Lydia E. Pinkham Medicine Co. v. Gove
25 N.E.2d 332
Mass.
1940
Check Treatment
Ltjmmus, J.

This petition for a writ of mandamus follows a suit in equity between the same parties, recently ended by the entry of final decree in favor of the petitioner. Lydia E. Pinkham Medicine Co. v. Gove, 298 Mass. 53; 303 Mass. 1. The stock of the petitioner, a Maine corporation, is held equally by the Pinkham interests and the Gove interests, and the directors are equally divided between them in such a way that the death of a director will not affect the equality. Arthur W. Pinkham, chosen by the Pinkhams, is president, and Lydia P. Gove, chosen by the Goves, who was assistant treasurer when the petition was filed, has become treasurer since the death of her mother on May 21, 1939.

The Pinkhams and the Goves have long been unable to agree upon the policy of the corporation in important particulars. The deadlock Was broken only by the fact that the' president, Arthur W. Pinkham, was authorized by vote of the directors, on June 7, 1927, "to exercise general supervision and control over the various departments of the Company’s businеss, to hire and discharge all employees therein and to issue such directions as in his judgment are proper from time to time to carry out the votes of the Board of Directors.”

We held (298 Mass. 53, 64) that the circumstances required a "liberal construction” of that vote, and that "the intent of the vote was to give the president general charge of the business as a whole, subject of course to the power of the directors to give specific directions from time to time or to mоdify or recall the grant.” It was further held, ibid,., 65, that under that vote the president had authority to bring suit in the name of the corporation to *215redress wrongs done by the Goves to the corporation. The form ‍​​​​‌​‌‌​‌‌‌​‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌‌​​​‌‌‌‌‌‌‌​‌​‌‍of the final decree ordered in the suit in еquity appears in 303 Mass. 1, 15-16. Provisions of the final decree restrain the present respondent from attempting to interfere with the general supervision and control of the corporate business by the president under the vote of June 7, 1927, and from refusing, neglecting or delaying disbursements directed by the president under that vote.

We see no reason for holding, though it is contended by the respondent, that the vote of June 7,1927, is no longer in effect. No substantial change in the situation has taken рlace since we gave that vote decisive force in the suit in equity.

The present petition is brought in part to require the respondent by mandamus to pay certain employees at an increased rate of compensаtion established by the president, in most instances on October 19, 1936. These increases were made without the consent of the Goves, and in the belief that the Goves would not approve them. When the increases were presented tо the directors for ratification on March 20, 1939, ratification failed upon a tie vote. But we think that that failure did not affect the validity of the act of the president in making the increases. The Pinkhams and the Goves differ honestly and in good faith as to the propriety and wisdom of these increases in pay.

A corporation may obtain a writ of mandamus to require a corporate officer to perform a ministerial duty owed to the corporation. St. Luke’s Church v. Slack, 7 Cush. 226, 238, 239. American Railway-Frog Co. v. Haven, 101 Mass. 398, 403-408. J. H. Wentworth Co. v. French, 176 Mass. 442. Longyear v. Hardman, 219 Mass. 405. Rayburn v. Guntersville Realty Co. 228 Ala. 662, 93 Am. L. R. 1055, and note. See also Granara v. Italian Catholic Cemetery Association, 218 Mass. 387.

The first defenсe is that the provision of the by-laws (Art. VII, Sec. 7) that “The compensation or salaries of all other officers and employees shall be fixed by the board ‍​​​​‌​‌‌​‌‌‌​‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌‌​​​‌‌‌‌‌‌‌​‌​‌‍of directors” precluded any increase of pay of employeеs by the president under the vote of June 7, 1927. That provision appears in a section which begins by providing for *216equality of compensation as officers and directors between the Pinkhams and the Go yes, and for the division among the members оf each group by vote of a majority of the group of the compensation awarded to the group. Then follows the sentence in question, and, following that, appears a provision that the aggregate salaries of the Pink-hams and the Goves shall not be less than $20,000 a year for each group.

