55 W. Va. 604 | W. Va. | 1904
Lead Opinion
This is a somewhat complicated and a hotly contested case -which has been in this Conrt on a former appeal. As then -passed upon it is reported in 46 W. Ya. 56, where the nature of the controversy and the history of the transactions out of which ■it arose are substantially set forth. It was impossible there, as ■it is here, to give in detail, or even‘enumerate, all that is con■tained in the old record of more than seven hundred pages, to •which nearly three hundred pages have since been added.
After the case was remanded to the circuit court for further ■■proceedings according to the principles announced by this Court upon the former appeal, it was referred to a commissioner with ■ directions to report, first, what would be a just and reasonable compensation to Albert Thompson for labor and money neces- • sarily expended in part performance of his contract; second, upon the request of any interested party, to make a statement -of such expenditures under the contract until the entry of the decree of August 4, 1893, showing allowances to him for his time, labor and all sums paid by him for the time and labor ■ of others, and expended by him in equipment and material necessary to carry out such contracts, all sums paid for cutting, 'hauling, skidding and driving logs, timber and tan bark, all reasonable sums paid sub-eontractorp by reason of the obligation of their contract and all other items reasonably and necessarily paid by him in part performance of the contract, allowing him interest upon the suma so expended, and crediting ■ said account with all sums paid to him by said company or its receiver or realized from the sale of any materials or equip-.ments; and, third, the amount due Thompson for work and
The commissioner reported that there was due Thompson as of the 12th day of June, 1901, $85,642.02, returning with liis report a full statement of all sums paid out and expended by Thompson in the prosecution of said work and all sums paid to him oh account thereof as well as the proceeds of the sales •of property used by him in the performance of said work as •equipments, such as horses, wagons, locomotives, cars, steel rails, etc. Upon exceptions sustained by the court the amount so found was reduced to $84,794.91 and a decree entered therefor. Cf this amount, about $480,000.00 is principal and the balance interest. Numerous exceptions to the report, urged in the court below and overruled, are insisted upon here, and there is much difference of opinion as to the true interpretation of the former decision of this Court. For the appellants, it is insisted that, under the principles so announced, the item of $14,749.34, mentioned in the opinion at page 65 of 46 W. Va., which, without interest, was originally $12,399.63, for work done on logs cut by Thompson, but not delivered so as to entitle him to demand payment therefor at the time the decree of sale was entered, is the only sum that can now be allowed him.
Counsel for the- appellee say this Court regarded and treated the contract as having been rescinded and declared it to be so and ordered that Thompson be put in statu quo, — reimbursed for all his outlay and made whole. The Court say, in the opinion, “A partly executed executory contract could be avoided before its final execution, but the executing party thereto should be placed in statu quo, in absence of fraud, by compensation in the nature of a quantum meruit for money and labor expended under such contract.” In conclusion the Court said: “Having partly executed his contracts, Albert Thompson is entitled to recover a just and reasonable compensation for the necessary expenditure of labor and money under his stocking contract, less the sums paid him; but he is not entitled to recover the large profits claimed by him. As the sum of fourteen thousand seven
The termination of Thompson’s contract, as decided on the-former appeal, rests upon two grounds. The first is that the corporation was unable, because of financial embarrassment, to further proceed with its business, and the other that, as Thompson was a director of the company, at the time the contract was-entered into, it was voidable at the election of the stockholders. It is not therefore the ordinary case of a wrongful prevention' of the performance of a contract, nor is it a case of settlement of the equities or legal rights of the parties, upon the 'rescission of a contract.
