Opinion ID: 2614193
Heading Depth: 1
Heading Rank: 4

Heading: director compensation

Text: Appellees assert that due to the special facts of this case an exception to the general corporate fiduciary rule should be made. It is suggested that since Pablo was not given a salary or other compensation from appellant, it was reasonable and proper for him to accept the undisclosed commission. In support of this position appellees cite early Hawaii trust cases for the principle that a trustee may receive reasonable compensation for special services rendered the trust estate. Estate of Wichman, 27 Haw. 780 (1924); Estate of Ena, 24 Haw. 414 (1918). These cases are clearly inapposite to the present situation. Appellees overlook the fact that a trustee is ordinarily compensated by the trust estate for the services he performs. The status of a corporate director is entirely different. The general rule is that directors of a corporation are not entitled to recover any compensation or salary for performing their ordinary duties unless a provision for such compensation is authorized by a resolution of the board of directors prior to the rendering of the services. Savage v. Lorraine Corp., 217 F.2d 378, 380 (9th Cir.1954). It is also the prevailing view that where a director also serves as an officer of the corporation, such as Pablo serving as president of appellant, the director-officer cannot recover compensation unless it is expressly provided for by statute, bylaw, regulation or contract. Brampton Woolen Co. v. Commissioner of Internal Revenue, 45 F.2d 327, 330 (1st Cir.1930); Cox v. First Nat. Bank of Brea, 10 Cal. App.2d 302, 305, 52 P.2d 524, 526 (1935). In the case at hand there is no evidence that any of the other directors who went with Pablo to California received any compensation. Nor is there any evidence that the corporation expected to provide any compensation for the services rendered in the transactions in question. In both trust cases cited by appellees it is further explained by the court that the trustee can only receive additional compensation over the statutory or agreed amount if the services are extraordinary and special in character. Wichman, supra, 27 Haw. at 784-785; Ena, supra, 24 Haw. at 417. In the case at hand, Pablo was acting as a director for the corporation when he went to California with the rest of the appointed subcommittee. He had no agreement with appellant, implied or otherwise, that he was to represent them as a compensated real estate broker. More specifically, the cases appellees cite and the rule of law espoused therein involve situations where the trustee is compensated by the estate itself for extraordinary services, in addition to his regular compensation. Conversely, where the commission or other compensation comes from a third party with whom the trustee is dealing on behalf of the trust estate, it is not allowed. The trustee violates his duty to the beneficiary if he accepts for himself from a third person any bonus or commission for any act done by him in connection with the administration of the trust. Thus, if he sells trust property and accepts from the purchaser a bonus for making the sale, he commits a breach of trust. So also, if he is employed by an insurance company with which he insures trust property, receiving as compensation a commission for placing the insurance, he is accountable for the commission. Restatement (Second) of Trusts § 170, comment o.