author: Ross, J.

text:
    Fitzgerald, Appellee, v. Chemical Service Corp., Appellant.

      (No. 7006
    Decided November 22, 1948.)

      Messrs. Kunkel & Kunkel, for appellee.

      Messrs. Harmon, Colston, Goldsmith <& Hoadly, for appellant.
   Ross, J.

This is an appeal on questions of law from a judgment of the Court of Common Pleas of Hamilton county in favor of plaintiff, entered in conformity to a verdict. '

The defendant claims the trial court committed error in dismissing from the consideration of the jury its affirmative defense, in assuming as proved a fact which was, on the contrary, a factual issue, in carrying this error into its general charge, in refusing a special' charge tendered by the defendant placing such factual' issue before the jury, and refusing a special interrogatory presented for the purpose of securing an answer from the jury upon such question of fact.

The defendant also claims the court committed error by injecting into the case in its general charge the-question of whether the defendant’s employee was driving at a speed permitting the stopping of the vehicle involved in the assured clear distance ahead',, when such question was not raised by the evidence.

The defendant also claims the verdict is against the weight of the evidence.

In the petition it is alleged that the defendant is a corporation “organized and existing under the laws of the state of Ohio,” and that the defendant through its employee acting within the scope of his employment with defendant caused injury to the plaintiff, also an employee of defendant, by and through the negligent operation of an automobile in which the plaintiff was being conveyed for the purposes of carrying on the business of the defendant. One of the specifications of negligence charged against the defendant was that its employee operated the automobile at a rate of speed which would not permit it to be stopped within the assured clear distance ahead.

In the first defense of the answer it is admitted that the defendant is a corporation, as alleged; that the plaintiff on the 16th of April, 1945, was riding in an automobile driven by another employee of defendant,over one of the roads in Ohio, and that at such time the plaintiff was engaged in promoting the defendant’s business. Otherwise, the first defense constitutes a general denial.

For its second defense, the defendant asserts that the plaintiff was a resident of Kansas City, Missouri, on the 16th day of April, 1945; that he was employed by the defendant under a contract of employment in the state of Missouri; that both plaintiff and defendant'had elected to accept the provisions of the Workmen ’s Compensation Act of Missouri; that the defendant employed more than ten employees regularly in and about its business; that plaintiff at the time of his injury was engaged upon the business of defendant and was temporarily in the state of Ohio while so engaged; that the plaintiff has no common-law right of action against the defendant by virtue of Section 1465-68, General Code, being a resident of Missouri, and insured under the Workmen’s Compensation Act of that state; and that the court, therefore, has no jurisdiction of the subject matter of this action.

In a reply to the second defense, the plaintiff denies he was a resident of Missouri on April 16, 1945; that he was employed by the defendant under a contract of employment executed in the state of Missouri; and that he was in transit from his place of employment in Kansas City, Missouri, to the city of Cincinnati, and from thence to Detroit, Michigan, when injured as alleged in the petition. Otherwise, the reply constitutes a general denial of the affirmative allegations of the second defense of the answer.

In view of the claimed error, and the sharp conflicts in the allegations in the pleadings, it is necessary to relate at some length just what the evidence develops on the questions presented.

Alex Bartel, president of the defendant corporation, was called as if on cross-examination by plaintiff. He stated the defendant was engaged in business in Michigan, Missouri, and Ohio on April 16, 1945, the date on which plaintiff was injured; that the company did not carry workmen’s compensation insurance in Ohio “because we did not have the proper employees, the proper number of employees in Ohio, but two.”

The plaintiff testified that in February 1945 he was working for the defendant; that he was a motorcycle officer in Kansas City with the police department; that when he was excused from duty he had worked for the defendant for two years; and that he started working "for defendant in November 1944 (plaintiff probably meant 1943); that in September 1944, while plaintiff was still in the employ of the defendant, through Alex Bartel, it was suggested he go to Detroit, Michigan, and take charge of the office of the defendant in that city; that plaintiff stated he did not wish to go to Detroit; that he wanted to stay in Kansas City; that Bartel stated “the office wasn’t doing enough to give me the guaranty up there which Detroit would do and they were going to sublet the office down here”; that Lou Bartel called him on the telephone from Cincinnati, in November 1945 (while still in the employ of defendant) and again suggested he go to Detroit; that the type of work in which he was engaged for the defendant was “cleaning the kitchen exhaust system, air condition systems, fire hazards”; that he was supposed to be a supervisor in Detroit, but that when he went there he was just a laborer; that about the middle of February 1945 he went to-Detroit to look over the job; that he had two weeks’ leave from his job on the police force; that after looking over the Detroit office he came from Detroit to Cincinnati about the last of February 1945; that while in Detroit he did some work for the defendant; that when lie arrived in Cincinnati about the 25th of February, 1945, it was then, in Cincinnati, that he had a conference with A1 Bartel, Lou Bartel and Sol Shuller; that then the proposition was made plaintiff to take a position in the Detroit office upon certain definite terms, which he then and there accepted, that he was to receive, fifty dollars a week and three dollars expenses on the road; that plaintiff then returned to Kansas City, gave the police department notice of resignation, and returned to Detroit on April 2, 1945, when he continued to work for the defendant; that he left Detroit, doing work for the defendant on the way down to Cincinnati, and did work for the defendant on several jobs in Cincinnati; that on the 16th of April he started back to Detroit and was to do certain work for the defendant on the way back; that the plaintiff and a fellow employee, by name of Owens, rode in an automobile driven by Shuller, an employee of defendant; that it was necessary to go by way of Columbus-because the truck driven by plaintiff was in a wreck and had been left there for repairs; that Shuller on the return to Detroit was driving at a high rate-of speed, 60 to 65 miles per hour, on a rainy night and down grade around a sharp “S” curve, when the, automobile swerved, skidded, turned around, went out of control and struck a tree, and the plaintiff lost consciousness; and that after his discharge from the hospital he left the employ of the defendant sometime-in November 1945, and returned to Kansas City, Missouri.

The plaintiff further testified:

“Q. I will reframe the question. Did you, when-you went to work for the company, the defendant in this case in Kansas City, which you have testified you did, choose to take the benefits of the Missouri Workmen’s Compensation Law? A. No, I did not.

“Q. You did not? A. No, in fact I didn’t even know they had any such thing.

“Q. Do they? A. I know the state had it but I didn’t know the company here had it.

“Q. You knew the company had ten or more employees there at that time, didn’t you? A. In Kansas City?

“Q. Yes. A. No they did not.

“Q. Iiow many did they have? A. They had — the-biggest amount they ever had at one time, and that was even when I was talking to him about sending out here for them, wasn’t over five.

“Q. Not over five? A. Never did have ten at anyplace I know of.

- “Q. Never had ten and only had five? A. That is-right, five to six men when I was breaking them in for them.

“Q. Did you ever make claim for the injury which-you have alleged in this case to the Missouri Workmen’s Compensation Board?

“Mr. Kunkel: Objection.

“A. No.

“The court: Overruled.

‘ ‘ Mr. Kunkel: Exception.

“Q. You didn’t? A. No.”

A1 Bartel, a brother-in-law of Sol Shuller, in charge of the defendant’s Detroit office, testified for defendant that no agreement as to terms of employment at the Detroit office was made in Cincinnati in the early part of the year 1945; that no definite agreement was made then and there with plaintiff as to the Detroit employment; that at the place where the accident occurred the road makes a “real wide sweeping curve— very wide. It is a very wide curve where you can see from every angle of it because there is no hills. It is level country ’ ’; and that when he tried to driye around the curve, the steering wheel turned in his hands and he had no brakes. On cross-examination, the witness stated that the plaintiff agreed to take the job in Detroit when he cáme to Cincinnati in the latter part of February 1945. The witness further mentioned three employees working in Ohio on various jobs in addition to work done by himself and the plaintiff.

Alex Bartel testified for the defendant that he was president of the company; that the plaintiff was employed on September 3, 1943, and that he was hired at that time by the manager of the Kansas City office, as a part time employee; that in 1944, he discussed with plaintiff the idea of going to Detroit, to take over the supervision of the Detroit office; that it was finally agreed in Kansas City that he should do so; that he would go to Detroit to see whether he liked it; that he went to Detroit for this purpose in April 1945; that at the meeting in Cincinnati it was understood he had taken over his duties in Detroit and there was merely a general discussion of the business there in Detroit, and on the 16th of April, it was understood he would return to Detroit and continue his work there; that after the accident the defendant moved plaintiff’s family to Detroit; that only two employees were regularly employed in the state of Ohio, who were officers of the company; that the defendant had ■qualified to do business in Missouri; that five or six ■employees were employed in that state; that he did not think the defendant had elected to accept the provisions- of tlie Workmen’s Compensation Act of Missouri; that the plaintiff had worked for the defendant from September 1943 to October 1945; and that at the time of his employment, with the company he was a resident of Missouri.

