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Dalton v. Electric Light Co.

In the case of Rogers v. R. R. Co., 22 Minn., 25, where the plaintiff brught an action to recover compensation for services claimed to have been rendered by him as secretary of the company, but his compensation nad not been fixed as required by the by-laws, and where he also sought co recover the value of services rendered by him to the company as land commissioner and as an attorney while he was acting as a director of the company and without any special contract, it was held that he was cntiileá to recover for all such services on the quantum. meruit. And in 29 Kansas,311, it was held that where the directors of a corporation appoint one of their number to act as treasurer, secretary, or other ministerial officer of the corporation, he is prima facie, entitled to reasonable compensation for his services as such officer.

i he judge who announced the decision of the court in the case of Gardner v. Butler, 30 N. J. Eq.,723, used this language, which it seems to us states the law clearly and correctly on the general question. "The directors of a corporation shall not be permitted to enter into engagements in which they have a personal interest, conflicting with the interests of those whom they are bound by fiduciary duty to protect, and that no consideration of their apparent or intrinsic fairness will induce a court, either of law or equity to enforce them against the resisting cestui que trusts is well settled.” * * * “The rule is that the trustee cannot fortify himself by a contract with himself for his own benefit, and set it up either at law or in equity as a valid obligation. It is of no binding force as a contract, and the cestui que trusts may repudiate it at will

. The agreement therefore which the directors made with themselves, must be pronounced to be illegal, and can furnish no support to their defense, as contracts. But while the express undertaking is without legal force, the directors of a company have a right to serve it in the capacity of officers, agents or employees, and for such services the law will enable them to receive a just and reasonable compensation. The law restrains them from making a contract when their own gain intervenes between "hcir exercise of judgment and their duties as trustees; but it does not operate to deprive the company of the service of those who in many cases nay alone possess the skill requisite to the successful management and control of the corporate business, and who may have the chiefest interest in its prosperity. Stockholders, because they are directors, are not coinpelled to commit the success of the company to strangers, or cise render their own service gratuitously. No claim which they may make against their company can acquire any support or validity from the fact that they have expressly sanctioned it; it must rest exclusively upon its fairness and justice, and be enforced upon the quantum meruit. Such is the full scope and effect of the rule, and the extent to which the transaction is annulled as will be found by an examination of the cases."

The general doctrine as to a recovery on an implied contract by ar. oficer of a corporation for extra services is well stated in the opinion of Morton Judge, in the decision Pew v. Bank, 130 Mass., 395. "A bank ox other corporation may we bound by an implied contract in the same manner as an individual may. But in any case, the mere faci that valuable services are rendereâ for the benefit of a party, does not make him liable iporon implied promisc to pay for them. I often happens that persons renaer services for others woich all parties understand to be gratuitons. Thus directors of banks aná or many other corporations usually receive no compensation. In such cases, however valuable the services may be

7 Dec. 10

Clark Circuit Court.

the law does not raise an implied contract to par by the party who receives the benefit of them. To render such party liable as a debtor under an implied promise, it must be shown, not only that the services were valuable, but also that they were rendered under such circumstances as to raise the fair presumption that the parties intended and understood that they were to be paid for; or, at least, that the circumstances were such that a reasonable man in the same situation with the person who receives and is benefited by them, would, and ought to understand that compensation was to be paid for them. 6 Allen, 207.” 3C. C., 291.

In this conflict of adjudication, we are of the opinion that the fact that Mr. Dalton was a director of this corporation when he was elected as treasurer thereof, and while he served as such, and that he had no express contract with the company at the time of his election, that he was to be paid for his services, would not preclude him from recovering the fair and reasonable value of his services, if they were valuabic, and were rendered under such circumstances as showed that it was the intcntinn of both parties that he was to be compensated therefor. And as there was evidence tending to show this, the action of the trial court ir arccting verdict for the defendant was erroneous, and for this reason thc judgment will be reversed.

Bateman & Harber, for Plaintiff in Error,
Paxtor Warrington & Boutei, contra.

CONSTITUTIONAL LAW-TAXATION-SAVINGS

SOCIETIES.
(Clark Circuit Court, November Term, 1896.)

Shearer, Summers and Wilson, J.
*COLLETT, TREASURER, v. THE SPRINGFIELD SAVINGS Society.
1. TAXATION OF SAVINGS SOCIETIES.

Section 27590, of the Revised Statutes, regulating returns for taxation of

savings societies, incorporated under the act of April 16, 1867, is not repas

nant to either section 2, or section 3, of article 12, of the constitution. 2. DEPOSITS IN SAVINGS SocieTIES ARE THE PROPERTY OF THE DEPOSITORS.

The deposits in such societies are the property of the depositors; the societies

are merely incorporated agencies for the depositors as principals, to receive,

loan and invest the savings of the latter. 8. DEPOSITORS REQUIRED TO RETURN AID PAY TAXES UPON THEIR INTERESTs.

