Court Opinion

ID: 9660655
Source: CourtListenerOpinion
Date Created: 2023-08-23 22:17:54.983178+00
Date Added: 2024-06-11T18:14:21.131617
License: Public Domain

FRITZ, C. J.
(dissenting). The evidence on the trial established without dispute that on and prior to March 9, 1945, the defendant corporation, the Vilter Manufacturing Company (hereinafter referred to as “Vilter Company”), was profitably engaged in manufacturing refrigeration equipment, and also heavy armament for the government during the war. Most of the shares of its stock were owned by the Vil-ter family. At the times of the transactions involved in this action Earl B. Tilton was the treasurer, executive vice-president, and general manager of Vilter Company, and given “final executive authority” in respect to its business policies, *292administration, organization, etc., and the “co-ordination of all operating and financial matters,” and by the terms of a contract his employment was to continue until October 31, 1947. The holders of the common and preferred stock of Vilter Company desired to sell either their stock, or the corporation’s assets; and on March 9, 1945, they (with one exception) entered into a contract (quoted in the opinion of the court) to sell their stock for the price stipulated in that contract. It was prepared by a law partnership, Miller, Mack & Fairchild (hereinafter called the “Miller firm”), which the stockholders selected to attend to the sale of their shares of stock in accordance with that contract. But Vilter Company was not a party to that contract or any negotiations thereunder, and it did not take any corporate action authorizing anyone to sell its assets or shares of its stock.
The. evidence on the trial admitted of the court’s findings to the following effect: On April 2, 1945, Joseph E. Rapkin, one of the associates of the Miller firm, upon being called into a meeting of the Vilter Company stockholders, learned that their shares of stock were for sale, and that negotiations with one of two prospective purchasers were being conducted on the basis of a price of $1,300,000 net to the stockholders. With their permission Rapkin asked his close personal friend and client, Otto A. Boheim, if he was interested in buying the stock at $1,300,000 net to the stockholders. Boheim declined to make a bid, but asked and received Rapkin’s permission to try to find a purchaser at said price, with a finder’s fee or commission to be paid by purchaser. Boheim and his wife and daughter owned and were officers of Western Industries, Inc., the plaintiff in this action. On April 27, 1945, Rapkin and three associates of the Miller firm organized a nonstock, nonprofit charitable and scientific corporation (which after an amendment was called “Foundation, Inc.”), for the purpose of purchasing from the Vilter Company *293stockholders all of their shares of stock at the price of $1,300,000. Foundation, Inc., had no capital or assets and it was organized with the intention of using the liquid assets of Vilter Company, and additional funds which were to be obtained on a loan secured by its other assets, to pay to its stockholders the price of $1,300,000 for their shares of its capital stock; and Rapkin and said three associates were elected as directors and officers of Foundation, Inc.
On April 28, 1945, a written offer of $1,300,000 for the Vilter Company shares of stock was made by Maxwell Ab-bell, and concurrently therewith the offerer agreed that if his offer was accepted he would pay a commission or finder’s fee of $60,000, of which the plaintiff in this action agreed to pay $30,000 to other brokers, leaving $30,000 for plaintiff. On April 30, 1945, Maxwell Abbell’s offer was rejected by the Vilter Company stockholders; and on May 1, 1945, an offer of $1,300,000 for their shares of stock was made by Foundation, Inc., and it was accepted; and the sale consummated by the stockholders transferring the shares of stock to Foundation, Inc., for $1,300,000. On May 1, 1945, the directors and officers of the Vilter Company, excepting Earl B. Tilton, resigned, and said four associates of the Miller firm were elected directors of Vilter Company, and Rapkin became a vice-president.
Upon Boheim learning on April 30, 1945, that the Maxwell Abbell offer had been rejected and that a finder’s fee would not be paid to him, he told Rapkin, “Joe, as far as we are concerned our work is finished and we will present you a bill for $30,000.” That bill reads: “Apr. 30, 1945, Vilter Manufacturing Co., Milwaukee, Wis. Terms: 10 days net. For services in connection with your financing, $30,000.” In relation to that bill and proceedings in respect thereto on May 1, 1945, by said newly elected board of directors, Rap-kin testified:
*294“ . . . that would have been the amount he [Boheim] would have received on the other deal and I felt that it was fair in the light of the services which he had rendered, and the fact that he would be so valuable to us in this transition period, that we should be willing to pay him the $30,000, that he should suffer no loss. There wasn’t any objection. . . . I think, except for whatever explanation I made on May 1, that we, I never tried to elaborate on the nature of the service after that.
“Q. At that meeting of May 1, what consideration and influence did you and the other directors give to the fact that Mr. Boheim had this contract to get a $30,000 finder’s fee, if the Chicago deal went through? A. I think it was given some consideration.
“Q. And it influenced your judgment in approving the bill? A. Yes.”