The principle of law underlying the first ground upon which the contract was declared to have terminated, is announced in People v. Globe Mutual Life Ins. Co., 91 N. Y. 174. 1 Am. & Eng. Cor. Cas. 586. This doctrine is that where performance of a contract by a corporation is prevented by its dissolution at the1 instance of the State or power creating it, it may annul its contracts, and, in doing so, does not commit any breach of the corn-tract. The act of annulment is deemed to be that of the State and not of the corporation, and gives the contractor no right to claim damages as for a breach of his contract. Whether, in such case, the contractor is entitled to be reimbursed for his outlay and expenses is not determined in that ease for the reason that no such question was involved. The demand set up and denied was .founded upon a contract of employment as agent
Other cases more analogous to the one now under consideration, hold that the effect of the dissolution of a corporation upon unexpired or executory contracts is to excuse further performance and render them nugatory as to so much as remains unperformed, but to entitle the obligee to damages for the breach of the contract to be paid out of the assets of the dissolved corporation. 10 Cyc. 1312. Thus, in Schleider v. Deilman, 44 La. Ann. 463, the court held the dissolution of the corporation to be a breach of the contract, giving the other party the right to recover what he has already expended toward the performance of it and the profits which he would have realized by performance. In re Willshire Iron Co., L. R. 3 Ch. 443, holds that where a sale of personal property has been made by a corporation which is dissolved before delivery of the property, the purchaser
In treating of this subject, Cook on Corporations, sec. 641, says: “It was formerly believed to be the common law that upon the dissolution of a corporation all its assets belonged to the state, and all its debts were canceled, and that the creditors were not entitled to anything from the assets. This remarkable theory has been stated and restated in text-books and decisions of the courts for over one hundred years. It is found in Blackstone’s Commentaries and in the old jrorks of ICyd on Corporations and Grant on Corporations. The courts, however, while' upholding the rule theoretically, have quite uniformly refused to apply such a doctrine, and have invented various theories, fictions, and arguments for avoiding this supposed doctrine of the common law. Finally, in 1899, an English court denied that the common law ever countenanced such confiscation, and showed that in the seventeenth and eighteenth centuries many corporations were dissolved, and that not in a single case was any such doctrine applied. It again may be said that, although the common law has its reproaches, this is not one of them. The American courts have always refused to follow the supposed common-law rule on this subject.” The same work says, at sec. 643; “As already seen, the old rule that upon dissolution all debts by or to the corporation are rendered unenforceable is no longer the law. It has been held that the liability of a corporation to deliver goods, according to an executory contract, ceases upon such corporation passing into the hands of a receiver, where the receivership was accompanied by the usual injunction against the further transaction of business by the insolvent corporation. This conclusion is arrived at on the theory that the failure to perform was due to the operation of law, and hence that no damages could be recovered for breach of the contract. The better rule, however, is that even at common law the obligations of a corporation do not cease by reason of its dissolution. The
TJpon this question the language of section 59 of chapter 53 of the Code has important bearing. It says the property and assets of a dissolved corporation, whatever the cause or manner of its dissolution may be, shall be subject to the payment of the liabilities of the corporation. This language is much broader than that of the New Jersey statute which only directs the payment of the debts of the corporation out of its assets, and under which the courts of that state give damages on executory contracts rendered impossible of performance by reason of dissolution. As has been stated, the contract is not invalid, everything done under it is in part performance thereof, and the .dissolution of the corporation cannot have the effect of rescission or rendering it void ab initio and undoing any tiling that has been performed under it. Dissolution, even upon the theory adopted by those courts which adhere to the doctrine of People v. Globe Mutual Life Ins. Co., is simply a contingency in view of which the contract was made, and which it was understood should, upon its happening, end the contract on a date earlier
Nor do the principles of law, constituting the other ground for discontinuing the performance of the contract, preclude recovery for outlay and expenses in part performance thereof. ■In its opinion the Court exonerates Thompson from any actual fraud in the procurement of his contract, although holding that his being a director of the corporation gave the stockholders the right to avoid it, and held that he is entitled to be compensated for labor and money necessarily expended by him in part performance thereof. The rule on this subject is stated in 10 Cyc. 794, 795, as follows: “Directors arc not disabled from entering into contracts with the corporation, provided there bo enough directors on the other side of the. contract to make á quorum, vand provided the contract is open, fair, and honest. The rule
Mr. Justice Miller, speaking for tbe court in Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, said: “So, when the lender is a di- i rector, charged, with others, with the control and management ■' of the affairs of the corporation, representing in this regard the ¡ aggregated interest of all the stockholders, his obligation, if ho: becomes a party to a contract with the company, to candor and; fair dealing, is increased in the precise degree that his repre-j sentatire character has given him power and control derived] from the confidence reposed in him by the stockholders who' appointed him their agent. If he should be a sole director,' or one of a smaller number vested with certain powers, this obligation would be still stronger, and his acts subject to more, severe scrutiny, and their validity determined by more rigid,' principles of morality, and freedom from motives of selfishness.; All this falls far short, however, of holding that no such con-, tract can be made which will be valid; and we entertain no doubt that the defendant in this case could make a loan of money to the company; and as we have already said that the evidence shows it to have been an honest transaction for the benefit of the corporation and its shareholders, both in the rate of interest and in the security taken, we think it was valid originally, whether liable to be avoided afterwards by the company or not.”
