Court Opinion

ID: 5574925
Source: CourtListenerOpinion
Date Created: 2022-01-11 01:21:11.552018+00
Date Added: 2024-06-11T08:35:53.561496
License: Public Domain

Fish, C. J.
(After stating the foregoing facts.)
1. The special demurrer to the allegation, that at the time of the organization and the first election of the officers of the corporation, it was tacitly understood that fair, reasonable, and adequate salaries should thereafter be paid to the officers, should have been sustained. It is obvious that this was the statement of a mere conclusion of the pleader, and not a statement of facts or circumstances which a' court or jury could grasp and consider, in order to determine whether or not there was an express or an implied contract to pay the plaintiff a salary as president of the corporation. If nothing was said upon the question of salaries or compensation of officers, the plaintiff might have tacitly understood one thing, and the other two stockholders and directors might have tacitly understood another. In order for a judicial tribunal to determine whether there was or was not a given understanding between parties, it is necessary for it to be informed as to what passed between the parties at *179the time of the alleged understanding. What was said and what was done should be alleged by the pleader, and not his mere conclusion as to what was in the minds of the parties at the time, unuttered and undisclosed to each other. For these reasons, independently of the question whether the corporation could be bound by any mere private understanding between its shareholders and directors as to what it would do in the future, the special demurrer in question should have been sustained.
2. The court should have then sustained the general demurrer and dismissed the petition, as it failed to state a cause of action against the defendant corporation. Whatever cause the plaintiff may have had for feeling aggrieved by the conduct of the other two stockholders and directors in voting to themselves salaries as officers of the corporation and refusing to provide a salary for him as its president, his petition clearly showed that he could not, under its allegations, recover of- the corporation, under either an express or an implied contract. The petition expressly negatived the idea that any corporate action had been taken providing for the payment of a salary, or any compensation whatever, to the president for his services. Hence the plaintiff had to rely upon an implied contract, and sought to recover for his services as president upon a quantum meruit. It is well settled in all jurisdictions that the directors of a private corporation are not entitled to salary or other compensation for performing the usual and ordinary duties pertaining to their office, as defined by the charter or by-laws, or by custom, unless there is an express agreement or provision for compensation when the services are performed. “They can not recover on implied contract for what the services were reasonably worth, for the law will not imply a promise on the part of the corporation to pay; and it can make no difference, in the application of this rule, that the services were performed with the expectation of compensation, or with the general understanding among the directors themselves that they should receive compensation. The courts have based this doctrine on the ground that the directors, president, and other managing officers of a corporation are in effect trustees, and the law does not imply any promise to pay trustees for performing their duties as such, or allow them to take compensation out of the funds in their hands, in the absence of an express provision or agreement for compensation.” 3 Clark & *180Marshall on Priv. Corp. §671a, and numerous cases there cited. By the weight of authority, this rule applies to directors serving as president, vice-president, treasurer, etc. Ib.; 21 Am. & Eng. Enc. L. 905-906, and cit. The rule is succinctly stated by Judge Thompson in his work on Corporations, in the following language: “In the absence of some provision in the articles of incorporation, in the by-laws, or in some resolution of the board of directors legally passed, the general rule is that the president and other officers of private corporations are presumed to serve without compensation, and can not maintain an action ¿gainst the corporation to recover compensation for their official services.” 7 Thomp. Corp. §8581. In Ellis v. Ward, 137 Ill. 509, the court not only announced this rule, but went further and held that a private corporation can not legally pay its officers for past services rendered in the performance of their usual duties, unless prior to the rendition of such services a by-law or resolution has been adopted authorizing and fixing com-* pensation therefor; and that, “Where a president of an incorporated company performs services as such, without any bjr-law or resolution providing compensation for his services, and afterwards accepts a salary voted to him for past services, he will be liable to refund the same -in favor of creditors of the company.” In the opinion it was said that this doctrine was well settled by that court, and a number of its decisions were cited. The general rule which we have been discussing is not applicable where a director, or managing officer, of a private corporation renders extra services, which are clearly outside of the usual and ordinary duties of his office; but he may recover the reasonable value of such services as upon a quantum meruit, where they were performed under such circumstances as to raise an implied promise on the part of the corporation to pay for them; especially if it was understood by the other officers of the corporation that he was to perform these services and to be paid for them by the corporation. 3 Clark & Marshall on Priv. Corp. §671c. The plaintiff was not obliged to serve the corporation as its president after the majority of its directors had declined to adopt a by-law or pass a resolution providing a salary for the incumbent of that office, and he was not entitled to compensation for services which he' had then already rendered the corporation as its president.