The witness, on being recalled, attempted to state that the defendant covered all employees wherever working by insurance under the Workmen’s Compensation Act of Missouri, but his evidence was stricken from the record. Later, a policy of such insurance was admitted in evidence.

Neither this witness nor any other witness attempted to testify that the defendant had filed with the commission in Missouri an election to accept the Workmen’s Compensation Act of Missouri, or that the defendant had posted a notice to such effect in its place ■of business, as provided by Section 3693, Revised Statutes of Missouri.

The plaintiff has predicated his action against the defendant upon his common-law right to hold the defendant-employer responsible for the negligent acts of its employee, acting within the scope of his employment for the defendant, it being claimed by plaintiff that such acts were the proximate cause of the injury for which he seeks damages against the defendant. The Workmen’s Compensation Act of this or another state, under certain circumstances, frees the employer from such liability, and the Workmen’s Compensation Act of this or another state may be interposed as an affirmative defense by an employer to such an action, if he can allege and prove that the necessary facts exist which free him from a duty to respond in damages under a common-law duty to his employee. If he does not interpose such affirmative defense, or if he fails to prove the facts which sustain such defense, he must respond to the action of his employee for common-law liability for negligence.

In this action, the defendant has alleged and at least attempted to prove facts which, it is claimed, show that the common-law rights of the plaintiff have been abrogated in favor of his rights under the Workmen’s Compensation Act of Missouri. The trial court excluded this affirmative defense from the consideration of the jury. This action was taken by the trial court upon the hypothesis that the defendant had failed to show that the contract of employment between plaintiff and defendant was made in Missouri. As will later appear, this conclusion of the trial court was not sustained by the evidence. However, it will appear hereinafter that the locus of the execution of the contract was not the only critical fact involved in the affirmative defense of this defendant, nor the only fact which the defendant was required to prove in order to establish the applicability of the Workmen’s Compensation Act of Missouri.

It is conceded that the defendant has not accepted or elected to take coverage for its employees under the Workmen’s Compensation Act of Ohio. The evidence of the defendant is that it does not have three employees regularly employed in Ohio. Thus, that portion of Section 1465-68, General Code, providing for agreements between employee and employer where the employer is subject to and has complied with the Ohio Workmen’s Compensation Act has no application, first, because, the defendant-employer is not subject to the Ohio act, and has not complied with its provisions ; and, secondly, because there is no evidence of any agreement in respect thereto.

Section 1465-68, General Code, supra, further provides, however, that if an employee is a resident of a state other than Ohio, “and is insured under the Workmen’s Compensation Act or similar acts of a state other than this state” then the employee shall not receive benefits under the Workmen’s Compensation Act of Ohio for injury received while temporarily employed therein, “and the rights of such employee and his dependents under the laws of such other state shall be the exclusive remedy against the employer on account of such injury.” (Emphasis added.)

At this point it may be well to note a pertinent section of the Revised "Statutes of Missouri (which hereinafter will be designated R. S. Mo.). This is Section 3700, which provides in part:

“(b) This chapter shall apply to all injuries received in this state, regardless of where the contract of employment was made, and also to all injuriés received outside of this state under.contract of employment made in this state, unless the contract of employment in any case shall otherwise provide.”

This court, as well as the trial court, by virtue of the provisions of Section 12102-31, General Code, is required to take judicial notice of these general statutes of a sister state.

The burden rests, therefore, upon the defendant under the Ohio Law (Section 1465-68, General Code), to show (1) that plaintiff is a resident of a state other than Ohio, and (2) is insured under the Workmen’s Compensation Act of some other state than Ohio. Or, applied to the facts here involved, that (1) plaintiff is a resident of Missouri, and (2) is insured under the Workmen’s Compensation Act of Missouri.

One of the burdens of defendant under the Missouri law, to escape common-law liability under the provisions of Section 3700 R. S. Mo., supra, is to show that the contract of employment with plaintiff was made in Missouri. If it was, and other pertinent provisions of the act are proved to apply in favor of defendant, the plaintiff was covered by the provisions of the Workmen’s Compensation Act of Missouri, and the defendant has sustained its affirmative defense, excluding it from the common-law liability asserted by the plaintiff.

The evidence is conclusive that the plaintiff was not .a resident of Ohio, and seems to indicate beyond question that plaintiff was a resident of Missouri at the time of his employment by defendant, being a member of the police department of Kansas City. There is no •evidence that he ever adopted another domicile or residence, except as noted hereinbefore. This would leave the question under Ohio law whether he also was insured under the law of Missouri.

Now it is apparent that this element of the defend.ant’s defense, under the Missouri law, was predicated upon a showing that the contract of employment was made in Missouri.

The trial court found as a matter of law that the contract was made in Ohio. Even if “the contract” be limited to the new arrangement involving the Detroit office, tlie evidence was in violent conflict upon this point, and there was no justification for the trial court’s finding even as to the Detroit arrangement. But it is clear there is not a single iota of evidence to show that the plaintiff’s original employment in 1943, which employment continued on down until after his discharge from the hospital, when he returned to Kansas City and quit the employment of the defendant, was not the subject of an oral contract made in Kansas City, Missouri, at the beginning of his employment with the defendant. The plaintiff himself so states. He was constantly employed with the defendant doing jobs in the time not required for duty with the police department of Kansas City. The plaintiff himself states he thought he was to be a supervisor of the Detroit office, but found when he went there that in fact his duties were that of a common laborer. The mere fact that he was to receive more wages, devote all .his time, change his location, or receive a different title could have no effect upon the outstanding conclusion that from 1943 to late 1945 he continued to be constantly an employee of defendant and that that employment originated in Kansas City, Missouri, in 1943. That the locus of the agreement as to the new arrangement as to the Detroit office is in doubt can also have no effect upon this fact.

On .this phase of the case the trial court was clearly in error in ignoring the conclusive evidence of the original 1943 employment of the plaintiff and its continuous course and in finding no conflict in the evidence upon the locus of the subsequent agreement, which merely effected a change of location, wages and title of position.

Even though the contract was made in Missouri, the-defendant is not freed from the operation of other sections of the Missouri Workmen’s Compensation Act, which became pertinent to the question still present— whether the plaintiff was covered by such act.

The Missouri Workmen’s Compensation Act provides for two classes of employers, major and minor. By Section 3692, R. S. Mo., it is provided that:

“(a) A major employer shall mean an employer who has more than ten employees regularly employed.

“(b) A minor employer shall mean an employer who has ten or less employees regularly employed.” Now the statutes of Missouri provide generally (Section 3690 E. S. Mo.) that all employers and employees are amenable to the act, subject to certain exceptions involving status and acts of the employers and employees. One of these exceptions is in favor of a minor employer. This exception is found in Section 3693, R. S. Mo., which in effect excludes minor employers from the operation of the Workmen’s Compensation Act'unless the employee has taken steps to have his employer declared engaged in a hazardous occupation (Section 3692 c. E. S. Mo.) or the employer elects by notice to the commission to be so covered, and publishes notice of such election in his place of business. There is no evidence in this case that the plaintiff employee ever served notice on the commission that the defendant was engaged in a hazardous business; in fact plaintiff stated on the witness stand, as hereinbefore set out, that he had not chosen to take benefits under the Workmen’s Compensation Act and “didn’t even know they had any such thing.” The defendant disclaims any coverage in any manner by reason of being a minor employer, and there is no evidence that it even tried to take advantage of the coverage provisions in Section 3693 E. S. Mo.

It is clear from the record that not only did the defendant disclaim the status of a minor employer, realizing that if in that status the plaintiff was not covered by the Workmen’s Compensation Act of Missouri, but the defendant made strenuous efforts to prove that it was a major employer and, hence, amenable to and covered by the act, by its policy of insurance introduced in evidence.

One of the officers of defendant attempted to state' that it was covered by the Missouri Workmen’s Compensation Act, but there was no attempt other than this statement of a conclusion of law, which was excluded from the evidence, to give evidence of the specific acts which would have brought the company within the protection of the act. It is true a policy of insurance was introduced in evidence, but this policy came into effect only for the purposes of this case, as-far as this case is concerned, if the defendant ’was responsible under the Workmen’s Compensation Act.

If the employer was a minor employer, there is-nothing in the evidence to show it was amenable to the act, and that the plaintiff was covered.