We think that the provision relied on by the respondent, inserted in a section devoted to an unusual scheme for salaries to a group to be apportionеd among the group, was intended only as an assertion of the reserved power of the directors over salaries in general, and not as a prohibition against the delegation of that power. It was not intended, in our opinion, to require a meeting of the board of directors whenever an additional office boy should be employed, or a mailing clerk should be thought worthy of an increase of a dollar a week. The compensation of employees, subject to control by the board of directors, fell, in our opinion, within the matters lawfully entrusted to the president by the vote of June 7, 1927. The history of the provision in question, traced through amendments to the by-laws, does not, in our opinion, show the contrary. We think that the act of the president in making the increases in question was the act of the corporation as fully as though the increases had been made by vote of the directors.

We are not unmindful of the argument of the respоndent that the effect of the vote of June 7, 1927, upon the power of the president to increase salaries of employees was a question of the law of Maine, which in our courts has been said to be a question of fact; that the naked denial of that power contained in the answer was sufficient to raise an issue of fact as to the law of Maine (Richards v. Richards, 270 Mass. 113, 117, 118); and that failure to traverse the allegation of the answer, denying that power, made the answer conclusive in that respect. G. L. (Ter. Ed.) c. 249, § 5. Horan v. Boston Transit Commission, 227 Mass. 142, 145. Casey v. Justice of the Superior Court, 229 Mass. 200, 202. Hill v. Mayor of Boston, 193 Mass. 569, 575. Without considering *217the soundness of the argument in point of legal theory, we think that in substance that allegation in the answer was traversed, though not carefully nor in terms, when the petitioner asserted the validity of the increasеs.

The rights and duties of the treasurer as such are not affected by the fact that she happens to own or control half the stock of the corporation. The by-laws (Art. YI, Sec. 2) provide that the treasurer shall receive and dispеnse the funds of the corporation under the direction and order of the directors. That does not mean that the treasurer may ignore the powers of the president under the vote of June 7, 1927, and refuse, unless ordered by the ‍​​​​‌​‌‌​‌‌‌​‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌‌​​​‌‌‌‌‌‌‌​‌​‌‍directors, to pay claims lawfully created under that vote. It merely expresses the subordination of the treasurer to the directors and to those acting by their authority. Unless managerial powers are attached to it by vote or by a course of conduct, the office of treasurer is ministerial. A treasurer is bound to disburse the corporate funds under, and only under, the orders of the directors or other officers in charge of the corporate business. Lydia E. Pinkham Medicine Co. v. Gove, 303 Mass. 1, 9. Brown v. Weymouth, 36 Maine, 414. Taylor v. Taylor, 74 Maine, 582, 584, 585. Minchener v. Carroll, 135 Ala. 409, 414. See also Hill v. Murphy, 212 Mass. 1, 3; Lowell v. Massachusetts Bonding & Ins. Co. 304 Mass. 153; Sears v. Kings County Elevated Railway, 156 Mass. 440. The case is not like Smith v. Commissioner of Public Works of Boston, 215 Mass. 353, and McLean v. Mayor of Holyoke, 216 Mass. 62, where the duty of the offiсer in question was not merely ministerial.

The treasurer is not given a veto power over the acts of other officers. If the contract or other act that gives rise to the claim for payment, though entered into by a duly authorized officer or agent and apparently binding upon the corporation, is nevertheless one that would be set aside upon equitable grounds at the suit of a stockholder (Dunphy v. Traveller Newspaper Association, 146 Mass. 495; Spiegel v. Beacon Participations, Inc. 297 Mass. 398), the treasurer as such cannot as of right resist payment by setting up the еquitable rights of the corporation or of the stockholders *218against the direction of the duly authorized officers, and is protected against liability to the corporation in making payment. Hubert v. American Surety Co. 26 N. M. 365, 367. Ohio Valley Trust Co. v. Stewart, 251 Penn. St. 544, 547. See also Waldron v. Lee, 5 Pick. 323, 328, 329. It is immaterial that the treasurer happеns to be a stockholder entitled to bring a stockholder’s suit. The issues open in such a suit cannot be tried as of right in a petition for mandamus against the treasurer.