In Leavenworth County v. Railway Co., 134 U. S. 688, the court refused to set aside the. foreclosure of a mortgage on a railroad and the sale of the road made under a decree, on the ground of its having been procured by parties sustaining a trust relation to the property,-where there was no proof of collusion or fraud in fact. In Ft. Wayne Rolling Mill v. Hill, 174 Mass. 224, the court said of a contract made between a corporation and one of its directors: “It was not illegal or void because made with a director, the only person likely to be willing 'to make it. In this country it very generally has been deemed impracticable to adopt a rule which absolutely prohibits such contracts.” The same doctrine is announced in the case of Gay v. Fair, 175 Mass. 521. In the late case of Hodge v. United States Steel Corporation, 54 Atl. R. I., the law on this subject is stated by the court .of last resort in N.eY Jprsey as follows: “The general doctrine
As the contract was voidable and not void per se, the principle of estoppel, according to the great weight of authority, is applicable to cases of this kind and must be given effect if the facts of this case warrant its application. The principal contract under which Thompson operated bears date June 18, 1890. Under it, he began operations in the same month and continued them until August, 1893, during which time he built a railroad, equipped it with locomotives and cars, built tram-roads, rebuilt and repaired dams in the Blackwater River and carried on the business of stocking the mill with timber under the com tract upon an immense scale, using the railroad, cars, locomotives, tram-roads, tools, appliances and the booms and dams in the river for that purpose, and, as indicated by the record, practically supplied the mill with timber. In these operations, he expended nearly three hundred thousand dollars, according to the report of the commissioner. He resigned liis position as director in 1891. Can it be possible that the directors and the stockholders who appear to have been few in number, (only six as indicated by the record), had no knowledge of the immense expenditure Thompson was making on the faith of this contract? Whether the making of the contract was in all respects duly formal or not, the books of the company were open to them, and upon them the terms of the contract were indicated by the entries. For a long time after Thompson ceased to be a. director and to have any share or part in the management of the «company, they allowed him to go on without objection or notice of the disapproval of the contract. If, having such knowledge, they had the right to avoid the contract because he was a director at the time it was made, can they do it in such manner as to inflict upon him” the loss of so much of this large expenditure as compliance with his contract, so far as he was
“The rule under consideration does not extend so far as to work an entire confiscation of the property of the unfaithful director, which he may have attempted to sell to his corporation at an advance over its cost to him, so .as to .derive a secret profit therefrom; but in the accounting which takes place under the principle the director will be compelled to yield to the corporation the secret profit, but will be allowed a credit for the property sold to the corporation at its real value.” 10 Cyc. 795.
“In most jurisdictions, as we have seen, a contract or other transaction ■ between a corporation and its directors or other officers, the corporation being represented by others, or a contract or other transaction between a corporation and a third party, from which a director or other officer derives a profit, or in which he is otherwise personally interested, is merely voidable at he option of the corporation, and not absolutely void. It follows that the transaction, if within the powers of the corporation, may be consented to, ratified, or acquiesced in by the stockholders, or by the board of directors, if it could be authorized by them. If it is consented to or ratified, with full knowledge of the facts, it is finally and absolutely binding, and neither the corporation nor the individual stockholders can afterwards sue to set it akide, or otherwise attack its validity. And since the corporation may thus consent to the transaction
This text is supported by authorities too numerous to mention or examine, one of which is the leading case of Foss v. Harbottle, 2 Hare 461, in which the Vice-Chancellor, after laying down the rigid rules of law, requiring the exercise of the utmost good faith on the part of promotors of corporations, treating them as acting in a fiduciary capacity, proceeds as Mows: “If persons, on the other hand, intending to form a company, should purchase land with a view to the formation of it, and state at once that they were the owners of such land, and propose to sell it at a price fixed, for the purposes of the company to be formed, the tranaction, so far as the public are concerned, commencing with that statement, might not fall within the principle of Hichens v. Congreve. A party may have a clear right to say — T begin the transaction at this time; I have purchased land, no matter how or from whom, or at what price; I am willing to sell it-at a certain price for a given purpose/ ” Another is Twin-Lock Oil Co. v. Marbury, 91 U. S. 587, heretofore quoted from. It holds: “The right of a corporation to avoid the sale of its property by reason of the fiduciary relations of the purchaser must be exercised within a reasonable time after the facts connected therewith are made known, or can by diligence be ascertained. As the courts have never prescribed any specific period as applicable to every case
On this question, it is useless to multiply authorities, for the principle is in perfect accord with both justice and common sense and underlies the whole doctrine of compensation. It is the principle of estoppel that gives the right to recovery for outlay and expenses where performance of a contract has been wrongfully prevented. United States v. Behan, 110 U. S. 338. It is on the basis of compensation, not punishment. Equity does not' permit parties to play fast and loose with a contract, when they know money is being expended, labor performed and obligations contracted on the faith of it. They canont take an equivocal position, waiting for time to reveal whether it will prove to be a good contract or a bad contract and' then accept it or reject it as may best subserve their own interest. Neither law nor equity permits any person intentionally to mislead another to his injury. Having, by their silence, led Thompson to believe that they would not disavow his contract, their ob
Having thus seen that no principle of law, nor any decided case, withholds from the appellee compensation for his outlay, as the legal consequence of the'termination of his contract before completion thereof on either of the two grounds on which it was terminated, there is nothing in the former decision to deprive him of it. The language of both the opinion and syllabus is broad enough to carry it, and the principles declared do not inhibit it. So, according to both the letter and the spirit of the decision, he is entitled to it, unless precluded on some other ground.
