Case Name: Hinkley and another, Appellants, vs. Sagemiller, Respondent
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1927-01-11
Citations: 191 Wis. 512
Docket Number: 
Parties: Hinkley and another, Appellants, vs. Sagemiller, Respondent.
Judges: 
Reporter: Wisconsin Reports
Volume: 191
Pages: 512–521

Head Matter:
Hinkley and another, Appellants, vs. Sagemiller, Respondent.
October 14, 1926
January 11, 1927.
For the appellants there were briefs by Edgcw L. Wood, and oral argument by Richard H. Tyrrell, both of Milwaukee.
For the respondent there was a brief by Bendinger, Graeb-ner, Hayes & Hofer of Milwaukee, and oral argument by H. J. Bendinger.

Opinion:
The following opinion was filed November 9, 1926:
Rosenberry, J.
The principal contention of the plaintiffs here is that the court erred in allowing the defendant Sagemiller more than $200 per month as salary for services rendered to the plaintiff corporation. The evidence in support of the finding as to the amount of salary which the defendant Sagemiller was to receive is to the effect that some time prior to the incorporation the four intending incorpora-tors met and that at such meeting it was agreed that Sage-miller should receive a salary. The testimony of the witness Rehberger tends to support the finding, while that of George M. Hinkley and George C. Hinkley squarely contradicts it. . It further appears without dispute that although the gross sales of the company for May and June were greater than $5,000 and less than $10,000 and in each of the succeeding months in excess of $10,000, the defendant Sagemiller drew only $200 a month of salary, and, although a general manager and in charge of the business of the company, at no time instructed the bookkeeper to pay or credit him with any amount in excess of $200 per month. It also appears without dispute that no formal action was ever taken after the incorporation of the company. At a meeting of the stockholders for the purpose of organizing the corporation, it appears that there was some discussion as to the salary to be paid to the defendant Sagemiller, but neither the amount of the salary nor a sliding scale for the future was mentioned or agreed upon at that meeting. Such talk as there was related to the understanding previously had, and the nature of that understanding was neither discussed nor made a matter of record. The by-laws of the corporation provide:
"The compensation of all officers shall be fixed by the board of directors and of all employees not mentioned in these by-laws by the officer or officers so authorized by the board of directors."
While a finding to the effect that there was no sliding scale agreed upop at the meeting held a week or ten days prior to the incorporation of the company would be in accord with, our view of the weight of the evidence, it cannot be said that the finding of the trial court is so clearly against the clear preponderance and great weight of the evidence that it should be set aside. Assuming, therefore, that a week or ten days before the incorporation the matter of salaries was discussed, that it was agreed the defendant Sagemiller should be paid $200 a month until the sales should equal or exceed $5,000 and $250 until the sales should equal or exceed $10,000, and thereafter $300 per month; that no action was ever taken by the board of directors in respect to the salary of the secretary and general manager; that he was paid down to and including November 21, 1925, at. the rate of $200 per month, — is the defendant Sagemiller entitled to compensation in excess of $200 per month? This involves the power of promoters and incorporators to bind the future corporation by a contract made by them for and on its behalf. If the defendant Sagemiller is to recover, he must do so upon express as opposed to implied contract. Lowe v. Ring, 123 Wis. 370, 101 N. W. 698.
The general rule is that a corporation until it is organized has no being, franchises, or faculties. Promoters or incor-porators attempting to act for it cannot therefore stand in the relation of an agent to a principal. Contracts made by promoters for and on behalf of a future corporation are in the nature of offers which may be accepted by the corporation when it comes into existence. Such acceptance may. be shown by act of the corporation or implied from conduct and circumstances,, but in order to bind the corporation there must be some acceptance or adoption by the corporation under the rule laid down in this state. Pratt v. Oshkosh Match Co. 89 Wis. 406, 62 N. W. 84. See, also, Samuel Meyers, Inc. v. Ogden Shoe Co. 173 Wis. 317, 181 N. W. 306; Ziemer v. C. G. Bretting Mfg. Co. 147 Wis. 252, 133 N. W. 139; 1 Fletcher, Corp. § 150, p. 309.
If after its organization a corporation accepts the benefit of a contract made on its behalf by its promoters, it becomes bound by the contract by adoption and must accept the contract with its burdens as well as its benefits. Morgan v. Bon Bon Co. 222 N. Y. 22, 118 N. E. 205. The case cited is one where a third person agreed with the promoters to do certain work for the corporation after it was organized and thereafter performed services in accordance with the agreement. This was held to be an adoption by implication. Where the acts which it is claimed amount to an implied adoption are performed by an officer who is a party to the contract and at the same time has charge of the corporate affairs, the situation is materially different, particularly so under the rule m Lowe v. Ring, supra. So far as there is any evidence of adoption or affirmance by any one other than the defendant Sagemiller after the corporation was organized, it tends to sustain the contention of the plaintiffs rather than that of the defendant Sagemiller. In the month of October the stockholders met for the. purpose of ascertaining the cost of handling their product. At that time Sagemiller was asked to state the amount of his salary, which he stated to be $200, and the costs were figured on that basis. There is no other testimony except a conversation had between the incorporators as they were leaving the office of the attorney where the incorporation papers were executed, to the effect that the defendant Sagemiller's compensation had been agreed upon, two of the directors claiming that it was fixed at $200, and two, including Sagemiller, claiming that it was $200 a month and to be increased in accordance with the sliding scale heretofore set out. If Sagemiller had drawn his compensation in accordance with the contract as claimed by him, or it had been credited upon the books of the company to the knowledge of the other stockholders, a different situation would be presented. It is considered, therefore, that even if, as the court found, there was an agreement prior to incorporation, there is not such affirmance or adoption of it subsequent to the incorporation of the company as to bind the corporation under the circumstances. Mills v. Hendershot, 70 N. J. Eq. 258, 62 Atl. 542. The defendant Sagemiller was therefore not entitled to compensation at a greater rate than $200 per month.
