Warwic v. Merridian Hotel Co
| Decision Date | 30 November 1936 |
| Docket Number | 32330 |
| Citation | 177 Miss. 611,170 So. 820 |
| Court | Mississippi Supreme Court |
| Parties | WARWIC et al. v. MERRIDIAN HOTEL CO |
Suggestion Of Error Overruled, January 11, 1937.
APPEAL from the chancery court of Jones county, HON. A. B. AMIS SR., Chancellor.
Suit by the Meridian Hotel Company against R. E. Warwick, his wife and others. Decree for complainant, and defendants appeal. Reversed and remanded.
Reversed and remanded.
Shannon & Schauber, of Laurel, for appellant, R. E. Warwick.
In an action by an officer or director to recover compensation, evidence of the situation and relations of the parties is admissible to establish their understanding and intention.
A person is not precluded from recovering for personal services rendered to the corporation by the fact that he is a stockholder. The question whether there existed an express or implied promise to pay for his services is one of fact, and his relationship is evidentiary matter bearing on this issue, but that is the only effect it has on his right to recover.
14 C. J. 847, sec. 1288; Russell v. Patterson Co. and Coane, 36 L.R.A. (N.S.) 199; Bassett v. Fairchild, 52 L.R.A. 66.
It is almost the universal rule that a director or an officer rendering services outside the scope of his official duties may recover compensation therefor, although not provided for by express contract, if the circumstances ate otherwise such as to raise an implied contract.
Goodin v. Dixie Portland Cement Co., L.R.A. 1917F 319-323; Fitzgerald and Mallory Construction Co. v. Fitzgerald, 34 L.Ed. 608; Stevens v. Industrial Commission, 81 A.L.R. 638; Hjorth Oil Co. v. Curtis, 3 A.L.R. 766; Shackelford v. N. O. J. & G. N. R. R. Co., 37 Miss. 202; Ten Eyck v. Pontiac, Oxford & Port Austin R. Co., 3 L.R.A. 378.
The rule that a director or other officer cannot act for the corporation in a matter in which he is interested is intended for the benefit of the corporation and its stockholders who may, like ah individual, elect to confirm a transaction which could have been repudiated, in which case the contract becomes fully binding on the corporation to the same extent as any other duly ratified contract entered into by an unauthorized agent. So the rule is for the benefit of the corporation and its stockholders, and does not extend to its creditors in the absence of a fraud, and when a disposition of the property of a corporation is assailed by its creditors, they are not clothed with the right of the corporation or of its stockholders to set it aside solely on the ground that it was entered into by representatives who had put themselves in a relation antagonistic to the interests of their principal. Corporation creditors can only impeach such a transaction on proof of the insolvency of the corporation at the time of its consummation, of that it was entered into with intent to hinder, delay, or defraud them.
7 R. C. L. 483, sec. 463; Russell v. Patterson, 36 L.R.A. (N.S.) 199.
There is no question but that Mr. Warwick, as a stockholder, had a right to vote to ratify the payment of his salary, or the setting up of a salary to him as general manager of the corporation.
Express Engineering Works, Ltd., 1 Chancery (1920) 466.
As to the fourth proposition that this judgment was not an existing debt, we most respectfully refer the court to the following authorities on this proposition. Section 4149, Code of 1930; Kimbrough v. Davies, 61 So. 697.
The next proposition we desire to discuss is that a tort is nota debt in the meaning of the Mississippi statute and the construction of the same by the Supreme Court. We most respectfully refer the court to the following authorities.
Section 4149, Code of 1930; Avery & Son v. McClue, 47 So. 901; 14 C. J., pages 1036, 1037, sec. 1612d, note 18 on page 1037;7 R. C. L. 510, sec. 504; Chase v. Curtis and Decoppet, 28 L.Ed. 1038.
Shannon & Schauber, of Laurel, for appellee, on crossappeal, First National Bank.
It was our contention in the lower court, and it is also our contention here, that The First National Bank of Laurel had a right to accept the checks of the Fire Protection Company signed by "R. E. Warwick, Treasurer" payable to R. E. Warwick, and apply the proceeds of said checks on the indebtedness of R. E. Warwick and Mrs. L. M. Warwick to The First National Bank of Laurel, and that in doing so and surrendering the notes, for which the checks were payment, to R. E. Warwick, the bank became ah innocent purchaser for value of the checks and the proceeds thereof.
Section 2681, Code of 1930; 8 C. J. 217; 3 R. C. L. 1058, sec. 261; West Rutland Trust Co. v. Houston, 80 A.L.R. 664.
One of the first duties of a bank in relation to a depositor is to honor the depositor's check, regardless of the purpose for which it is given, if it is properly signed and there are funds in its hands belonging to the depositor.