Another objection urged against the allowance of Thompson’s claim is the alleged purchase by him of the property of the Blaekwator Boom and Lumber Company at the sale under the decree of June 23, 1893, and confirmed by the decree of August 4, 1893, as to which sale and the terms and conditions thereof see the opinion filed on the former appeal. 46 W. Va 56, 59. The ostensible purchaser at this sale was W. H. Osterhout, but the Thompsons, the appellee and his son, F. E. Thompson, furnished him, on some sort of terms, part, if not all, of the money for the cash payment, and became his sureties on the notes for the deferred payments. After the sale a new mill was purchased and erected in the place of the one which had been burned down under the receivership, a new company was organized, the Blackwater Lumber Company, and the stocking, cutting and marketing of the timber was resumed under the management of Frank E. Thompson, and so continued until the time of his death, by which event the appellee became the owner, by the statutes of descents and distribution, of all the estate of F. E. Thompson, including a large amount of timber to be cut at the mill under contract. The appellee then resumed the management of the mill and property, paid part of the money due on the notes, and, in 1898, purchased the interest of Osterhout and is now substantially the owner of all the property. He claims to have sold to the new company his locomotives, cars, steel rails, splices, teams, camp outfits, tools and appliances of all kinds. In addition to the circumstances indicating that the Thompsons were the real purchasers, a witness testifies that he had a conversation with them and Osterhout in which they as
Having erected its mill and obtained- contracts of purchase of the timber standing on Jarge tracts of land in the vicinity thereof, and commenced its operations, the Blackwater Boom and Lumber Company, on the 18th day of June, 1890, entered into a contract with S. W. Thompson and the appellee, Albert Thompson, for cutting and delivering said timber at the mill at certain specified prices per thousand feet. The lands mentioned in the contract from which the timber was to be so taken are those of the Marshall Coal and Lumber Company, containing twelve thousand acres, lying on both sides of the Blackwater River, H, G. Davis & Bro., Wm. H. Harness, J. G. Harness, W. W. Harness, Tí. C. Harness, II. J. Cooper, J. W. Parsons, G-. S. Harness, G. II. Kuykendall, Jacob Van Meter and Ann Van Meter. In ail the contracts for the purchase of the timber on these lands by the Blackwater Boom and Lumber Company, there were certain covenants, and among others, time limits for the removal of the timber, and the contract made with the Thompsons contained this clause: “All of said contracts are to be kept and observed as to detail by said Thompsons as binding upon them.” Part of these lands lay along and near enough to- the river to make it practicable to- put the logs into it and drive them to the mill, while from others the timber had to be hauled. So the contract required the Thompsons to put the logs into the “mill pond at Davis in summer and to bullchain in winter.” Owning the land on both sides of the Blackwater River, the Marshall Coal and Lumber Company, in its contract of sale of the timber to the Blackwater Boom and Lumber Company, granted to it the free and exclusive use of the river and its branches for floating, booming and manufacturing its timber, with the right to erect dams and mills for such purpose, and also the right to construct, on its lands, tram-roads for hauling the timber.
In the light of these facts, the following clauses of the Thompson stocking contract are to be read and kept in mind, together with what Thompson did under the contract, in order to clearly understand his situation when the property and rights of the
“9 th. Said Thompsons agree to make all river improvements and repairs to river piers, dams, booms, etc., while said river improvements are used by them, excepting always dams, piers, booms, etc., at the mill; but said Thompsons agree to renew the boom and renew the piers, down to the water even at the mill pond, once during this contract when said boom and piers need said repairs; and said Blackwater Boom and Lumber Co. agree to furnish the standing timber for said repairs to Davis boom and piers at mill.”