The second contention of the plaintiffs is that the defendant Sagemiller was not entitled to compensation after he was suspended on November 21st for the period ending December 21st, when he was finally suspended by order of the court.
At a meeting of the board of directors a resolution was introduced deposing Sagemiller as secretary and general manager of the corporation. Upon that question directors George C. Hinkley and George M. Hinkley voted for the resolution, and directors A. J. Rehberger and Henry B. Sagemiller, the defendant, voted against the resolution. Thereafter the president, so far as it was possible for him to do, suspended the defendant. The resolution was in fact adopted because Sagemiller had no right to vote upon the resolution deposing him from office. It is an elementary principle in every system of jurisprudence that a man may not sit as judge in his own case. See 3 Cook, Corp. (8th ed.) § 649; 3 Fletcher, Corp. § 1889; also 4 Fletcher, Corp. § 2352.
That good cause existed for the removal of Sagemiller there can be no doubt. The findings of the court in that regard are well supported by the evidence. It is not clear whether the defendant Sagemiller continued to manage and operate the business of the company, but apparently he did so in defiance of a majority of the members of the board of directors qualified to act.
The court found that the defendant Sagemiller had 'misappropriated $700.44 of the company's funds. Many of these items were misappropriated by the defendant Sage-miller for his personal use and benefit. We do not understand upon what theory an officer of a corporation who has been guilty of such gross misconduct as to warrant his removal from office can be held to be entitled to compensation for services during the period of his suspension. It is one of the fundamental principles of agency that an agent guilty of misconduct and fraud in relation to the transaction of his principal's business is not entitled to compensation for his services. Rogers v. Priest, 74 Wis. 538, 43 N. W. 510; Arthur Koenig Co. v. Graham Glass Co. 170 Wis. 472, 175 N. W. 814. Certainly the secretary and general manager of a!-corporation owfes to the corporation'the utmost fidelity and is required in his dealings with the corporation to ex ercise the highest good faith. No court holds corporate officers to a stricter obligation with respect to dealings between themselves and the corporation which they serve than does this court. It cannot be. said, therefore, that a corporate officer who has so far disregarded his duties as to have misappropriated its funds and been guilty of misconduct is entitled to compensation. See 4 Fletcher, Corp. § 2766, and cases cited; also 14 A Corp. Jur. 139.
The plaintiffs next, contend that they were entitled to tax costs for proposed findings of fact and copies thereof. This claim-is based upon the provisions of sub. (3), sec. 271.04, Stats., which provides:
"When allowed costs shall be' as follows: . . .
"(3) Drawing all process and returns, admission of guardians, recognizances of bail in suits against the. bail only, pleadings, adjournments, suggestions, entries, special verdicts, and bills of exceptions which shall be necessary, and all other necessary entries, pleadings and proceedings in án action according to the practice, of the court, and for which no special provision is herein made."
The proposed findings contained seventy-nine folios, and the plaintiffs sought to tax $19.75 for the original and $28.44 for three copies. The plaintiffs also taxed and tire court allowed drawing findings thirty-three folios, $8.25, and for copies ninety-nine folios, $11.88. The court disallowed the amount taxed for proposed findings and copies. It is alleged and not disputed that by the practice of the court and by request in this instance, the plaintiffs, in whose favor the judgment went, were requested to prepare proposed findings. It appears from the opinion of the trial court that several findings proposed by the plaintiffs were not made, not being in accordance with the facts as found by the court. The proposed findings do not appear in the file. We are therefore unable to ascertain in what respect the findings as signed differ from the proposed findings, If an attorney on the request of the court, or in accordance with the prac tice of the court, proposes findings covering the evidence which are an aid to the court in its consideration of the case, we see no reason why such an item should not be taxed. While the statute requires the trial court to prepare the findings of fact and conclusions of law, it is the general practice for attorneys, to assist the court in that respect by offer.-ing proposed or requested findings. It appears, however, that the proposed findings were in part adopted by the court. The plaintiffs would therefore not be entitled to tax for the second dra'ft, but should be allowed for the copies. The court should therefore have allowed $19.75 for the original proposed findings, $28.44 for copies, and $11.88 for copies of the findings.
George C. Hinkley was not a party to the action, although he was a stockholder and director of the company. He did not attend in response to a subpoena, but was actually in attendance for four days. The court erred in denying plaintiffs' right to tax therefor.
By the Court. — Judgment is reversed, and cause remanded with directions to enter judgment for the plaintiffs as indicated in this opinion.
A motion for a rehearing was denied, with $25 costs, on January 11, 1927.