Court Opinion

ID: 9579224
Source: CourtListenerOpinion
Date Created: 2023-08-21 21:52:50.93437+00
Date Added: 2024-06-11T13:34:56.000128
License: Public Domain

Bussey, Justice
(dissenting) :
While admittedly there is some evidence tending to support the findings of fact by the master, adopted in the majority opinion, I have concluded after considerable study of the record and exhibits that the clear weight of the evidence preponderates in favor of the findings of fact by the circuit judge rather than those of the master. Being of this view, I am compelled to dissent.
The apartment complex was completed in July 1964, whereupon the plaintiff, C. N. Talbot, with the help of a resident manager, selected by him but approved by James, took charge of the management and operation of the apartment complex, all receipts being deposited by Talbot and all checks being written by Talbot. In 1968, after Talbot and his manager had been in charge of the apartment complex for nearly four years, the corporation was virtually insolvent and the recommendation of Talbot’s auditor was that the project be surrendered to FHA as a failure. To this James did not agree; instead he took charge of the operation of the apartment complex himself for the corporation, and a little more than a year later the corporation had seventeen to eighteen thousand dollars in the bank with all current bills paid.
*88Talbot was obviously chagrined at this course of events and it was not until after he was ousted from management that he actively asserted any claim on behalf of the corporation against James. While he denied knowing that James Construction Company was the general contractor on the project, by his own testimony about January or February 1965 he knew that a check for more than fifteen thousand dollars had been drawn on the construction account for the benefit of James. There is no suggestion that he then made any issue thereabout; instead, he waited until nearly four years later and until after he had been ousted from the active management of the operation.
Again, while denying knowledge of the contract, he offered in evidence Plaintiff’s Exhibit No. 5, General Contractor’s and Subcontractor’s Statement, dated November 6, 1963, which clearly shows the general contractor to be James Construction Company; the cash amount of the general contract to be $716,000, plus a cash fee of $20,000. When asked where he got Exhibit 5, he said from Mr. Barnes, the attorney in Columbia who handled the FHA loan application for the corporation. The evidence rather clearly shows that all papers in connection with the FHA loan, application, mortgage, corporate minutes, resolutions, etc., were prepared by Mr. Barnes and were before the meeting in Columbia on November 6, when and where Talbot was present. There is nothing anywhere in the record from which it could be inferred that there was anything at all secretive about the preparation and execution of the general construction contract between Chicora and James Construction Company, it having been prepared by Mr. Barnes and, on its face, executed at the same time and place as the resolution which authorized James to execute the construction contract on behalf of the corporation, all in the presence of Talbot.
Talbot by his own testimony made no effort to acquaint himself with the contents of the various documents then before the meeting and testified that they were so voluminous it would have taken him thirty days to read them. All of *89Talbot’s testimony, in my judgment, has to be weighed in the light of the fact that he asserted no claim against James until after he became disgruntled at his failure to make a success of the operation of the project and at not having been able to draw any income or profit therefrom. Much of his testimony was addressed to the totally untenable position, rejected by the master and not further pursued, that James was bound to personally pay various and sundry fees, the payment of which by James was obviously not within the contemplation of the parties, and, if paid by James, would have resulted in him having contributed to the venture far in excess of anything contributed by the Talbots.
The resolution of the Board of Directors at the meeting on November 5, 1963, unanimously confirmed by the meeting of the stockholders on the same date, as evidenced by their written signatures, clearly shows that all parties agreed that James’ efforts over a two year period and the contracts and commitments thereby produced plus the continued use of the finances and credit of James during the actual construction period represented a value of $44,000, which was accepted in full payment for James’ ten shares of stock. According to the literal terms of this resolution, nothing remained to be done by James to fully earn his ten shares except allow the use of his credit throughout the construction period. As president of the corporation, he would have been expected to at least reasonably supervise the construction of the project in the interest of the corporation, whether or not required to do so by either the resolution of November 5 or the pre-incorporation agreement between the parties. The general supervisory duties of a corporation president or a pre-incorporation promoter are a far cry from the arduous, time consuming and expensive duties of a general contractor.