Even if the allegations of the petition, as amended, in reference *181to the assistance which the plaintiff rendered the corporation in the successful conduct and management of its financial affairs, by the use of his personal influence with financial institutions in its behalf and the pledging of his own credit for its benefit, etc., can be considered as presenting a case of services rendered the cor-, poration, outside of his regular official duties, of such a character and under such circumstances as to raise an implied promise on the part of the corporation to compensate him for them, he did not. sue for the value of these services. His suit was for “a fair, reasonable, and adequate sum of money in payment of salary as president of the defendant company from the 19th day of June, 1900, to the 14th day of July, 1904.” And he alleged “that such part of the salary as accrued between June 19th, 1900, and May 8th, 1902, -became due and payable on the said last-named day, being the time at which the salaries of the other officers of said company. were fixed, and such parts of such salary as accrued after May 8th,. 1902, became due annually on June 19th of each year, except for the unexpired term extending from June 19th, 1904, to July 14th, 1904, which became due and payable on the last-mentioned day.” He prayed '“judgment against the defendant for such fair, reasonable, and adequate sum of mone3r in payment for his services and salary as president for the time aforesaid, to wit, from June 19th, 1900, to July 14th, 1904, together with interest on said sum from the date the same became due and payable as above set forth.” He also alleged that “the sum of $3,600.00 per annum is a fair and reasonable sum as a salary for the president of the Home Mixture Guano Company during the tiine aforesaid, which amounts to the sum of $14,650.00, for the pa3rment of which he has made a demand on the said Home Mixture Guano Company, and the same has been refused.” This was the character of his suit. It was clearly and simply a suit for salary or compensation for the plaintiff’s services as president of the defendant corporation, and not in anywise a suit for compensation for services rendered by him to the corporation outside of his office and duties as its president. There was in the petition neither an allegation as to the value of any extra services rendered to the corporation by the plaintiff, nor any prayer for compensation for such services. So, all the allegations in reference to what he did in behalf of the corporation, in securing for it financial assistance and in rendering such assistance *182to it, etc., can only be construed as intended to show the nature and character of the services which he rendered it as its president, and to strengthen his claim for adequate compensation for such services.
3. Counsel for defendant in error contends that even if the court should hold that the petition did not set forth a cause of action for compensation for the plaintiff’s services as president of the corporation prior to the passage of the by-law or resolution fixing the salary of the president at the sum of $3,600 per annum, still the petition would show a right in the plaintiff to recover for the time which he served as president after this action was taken by the majority of the board of directors, it being alleged therein “that he remained as president for about two weeks or more after the salary for president had been thus fixed.” The contention that the plaintiff would, under the allegations of his petition, be entitled to recover, upon an express contract, compensation for the brief interval of time during which he served as president after a salary for that officer had been provided for by the directors, is not sound, as the plaintiff, as we have seen, sued, and sued only, upon an implied contract. Nowhere in his petition did he allege that he was entitled to recover anything under the by-law or resolution providing a salary for the president, and nowhere did he pray for such a recovery. lie did seek to recover compensation for the whole time that he was president at the rate of $3,600 per annum,' but he sought to recover this, not under any resolution or by-law adopted by the directors, but upon a quantum meruit, alleging “that the sum of $3,600.00 per annum is a fair and reasonable sum as a salary for the president of the Home Mixture Guano Company during the time aforesaid,” that- is, during the whole time that he was president. He never planted his case, either in whole or in.the slightest part, upon an express contract on the part of the corporation to pay him, but, always and everywhere, upon an implied contract to pay him “a fair, reasonable, and adequate sum of money” for his services as its president. The allegations, that, “After the sale of your petitioner’s stock had been agreed upon and the same was to be purchased by the said H. Bussey and Arthur Bussey, with their associates, a meeting of the stockholders and directors . . was held, at which certain resolutions and by-laws were adopted, and wherein it was provided that the president of the defendant compan}'- should thereafter be paid the sum of *183$3,600.00 annually, payable monthly,” etc., were apparently made for the sole purpose of showing how unfairly the plaintiff had been treated by his fellow-stockholders and directors, in that they had refused to provide any salary for the president while he was holding, and was expected to continue to hold, that office, but “as soon as it was determined that petitioner was no longer to occupy the position of president, . . a salary for that office was at once fixed for the amount named, . . and the said II. Bussey was to be the recipient and beneficiary -thereof.” The manner and connection in which these allegations were made clearly indicate that their sole purpose was to strengthen the plaintiff’s claim for “a fair, reasonable, and adequate sum of money in payment of salary as president of the defendant company,” upon an implied contract, by showing what was done with reference to a salary for the president as soon as it was ascertained that the plaintiff was to vacate that office. As if to emphasize and make clear the purpose for which these allegations were introduced by the amendment to the petition, the allegation that the plaintiff “remained as president for about two weeks, or more, after the salary for the president had been thus fixed,” is immediately followed by the statement, “but it was known and determined that petitioner was not to occupy said position, and that this petitioner would not be the beneficiary of the sum so named.” This last-quoted statement is in effect an allegation that the provision for a salary for-the president was not to become operative until a new president was elected. There is not the slightest indication that' the plaintiff sought to recover anything under the resolution or by-law providing a salary for the president of the company. For these reasons, we do not think that the allegations in reference to the action of the directors in fixing a salary for the president can be construed into a separate count in the petition, upon an express contract to pay the plaintiff for his services as president “for about two weeks, or more,” after this action was taken.
It follows, as we have said, that the general demurrer should have been sustained and the petition dismissed, upon the ground that it set forth no cause of action against the- defendant corporation..

Judgment reversed.

All the Justices concur.