Defendant in its brief states that it employed at least 11 employees. No reference to the bill of exceptions supporting this contention is given, and the facts do not sustain it, even if it be conceded the number of employees is not limited to those employed in Missouri. Both plaintiff and an officer of defendant testified the defendant employed some five or six employees in Missouri. The defendant introduced evidence he employed not more than two in Ohio, and this is all the definite evidence on this question. There was evidence indicating that defendant handled a number of jobs in Michigan, Missouri and Ohio, but how many employees-were required to handle all these jobs is left to conjecture. As far as the evidence goes, the eight employees might have handled all the jobs.

It is to be remembered that the burden constantly rested upon the defendant to prove its entire affirmative defense, and there must be some substantial evidence to sustain every portion of it or the court was not in error in excluding it.

The record has been carefully examined, searching for substantial evidence that defendant was a major employer, or, on the other hand, was not a minor employer, not covered by the Workmen’s Compensation-Act of Missouri. This, as indicated, requires that there be substantial evidence of employment of more-than ten employees. (Section 3692, R. S. Mo., supra.) The record fails to show any substantial evidence of such fact.

The ease with which such fact could have been proved, as, for instance, introduction of the records of the company showing its pay rolls, coupled with the absence of such evidence is more than merely significant.

It must be concluded, therefore, that the trial court was correct in withdrawing this defense from the jury,, and, consequently, committed no error in refusing to-present to the jury the special charge and interrogatory predicated upon such affirmative defense. The-fact that such action was predicated upon an erroneous-view of the evidence is not material if other evidence, or the lack of material and relevant evidence justifies-such action.

At the conclusion of all the evidence, the defendant made a motion for judgment. In ruling on this motion,, the trial court stated:

“Now as to the second branch of the motion as to the jurisdiction of the court, the facts show that this was an Ohio corporation with its principal office here in Ohio throughout all of this time and this court is of the opinion that this contract of employment was made in Ohio. There is testimony of some telephone conversation with respect to the transfer to Detroit from Missouri where he had been employed over a period of time, but the business of making this contract, it seems to the court, was conducted here in this state. Now the court also finds as a matter of fact that this defendant company was employing three or more workmen in Ohio under the provisions of the Workmen’s Compensation Act. Now the only question the court had is whether or not there was a choice or an election of remedies. I did have the notion, whether there had been a compliance or not, and there was no compliance with the Workmen’s Compensation Act in Ohio, I did have the notion that whether there was compliance or not, that any workman injured, in.the course of employment was bound to act under the Workmen’s Compensation Act and file a claim with the Industrial Commission of Ohio; however, it seems the court was in error on that as Section 1465-73 seems to cover that, so that as to the second ground of your motion that will be overruled, so the case will go to the jury on the question first, whether there was negligence as claimed on the part of the defendant and secondly, whether such negligence, if any, was the proximate cause.”

Section 1465-73, General Code, provides that certain employers who fail to comply with the Workmen’s Compensation Act of Ohio shall be liable under their common-law liability to employees. The application of this section of the statutes must be considered with Section 1465-68, General Code, supra, which provides that the employee is relegated to his rights under the laws of the state of the employee’s residence if the contract of employment was made outside Ohio.

It will be noted that the court found as an established fact that the defendant employed regularly three or more workmen.

An officer of the company testified that only two persons were regularly employed at the office of the company in Ohio, and that the defendant had not accepted the benefits of the Workmen’s Compensation Act of Ohio.

The trial court was correct in stating that the evidence was conclusive to the effect that the defendant had in service more than three workmen regularly in its business. To escape liability under Section 1465-73, General Code, supra, it was necessary for the defendant to bring itself within the purview of Section 1465-68, General Code, supra. This it attempted and failed to do, as hereinbefore set forth.

Referring now to another claim of error assigned by the defendant, it appears from the bill of exceptions that the court stated to the jury in its general charge:

“The Legislature of our state has prepared a good many laws with respect to the operation of motor vehicles on the highways and streets of our state. It has provided that no person shall operate a vehicle, and by ‘vehicle’ is meant to include a motor vehicle, so as to endanger the life, limb or property of any person while in the lawful use of the streets or highways. No person shall operate a motor vehicle upon the streets and highways at a speed greater or less than is reasonable or proper, having due regard to the traffic, surface and width of the street or highway and of any other conditions then existing, and no person shall drive any motor vehicle in and - upon any street or highway at a greater speed than will permit him to bring it to a stop within the assured clear distance ahead. ’ ’

And, again:

“Now this statute also uses the words ‘assured clear distance ahead’ in connection with the operation and control of an automobile. This language requires that the driver of an automobile have his automobile under such control that he will be able to stop said automobile before striking an object either moving or stationary which is reasonably within his view. It does not how■ever apply to objects projected suddenly into the •driver’s path or view.

“Now I should say to you that when the Legislature passes a law requiring the doing or not doing of a certain thing, the violation of that law is considered "to be negligence in itself, that is negligence per se; so ■that you will take into consideration these laws or rules which I have read to you in determining the first issue which you must decide, whether or not the defendant was negligent as that term has been defined •to you and in the manners claimed by the plaintiff.”

There was no evidence in this case that there was .•any object in the path of the automobile if it had pro•ceeded on the right-hand side of the road around the ■curve. The object with which the vehicle collided was .a post off the road and which was not within what is reasonably considered the assured clear distance .ahead. Had the automobile remained on the road there was nothing to impede its progress no matter at what speed it was moving.

The question of assured clear distance ahead was .not in the case. We are cited to no case justifying .a charge upon the issue of assured clear distance ;ahead involving circumstances similar to those here •considered, or do we find any such case. On the contrary, it is apparent from the cases in which its use has been approved that it has no application to the instant case. Gumley, Admr., v. Cowman, 129 Ohio St., 36, 193 N. E., 627; Kormos v. Cleveland Retail Credit Men’s Co., 131 Ohio St., 471, 3 N. E. (2d), 427; Smiley v. Arrow Spring Bed Co., 138 Ohio St., 81, 33 N. E. (2d), 3, 133 A. L. R., 960; Thompson v. Kerr, 39 Ohio Law Abs., 113, 51 N. E. (2d), 742.

Strictly speaking, the matter of the assured dear-distance ahead was not an independent issue, but rather involved an act or course of conduct which’ might be considered negligence per se, and, therefore, sustain the specification of negligence pleaded.

The petition specifically charged violation of the-assured-clear-distance-ahead statute. The jury should' have been instructed that there was no evidence sustaining this specification of negligence. • On the contrary, in spite of the fact that such was the case, the jury was charged directly upon this specification of' negligence. To charge upon an issue not presented by the evidence or upon facts not proved or upon a specification of negligence not sustained by evidence,, constitutes error on the part of the trial court. 39' Ohio Jurisprudence, 952, “Trial,” Section 267.

The automobile of the defendant’s employee collided with a post off the traveled part of the highway, and only after it had left such traveled path and which would have been taken by the vehicle if it had not skidded off the road. The jury might well have concluded that some additional burden rested upon the defendant by reason of the presence of this post, and that the employee was guilty of negligence per se if he did not drive at a speed which under any circumstances would prevent collision with such post. If such negligence per se was thus established, the only other questions would be proximate cause and damages.

On the other hand, the jury might have had difficulty in finding mere negligence proven by reason of the conflicting evidence upon the speed of the car, and whether it was driven at a reasonable speed. Such being the case, it must be concluded that the injection of this specification of negligence into the case in the absence of any evidence justifying its presentation to the jury constitutes error, prejudicial to the defendant, requiring a reversal of the judgment of the trial court.

No other error is found in the record.

The judgment is reversed and the cause remanded for a new trial.

Judgment reversed.

Matthews, P. J., Ross and Hildebrant, JJ., concur in the syllabus, opinion and judgment.


source: Caselaw Access Project

author: Hurd, P. J.

license: Public Domain

text:
    Holmes, Admr., Appellee, v. Republic Steel Corp. et al., Appellants. Holmes, Admr., Appellant, v. Republic Steel Corp. et al., Appellees.

      (Nos. 20640 and 20641
    Decided November 15, 1948.)

      Mr. David Perris, for appellee and appellant Godfrey Holmes, administrator.

      Messrs. Jones, Day, Cockley dt Reavis, Mr. Earl W. LeVever and Mr. Curtis C. Williams, for appellants -and appellees Republic Steel Corporation and Tom M. Girdler.

      Mr. Thomas F. Patton, for Republic Steel Corporation.
   Hurd, P. J.

This is a derivative action in equity for •cancellation, accounting and equiiable relief, commenced in the Court of Common Pleas of Cuyahoga •county by Hannah S. Holmes, who was then the own-fir of 12 shares of the common capital stock of the Republic Steel Corporation, against the corporation and Tom M. Girdler, chairman of the board of directors and ■chief' executive officer. While the suit was pending in the Common Pleas Court the plaintiff died and the action was revived in the name of Godfrey Holmes, the administrator of her estate, as substitute plaintiff. For purposes of convenience we shall hereinafter refer to the individual defendant as Girdler and the corporate defendant as Republic.

