Court Opinion

ID: 6281248
Source: CourtListenerOpinion
Date Created: 2022-02-18 16:16:50.674376+00
Date Added: 2024-06-11T09:00:12.214627
License: Public Domain

Opinion by
Porter, J.,
The case stated upon which the parties agree and which will appear in the report of this case renders unnecessary any detailed recital of the facts. The plaintiff is and has been for many years vice-president and a member of the board of directors of the Central Building and Loan Association of Philadelphia, and he is, also, a licensed real estate broker. The defendant had for five years been a stockholder in said association and the association held a mortgage upon his real estate for $7,500. Defendant applied to the plaintiff for an increased mortgage loan in the sum of $15,000, out of the proceeds of which, if obtained, the first mortgage was to be paid and satisfied. Plaintiff procured the loan from the Central Building and Loan Association, he being present and acting as president at the meeting when the loan was approved by the board of directors, but he did not vote thereon. At the time fixed for settlement of the mortgage, the plaintiff presented to defendant a bill for a broker’s commission of three per cent, whereupon the defendant refused to complete the transaction upon that basis. If, upon this state of facts, the defendant is liable for a commission, the amount thereof should be three per cent, of the mortgage. The court below entered judgment in favor of the plaintiff for $450 and the defendant appeals.
When the parties state the facts that which is not expressly agreed upon and set forth in a case stated must be taken not to exist: Port Pitt Stamping Co. v. Gas Co., 269 Pa. 162. We must, therefore, take it as settled that this defendant did not make any express contract to pay commissions, if he is to be held liable, it must be upon a contract implied from the circumstances. It must be accepted as established, for the same reason, that this plaintiff did not make known to the building and loan association, or to its board of directors at the time he presided at the meeting which approved the loan, that he expected to make for himself any profit out of the trans*143action. If the plaintiff is to profit by the transaction, that profit will be, so far as the corporation is concerned, a secret profit. “The director of a corporation is a trustee for the entire body of stockholders, and by assuming the office, he undertakes to give his best judgment in the interests of the corporation in all matters in which he, acts for it, untrammeled by any hostile interest in himself or others; and all secret profits derived by him in any dealings in regard to the corporate enterprise must be accounted for to the corporation”: Bird Coal & Iron Co. v. Humes, 157 Pa. 278; Keystone Surgical Supply Mfg. Co. v. Bate, 187 Pa. 460. When he is to make a profit out of a transaction which involves a loan of money by the corporation, he must fully disclose the facts, or he may afterwards be called upon to disgorge his secret profits. “The law has ceased to look at the mere form of the device employed, it now pierces through the surface and seizes upon the evils which lie within”-: Tenth National Bank v. Smith Construction Co., 242 Pa. 269. “These general rules work no hardship to any one, they simply mean that those entrusted with the. management of a corporation must be above board, fair and honest with its stockholders in all matters concerning the common enterprise or its control, and that one so situated, will not be permitted to derive any personal profit or advantage by reason of his position, distinct from his coshareholders”: Porter v. Healy, 244 Pa. 437. The stockholders of a building and loan association are to a great extent people of moderate means and they are entitled to the protection which these*well established principles give to all stockholders, to protect them against the rapacity of officers who seek to make a profit for themselves. That there has been heretofore no reported case in which a director of a building and loan association had attempted to compel a stockholder.to pay a commission for procuring a loan from the association speaks well for the manner in which such associations have been conducted. Had this defendant expressly con*144tracted to pay the plaintiff a commission for obtaining this loan and had actually paid it, the money thus paid would have been in contemplation of law, the property of the association; the defendant not having disclosed the fact to the corporation. Building and loan associations are, within certain limitations, authorized to assess fines upon their stockholders and to exact a premium on loans, under well-established rules, which apply to all stockholders alike, but they have no authority to charge an individual stockholder a commission on a loan, which might involve gross discrimination and favoritism. The mere fact that this plaintiff did not vote, when the meeting of the board of directors, at which he presided, approved the loan, cannot operate to permit him to make a profit out of the transaction. The plaintiff acting as a director, owed a duty to all the stockholders, they were entitled to his best judgment, or at least that he should then and there state that he was interested in the transaction. The law would have regarded with suspicion and disapproval an express contract made between plaintiff and defendant under the facts agreed upon in the case stated, and, this being the case, the law will not imply from such facts a contract upon the part of the defendant to pay the plaintiff a commission.
The judgment is reversed and judgment is here entered in favor of the defendant.