“10th. The Blackwater Boom and Lumber Company agree to sell and S. W. and A. Thompson agree to purchase all effects used by said Co. in stocking and driving as follows, to-wit, horses, harness, wagons, tools, supplies, and camp outfits also co/s blacksmith shop at Davis, with its tools and supplies in shop and ordered; all effects at a fair valuation, but if parties cannot agree at a fair valuation then the valuation of above property shall be decided by a board of arbitration, to be' composed of parties agreeable to both parties hereto. It is mutually agreed that ‘one have’ the purchase price of above property be paid on 20th Aug. and. one-half be paid on 20th Sept., 1890.”
“11th. It is mutually agreed by the parties hereto that in ease any improvements not sold as above provided for be used by said Thompsons, such as camps, slides, &c, said Thompsons agree to pay for use of same, excepting camps along the river, for which no charge is to be made, for a consideration to be agreed upon.”
“12th. The Blackwater Boom and Lumber Co., agree to . grant to said S. W. and A. Thompson all the rights and privileges held by them under the Marshall C. & S. Co. contract and under other contracts to erect dams, booms, piers and erect and build bridges and tramroads, but only for the purpose of carrying out this contract; and the said Blackwater Boom and Lumber Co. agree to proceed under their contract for the purpose of condemning rights of way, etc., provided said Thompsons pay all costs, judgments and damages under said condemnation proceedings, always provided said Thompsons require said proceedings to carry out this contract.”
In cases of breach of contract, money paid out and expended by the plaintiff to prevent or lessen the resulting damages is recoverable. A man is not precluded from recovering because it is in his power, by the expenditure of his own money, to save himself from the injury inflicted by the other party. Sutherland on Damages, in treating of the elements_of damages, says at section 88, (3rd ed.): “Fifth, such losses may consist of labor done and expenses incurred to prevent or lessen damages which would otherwise result from the defendant’s default or mis-condhet.' The law imposes upon a party injured by another’s breach of contract or tort the active duty of using all ordinary care and making all. reasonable exertions to render the injury as light as possible. If by his negligence or wilfulness he al
In support of the view here taken, the following is quoted from the decree of confirmation of the sale: “The said special receiver is directed to execute and deliver to the said William H. Osterhout, the purchaser, a deed conveying to him all the property, real and personal, and also all the corporate rights, powers, privileges and franchises of the said Blackwater Boom & Lumber Company, together with all the improvements made in said Blackwater river and its tributaries, including dams, piers and booms and all standing timber belonging to said company, and all the rights, powers and privileges conferred ■ upon said company under and by virtue of the contracts set forth in the decree of sale, other than the logging contracts with S. W. and A. Thompson; and in said deed said receiver shall reserve a lien for unpaid purchase money upon the real estate conveyed and upon the leashold property held under leases from H. G. Davis and others and upon all improvements - thereon; and the said receiver, Fairfax S. Landstreet, is directed forthwith to turn over and deliver to the said purchaser, William H. Osterhout, the possession of all said property, real
If the price paid was inadequate, it is too late to suggest that the inadequacy is the result of manipulation on the part of Thompson or of collusion between him and Osterhout. That would have been ground for resisting confirmation of the sale, but it can have no bearing on the question of Thompson’s right to compensation or the amount thereof. The sale was widely advertised and was public and open to the world and the confirmation without objection on the part of creditors or stockholders estops them from denying the fairness of the sale or adequacy of the price. At any rate, it has no connection whatever with the matter now under consideration.
