Summary
In Leggett v. Mutual Commerce Casualty Company, 250 S.W.2d 995, 998[3, 4] (Mo. 1952), it was said, "The managing officers of a corporation have the power to employ counsel without written authorization from the board of directors and if the corporation accepts the services is liable for their reasonable value.
Summary of this case from Hayden v. First Community State BankOpinion
No. 42744.
September 8, 1952.
APPEAL FROM THE CIRCUIT COURT OF JACKSON COUNTY, DIVISION NO. 9, BEN TERTE, J.
Edward L. Scheufler, Maurice E. Benson, Kansas City, for claimant-appellant.
Joe E. Burris, Kansas City, for respondent.
In September 1947, by a proceeding in the Circuit Court of Jackson County, the Superintendent of the Divisions of Insurance took over the assets of the Mutual Commerce Casualty Company. Leggett v. Green, 8 Cir., 188 F.2d 817. Among the claims against the assets of the company is this claim by Moss H. Silverforb for attorney's fees in the total sum of $60,000. Court appointed commissioners, disallowed the claim and upon Mr. Silverforb's exceptions the circuit court entered a judgment approving the findings and report of the commissioners and Mr. Silverforb appeals from that judgment.
The Mutual Commerce Casualty Company was organized in 1939 and Mr. Silverforb was the moving spirit in the promotion and organization of the company, and until 1946 was the principal stockholder and directing officer of that company and its "agency company," "Associated Underwriters." From its inception in 1939 to its dissolution in 1947 Mr. Silverforb handled practically all of the company's legal business, and, admittedly, has never received any compensation for his services. He passed on and settled all claims, tried lawsuits over the state, argued cases in the appellate courts, attended to all the corporate business, made trips over the country on behalf of the company and had innumerable conferences with the Division of Insurance and its employees. His claim is separable into two parts, $50,000 for services rendered from 1940 until his resignation as a director and general counsel, and $10,000 for services rendered the company after his resignation. Upon this appeal it is asserted that the commissioners erroneously found that he was claiming under a contract of January 16, 1940 when the evidence showed that "he was claiming under the contract as reaffirmed by the agreement of June 20, 1947" and, consequently, that the trial court was in error in approving the findings and report of the commissioners.
His amended claim before the commissioners states that "on the 16th day of January 1940 a contract of employment was made and entered into by the Board of Directors and officers of said Company, with this claimant." He then sets forth the substance of the agreement, his connection with the company and the performance of his legal services and pleads that "in May and June 1947 this Claimant in conference with the Superintendent of the State of Missouri, and with other interested parties, * * * they being officers and directors * * * and as a result of said conferences said Claimant agreed to accept the sum of $50, 000.00 as a compromises sum for the legal services rendered up to that date, and the Superintendent of Insurance agreed that said sum was fair and reasonable." The contract of January 16, 1940 was in fact a resolution of the board of directors which recited the employment of Mr. Silverforb for a period of twenty years. So far as material to his claim and contract for legal services the resolution employs "Moss H. Silverforb as General Counsel or Attorney, with a salary that may be voted upon by the Board of Directors as they deem fit and sufficient for the services rendered * * * from the assets of this Company as the assets may permit from year to year." The board of directors met from year to year but no salary for legal services was voted by the board of directors and no claims were presented, the reason being that the finances of the company would not permit the payments. Mr. Silverforb said that such payments would have embarrassed the company and "if I would have drawn funds out, I would have turned around and put them back." The contract of June 20, 1947 by which he claims the original contract "was reaffirmed" is a contract signed by six individuals, including Mr. Silverforb. The other signers were to furnish $225,000 to the company and were or became directors. Among other things the present board of directors was to resign and a new list of directors were to be elected. As to this claim that contract provides: "It is further understood and agreed for and in consideration of all of the foregoing, that signatory, M.H. Silverforb, shall agree, and does hereby agree that any contract existing between him and Mutual Commerce Casualty Company by which he was employed as General Counsel for said company shall be, and is hereby terminated, and it is further agreed that he shall receive for his legal services to said company to date, and in full satisfaction of all claims he may have against said company for legal services, the sum of Twenty-five Thousand Dollars ($25,000.00), which is to be paid only out of earned surplus and under conditions to be approved by the Superintendent of Insurance of Missouri." It does not appear in the record as plainly as it should but as we understand the record Mr. Silverforb was speaking of this contract when he said "but that new contract was never consummated." He said that after the execution of the agreement there was an "unearned surplus" in the company. He also testified that the Superintendent of Insurance stated that his charges for legal services were fair and reasonable but there is nothing in this record to show that the Superintendent of Insurance agreed or set forth "under conditions to be approved by the Superintendent of Insurance" the payment of either $25,000 or $50,000. Of course, if this new agreement was never consummated it could not "reaffirm" the original contract. In short Mr. Silverforb either agreed to accept $25,000 "under conditions to be approved by the Superintendent of Insurance," and those conditions and approval have not been shown, or, he agreed to receive such salary "that may be voted upon by the Board of Directors as they deem fit and sufficient * * * from the assets of this Company as the assets may permit from year to year," and the assets did not permit of such payments and the board of directors did not see fit to vote any salary, and he is bound by that agreement. "Appellant agreed to accept such fees as the Comptroller approved, and also agreed that the Comptroller's decision as to the amounts to be paid should be final. In the absence of fraud or bad faith, neither of which is charged, the contract was binding upon appellant." Crichlow v. Doepke, 5 Cir., 56 F.2d 599; Thurston v. Traveler's Insurance Co., 128 Neb. 141, 258 N.W. 66. Consequently the court did not err in adopting and approving this phase of the commissioners' report.