The issues as presented to this court for decision ■ arise by reason of two separate appeals on questions -of law and fact as follows:

Appeal No. 20640 is by defendant Girdler and is from the judgment of the Common Pleas Court which held invalid and without corporate authority a payment of $51,000 to him by Republic in addition to his salary of $175,000 for the year 1940.

Appeal No. 20641 is by the plaintiff and is from that part of the judgment of the trial court which held valid a pension plan set up on April 15, 1937, by Republic for 80 corporate officers and their employees including the individual defendant Girdler.

In the original action the plaintiff also attacked the legality of the fixed salaries paid by Republic to Girdler, alleging that the same were “excessive, unreasonable and unconscionable.” The trial court found for defendants on this issue and from that portion of the court’s judgment no appeal has been filed.

These appeals are submitted de novo upon the pleadings as amended and upon the testimony taken and evidence presented before a master commissioner appointed by this court for that purpose upon application duly made and allowed.

The record before us is voluminous and presents a wealth of factual data contained in three large volumes of testimony and documentary evidence in the form of numerous exhibits. Many witnesses testified for defendants before the master commissioner who were not called to testify in the trial below, so that by reason of the additional evidence presented in this court, we have before us a much more extensive record than that produced in the original trial of the case in the Common Pleas Court.

There are two principal questions for our determination :

1. Whether the additional compensation paid by Rejiublic to Girdler at first in the form of an annuity, later reduced to cash, in the sum of $51,000 was unlawful as an ultra vires act (20640).

2. Whether a contract between Republic and Girdler executed in the year 1937 in pursuance of a general pension plan adopted by Republic was a valid exercise of corporate powers (20641).

As hereinbefore indicated, the trial court decided the first question in favor of plaintiff and rendered judgment against defendant Girdler for the benefit of Republic in the sum of $69,225.86 (which included interest) and costs as having been paid “illegally and without authority.”

The Common Pleas Court decided the second question in favor of defendant Girdler, finding that “the pension plan entered into is a valid, binding and en-forcible contract.”

In arriving at its conclusions on the second question, the Court of Common Pleas held the pension plan valid, including the contract with defendant Girdler on three grounds, namely:

(1) That the plan was expressly approved by the requisite vote of the shareholders at a meeting at which approximately 5,500 shares were represented in person and 3,000,000 shares were represented by proxy and that thereafter, the board of directors by appropriate action authorized the execution of the necessary documents to carry into effect the plan approved by the shareholders and that all the proceedings in respect thereof were in accordance with the applicable statutes of New Jersey, the domiciliary state of defendant Republic.

(2) That the plan was lawfully adopted under the implied powers of Republic, even if it were not expressly authorized by the statutory law of New Jersey.

(3) That the doctrine of estoppel applied in that plaintiff’s decedent had executed a proxy covering her shares which by her authority were voted in favor of the plan.

We have examined the record, considered the arguments and briefs of counsel and have unanimously concluded that the contract between Republic and Girdler, executed in the year 1937, in pursuance of a general pension plan adopted by Republic, was a valid exercise of corporate powers and that therefore the decree should be for defendants as in Common Pleas Court on appeal No. 20641 on the three grounds aforestated, and upon authority of the statutes and eases cited and quoted in the opinion of Orr, J., on this phase of the ease, as follows:

Title 14:9-1, General Corporation Law of New' Jersey; Watson v. Watson Mfg. Co., 30 N. J. Eq., 588; Gurney v. Atlantic & Great Western Ry. Co., 58 N. Y., 358; Title 14:7-1, General Corporation Law of New Jersey; Heinz v. National Bank of Commerce, 237 F., 942; Gilbert v. N. & W. Ry. Co., 114 W. Va., 344, 171 S. E., 814; Mabley & Carew Co. v. Borden, 129 Ohio St., 375, 195 N. E., 697.

This leaves for our further consideration only the first pi’incipal question above set forth, namely the matter of the additional compensation paid to Girdler by Republic during 1940.

There are certain facts concerning which there appears to be no dispute and which may be detailed briefly as follows:

A company known as Republic Iron & Steel Company was organized in 1899 under the laws of New' Jersey. Thereafter on April 8, 1930, a merger was effected which included Central Alloy Steel Corporation, Interstate Iron & Steel Company, Donner Steel Company, Inc., and The Bourne-Puller Company, with the corporate name of Republic Steel Corporation. Thereafter Republic acquired a number of other companies so that it now ranks as the third largest steel company in the world.

Plaintiff’s exhibit 17 which is the annual report of Republic for the fiscal year ending December 31, 1940, shows that the business of Republic ranges from the mining of iron ore, coal and other raw materials to the manufacture, sale and distribution of a widely diversified line of finished and semi-finished iron and steel products and by-products.

The same annual report also shows that in 1940 the corporation had a gross income in excess of $300,000,-000, a gross profit in excess of $62,000,000, a consolidated net income after all charges in excess of $21,-000,000 and a pay roll in excess of $97,000,000 aud that in the same year it paid taxes in excess of $16,000,000 and paid dividends on its three classes of stock aggregating in excess of $6,000,800. It had assets of a value in excess of $400,000,000 and employees numbering in excess of 60,000 persons who were employed in 35 different states.

The report shows also that the corporation has plants in Cleveland, Youngstown, Warren, Niles, Canton, Massillon, Newton Palls and Elyria, Ohio; Buffalo, Brooklyn and Troy, New York; Chicago, South Chicago and Moline, Illinois; Gary and Indianapolis, Indiana; Monroe, Michigan; Pittsburgh, Beaver Palls and Philadelphia, Pennsylvania; Hartford, Connecticut; Birmingham and Gadsden, Alabama; and Ha.mil-ton, Ontario, Canada. It had warehouses and sales offices in nearly every state of the Union. It had 11 iron ore mines in Minnesota, Michigan, New York and Alabama and eight coal mines in Pennsylvania and Alabama. It also owns or controls 15 subsidiary companies engaged in allied businesses, and has a substantial investment in several others. According to the same report, in 1940 Republic had outstanding 282,303.5 shares of its prior preference stock, 119,597 shares of its convertible preferred stock and 5,834,289.9 shares of its common stock.

The defendant, Girdler, came to Republic on April 8, 1930, as chief executive officer. At first he was president and chairman of the board of directors; in 1937 he gave up the office of president and was retained in his position as chief executive officer of the corporation in the capacity of chairman of the board of directors and chairman of the executive committee. Since 1930 to the time of trial herein (except for an interim during World War II) he devoted his entire time to the duties of his office and the business of the corporation.

The record before us discloses in great detail the activities of the defendant in the active management of the affairs of the corporation and in the direction of the officers of Republic so that there can be no doubt on the uncontradicted testimony that defendant Girdler was in fact, as well as in name, the directing head of Republic’s business at all times during the period under consideration, under the authority of the board of directdrs.

At a meeting of the board of directors held on April 10, 1940, in New York City, the following resolution was adopted:

“The chairman submitted a list of the officers of the corporation, with their present salaries; Mr. T. M. Girdler, retired from the chair and Mr. R. J. Wysor presided. Upon motion duly made, seconded and carried, Mr. Girdler not voting, the salary of Mr. T. M. Girdler as chairman was fixed at the rate of $175,000 per year, plus any additional amount, if any, as the board of directors ' may determine prior to December .92, 1940." (Emphasis added.)

Thereafter, in a meeting of the board of directors held on December 23, 1940, in New York City, the following resolution was adopted:

“The chairman stated that he desired to present to the meeting the desirability of having the corporation purchase deferred annuity contracts, having no cash surrender value, on the lives, of the five chief executive officers of the corporation in an aggregate amount not exceeding $149,500 and the delivery of such contracts to said officers as additional compensation for the calendar year 1940.”

At the same meeting the following resolution was adopted:

“Resolved, that Republic Steel Corporation purchase deferred annuity contracts, having no cash surrender value, on the lives of the following named officers of the corporation, in the respective amounts set opposite the name of each officer, to wit:

Tom M. Girdler 50,000

Rufus* J. Wysor 37,000

Norris J. Clarke 25,000

Charles M. White . 25,000

Myron Arms Wick 1 12,500.”

