Brown v. Republican Mountain Silver Mines, Ltd., 17 Colo. 421

Brown v. Republican Mountain Silver Mines, Ltd.

17 Colo. 421 | Colo. | 1892

Mr. Justice Elliott

delivered the opinion of the court.

At the close of plaintiff’s evidence the district court upon *424defendant’s motion rendered a judgment of nonsuit upon the ground that plaintiff had failed to prove a sufficient case for the jury. Code, sec. 166. This action of the court is assigned for error, and it is the only matter urged in argument for reversal. The ground of defendant’s motion for nonsuit was, that there could be no recovery in the case since there was no evidence of an express agreement or arrangement between the plaintiff Br<?wn and the defendant company by which lie was to have compensation for the services sued for.

The doctrine is generally accepted that directors of a corporation are not entitled to compensation for their services as directors unless such compensation is provided for, or expressly sanctioned, by the charter. Without such authority the directors cannot lawfully vote compensation to themselves for the performance of their ordinary duties, nor can they accomplish such end indirectly, — as by designating one of their number “ Managing Director ” and giving him a salary for the performance of such ordinary duties as are devolved by the charter upon the board of directors.

If, however, a director render services to the corporation clearly outside of his duties as a director in pursuance of an antecedent appointment or employment by a majority of the board, and the services be such as the company may legally contract for, he may recover compensation therefor. The more stringent rule is that to justify a recovery of compensation under such circumstances the employment must be by express contract as by a resolution of the board duly adopted and recorded before- the services are rendered, or, by other equally competent and definite evidence. Some modern decisions announce a more liberal rule, to the effect, that for services rendered by a director not embraced in his ordinary duties as such, his employment by the corporation and its promise to pay therefor, may be implied or inferred from the facts and circumstances of the case, thus allowing a recovery as upon a quantum meruit.

There are many reasons for adhering to the more stringent rule. Ordinarily, the directors of a corporation are entrust*425ed with extensive powers in the management of its affairs; they occupy positions of trust and confidence with reference to the corporate body and its stockholders; the relation is of a fiduciary character ; hence, in the performance of their duties as representatives of the corporation, especially in matters where their individual interests are also concerned, the law exacts of them the utmost good faith and fair dealing.

But even if the more liberal rule may be resorted to in some cases, it certainly should be held that a director cannot recover compensation for services rendered by himself to his corporation upon an implied contract unless it be established by a clear preponderance of the evidence, first, that the services were clearly outside his ordinary duties as a director, and, second, that they were performed under circumstances sufficient to show that it was well understood by the proper corporate officers as well as himself that the services were to be paid for by the corporation. 1 Morawetz on Corporations, secs. 508, 516; 2 Waterman on Corporations, sec. 265; Taylor on Corporations, secs. 612, 646, 647; Loan Ass’n v. Stonemetz, 29 Pa. 535; Kilpatrick v. Penrose Ferry Bridge Co., 49 Pa. St. 118 ; Martaindale v. Wilson-Cass Co., 134 Pa. St. 348; Cheeney v. L. B. & M. Ry. Co., 68 Ills. 570; Utica Ins. Co. v. Bloodgood, 4 Wend. 652; Mather v. E. & M. Co., 118 N. Y. 629 ; McAvity v. Lincoln P. & P. Co., 82 Me. 504; Eakins v. White Bronze Co., 75 Mich. 568; Citizens Nat. Bank v. Elliott, 55 Ia. 104; Pew v. Gloucester Nat. Bank, 130 Mass. 395; Fitzgerald Cons. Co. v. Fitzgerald, 137 U. S. 98; Ten Eyck v. Railroad Co., 74 Mich. 226.

It is unnecessary in this case to decide which of the rules above stated is to be preferred. The ruling of the trial court to the effect that the plaintiff’s evidence did not prove a sufficient case for the jury was, in our opinion, correct according to either rule.

The charter as offered in evidence does not provide in terms that the services of a managing director shall be remunerated. The plaintiff does not base his claim upon the contingencies specified in section 90 of the charter; and there *426is no evidence that the board made any arrangement with plaintiff for his special remuneration as indicated by section 91. It is not contended that the evidence shows an express contract by the defendant company to pay plaintiff for his services as director or as managing director. It is conceded that plaintiff was not entitled to compensation as managing director prior to May, 1884, though he held that position during 1882 and continuously thereafter until the bringing of this action.

It is admitted that plaintiff was reimbursed for his traveling expenses and for all expenditures of money out of pocket made in the service of the company. He was a member of the board of directors and attended their meetings during the five years for which he now claims compensation, and yet no agreement or arrangement was entered into in respect to such compensation. The evidence may, perhaps, show that he gave more attention to the business of the corporation after May, 1884, than before that time; but it does not show that the character of his duties as managing director were essentially different from and after that date, nor that he at any time rendered services for the defendant company clearly outside of the proper duties of a director or of the board of directors.

From all the facts and circumstances shown in evidence it is clear that the jury would not have been justified in sustaining his claim to recover in the action upon the basis of an implied contract, even if such basis were to be held sufficient in law. The judgment of nonsuit was, therefore, proper, and must be affirmed.

Affirmed.