The foregoing principles and conclusions settle the most important question in the case, but do not cover the. exceptions touching specific items entering into the account, the mode of statement and the evidence upon which the balance struck depends. Under exceptions 1, 2, 3, 6, 12 and 13, it is insisted that Thompson’s contract was divisible, that the executed part of it could not be considered in ascertaining his compensation, and that the sums expended in getting out the timber which had been paid for and the amounts received on account of it, should not have been charged and credited in the statement, for the reason that if, in any instance, Thompson, had lost money on any particular lot of timber, the loss was, by such method of statement, wrongfully charged to the company since it ought to be borne by Thompson, and if, in any instance, a profit had resulted, it was wrongfully given to the company, as it belonged to Thompson. If, on the last stated hypothesis, any error has been committed, it is not prejudicial, but beneficial, to the appellants and they cannot complain of it.- If, on the former, any error was committed, it is prejudicial, but the burden is upon the appellants to show that such losses sus^ tamed were carried into the general balance against the company. This they have failed to do. They point out no instance of such charge, and have introduced no evidence showing it. Moreover, it is a question of fact on which the commissioner and the court below have passed, and their finding cannot be disturbed by this Court unless plainly wrong. How is it possible to determine the amount of compensation on the basis of charging all expenditures and the value of work and labor, and cred
Exceptions 9, 10, 11, 14, 15 and Yi present the contention that the expenditures for permanent improvements and preparations for the execution of the contract should be apportioned between the executed and unexecuted parts of the contract, on the theory that if,'when interrupted, his contract was three-fifths performed, he- should be allowed only two-fifths of such expenditures. The authorities cited for this do not support it. The first is Watts v. Camors, 115 U. S. 353, holding that a clause in a charter — party whereby the parties bind themeselves, etc., “in the penal sum of estimated amount of freight,” to the performance of the agreements contained in the contract, is not a stipulation for liquidated damages and is discharged' by payment of the actual damages sustained by breach of the agreement. Another is Steamship Co. v. Card, 59 Fed. Rep. 159, holding as follows: “In awarding damages against a charterer for refusing a vessel, the net freight earned by obtaining another — less valuable — cargo is to be deducted from the sum which would have been earned under the charter.” Another is Transfer Co. v. Merchants & Co., 12 App. Div. N. Y. 260, applying the principle of the last named case in determining the measure of damages for breach of an agreement to take and deliver the output of an ice manufacturing plant. Another is Ewing v. Codding, 5 Blackf. Ind. 433, an action by a landlord against the tenant for breach of an agreement to deliver one-third of the crops as rent, in which it was held that, in assessing the damages, the defendant might prove, in mitigation thereof, that, after the making of the lease, the plaintiff, with defendant’s consent, had leased a part of the premises to a third person, from whom he had received rent for that part. The last one is Jehsen v. Dock Co., L. R. 10 C. P. 300, relating to reduction of damages resulting from a breach of a contract concerning one ship by applying profits earned with another ship. These authorities, except the Indiana case, all relate to damages by prevention of anticipated profits, and not to com
To apportion the expense for permanent improvements between the executed and unexecuted portions of the contract, on the theory that Thompson has had three-fifths of the benefit of them would be inconsistent with the rule of compensation adopted and contrary to the facts as regards the alleged reception of the three-fifths of the benefit of them. Everything received by him goes in reduction of his bill for services and outlay. Every dollar paid by him, profits on the executed work included, is charged against his bill. How can it be said, then, that he has had the benefit of these improvements so far as the contract has been executed? The rule of compensation as laid down by the court deprives Thompson of all his profits, past and future, directs that he be made whole, nothing more, nothing less, and excludes any inquiry as to allowances of, or deductions for, profits benefits and losses.
In this connection, it is contended that Thompson should not be allowed the money expended in the construction of the railroad because he hauled over it more of F. E. Thompson’s timber than of the company’s timber. In order to reach the Yan Meter tract of timber owned by the company, and which Thompson was bound to log under a short time limit, it was necessary to build the road through the C. E. Harness tract, the timber on which belonged to E. E. Thompson, or to the company and was to be logged by said E. E. Thompson. Albert Thompson having built his road through said tract, hauled timber from it for F. E. Thompson and has credited in his statement against his expenditures, the hauling of said timber at fifty cents per thousand and testifies that there was a profit in it to him and therefore to the company. But it is said he hauled more timber on this road for his son than he hauled for the company, and, that, therefore, he did not build it for use under his contract with the company. This position is untenable. He was bound to take the timber from the Yan Meter tract, No. 8, the "W. Ii. Harness tract No. 11, and the J. W. Parsons tract No. 12, under time limits, all lying beyond the C. E. Harness tract, from which he incidentally hauled timber for E. E. Thompson. The situation of these lands necessitated the hauling of the timber by a rail
Again it is urged that compensation cannot be had because the work under the contract was prosecuted in the name of a corporation organized- by Thompson called the Forest City .Lumber and Improvement Co. No authority is cited in support of the contention and the argument in its favor is far from convincing. If a contractor can employ individuals to aid in carrying on his contract why can he not, on the same principle, procure the work to be done by a corporation ? Must he do all the ■ work with his own hands or keep the business all in his own name? If he chooses to operate through a corporation so as to limit his liability on claims for damages as to third persons, or to keep one branch of his business separate from others, is that a matter which in any way prejudices or concerns the other party to the contract, even if it be in some sense immoral or even contrary to public policy, as charged in the argument ? Whether it is immoral or otherwise wrong, we have no occasion to say.