The resolution then provided for the execution of the contracts and payments of the premiums required and concluded :

“Resolved, further, that the treasurer of the corporation lie * * ■ * authorized and directed to pay to Tom M. Girdler as further additional compensation for services rendered by him to the corporation during the calendar year 1940, the sum of $1,000.1 ’

The record shows that later the annuities being found taxable, they were surrenderd and cash paid to the various officers, including Girdler, in lieu of the annuities. On this basis the total additional compensation paid to defendant Girdler was $51,000 during the year 1940.

During the course of the trial the general counsel for Republic explained the nature of the annuity contract and how it was entered into and terminated, as follows:

“In 1940 the directors, in accordance with the reservation they made at the time they fixed the salary for the year, voted additional compensation because of the excellent showing of the company for that year; but instead of paying it in cash they delivered an annuity contract for which the company expended $50,000. That- was done mainly on my advice to the directors in the hope that there would be no immediate income tax payable on that, but the income tax would be deferred until the annuity was received later under certain existing rules. 1 thought that could be done. However, when the returns were examined, the Federal Revenue Inspectors assessed the deficiency, claiming that it was additional compensation taxable immediately. We went to the Board of Tax Appeals and the Board upheld the Commission. As a result these men were called upon to expend considerable money in paying the deficiency taxes, so they surrendered the annuity to get the money to pay the tax, so it wound up as though they got the money and paid the tax in the first instance.”

In this appeal we are not called upon to determine whether the total compensation paid to defendant Girdler during 1940 was reasonable under all the circumstances because the parties themselves have stipulated in respect thereof as follows: (Stipulation No. 2, page 645 of record) :

“That the total of the amounts received by the defendant Tom M. Girdler for the year 1940 — consisting of the sum of $175,000 paid to him in regular monthly installments during that year 1940, and consisting further of the annuity purchased for him at a cost of $50,000 as well as the further sum of $1,000 paid in cash during December of 1940 — was wholly reasonable in amount, having regard to the value of the services rendered by him as chairman of the board of directors of the defendant Republic Steel Corporation, and that there is no issue whatsoever herein, either as regards the reasonableness of the sum of $175,000 mentioned in the minutes of the meeting of the board of directors of April 10, 1940, or as regards the total figure of $51,000 mentioned in the minutes of the meeting of the board of directors of Dec. 23, 1940.”

Neither do we have any question of claimed fraud or deceit in respect of the action taken, there being no charge by plaintiff that the conduct of the directors in awarding additional compensation was a fraud upon the corporation or its shareholders in any manner whatsoever. On the contrary it was stated positively that no such claim was being made.

However, counsel for plaintiff contends that the sum of $51,000 was paid Girdler without authority; that such amount by way of additional compensation “was not fixed according to law and was otherwise illegal”; and that in the allowance and payment thereof the directors were guilty of ultra vires acts. On the other hand, the defendants contend that the 1940 plan of .additional compensation was lawful and not ultra vires; that the rate of Girdler’s compensation was ■properly established; and that it was “wholly proper for the board of directors by prior resolution to reserve the right to a ward additional compensation commensurate with corporate success.”

At the time of this action by the directors, Chapter •3 of the general corporation laws of the state of New Jersey as revised in 1937, defining the powers of New Jersey corporations in respect of appointment of officers and the fixing of their compensation, read in part as follows:

“14:3-1 Powers Generally: Every corporation shall have power to:

“e. Appoint such officers and agents as the business •of the corporation may require and fix their compensation # *

The pertinent part of the bylaw adopted by the board of directors of Republic, under the provisions of the New Jersey statute above quoted is bylaw No. 11 as follows (Excerpts from Bylaws of Republic Steel Corporation, May 30, 1930, defendant Girdler’s Exh. 18):

“The officers of the company shall be a chairman of the board of directors, a president (the foregoing to be chosen from the directors) one or more vice-presidents * * *. The term of office of every officer shall be from the date upon which he shall be chosen, •until the first meeting of the directors after the next ■annual meeting of the stockholders, and until his successor in office shall be chosen. * * * The compensation •of all officers shall be fixed by the board of directors -or executive committee.”

Bylaw No. 12 defining the duties of the chairman of the board is as follows:

“No. 12. The chairman of the board shall be the chief executive officer of the corporation. He shall preside at all meetings of the stockholders and of the-board of directors and of the executive committee and' shall perform all such other duties and exercise all such other powers as are usually incident and pertain to-the chief executive officer of a corporation, as well as such other duties and powers as the board of direetorsmay from time to time prescribe.”

The general counsel of Republic explained also the-action taken in the directors’ meeting of April 10, 1940,. based upon the discussion which took place in his presence at that meeting, and in respect thereof he testified as follows:

“The directors * * * stated that the company had been doing increasingly well and that the outlook for the year was very good. They thought that the key people of the company should be rewarded for the-performance of the company if their expectations were-realized. They did not, however, want to increase the fixed minimum obligations of the company until they saw what the results of the year would be.”

The same witness testified further:

‘ ‘ The directors discussed among themselves and with-me, and in my presence, the fact that the prospects for the year looked good and they expected to make a considerable amount of money unless something unforeseen developed. I recall one or two mentioning the-fact that war had broken out in Europe and that if that should cease suddenly or something should happen, the realization might not come true and they stated that if the company did better than the year before, they wanted to and would pay extra compensation for the year to the key employees of the company- and they said that they did not at that time want to> determine the amount; they wanted to wait until the year’s results were ascertainable before they fixed the amount that they would pay in the event the company did better than the year before. ’ ’

With respect to the preparation of the corporate minutes after the action taken at the meeting, the witness testified:

“The words ‘if any’ were inserted, of course, by myself. I intended by those words in a clear and concise manner to indicate that if the company had a good year in 1940, that is as good a year or a better year than they had in 1939, the corporation by this action would unequivocally and definitely bind itself to pay .additional compensation to Mr. Girdler and to the ■other eleven people involved, in December, 1940, based •on the results of the year, the amount to be determined by the board on the basis of the efforts set forth by the employees and the results of the year; and that if the corporation did not have a good year in 1940, that is, if the year was less prosperous than it was in 1939, there would be no obligation on the part of the directors to pay additional compensation to Mr. Girdler or the other men involved in 1940.”

We have thus detailed the testimony of the general counsel for Republic at some length because we find upon an examination of the entire record complete corroboration thereof in substance by all the directors present at the meeting of April 10, 1940, who testified on this appeal.

With respect to defendant Girdler, we find credible ■evidence undisputed in the record that during 1929 his last year with Jones & Laughlin Steel Company, he received a total compensation in excess of $359,000; that there was a general understanding when he came to Republic at a reduced salary of $150,000 per annum. in 1930, that, dependent upon the success of his efforts and the financial success of the corporation, there would be compensation in addition to the regular salary ; and that a plan of additional compensation would eventually be established, dependent upon results accomplished by way of increased corporate savings. The defendant Girdler, testified in substance to the effect that he was absent from the meeting room on April 10, 1940, when the subject of his own compensation was under consideration; that when he returned to the room he was informed by the spokesman for the board that his compensation had been fixed at $175,000 and that the directors had decided that if the corporation had a “good year” and prospects looked very good, there would be additional compensation for the key employees of the company, but that no amount was fixed and there was no discussion of the amount; and that he considered himself a key employee and that he worked in reliance on that statement and that he fully anticipated he was going to have additional compensation for the year 1940.

The record shows that similar resolutions were adopted in favor of the president, the vice-president in charge of sales; the vice-president in charge of operations; and that each officer respectively refrained from voting on the resolution which affected him. All this testimony stands undisputed in the record. However, counsel for plaintiff points to an answer by Girdler while under cross-examination in the trial below, incorporated in the record before us, to the effect that he did not have an agreement for additional compensation and argues that there was not an agreement either express or implied, for want of mutuality. We think this point is not well taken on the facts. The question asked of Girdler called for a conclusion of mixed law and fact and Girdler by way of explanation of Ms answer on tMs appeal clearly indicated a reliance upon the promise of the directors for additional compensation in some amount to be fixed by the directors within their discretion, contingent upon increased earnings for the year in question. This explanation is entirely compatible with the facts, as shown by the record on this appeal.

We hold the view which was also expressed by the trial court, that courts of equity in consideration of issues such as are here presented, must consider each ■case separately on its merits, based entirely upon the particular set of facts as disclosed by the evidence, applying thereto well defined principles of equity jurisprudence.

Considerable discussion was had by counsel in this case with respect to the words “fix their compensation” as the same appears in the general corporation laws of New Jersey and the words “compensation shall be fixed” as the same appear in bylaw No. 11 of Republic. Counsel for plaintiff argues in effect that the meaning of the word “fix” is such as to render void that part of the resolution adopted by the board of directors in April, 1940, which leaves as a matter of discretion with the board the allowance of additional compensation within the year. We do not agree with this contention.