Supervising a general contractor is one thing; while acting as a general contractor, engaging, supervising, and following up eighteen or twenty subcontractors is an entirely different thing. There is uncontradicted evidence of volumin*90ous paper work, record keeping, reports, etc., on the part of James and his personnel in the performance of the general construction contract. The record leaves no doubt whatever, to my mind, that James Construction Company performed services to the corporation subsequent to November 5, 1963 far over and above the service contemplated by either the aforesaid resolution or the pre-incorporation agreement.
As mentioned in the majority opinion, the “Trade Payment Breakdown” attached to the approved FHA construction contract made an allowance for overhead expenses in the amount of $31,589, payable by means other than cash. Apparently from the evidence, this amount, otherwise drawable, as overhead by James, was to form a part of the equity of the corporation required for the FHA loan and, of course, not actually received by James. Aside, however, from this item, the record reflects that where, as here, there was an identity of interest between the contractor and The sponsor, FHA, within certain limitations, permitted the contractor to include in his certification of the actual cost of a project a reasonable allocation of his general overhead expense, i.e., the proportion of his actual general overhead expense attributable to the particular contract job.
In his cost certification to FHA James showed the entire overhead of James Construction Company during the period that the apartment project was under construction, and represented that 88.98% thereof, or $22,817.34, was attributable to the construction of Chicora Apartments. Of this amount, FHA allowed only $21,231.90 (3% of other costs) as a portion of the actual cost of Chicora Apartments. James’ figures as to his overhead and the portion thereof attributable to the construction of Chicora Apartments may or may not have been accurate, but he was not even cross-examined thereabout. Assuming the accuracy of his figures it follows that his net profit from this general construction contract was the sum of $25,025.31 less $22,817.34 overhead, or $2,207.97. Even Talbot had to frankly admit that he did not know of any loss suffered by the Talbots or the *91corporation as a result of the general contract being let to James. He tacitly, if not expressly, conceded that Dargan, or any other reputable contractor, would have cost the corporation some twenty-five or thirty thousand dollars more.
In summary, I conclude that the following facts are established by the clear preponderance of the evidence:
1. Mrs. Talbot left largely to her husband the handling of her interest in the corporation, except when called upon to sign any document.
2. Talbot, individually and as the agent of Mrs. Talbot, knew on November 6, 1963 that James Construction Company was going to be the general contractor on the project and, moreover, that the project could not otherwise successfully be pursued. He may not have known all of the details of the contract, but any lack of knowledge on his part was attributable to his lack of diligence or interest and not to any intentional failure to disclose by James.
3. That the corporation clearly benefited from the contract being let to James and suffered no detriment whatever therefrom.
4. That the services performed and the overhead incurred by James as general contractor were in addition to anything required of him under the pre-incorporation agreement or the corporate resolution of November 5, 1963 authorizing the issuance of his shares of stock to him. James actually received little profit from the contract, as opposed to overhead expense, most of what a contractor normally would receive as profit having been left in the corporation to make up the equity necessary to comply with FHA requirements.
Under the facts as I see them and find them to be, I do not think that the building contract was voidable but even if it were, what relief may be properly granted at this late date ? The contract is fully performed and its rescission is now impossible. Any recovery by the corporation must rest upon the principle that it suffered loss in one way or another as *92a result of the alleged unauthorized act of James. The weight of the evidence clearly reflects that the corporation was benefited rather than being damaged. Even assuming void-ability initially, in the absence of actual fraud or bad faith, under the weight of authority James would still be entitled to be compensated for the labor and money necessarily expended by him in the performance of the contract. 19 C. J. S. Corporation § 783, p. 159; Griffith v. Blackwater Boom & Lumber Co., 46 W. Va. 56, 33 S. E. 125.
For the foregoing reasons, I would affirm the judgment of the lower court, but at the very least, if the corporation is to recover at all from James, its recovery should be limited to any profit actually received, as opposed to his overhead expense. If the judgment below be not affirmed, the cause should be remanded for the purpose of determining the amount of actual overhead which James should equitably be allowed to retain.
Brailsford, J., concurs.