Exception No. 22 comprises six different items. The first is $4,750.00 charged by Thompson for his personal services. The objection seems to be that he charged this as a salary at $1,500.00 per year as president of the Forest City Lumber and Improvement Co., a mere instrumentality in his hands for the execution of the work under his contract. As already indicated, there is nothing in this objection. The second is to the al
Exceptions Nos. 5, 1G, 18 and 19 relate to questions of competency, relevancy and sufficiency of the evidence upon which the report is based. It is shown that many of the items charged were not found on the bool^s of the Forest City Lumber and Improvement Co., or the Blackwater Boom and Lumber Co., but were taken from Thompson’s private memoranda, or inserted upon his verbal representations. The commissioner has made a complete list of all the items not taken from the books. Those in Thompson’s favor are principally items of rent, wages of S. W. Thompson, superintendent, services of Albert Thompson, amounts paid Tolbard, Bartlett and Whitcomb, an item of $230.00 paid the Blackwater Boom and Lumber Co. for loss of timber on the Yan Meter land not removed within the limit of time specified in the contract, and an item of $4-50.00 .paid for a team of horses and harness. These charges amount to $14,271.94-, and, with the exception of three or four small items, were all fully explained by Thompson in his testimony and shown by him to be proper charges, under the principles of law hereinbefore announced. The items on the other side of the ac
This disposes of all important exceptions and assignments of error respecting the principles on which the account is stated and the items thereof. Bnt two errors, not made the subjects of exceptions nor mentioned in the assignments of error, have been discovered. The receiver paid Thompson in August, 1893, interest amounting to $330.68, which has not been credited in the account against him, though charged in his favor. He is credited as of October, 1894, with $15,955.00, proceeds -of property sold, and, as of December, 1895, with $2,000.00 on account of property sold. These sums should have been credited as of August, 1893, for Thompson used them from that date until they were sold, and he ought, therefore, to pay, as compensation for their use, at least the interest on the sums for which he sold them. Making these corrections, and deducting $34.50 interest on small items disallowed by the circuit court, the sum found to be due him as of the 12th day of June, 1901, is $80,288.96 of which $47,873.62 is principal and $32,415.34 is interest.
The last contention is that the court erred in decreeing the amount due the appellee to be a lien upon the assets of the company. As this question was adjudicated on the former appeal, the court below could not, ncir can this Court now, disturb that conclusion and determination. Point 4 of the -syllabus declares that Thompson’s "compensation is entitled to a preference of payment out of the corporate assets in the hands of the receiver in equal priority with the other obligations of the receivership.” That decision may be wrong, though we do not say it is, but it is, and must remain, the law of this ease, however erroneous it may be. Camden v. Werninger, 7 W. Va. 528; Horn v. Perry 11 W. Va. 694; Henry v. Davis, 13 W. Va. 230; Northwestern Bank v. Hoges, 37 W. Va. 475.
As there is no error in the decree except in respect to the omission of said sum of $330.68 from the credit side of the account and the failure to charge Thompson with the use of the property from the date of the decree of confirmation until disposed of, as hereinbefore stated, it will be corrected and modified in these respects and, as so modified, affirmed, and the cause remanded for further proceedings, but, as this reduces the amount
Rehearing
ON PETITION POR RE-HEARING.