In our opinion the word “fix” as here used, taking into consideration the entire context, merely connotes “to determine,” “to allow,” “to settle,” or words of like import. If we construe the resolution in its entirety, giving to the words their plain ordinary meaning, we must give effect to the words “plus any additional amount, if any, as the board of directors may determine prior to December 31, 1940.” Hence the word “fix” which by the terms of the resolution applied to the words'“salary * * * at the rate of $175,000' per year ’ ’ must have equal application to the' words-“plus any additional amount * *

It is our conclusion, based upon the evidence, that the additional compensation provided for by the words “plus any additional amount, if any, as the board of directors may determine, prior to December 31” constituted nothing less than an implied contract for payment of reasonable compensation, in addition to the-stated salary, which was considered the minimum contingent upon the discretion of the members of the board of directors as to amount and conditioned upon whether the earnings of the company justified such, action based upon the factors involved.

The facts of the instant case are closely analogous, to the facts in the case of Church v. Harnit, 35 F. (2d), 499, decided by the Circuit Court of Appeals, 6th Circuit (Certiorari denied 281 U. S., 732, 74 L. Ed., 1148, 50 S. Ct., 247), the sixth paragraph of the syllabus being as follows:

“6. President of corporation held entitled to retain bonus payment, even though allowances made by board of directors were void, where total compensation paid was reasonable, and there was no fraud, since under such circumstances president should not be required to refund bonus payment and seek relief on theory of quantum meruit. ’ ’

In the same case, commencing on page 501, the court, through Hickenlooper, J., says:

“From the very inception of defendants’ association with the company it was understood by each of them, as well as by the boards of directors from time to time, that the fixed salary should be considered as the minimum compensation for services rendered, and ■that each of the defendants should be entitled to receive additional allowances, more fully compensating them for their services, in the event that the affairs of the corporation prospered. Bonuses of varying amounts were paid to one or more of the defendants each year from 1901, increased in amount with the increasing success of the business, and may be said to have no more than brought the total compensation. paid, salaries and bonus, to a close approximation of what was paid elsewhere for similar services in the same line of business. There is no contention on the part of the plaintiff-appellant that the defendants received more in the way of salary and bonus than the fair value of their services. The business was managed with marked efficiency. Each of the defendants applied himself with peculiar energy and ability to his particular task. Each served through the succeeding years with the understanding and expectation that he would receive additional compensation if his loyalty and industry merited, and the success of the business warranted, such allowances. The company would now be estopped to deny that such was the contract of employment. Letta v. Cincinnati Iron & Steel Co., 285 F., 707 (C. C. A. 6). Otherwise expressed, the agreement of employment was not for a fixed salary but for a minimum salary, with the maximum to be determined upon principles of quantum meruit and consistent with the success of the business.

“Under the foregoing circumstances, we are of the opinion that the corporation, in whose interest and on whose behalf the plaintiff files his bill, must be held to have contracted with the defendants for the payment of reasonable additional compensation or bonus. There is nothing’ illegal dr against public policy in such a contract. Cf. National Loan & Invest ment Co. v. Rockland Co., 94 F., 335 (C. C. A. 8); Metropolitan Rubber Co. v. Place, 147 F., 90 (C. C. A. 2); Tietsort v. Irwin, 9 F. (2d), 65 (C. C. A. 6) ; Rowland v. Demining Exploration Co., Trustees, 45 Idaho, 99, 260 P., 1032; Girard v. Case Bros. Cutlery Co., 225 Pa., 327, 74 A., 201; Putnam v. Juvenile Shoe Corp., 307 Mo., 74, 269 S. W., 593, 40 A. L. R., 1412.

“The one essential requirement in such cases is that the services shall not only be valuable, but that they shall have been rendered with the understanding and intention that they were to be paid for or under such circumstances as would raise a fair presumption of such intention. Fitzgerald & Mallory Construction Co. v. Fitzgerald, 137 U. S., 98, 111, 11 S. Ct., 36, 34 L. Ed., 608; Pew v. First National Bank, 130 Mass., 391, 395; St. L., Ft. S. & W. R. R. Co. v. Tiernan, 37 Kan., 606, 621, 622, 15 P., 544.”

Without repeating the facts at length, it would appear that the facts in the case at bar are even stronger in favor of the officer-director than those involved in Church v. Harnit, supra, particularly in view of the-express language used in the resolution. It is true that the history of Girdler’s relations with Republic does-not extend over a like period, but in other respects the-analogy is clear.

Another ease in point is National Loan & Investment Co. v. Rockland Co., 94 F., 335, decided by the U. S. Circuit Court of Appeals, 8th Circuit, where the-court, speaking through Sanborn, J., says in part at page 338:

“But such officers, who have rendered their services under an agreement, either express or implied, with the corporation, its owners or representatives, that they shall receive reasonable, but indefinite, compensation therefor, may recover as much as their services are worth; and it is not beyond the powers of the board of directors to fix and pay reasonable salaries to them after they have discharged the duties of their offices. Missouri River Co. v. Richards, 8 Kan., 76, 81; Rogers v. Railway Co., 22 Minn., 25, 27; Railroad Co. v. Tiernan (Kan. Sup.), 15 Pac., 544, 553; Stewart v. Railroad Co., 41 Fed., 736, 739; Rosborough v. Canal Co., 22 Cal., 557, 562.”

See, also, Dalton v. Brush Electric Light Co., 7 C. D., 141, 142, 13 C. C., 505, affirmed without opinion by the Supreme Court, 60 Ohio St., 594, 54 N. E., 1098, and the New Jersey cases of McKann, Jr., Prosecutor, v. Town of Irvington, 133 N. J. Law, 63, 66, 42 A. (2d), 391, 393; judgment affirmed 133 N. J. Law, 575, 45 A. (2d), 494 (1946); Tice v. City of New Brunswick, 73 N. J. Law, 615, 64 A., 108 (1906); and Warren v. Hudson County, 23 N. J. Misc., 252, 263, 43 A. (2d), 785, 792.

The record shows that the services of (rirdler were valuable in his capacity as chairman of the board and chief executive of Republic and that the services wore rendered in reliance upon the promises of the directors as indicated by their action at the meeting of April 10, 1940, and as exemplified by the resolution in evidence.

We have hereinbefore referred to the stipulation that the sum paid under color of the resolution under all the circumstances was reasonable and that it is conceded that there was no element of fraud in the transaction. We are, therefore, of the opinion that the action of the directors was not ultra vires either under the statutory law of New Jersey, the bylaws of the corporation, or under principles of equity jurisprudence.

It is our opinion as hereinbefore indicated, that the principles enunciated in the cases of National Loan & Invest. Co. v. Rockland Co., supra, and Church v. Harnit, supra, fully support this conclusion. It should be observed we think, that the trial court, in attempting to distinguish between those cases and the facts of the instant case, did not have before it the additional evidence which we have before us on this appeal.

The claim has been made by plaintiff that this court cannot consider the testimony of the directors as to that which was said and done at the meeting of the board of directors on April 10, 1940, on the ground that such parol evidence tends to contradict or vary the terms of a written agreement. We are not in accord with this view. The testimony of the directors was not introduced for the purpose of varying or contradicting the terms of a written contract. It is our view that the agreement of the parties was in fact consummated at the meeting of April 10, 1940, so that it is competent to show by parol evidence what transpired at the meeting. The corporate resolution was prepared at a later date by the general counsel, and is in briefest form merely prima facie evidence of the proceedings and the conclusions reached at the meeting. We do not find any provisions in the laws of New Jersey or the bylaws of Republic which would indicate that the resolution on its face is ultra vires. However, in a case such as this, where the action of the board of directors is challenged, evidence of that •which was said and done at'the meeting is competent to show the actual facts. This is particularly true in cases where the true meaning is indefinite, ambiguous, or if the minutes appear on the face to be incomplete or otherwise fail to show what actually transpired. See 5 Fletcher Cyclopedia Corporations, 532, 533, Section 2198.

Referring once again to the case of Church v. Harnit, supra, the court said (at page 502):

‘4 In the instant case there was. an express understanding between the corporation and each of the defendants as to additional compensation which is entirely consistent with the also express contract as to a minimum compensation. The evidence of this understanding was not introduced for the purpose of varying a written contract, but rather for the purpose of defining the true terms of employment. The contracts of all, with the possible exception of that with Iiarnit lay in parol, and it was permissible to show the extent to which the fixed salary was intended to compensate for services as establishing the terms of such contract. No formal action by the board was necessary. It is sufficient if there was a clear and well-defined understanding. Chabot & Richard Co. v. Chabot, 109 Me., 403, 84 A., 892; Young v. U. S. Mort. & Tr. Co., 214 N. Y., 279, 285, 108 N. E., 418; In re Super Trading Co., 22 F. (2d), 480 (C. C. A. 2).”