The depositors are required to return and pay taxes upon the value of their

interests in the society, and the society to return and pay taxes upon the re-
mainder of the property not the reciprocal of such interests. The surplus,
undivided prots, real estate and furniture do not add to the taxable value oi
the depositors .iterests, and a complete taxation of all the taxable property is
effected ny requi.i.g the depositors to pay upon the vein of tricir interests
and the society to pay upon the surplus, undivided profits, real est. te and
furniture.
ERROR to the Court of Common Pleas of ik county.

October 14, 1892, the plaintis brought ruit in the c^urt of coma on pleas of Clark county to recover ::om the defendant taxes and penalty, amounting to 62,984.72 for the years 1887 to “i, be inclusive ; and on March 4, 1893, brou;li su i to iscover from the defendant taxes and penalty amounting to $20,183.19 for the year 1902.

*This decision was affirmed in 5* () S., 770, Minshall, J. dissenting; unreported. Applicatior for rehearing denied, 4 Legal News, 347,

Coiletty. Sevings Society.

Answers and replies were filed. The cases werc consolidated and tried to the court, e jurv being waived.

The court stated its conclusions of fact separately from its conclusions oi law, anó upon the issues joined found in favor of the defendant, and adjudgeá chat the petitions be dismissed.

The piaintiff excepted to the conclusions of faci and to tic conclusions of law, and filed a motion for a modification of certain of the conclusions oí fact, and for a new trial. This motion was overruled, and plaintiff prosecutes error to this couri, assigning as grounds therefor, crror in the admission and rejection vi testimony; crroz iu certain of the conclusions of fact, in certain of the conclusions of law, and in the judgment.

The Springficid Savings Society was incorporatea and carried on its tusiness under an act entirica“ An act to incorporate Savings Societies,” passed April 16, 1867, 64 Ohio Laws, 184. SUMMERS, J.

Counsel for defendant claims chaîcatii -879 the defendant was not required to make any return for taxation or the property held by it, but that the depositors were the real owners or the property, and are now, aná always have been, required to return their interests for taxation; that in 1879, by an amendment of what is now section 2734 of the Revised Statutes, (76 Ohio Laws, 28), the society was required to return and pay taxes upon the surplus; and that so the matter stood until April 16, 1890, when section 27596 was enacted, and that since that date the defendant has been required to make the return provided by section 27596; that the society is merely the incorporated agent or trustee of the depositors; that the depositors were, and are, taxed upon their deposits, and the society upon the surplus, and that thus a complete taxation of the entire property is affected, and that this result, and not double taxation, is what the legislature intended, and all that the constitution requires.

Counsel for plaintiff claim that the defendant is now, and always has been, required to list its property in the same manner as an unincorporated bank; that the society in its corporate capacity is the owner of iko property; that the deposits are debts owing by the society to its depositors; that under the constitution and laws of this state debts cannot be deducted from cash and bonds, and that Treasurer v. Bank, 47 Ohio Si., 598, holding that section 2759, in so far as it provides for the deduction by unincorporated banks of debts from cash and bonds, contravenes section 2, of article 12, of the constitution, is decisive of this case.

The defendani, for each of the years in controversy, returned and paid taxes upon its furniture, real estate, and surplus, less that part of the surplus invested in United States bonds, and the court, in one of its conclusions of fact, finds that in each of said years 188? to 1892, both inclusive, said savings society paid taxes on a larger amount than it would be required to pay taxes upon, by the letter of section 2759 of the Revised Statutes,

The findings of fact, sustained by the evidence, will warrant no other conclusion of aw than that the return for each of the years in controversy prior to the year 1892, was not faise ; so that on.y the return for 1892 is involved, and the principa' question is, does section 27690 cf the Revised Statutes, in so far as it directs the auditur, in escertaining the amount to place on the tax duplicate in the name of societies organized inaer ine 1am of 1867, to deduct che sixth item, the deposits, from the third and

Clark Circuit Court.

fourth items, cash and stocks and bonds, conflict with any provision of the constitution?

Or, to state it in a different form, do the deposits held and controlled by the defendant, The Springfield Savings Society, belong to it, or do they belong to the depositors, and are they held and controlled by the society as the incorporated agent or trustee of the depositors, and for their sole use and benefit? Do the interests of the depositors for the purposes of taxation represent the deposits and the property in which they are invested, and are the depositors taxed upon their interests, and the society upon the remainder of the property not represented by such interests?

“The relation of bank and general depositor is simply the ordinary one of debtor and creditor, not of agent and principal, or trustee and cestui que trust.Spear, J., in Railroad Co. v. Bank, 54 Ohio St., 60, 71. Bank v. Brewing Co., 50 Ohio St., 151 ; Covert v. Rhodes, 48 Ohio St., 66, 71; Treasurer v. Bank, 47 Ohio St., 503, 522.