Boheim, in testifying, admitted that until he told Rapkin on April 30, 1945, “we will present you with a bill for $30,000,” Rapkin had never told him that he was employing him to render any services for Vilter Company; that prior to May 1st Rapkin had nothing to do with the stockholders or directors of Vilter Company, and that he never discussed business matters with any of its officers. Boheim claims that he was “hired” by Rapkin for defendant, but neither Rapkin nor Boheim testified as to any such hiring of Boheim; and he never asked Rapkin whom he was representing, and Rap-kin did not say. He had not been given any authority by the officers, directors, or stockholders of Vilter Company to hire Boheim on behalf of defendant for any purpose; and upon Rapkin’s inquiry he was informed only that Boheim could try to find a purchaser on the condition that a finder’s fee be paid by such purchaser. Rapkin testified also that before May 1, 1945, he did not discuss any management problems with Boheim and had no authority to hire him for any purpose on behalf of Vilter Company; and there had been no previous discussion between Boheim and Rapkin in relation to any compensation to Boheim from anybody, excepting *295Boheim’s statement as to a finder’s fee to be paid by a purchaser.
Rapkin did testify that he “called on Boheim for advice and assistance on working out the financing,” but Rapkin also testified that he alone arranged the financing for Vilter Company to obtain a required loan with Commercial Discount Corporation; and that Boheim did not help to get that money. Likewise Boheim testified that he did not participate in the transactions with the finance company; that he did not have anything to do with the real-estate mortgage, because the loan of the money was entirely up to the Miller firm and the stockholders and directors of the corporation; that Rap-kin “did not come to us for advice as to how to set it up;, and we did not give him any advice, as to how to set it up, because we do not know enough about those charitable organizations.” And also Rapkin testified that Boheim did not consult “with us so far as Foundation, Inc., is concerned. . . . He didn’t work on the consummation of the transaction.”
There is, however, some testimony that on May 1, 1945, without the consent or approval of Earl B. Tilton, the executive vice-president, general manager, and executive authority of the defendant, Rapkin had Boheim with him a substantial part of the day and for about twenty days thereafter to assist in what was admittedly merely clerical work, and which, commencing around May 21st, was again handled directly by defendant’s employees. Neither Boheim nor plaintiff had any further transactions with defendant, although it appears that at a special meeting on May 16, 1945, of stockholders of Vilter Company (the stock of which was then owned by Foundation, Inc., and voted by its officers, who were said four associates of the Miller firm) all actions by the board of directors at the meetings of May 1 and May 8, 1945, in relation or pursuant to resolutions adopted by and reported to the stockholders at said meetings on May 1st and *296May 8th were ratified and confirmed in an omnibus manner without specifying particularly what matters were intended to be thus approved. And it does not appear that the directors or stockholders of Vilter Company at any meeting ever expressly ordered or directed the payment of $30,000 to plaintiff.
In relation to plaintiff’s bill or statement for $30,000 there was evidence on the trial which the court could consider credible and sufficient to fully warrant the following findings and conclusions by the court, to wit:
“Said statement was false in that at no time prior to May 1, 1945, was either the plaintiff or Mr. Boheim employed by the defendant [Vilter Company] for any purpose whatsoever, and at no time did they or either of them render any services for the defendant, or of any benefit to the defendant, whether in connection with the financing of defendant, or otherwise, and at no time prior to May 1, 1945, were they or either of them requested to render any service for defendant, by any of its officers, directors, stockholders, or employees; and all services rendered prior to May 1, 1945, by Mr. Bo-heim, or by any employees of any enterprise with which he was associated, related solely to his efforts to earn a contingent commission or finder’s fee by producing a successful bidder for the purchase of defendant’s stock from the holders thereof.
“On and prior to April 30, 1945, Mr. Rapkin was not an officer, employee, or agent of defendant, nor was he then acting nor had he previously acted as an attorney for defendant; and Mr. Rapkin then had no authority, actual or apparent, to employ either or both the plaintiff or Mr. Boheim on behalf of defendant for any purpose whatsoever, or to request either or both of them to render any services to or for the defendant, or to incur any obligation or make any agreement for or on behalf of defendant; and Mr. Rapkin did not employ or purport to employ either or both the plaintiff or Mr. Boheim on behalf of the defendant, or to render any services to it. . . .
“On May 1, 1945, after he became a vice-president of defendant, Mr. Rapkin orally promised Mr. Boheim that de*297fendant would pay the $30,000 invoice referred to in finding 9. At the time of such promise defendant was not indebted to plaintiff; there was no consideration to support the promise; Mr. Rapkin was a fiduciary both for the defendant and for Foundation, Inc.; he was precluded from making or agreeing to make any gift of any of defendant’s assets, or any disposition thereof excepting in the regular course of the business of defendant; the promise was contrary to the best interest of defendant and Foundation, Inc.; and neither defendant nor Foundation, Inc., derived or could derive any benefit therefrom; the promise was an agreement to make a gift; Mr. Rapkin had no authority to make the same without the consent and approval of his senior officer Earl B. Tilton; and the promise was and is void and unenforceable.