This does not, however, dispose of the other phase of the report and the claim for $10,000. In this connection it does not plainly appear from this record that all the findings by the commissioners are applicable to both phases of this claim for legal services. However, the finding that Mr. Silverforb was one of the original incorporators and furnished "substantially all of the money that went into the financing of this company," that he was continuously a director, drafted the resolution, formed Associated Underwriters and that "his activities in connection with this company were those of the promoter of a business, that his services to the company were rendered for the purpose of protecting his investment, rather than as an attorney hired by the Board of Directors," does not in any manner establish that Mr. Silverforb was not employed to handle the legal affairs of the Mutual Commerce Casualty Company or if he was that he was not entitled to compensation for his services. Promoters of corporations and directors may contract with the board of directors or its officers for their services. 19 C.J.S., Corporations, §§ 799, 803; 18 C.J. S. Corporations, §§ 145, 146; Foster v. Belcher's Sugar Refining Co., 118 Mo. 238, 24 S.W. 63.
As we have said, the allegations and proof of his claim relative to the $50,000 were based upon the theory of a specific written contract. Early in the hearing, in response to a question by one of the commissioners, Mr. Silverforb said that his claim was based upon a "contractual obligation" and not upon quantum merit. He said that he considered the value of his services up to the time of his resignation to be $50,000 and after that time to be of the value of $10,000 and that was the way he established a total claim of $60,000. However, as to the additional claim of $10,000 Mr. Silverforb merely alleges that after his resignation as an officer and director and after the management of the company was taken over by others that he continued performing the duties of a general counsel and rendered the same legal services that he had theretofore rendered and "that Claimant is entitled to the reasonable value of $10,000 for the time and expenses of services rendered, in addition to the agreed settlement figure of $50,000.00 * * *." As to this item, despite his answer to the commissioner, there was neither allegation nor proof of a written contract or written request that he perform legal services for the company after his resignation, and if there had been a written request it did not purport to fix his compensation and in those circumstances the measure of the value of his services would be a "reasonable fee" and any recovery on his part would necessarily have to be upon the theory of quantum merit. Evans v. York, Mo.App., 216 S.W.2d 124, 127; Beerend v. Benwood-Linze Co., Mo. App., 192 S.W.2d 660. The managing officers of a corporation have the power to employ counsel without written authorization from the board of directors and if the corporation accepts the services is liable for their reasonable value. Western Bank of Missouri v. Gilstrap, 45 Mo. 419; Turner v. Chillicothe Des Moines City R. R. Co., 51 Mo. 501; Southgate v. Atlantic P. R. R. Co., 61 Mo. 89; Becker v. National Refining Co., Mo.App., 850 S.W.2d 670.
Upon this phase of the claim Mr. Silverforb said, "From that date (June 1947) on to the dissolution of this company, I have conferred with Mr. Robert Worth, * * *. I went over the affairs of the company when Mr. Worth took over as acting president, and at that time we discovered numerous false claims had been made, and Mr. Worth called me at all hours of the day and evening. We worked out there together many many nights as late as 12:00 and 12:30, going over matters of the company pertaining to claims, and reports and policies of the company, and during that period of time I counselled with him and with the various members of the Board, and from that time on, I considered my services as valued at $10,000.00, * * *." Considering the claim and the proof, as to this phase of the case, there are allegations and proof from which it is a fair inference that there was a request for the services, considering performance by the claimant, a resulting indebtedness, a demand, and it is a fair inference that the services were not gratuitously rendered and had not been paid for, and these are the essential requisites to a cause of action in assumpsit. Laughlin v. Boatmen's Nat. Bank of St. Louis, 354 Mo. 467, 474, 189 S.W.2d 974, 978; Evans v. York, supra.
There was no evidence other than that offered by the claimant who, in a general manner, enumerated the services he had performed and stated that he "considered" his services over this period to be of the value of $10,000. While this cause is triable de novo upon this appeal Baerveldt Honig Const. Co. v. Dye Candy Co., 357 Mo. 1072, 212 S.W.2d 65, it is not possible upon this record to confidently assert that the services were in fact of the reasonable value of $10,000. Mr. Silverforb resigned as a director and officer on the 20th day of June 1947. The liquidation proceedings were filed and the Division of Insurance took charge of the company on the 17th day of September 1947. So as to this phase of the claim Mr. Silverforb's services were performed over a period of two months and twenty-seven days. The reasonable value of his services is a question of fact, not precisely determinable upon this record and appeal, and neither the commissioners nor the trial court considered or passed upon the value of his services for this period of time. Laughlin v. Boatmen's Bank, supra; 7 C. J.S., Attorney and Client, 191(1) (2) (d), pages 1078-1093. The judgment as to the claim of $50,000 is affirmed, and the judgment as to the claim of $10,000 as the reasonable value of his services from and after June 20, 1947 is reversed and remanded.
WESTHUES and BOHLING, CC., concur.
The foregoing opinion by BARRETT, C., is adopted as the opinion of the Court.
All concur.