But that the relation of savings societies, such as defendant, and depositor is that of agent and principal, is settled by an unbroken current of authority. Ridenour v. Mayo, 40 Ohio St., 9; Morse on Banks and Banking, section 3; Grant on Banking, 614; Commonwealth v. People's etc., Bank, 5 Allen 428, 434; In re Newark Savings Inst., 28 N. J. Eq., 552; Cogswell v. Bank, 69 N. H., 43; Osborn v. Byrnes, 43 Conn., 155; Huntington v. Savings Bank, 96 U. S. 388, 394; Stockton v. Bank, 32 N. J. Eq., 163, 165; Hannon v. Williams, 34 N. J. Eq., 255, 258; Mechanics' Bank v. Granger, 17 R. I., 77; Lewis v. Lynn Savings Inst., 148 Mass., 235; Ward v. Johnson, 95 111., 215.

Such societies were authorized, because their objects are conducive to the public good. These are to induce persons of small means, who have not sufficient money to make a loan, or sufficient experience to invest it, to husband their resources by providing a safe agency for receiving and loaning their money, wholly and solely for their benefit.

In some respects the relations between such societies and their depositors are hardly distinguishable from those between corporations and their stockholders. The property of the former is held in trust for its depositors. That of the latter for its creditors and stockholders. Upton v. Tribilcock, 91 U. S. 45, 48. The capital of the latter cannot be withdrawn until the winding up of the company, and the stockholders are given certificates as evidence of their interests in the company. The society can have no capital or anything with which to carry on business other than the deposits; and, in order that it may induce people to entrust their money to its care and so accomplish the objects of its creation, it is necessary that the depositor may, from time to time, put in whatever he can spare, with the assurance that he can, at any time, upon short notice, draw out the whole or any part, as his desires may prompt or necessities require, without awaiting the winding up of the institution, or relying upon the uncertainties of finding a purchaser for his interest. And so the law provides that he may withdraw his deposits upon thirty days' notice, and that an account shall be given him in a book, or otherwise, of the sum deposited, which shall be the evidence of his property in such society.

In Jones v. Davis, 35 Ohio St., 474, it was determined that for the purposes of taxation, the capital stock of the corporation is represented by whatever it is invested in, and that when the corporation is required to list its personal property for taxation, the owner of shares of its capital stock is not required to list his shares for taxation.

Collett v. Sevings Society.

Judge Cooley, speazing of what is meant by duplicate taxation in its proper sense, and "which would render it wholly inadmissible under any constitution requiring equality and unirormity in taxatiou," and then giving instances of such duplicate taxationi, says: “The sane may be said of a tax on the property of the corporation, and also ou the capita.. which is invested in the property; if the latter is taxed as property, this also is duplicate taxation, and as much unequal as would be the taxation of a farmer's stock by value when on the same basis it is tazed as a part of his general property. When, for instance, the money paid in as capital of a manufacturing corporation has been invested in bužidings anci machinery, these are what then represent the capita, and to tax tre capital as valuable property distinct from that which then represer.ts it, would be to tax c mere chadow: * would be to make the shadowy stand for the substance in order that it cight be taxed, when the substance itself is taxed, a rectly under its own proper designation.”

And in a foot note he says: "That the capital of corporation is represented by the property in which it has been invested can mardly require the citation of authorities, but the following may be referred to" -citing twenty-six cases from weive different states. Cooley on Aaration, 225.

Now, it is evident that the depositors' property in such society and the deposits, or that in which they are invested, are for the parpose cí taxation just as clearly reciprocals as are stockholders' shares o soci: and the capital stock or that in which it is invested; and if the depositors are taxed upon the reciprocal of the deposits or that in which they are invested, and the society is taxed upon the real estate, furniture, suplus and undivided profits, the whole property is taxed, and not only: 110 provision of the constitution violated, but, perhaps, all is exacica that the constitution will permit.

In Exchange Bank of Columbus v. Hines, 3 Ohio St., 1, 15, Bartley, C. J., says: “Uniformity in taxation implies equality in the burden os taxation."

And on page 43, Thurman, J., says: “In regard to taxation, equality is the great idea of the constitution. Inequality was thc prcexisting evil. Equality is the remedy."

And on page 45, speaking of section threc, of articie twelvc od 20 constitution, he says: “For this same section of the constitution declares that the objects of taxation belonging to banks and bankers zbaibe taxed, so that all property employed in banking skall always begi O DOLden of taxaticn equal to that nposea on the property of individuais. The burden is to be not less, 2105 greater but equai.”

“ It is a fundamental maxin taxation that the same pro zerty shall not be subject to a double tax by the same party, eicher erect or se directly; and where it is once decideci that any class of pacperty is labio to be tazed under one provision of the statutes, it has been neid io oliot, as legal conclusion, that the legislature could not have tcnged that the same property should be subject to another tax, though tuere may be general words in the law which woulâ seem to impl" that it may loc tazzec. a second time. This is a sound and very jus“ rulc of construction on it has been applied in many cases where, et arst reading of the law, a doucie taxation might seem to have been iutendea.” Cooley 012 Taxation, 27.

The power of taxation is included in the legislctive power, and under this power, subject to the limitations of section 2, of article 12, that "Law

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