“On May 8, 1945, Mr. Rapkin made the following report to a meeting of the board of directors of defendant:
“ ‘In the course of this explanation he reported that a statement dated April 30, 1945, addressed to the company had been delivered to him by Western Industries, Inc., in the sum of $30,000. The statement was for services previously rendered to the company, in an amount agreed by Mr. Foley as president and Mr. Rapkin as vice-president, with the board’s approval.’ The board then considered other matters in detail but did not discuss the $30,000 claim, and thereafter a resolution was adopted ratifying ‘the action of the company’s officers with respect to any and all matters reported at this meeting.’
“The report to the board was incorrect, since plaintiff had not ‘previously rendered’ any services to defendant; and any attempted ratification based upon such erroneous information was and is nugatory. Independent of such consideration, the said general resolution of ratification was and is insufficient to constitute an adoption or approval of the $30,000 statement ; and the board of directors of defendant, as fiduciaries representing Foundation, Inc., had no power or authority to pay or authorize the payment of plaintiff’s fictitious claim. Neither defendant nor Foundation, Inc., at any time agreed to pay plaintiff said sum of $30,000.”
To those findings there is applicable the rule that although there are conflicts in some of the testimony of the witnesses, *298the determination of their credibility and the weight of their testimony was primarily for the trial court, and that as there was sufficient basis in the evidence to sustain its findings and they are not contrary to the clear preponderance of the credible evidence, they cannot be disturbed on this appeal, and therefore must be sustained. Interior Woodwork Co. v. Buhler, 207 Wis. 1, 6, 238 N. W. 822.
It follows that as up to May 1, 1945, neither the claimed activities of plaintiff or Boheim were pursuant to any request or promise by Vilter Company and did not result in any benefit or value to it, they do not constitute any consideration for any legal obligation or the payment thereof by Vilter Company to plaintiff. As stated in Dilweg v. Milwaukee M. T. Co. 174 Wis. 200, 201, 202, 182 N. W. 726,—
“It is well established that ‘to entitle a broker to compensation he must have been employed to negotiate the transaction in connection with which his services were rendered. In the absence of such employment or, in other words, where the broker acts as a mere volunteer, he is not entitled to compensation, although his services are the efficient cause of bringing the parties together and result in a sale or other contract between them.’ . . . Conceding that the colloquy set forth in the statement of facts amounted to a promise on the part of Trecker that a broker’s commission would be paid to plaintiff if a contract were consummated, it is apparent that there was no consideration for the promise, as the only services rendered by the plaintiff upon which he relies as entitling him to a commission were already performed.” See also 1 Williston, Contracts (rev. ed.), p. 508, sec. 142.
Consequently as there was no legal obligation on the part of Vilter Company or Foundation, Inc., for their payment of any amount whatsoever to the plaintiff or Boheim, there is applicable the rule that corporate officers and directors of a corporation are trustees and that as such they are precluded from making a gift of corporate assets to themselves or to other private parties. As stated is 3 Fletcher, Cyc. Corp. (perm, ed.),—
*299“ ‘The directors of a corporation are intrusted with the management of its business and property for the benefit of all the stockholders, and occupy the position of trustees for the collective body of stockholders in respect to such business.
. . '. It is their duty to administer the corporate affairs for the common benefit of all the stockholders, and exercise their best care, skill, and judgment in the management of the corporation business solely in the interest of the corporation.’ ” 3 Fletcher, Cyc. Corp. (perm, ed.), p. 178, sec. 838.
“Of course, if the corporation has no power to make the donation, the board of directors is without such power. And therefore an appropriation of the funds of a company as a gift, by the act of the directors without the consent of the stockholders, would ordinarily be a misappropriation, certainly an act beyond the corporate powers of the directors. ...” 2 Fletcher, Cyc. Corp. (perm, ed.), p. 407, sec. 520 (Citing Frankfort Bank v. Johnson, 24 Me. 490, 502; Bedford R. Co. v. Bowser, 48 Pa. St. 29, 31; Holland Banking Co. v. Continental Nat. Bank, 324 Mo. 1, 22 S. W. (2d) 821, 826; Parrott v. Noel, 8 Fed. (2d) 368, 371; Moss v. Copelof, 235 Mass. 162, 126 N. E. 474, 476; Brinkerhoff Zinc Co. v. Boyd, 192 Mo. 597, 91 S. W. 523.)
Those rules should be considered particularly applicable in this action because of the facts that Foundation, Inc., as organized is a charitable corporation and that by its purchase of all shares of Vilter Company stock it is to all intents and purposes virtually the owner of the assets of Vilter Company; and under those circumstances the payment of $30,000 of its assets to plaintiff would be a gross misappropriation of assets of Foundation, Inc., which were to be used for its charitable purposes.
It follows that it is my conclusion that the judgment should be affirmed.
Mr. Justice Hughes and Mr. Justice Broadfoot authorize me to add that they concur in this dissent.