7 C. J. 679, sec. 402; Eyrich v. Capital National Bank, 67 Miss. 60, 6 So. 615.
Counsel for the New Meridian Hotel Co., the crossappellant, seems to rely very much on the case of Bolivar County v. Bank of Cleveland, decided by this court on May 28, 1934, and reported in 170 Miss. 555, 155 So. 176. We think this decision supports our contention, rather than that of counsel for cross-appellant.
The chancellor, in his written opinion, gives the New Meridian Hotel Company a lien on the property described in the deed of trust securing the indebtedness owing by the Warwicks to the First National Bank, but makes the lien subject to the balance, of the indebtedness owing to The First National Bank of Laurel by them, which is something over one thousand six hundred dollars. We submit that whatever equities the New Meridian Hotel Company has or might have, are subject to the rights of The First National Bank, as shown by the testimony in this record.
Alexander & Satterfield, of Jackson, for appellant, R. E. Warwick.
No cause of action whatsoever exists in the New Meridian Hotel Company as the same lies only in the trustee in bankruptcy. It would be possible to burden the court with cases from almost every federal circuit in the United States upholding the proposition that when ah individual of corporation goes into bankruptcy the creditors have no remedy after adjudication except through the trustee.
The fact of the closing of the bankrupt estate does not change the rule, for the same may be re-opened at any time upon the request and suggestion of any party, including creditors.
Collier on Bankruptcy, sec. -2, pages 102, 103 and 104, and sec. 60, page 1318; Remington on Bankruptcy, par. 2222, page 319; Lovell v. Latham, 211 F. 374; Trimble v. Woodhead, 26 L.Ed. 290; Glenny v. Langdon, 25 L.Ed. 43.
The suit is improper because ir is brought by an individual creditor and is not for the benefit of all creditors.
Platner v. Hughes, 43 A.L.R. 1141.
The Fire Protection Company was justified in paying salary to R. E. Warwick for services rendered as general manager as distinguished from his position as secretary.
Allen Gravel v. Nix, 129 Miss. 809, 93 So. 244; Shackelford v. New Orleans, etc., Railroad Co., 37 Miss. 202; Thompson on Corporations, sec. 1851, page 437, sec. 1853, page 439, and sec. 1855; Fletcher Cyclopedia, Corporations, sec. 2114, page 387, sec. 2115, page 393, and sec. 2116, page 396; Rosehill Cemetery Co. v. Dempster, 79 N.E. 276; Navco Hardwood Co. v. Bass, 108 So. 452.
Ownership by R. E. Warwick and his wife of all stock in the corporation docs not affect the corporate status.
Bahannon v. Binns, 31 Miss 355; Millsaps v. Merchants & Planters Bank, 13 So. 903; Cannon Mfg. Co. v. Cudhay Co., 267 U.S. 333; Pullman Car Co. v. Missouri Pacific Co., 115 U.S. 596; Watson v. Bonfils, 116 F. 167; Pickett v. Wood, 234 F. 833.
Under the above authorities, we believe that the court below committed error in holding that the Fire Protection Company was nota distinct corporation and that its bankruptcy was of no effect with reference to the rights involved.
No fraud whatever has been shown in connection with the transactions of R. E. Warwick and the Fire Protection Company.
Welch & Cooper, of Laurel, for appellant, Capital National Company.
We believe that the case of Joseph H. Reif, Trustee, etc., of Shongood Hart Company, Inc. v. Equitable Life Assurance Society of the United States, 268 N.Y. 269, 197 N.E. 278, 100 A.L.R. 55, is decisive of the questions involved.
The utmost result of the acceptance of a corporate check is to put the payee upon inquiry to ascertain the truth, inquiry may have been omitted. The payee has the benefit, nonetheless, of anything that inquiry would have developed if pressed to a conclusion.
Mutual Trust Co. v. Merchants' National Bank, 236 N.Y. 478, 141 N.E. 922; Whiting v. Hudson Trust Co., 234 N.Y. 394, 138 N.E. 33, 25 A.L.R. 1470.
It is clearly the general rule that the payee of a corporate check who accepts the check in payment of the individual debt of the corporate officer signing ir is not liable to the corporation, if the officer was authorized to use corporate funds for that purpose.
Reif v. Equitable Life Assurance Society of the United States, 268 N.Y. 269, 197 N.E. 278, 100 A.L.R. 55; J. B. Kepner Co. v. Hutton, 179 A.D. 130, 166 N.Y.S. 408, 226 N.Y. 674, 123 N.E. 871; American Surety Company of NeW York v. Waggoner National Bank of Vernon, Texas, 5th C. C. A.
Warwick is not liable to appellee. We do not represent Mr. Warwick. His interests are being handled capably by his own attorneys. We hope we will say nothing herein that will hurt them or prejudice their cause. However, ir is obvious in this case that ir there can be no recovery by the appellee, Meridian Hotel Company, against Warwick, there can be no recovery...
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