. 979

89 Kan. 842

THE WINFIELD MORTGAGE & TRUST COMPANY, Appellee, v. W. C. ROBINSON, Appellant

No. 18,238

Supreme Court of Kansas

June 7, 1913

Decided January, 1913.

Appeal from Cowley district court.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. CORPORATION--Compensation for Services of President--Ordinary Duties. A president of a corporation is not entitled to compensation for performing the ordinary duties of his office in the absence of a previous agreement or authorization by the board of directors.

2. Employing Counsel--Directing Litigation. The employment of counsel in behalf of the corporation and the directing of litigation in which it is interested is one of the ordinary duties and powers of a president of a corporation.

3. MONEY RECEIVED--By President--Action to Recover--When Interest Not Allowed. Where a president of a corporation institutes and carries on litigation in its behalf in which money is recovered and there arises a bona fide dispute between him and the corporation as to what expenses of the litigation shall be paid out of the fund, and also whether he is entitled to retain compensation for his services in connection with the litigation, and an action is brought against him to recover the money withheld in which some of his claims are upheld and others disallowed, and there is no vexatious or unreasonable delay in the payment of the money he is not liable for interest on the money so withheld.

W. P. Hackney, and J. T. Lafferty, both of Winfield, for the appellant.

G. H. Buckman, and S. C. Bloss, both of Winfield, for the appellee.

OPINION

JOHNSTON, C. J.:

This was an action to recover from the appellant, W. C. Robinson, moneys alleged to belong to the appellee, the Winfield Mortgage & Trust Company, the payment of which he had refused to make on demand. For a number of years the company successfully carried on the business of loaning money and selling mortgages, and in furtherance of the business issued and floated $ 70,000 of its debenture bonds, and as security for their payment deposited with a trustee in New York an equal amount in mortgages. In 1894 the company became insolvent, and F. K. Robinson, a nephew of appellant, was appointed as receiver of the company. Appellant had been acting as president of the company before the receiver was appointed and continued to act in that capacity throughout the receivership. During the receivership no stockholders' or directors' meetings were held, but on January 5, 1909, an election was held and new officers were elected to take control of the company's business. When F. K. Robinson filed his report as receiver its correctness was challenged by appellant, who was then president of the company, and counsel were employed by him to take exception to the report and to conduct an investigation of the receiver's administration. Many motions were made and hearings had in this connection, and at the end it was found that there was in the receiver's hands, belonging to the company, a much larger sum than had been reported, and he was ordered by the court to pay into the court $ 9969, which was done. The appellant, as president of the company, had employed two firms of lawyers to protect the interests of the company in the controversy with the receiver, and out of the money paid in by the receiver on the order of the court $ 1500 was paid as a fee to one of the firms and $ 3000 to the other. After paying all allowances and expenses there remained in appellant's hands, as was alleged, $ 5469 which had been paid over to appellant by the clerk of the court. Afterwards, when the new officers of the company had been elected and installed, a demand of this sum was made upon appellant, but it was refused, and thereupon the present action was brought. The appellant alleged in an answer that he was entitled to a credit of $ 3500 for services rendered by him in and about the litigation against the receiver. He also claimed a credit for an additional attorneys' fee and some other expenses that had been incurred. The trial court, on a demurrer to a count of the answer, held that the services rendered by appellant came within the scope of his duties as president of the company, and that no provision having been made to pay him for such services no recovery could be had. On a trial before a jury a verdict was returned in favor of the company for $ 5480.12, and the special findings returned show that appellant was allowed $ 500 for an additional fee paid to attorneys in Kansas and $ 125 paid an attorney for services in a proceeding in New York for an accounting with the trustee. Another finding disclosed that $ 822.12 was allowed by the jury as interest on the amount found to be due from and withheld by appellant.

The first question arising on the record is as to the right of appellant to compensation for services rendered in and about the controversy with the receiver. Appellant employed counsel to conduct the litigation, consulted with them as to the course to be pursued, examined pleadings, reports and papers filed in the case, and attended a great many hearings upon motions and applications that were presented to the court. It is well settled that an officer of a corporation is not entitled to compensation for services rendered by him in an official capacity or as incidental to the office unless such compensation has been agreed upon or its payment authorized in advance by the board of directors. No agreement was made with the appellant that compensation for his services in this respect should be made, nor was payment authorized by the governing authority of the company, either before or after the rendering of the services. In National Bank v. Drake, 29 Kan. 311, 44 Am. Rep. 646, this rule was announced by the court, and then it went farther and held that it was not within the power of the directors to pay for such services after they had been performed unless there was a previous agreement between the company and the officers that compensation should be made. See, also, the cases therein cited. In the opinion the case of Loan Association v. Stonemetz, 29 Pa. 534, was cited, in which it was said:

"We regard it as contrary to all sound policy to allow the director of a corporation elected to serve without compensation, to recover payment for services performed by him in that capacity, or as incidental to his office. It would be a sad spectacle to see the managers of any corporation, ecclesiastical or lay, civil or eleemosynary, assembling together and parcelling out among themselves the obligations or other property of the corporation in payment for their past services." (p. 536.)

In reference to the rule that officers are not entitled to compensation for performing the usual and ordinary duties incidental to the office without agreement or provision having been made by corporate action, it is said in 3 Clark and Marshall on Private Corporations, § 671:

"They can not recover on implied contract for what the services were reasonably worth, for the law will not imply a promise on the part of the corporation to pay; and it can make no difference, in the application of this rule, that the services were performed with the expectation of compensation or with the general understanding among the directors themselves that they should receive compensation. And no compensation can be recovered from the corporation by one employed by a director to do what the director should have done, as such, without compensation.

"The courts have based this doctrine on the ground that the directors, president, and other managing officers of a corporation are in effect trustees, and the law does not imply any promise to pay trustees for performing their duties...