Whatever may be the scope of the discretionary power of the сourt to ‍​​​​‌​‌‌​‌‌‌​‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌‌​​​‌‌‌‌‌‌‌​‌​‌‍withhold a writ of mandamus where granting it would be inequitable (McNeil v. Mayor & City Council of Peabody, 297 Mass. 499), a treasurer has no right to convert a proceeding like the present into a complete inquiry into the propriety of the acts of those who control and managе the corporation. In the present case any question of the sort is foreclosed by the finding of the single justice that "So far as the issuance of a writ of mandamus is discretionary, I would nbt refuse the writ on discretionary grounds.” On a report to this court, we neither exercise any discretionary power, nor, commonly at least, review the exercise of that power by a single justice. Boucher v. Salem Rebuilding Commission, 225 Mass. 18. Hunter v. School Committee of Cambridge, 244 Mass. 296. School Committee of Lowell v. Mayor of Lowell, 265 Mass. 353, 354. Shawmut Mills v. Assessors of Fall River, 271 Mass. 358, 360. D. N. Kelley & Son, Inc. v. Selectmen of Fairhaven, 294 Mass. 570, 574. Security Co-operative Bank v. Inspector of Buildings of Brockton, 298 Mass. 5. Graves v. School Committee of Wellesley, 299 Mass. 80. Elmer v. Commissioner of Insurance, 304 Mass. 194.

In the present case there is nothing to suggest any invalidity or impropriety in the increases in compensation of employees. The corporation is large in assets, volume of business, and earnings. The employees in question hold positions of importance. The increases cannot be pronounced as matter of law extravagant in amount. As to the increased compensation of employees the petitioner is entitled to the writ.

*219The remaining question relates to a contract entered into by the president on behalf of the cоrporation with Mr. Worthen on December 19, 1938., By that contract he was employed as general counsel for the corporation for an indefinite period, terminable by either party, upon a retainer of $1,250 a month. The retainеr w-as to cover certain services, but not services in litigation, nor services for more than two days a month in New York or Washington, nor other services outside the neighborhood of Lynn or Boston. If the retainer of $1,250 should not be paid promрtly on the fifth day of any month, then any services rendered during the month in excess of one hundred hours were no longer to be covered by the retainer but were to be paid for at the rate of $12.50 an hour. For services in litigation, the compеnsation was to be $100 a day for services in court and $12.50 an hour for services out of court, with such increase as the success of the litigation or the amount involved might make fair in the opinion of the president. For services in the litigation рending at the time of the contract in Massachusetts and Maine, a somewhat variant scale of compensation was provided. For other services not covered by the retainer the rate was to be $12.50 an hour. If the retainеr, or any bill for services approved by the president or vice-president should not be paid within fifteen days, and action should be brought against the corporation to recover the amount due, the corporation was to рay for services in the prosecution of the action at a specified rate, and in addition the expenses of the action.

The respondent has refused to make any payment under this contract, and the second purpose of this petition is to require the respondent by mandamus to make the payments called for by the contract.

Some of the provisions of this contract are unusual. But we think that the amounts coming due under it fall within the same class as thе increases in pay of employees. The retaining of general counsel for a corporation of the magnitude of the petitioner cannot be said to be beyond the ordinary scope of the business of which the president was “to exercise general supervision and control.” The com*220pensation agreed upon, including the provisions for increased compensation upon failure to pay promptly, cannot be pronouncеd improper or extravagant as matter of law. It is found that the president believed the contract ‍​​​​‌​‌‌​‌‌‌​‌‌‌​‌​​​‌​​‌‌​​‌​‌‌‌‌​​​‌‌‌‌‌‌‌​‌​‌‍to be in the best interests of the corporation. No action against the corporation has been brought upon the contract, and the provision for paying for expenses and services in such an action is not involved in this case.

A writ of mandamus is to issue as prayed for.

So ordered.