Additional opinion by
A petition for re-hearing sets up one new contention, namely, that, while the statement of the commissioner shows over 13,-000,000 feet of timber was hauled for F. E. Thompson, for which credit is given, only 6,205,000 feet less than half as much, is credited as having been stocked for F. E. Thompson. This discrepancy, if credited, at $4.50 per thousand feet would amount to over $30,000.00, and it is urged that the allowance to Thompson should be cut down by about that much. It is rather strange that such an amount should have been overlooked until this late hour, especially so in view of the strenousness with which this contest has been waged on both sides, but if the claim has any foundation in the record it is made in time. Only the amounts paid by F. E. Thompson for stocking his timber are proper credits. If the 7,000,000 feet and over, stocked for him and not so credited, was paid for by the Blackwater Boom -and Lumber Co., upon the order of F. E. Thompson, and is, therefore, included in the cash credited in the statement, it is not only accounted for, but to credit it up as timber stocked for F. E. Thompson would give a double credit. Credit for $170,000.00 as cash, notes and drafts, exclusive of commissions paid Thompson on sales of lumber, is given in the statement.. At an average price of $4.00 per thousand, this represents 42,374,000 feet; at $4.50 per thousand, it represents 37,777,000 feet; and at $5.00, covering- both stocking and hauling, it represents 33,901,000 feet. Thompson gives the total amount of spruce timber scaled under his own contract as having been 25,643,710 feet. Add to this 13,000,000 feet as having been stocked for F. E. Thompson and the result is 38,643,710 feet. Add to 33,901,000 feet, represented by the cash credited by-Thompson, the 6,200,000 credited as having been stocked for F. E. Thompson, and the result is 40,101,000, but little more than the total found by the other method. But there was some hemlock timber put in by Thompson under his own contract, not included in the 25,643,710 feet. The amount, however, is
This petition renews, in slightly different form, the contention that Thompson is precluded from claiming the money expended by him because the expenditures were made in the name of the Forest City Lumber Company. It says he paid $25,000.00 for the stock of that Company which he still holds, wherefore said sum should be deducted from the amount allowed him. That corporation was organized for the sole purpose of carrying out Thompson’s contract, and all the money paid into its treasury as capital stock or otherwise was Thompson’s money. It never had any assets except the money expended through it by Thompson in the execution of his contract and the money derived by Thompson from his contract through it as an agency used in the execution thereof. All these sums are carried into this account as charges and credits, the Forest City Company is defunct, and its stock is but waste paper in Thompson’s hands. The corporation had no substantial existence, nor its stock any value, save as an instrumentality in the execution of the contract. To make such deduction, therefore, would be to substitute a mere shadow for substance, and subordinate equity and justice to a barren technicality.
It is further insisted in the petition that the former adjudication by this Court gave no lien for the amount now found to be due to Thompson, because the present claim was not then before the Court. All the items in the account as now stated were not then in the record. Some of them were, but not stated in the present form. The claim that formed the basis of the former decree was for damages for breach of contract, composed of two items, outlay and gains prevented, as formerly explained. This Court said the latter could not be allowed, but that, upon the ascertainment of the former, a decree therefor should be entered, giving a lien for it upon the assets of the company, and, for that purpose, the cause was remanded to the circuit
Modified.
Dissenting Opinion
(dissenting) :
I cannot concur in the oppinioin in this case for the reason that it is a misconstruction of and in violation to some extent oí the former opinion herein. The facts and circumstances clearly show that Albert Thompson was the real purchaser of the property of the defendant company in the name of Osterhout, who was only nominally used to cover the transaction; that Thompson suffered no loss so far as his outlay and expenses were concerned but had really made a profit according to his own testimony at the time the sale of the property was decreed and that the larger bid was made by him on the theory that he would be able to cover the difference between the two bids by his account for profits not earned; and that having failed in this, his present account as to damages for outlay and expenses is an unconscionable demand to cover the difference between the two bids incurred by him under a misapprehension of the law as to his right to recover such unearned profits.
In becoming a purchaser of the property, it was Thompson’s duty to take into consideration that the law imposed upon him, as the company’s contractor, the obligation to use all ordinary means to save the company harmless from the expenditures incurred by him in carrying out his contract. 1 Sunderland on Damages, sec. 88, p. 184, and sec. 90 p. 188. This is a condition the law imposed upon him as a purchaser and which it must be assumed he fully understood at the time of his purchase and that he made the same with this understanding. Hence he could not have made the purchase with any legal expectancy of a recovery of his outlay and expenses from the company, owing to his knowledge that it was his legal duty to save the company harmless. Nor, did he, in making his bid, take into consideration his outlay and .expenses, for the sale was made entirely free from his stocking contract which necessarily excluded all improvements made by him for the purpose of carrying them out, and gave the purchaser no right to such improvements without the consent of Thompson. This gave him such control over the property that no one else dare bid against him. For a purchaser, subject to the stocking contracts, would be entirely in his power, and a purchaser, free from the contracts, would be none the less so, the improvements made by him were essential to the enjoy
This is such a mistake that equity has no power to relieve' against, it being in no sense mutual or occasioned by the act or conduct of the opposite party. Yet the Court relieves him therefrom by allowing his unconscientous demand for improvements and expenditures concerning which he suffered no loss but enjoyed the full benefit thereof to the great enhancement of his property. In doing so, the Court in effect overrules its former opinion and allows Thompson the greater portion of the profits' then denied him. For this there can be no other justification or excuse than the legal mistake made by Thompson in making his higher bid. While this may appear equitable, yet it is in violation of the established rules and principles of courts of equity. Hence my dissent.