We have here a case of a prior resolution in April, 1940, reserving the right to award before the end of the year additional compensation or bonus, contingent in amount within the discretion of the board of directors and dependent upon and commensurate with corporate earnings with actual notice thereof to Girdler, and acceptance thereof by him. In our opinion the gross income of Republic in excess of $300,000,000, the gross profit in excess of $62,000,000, the consolidated net income, after all charges, in excess of $21,000,000 certainly would be sufficient to justify the additional award in December, based upon the previous resolution adopted in April.

In our opinion, the adoption of the prior resolution in April, 1940, evidentiary of the understanding of the parties providing for a minimum salary 4 4plus any additional award, if any, as the board of directors may determine prior to December 31, 1940,” had the effect of validating the action later taken in December, 1940, in pursuance thereof, so long as such action was free from any taint of fraud and the additional amount allowed by way of additional compensation or bonus was in all respects reasonable under the facts and circumstances then and there existing.

Furthermore, the record shows here, as in Church v. Harnit, supra, based on results accomplished, that the business was managed with marked efficiency; that the total compensation paid, both salary and bonus, was a close approximation of that which was paid elsewhere for similar services in the same line of business, and that there is no contention on the part of the plaintiff that Girdler received more in the way of salary and bonus than the fair value of his services.

We think that on principle and authority the action of the directors in awarding additional compensation, based upon the record before us must be sustained.

It is our conclusion based upon the evidence before us on this appeal that this court of equity would not be justified in setting aside the award of additional compensation in the absence of a claim that the same was unreasonable or that there was fraud in the transaction. It being stipulated that the amount was reasonable and it being conceded that there was no fraud involved, we are of the opinion that the defendants are ■entitled to a finding and decree in their favor on appeal No. 20640.

For the reasons stated, an order and decree may be ■entered finding for defendants on both appeals (Nos. 20640, 20641).'

Judgment accordingly.

Morgan and Skeel, JJ., concur.


author: By the Court.

text:
    The Liberty Folder Co., Appellee, v. Anderson et al., Appellants.
    (No. 145
    Decided January 19, 1949.)

      Messrs. Pickrel, Schaeffer & Ebeling and Messrs. Cummins <3 Boiler, for appellee.

      Mr. Sidney G. Kusworm, Mr. D. F. Mills, Mr. Rodney R. Blake, Mr. Robert D. Touvelle and Messrs. Myers <3 Myers, for appellants.
   By the Court.

This cause is submitted on motion of plaintiff, appellee herein, to dismiss the appeal on questions of law and fact, and, also, to dismiss the appeal.

The court ordered the receivers to sell certain real estate in which the defendants, appellants herein, have an interest, “free and clear of dower interest of the defendant, Mary J. Anderson, in and to said real estate,” and further ordered that the claim of Mary J. Anderson arising by dower interest “be transferred to the funds received by said receivers from the-sale of said real estate with the same priority and effect as though they had attached to the original property.” From that order this appeal was taken.

Clearly, this is not a chancery matter and a trial de novo may not be had. Eaton v. Robison, 47 Ohio App., 436, 192 N. E., 132.

The appeal on questions of law and fact will be dismissed. The court will retain the case for hearing-on appeal on questions of law. Section 12223-22, General Code. Under Section 11564, General Code, the court is required to make an order respecting the filing of a bill of exceptions.

It is claimed in the brief of plaintiff that a bill of' exceptions has been filed, although the transcript of the docket does not disclose it. If a bill has been filed in this court, an order is made to refile it in this court within three days from the date this entry is journalized. If the bill has not been filed, then the court orders such bill to be filed in conformity to Supplement to Rule VII effective January 1, 1949.- In all events,, the court orders assignments of error and briefs to be filed in conformity- to Supplement to Rule VII.

The motion to dismiss the appeal on the ground that appellants failed to file their briefs within 50 days after filing notice of appeal as provided in Rule VII, is overruled. So long as this appeal stood as an appeal on questions of law and fact Rule VII had no application. Rule VII applies only to an appeal on questions of law.

Judgment accordingly.

Wiseman, P. J., Miller and Hornbeck, JJ., concur.


text:
    The J. C. Hockett Co., Appellee, v. Simmonds, Appellant.
    (No. 7021
    Decided January 10, 1949.)

      Mr. Louis R. Sebear, for appellee.

      Messrs. Freiberg & Simmonds, for appellant.
   Ross, J.

This is an appeal on questions of law from a judgment of the Court of Common Pleas of Hamilton county, affirming a judgment of the Municipal Court of Cincinnati, in favor of the plaintiff.

The plaintiff, a corporation engaged in the business of owning and operating an elaborate jewelry store in the heart of the business district of the city of Cincinnati, accepted a check drawn by the defendant in payment of a thirty-dollar purchase and gave the person presenting and endorsing the check $119.25, the difference between the amount of the purchase, plus tax, and $150, the face value of the check. When the check was presented through channels to the drawer’s bank for credit it was found that payment had been stopped by the drawer. The plaintiff now brings this action against the drawer of the cheek to recover the sum of $150, plus interest and costs.

The answer was essentially a general denial.

It appears from the evidence that the defendant was induced to give the check in question to a person who represented herself to be “Sarah McMillan,” who was accompanied by another woman. Shortly after such person with her companion had left with the check it was discovered that the consideration for the check did not exist and that the representations made by the women inducing the defendant drawer to part with the check were wholly false and fraudulent. The check was given to the woman representing herself to be “Sarah McMillan” at the request of her companion, late Friday afternoon after banking hours. Payment' was stopped on the check by the defendant drawer at the opening of the drawee bank on Saturday morning, the next day following. That same Saturday afternoon, after the close of banking hours, two women entered the store of the plaintiff and made-a purchase of a pen priced at $30. One of the women represented to the saleslady that she was “Sarah McMillan” and tendered the defendant’s check for $150 to the saleslady in payment of her purchase, endorsing the check in the latter’s presence, “Sarah McMillan, William H. Taft Road.”

It is admitted by all concerned that the person so-endorsing the check and tendering it as “Sarah McMillan” was not the person to whom the check was given by the drawer, as “Sarah McMillan.” Nor was such endorser present when the check was given to-“Sarah McMillan.” The payee of the check receiving the check from the drawer defendant, understood by the drawer to be “Sarah McMillan” in no way resembled the endorser of the check from whom the plaintiff’s employee received the check. This endorser identified herself to the saleslady by presenting a “billfold,” containing a photograph, a driver’s license, containing the signature “Sarah McMillan,”' and “other documents.” The “billfold” and its contents were taken to the manager of the store, who authorized acceptance of the check after examination of' its contents, and glancing at the endorser. No other attempt was made by the plaintiff’s employees to ascertain whether the person, to whom was given the merchandise and the balance of the amount of the check, was the actual payee intended by the drawer.

The trial court found as a fact that the companion of the payee at the time the check was delivered by the drawer was the companion of the person who represented herself to be “Sarah McMillan” to the plaintiff’s employees, and who endorsed the check, but that. the recipient of the check from the drawer was aot present in plaintiff’s store at the time plaintiff made payment thereon. In other words, the companion of the real payee was also the companion of the endorser ■of the check who received the' value of the check in merchandise and cash from plaintiff’s employees.

There was other evidence introduced indicating that this “companion” was present at other times and places when other checks given by the drawer defendant to the payee “Sarah McMillan,” coincident with delivery of the $150 check herein involved, were cashed by storekeepers, but that these women impersonating the payee were different in each case.

If the plaintiff had paid value upon the endorsement of the actual payee of the check, it would have been protected as a holder in due course. 10 Corpus Juris ■Secundum, 1089, Bills and Notes, Section 494 b; 8 American Jurisprudence, 314, Bills and Notes, Section 602.

See Continental-American Bank & Trust Co. v. United States, 161 F. (2d), 935; Schweitzer v. Bank of America, 42 Cal. App. (2d), 536, 109 P. (2d), 441.

The fact remains that the plaintiff did not pay to the actual intended payee of the check, who may have been an impostor. Nothing that the drawer did can be ■construed as an act misleading the plaintiff into paying to a person other than the real payee.

It is almost inconceivable that astute persons engaged in business, daily dealing with the public, conscious of the prevalence of persons who prey upon the credulity of citizens, could pay a woman entirely unknown, the proceeds of a check, presented after banking hours when it was impossible to check the validity of the instrument presented, and with but a •cursory examination of papers, easily forged, which might or might not identify such person. The presT ence of signs in many establishments upon which is-stated “No checks cashed here” indicates that not all persons engaged in business are so credulous.

The law requiring payment to the actual person whom the drawer intends and designates in a check as payee is well established. Beattie v. National Bank of Illinois, 174 Ill., 571, 51 N. E., 602, 66 Am. St. Rep., 318, 43 L. R. A., 654. In this case it is stated at pages-575 and 576:

“Nothing is -better settled than that a forged indorsement does not pass title to commercial paper negotiable only by indorsement, and does not justify the payment of such paper. Here, whether the indorsement of the payee’s name was technically a forgery,, or was merely a spurious and false indorsement, in either case it was inoperative to change the title to the instrument. (Graves v. American Exch. Bank, 17 N. Y., 205.) In Graves v. American Exch. Bank, supra, it was held that the drawee of a bill of exchange is bound to ascertain that the person to whom he makes payment is the genuine payee, or is authorized by him to receive it; that it is no defense against such a payee that the drawee, in the regular course of business with nothing to excite suspicion, paid the bill to a holder in good faith and for value under an indorsement of a person bearing the same name as the payee. There it was said by the court: ‘The defendants, on whom the draft was drawn, paid it upon the indorsement of another Charles F. Graves, residing at or near La Salle, who wrongfully took it from the post-office at Mendota. Such a payment, although made in good faith, did not divest or impair the title of the owner who had not seen or indorsed the paper.’ In Mead v. Young, 4 T. R., 28, the action was brought by the indorser of a bill of exchange against the acceptor, the bill having been drawn by one Christian on the •defendant in London, payable to Henry Davis or order; and having been put into the foreign mail, inclosed in a letter from Christian, it got into the hands of another Henry Davis than the one in whose favor it was ■drawn. The defendant accepted the bill, and it was discounted by the plaintiff. It was held that it was competent for the defendant to prove that the person who indorsed to the plaintiff was not the real payee, though he was of the same name, and though there was no addition to the name of the payee on the bill; and it was also held that if a bill of exchange payable to A or order got into the hands of another person of the same name with the payee, and such person, knowing that he was not the real person in whose favor it was drawn, indorsed it, he was guilty of a forgery. In that case Ashhurst, J., said: ‘In order to derive a legal title to a bill of exchange, it is necessary to prove the handwriting of the payee, and therefore, though the bill may come by mistake into the hands of another person, though of the same name with the payee, yet his indorsement will not confer a title.’ In the same case Buffer, J., said: ‘I am of opinion that it is incumbent on a plaintiff who sues on a biff of exchange, to prove the indorsement of the person to whom it is really payable. * * * Now, here it is clear that the indorsement was not made by the same H. Davis to whom the bill was made payable, and no indorsement by any other person will give any title whatever.’ ”

In Cohen v. Lincoln Savings Bank of Brooklyn, 275 N. Y., 399, at pages 405 and 406, 10 N. E. (2d), 457, 112 A. L. R., 1424, it is stated:

“The rule that the payee of the check is the particular person who was intended by the drawer to be-the payee can hardly be questioned. The name by which he is designated is merely the tag by which the-intended person may be identified. A person, though bearing that name, if not the person intended, has no title to the check and cannot indorse or transfer title-to it. (Graves v. American Exchange Bank, 17 N. Y., 205.) When an instrument is made ‘payable to the order of a fictitious or nonexisting person, and such-fact was known to .the person making it so payable, ’ the instrument is payable to bearer. (Negotiable Instruments Law, Section 28, subd. 3.) Even before the Negotiable Instruments Law was adopted, a bill payable to a fictitious payee was payable to bearer without being indorsed by the maker or the person to whom it was delivered. (Plets v. Johnson, 3 Hill, 112; Central Bank of Brooklyn v. Lang, 1 Bosw., 202; Irving Nat. Bank v. Alley, 79 N. Y., 536.) When the instrument is payable to the order of a fictitious or nonexistent person, and the person making it so payable-has been induced to believe that he is describing an existing person as payee, no other person can acquire-any right or title to the instrument. (United Cigar Stores Co. v. American Raw Silk Co., 184 App. Div., 217; affd., 229 N. Y., 532; Shipman v. Bank of State of New York, 126 N. Y., 318.)

“Every valid instrument which is not payable to-bearer must be payable to a determinate payee and where it appears that the maker intended a particular-person to be the payee, the payee so intended even though designated by a wrong name and even though he induced the maker to deal with him through fraudulent misrepresentation as to his responsibility, character or name, is the real payee and can by indorsement transfer title to the instrument. ‘Although one-may be deceived as to the name of the man with whom he is dealing, if he dealt with and intended to deal with the visible person before him the check may properly be indorsed by the impostor.’ (Halsey v. Bank of New York & Trust Co., supra, p. 139.) ”

We are concerned here with a payer of a check asserting that it is a holder in due course, but upon an admittedly forged endorsement.

The endorser of the check was not the actual payee of the check intended by the drawer to be such payee. In such case, where a person other than the actual payee of a check endorses the same, even though bearing rightfully the name of the payee, the endorsement is ineffective to pass title to a payer and constitute him a holder in due course.

In 8 American Jurisprudence, 319, “Bills and Notes,” Section 605, it is stated:

“Thus, where a bill is payable to the order of a person, and another person of the name of the payee obtains possession of it and indorses it to a party who takes it in good faith and for value, such party acquires no title to the bill. If the indorsement so made by a person who is not the real payee, but has the same name as the real payee, is made by such person with full knowledge that he is not the real payee, and with intent to perpetrate a fraud, his indorsement cannot be regarded otherwise than as a forgery.”

In Home Indemnity Co. v. State Bank of Fort Dodge, 233 Iowa, 103, at page 157, 8 N. W. (2d), 757, it is stated :

“As noted in American Sash & Door Co. v. Commerce Trust Co., supra, 332 Mo., 98, 121, 56 S. W. (2d), 1034, 1044, checks put in circulation often pass through many hands, and the drawer is not expected to verify the endorsements. ‘On the other hand, the bank by the simple expedient of requiring the last indorser tO' he identified and responsible, can protect itself.’ The bank may require that the holder furnish it security or guaranties to protect it from any loss’. As said in Hays v. Lowndes Sav. Bk. & Tr. Co., 118 W. Va., 360, 366, 190 S. E., 543, 545 [quoting from Citizens Nat. Bk. v. Reynolds, 72 Ind. App., 611, 615, 126 N. E., 234, 236] :

“ ‘For its own protection the bank may go further.. It may refuse payment until the stranger brings in a person whom the bank knows to be financially responsible and wh.o is willing to become an indorser.’

“Section 9483 of the 1939 Code is simply a statutory embodiment of a rule of the ‘law merchant’ evidenced’ by judicial decisions from the early English courts-down through the year's. In Tatlock v. Harris, 3 T. R., 174, 181, Lord Kenyon said:

“ ‘* * * there is no doubt, but that the endorsee of’ a bill of exchange, payable to order, must in deriving his title, prove the hand-writing of the first endorser.’’

“A forged endorsement nullifies the instrument as-to all parties against whom the forgery is committed. The doctrine of bona tides does not apply to such a holder. He acquires no interest in it, although he may be ignorant of the forgery. The moment such a draft or check is paid by the drawee, the holder becomes-liable as for money had and received. As a corollary to this rule, the holder of a check payable to order-must trace his title through genuine endorsements, including that of the payee. See 8 American Jurisprudence, Bills and Notes, 318, 319, Sections 604, 605; Citizens Nat. Bk. v. City Nat. Bk., supra, 111 Iowa 211, 216, 82 N. W., 464; annotation, 67 A. L. R., 1535 et seq.”

In 10 Corpus Juris Secundum, 1087, “Bills and Notes,” Section 494, it is stated:

“One acting on an indorsement must ascertain its .•genuineness at his own risk; and, where indorsement is essential to recovery, there can be no recovery if it was forged.' So forgery of the payee’s name is a defense in a holder’s action against the payee, maker, or ■drawer; and a payee whose name has been forged may in proper circumstances recover from the drawer, ■drawee, or indorsee.”

See, also, c at page 1090, Id.; and Midland Acceptance Corp. v. Saunders, 50 Ohio App., 123, 197 N. E., 589.

It is true the drawer through negligence may mislead the payer and in such case the drawer is liable to the payer, even though the endorsement may be a forgery by a person bearing the same name as the payee.

See Weisberger Co. v. Savings Bank, 84 Ohio St., 21, 95 N. E., 379, 34 L. R. A. (N. S.), 1100. This case is cited in 10 Corpus Juris Secundum, 1090, supra.

In no way did the drawer in the instant case lead the payer to believe that the endorser who forged the payee’s name had any right to so endorse the check or attempt to pass title thereto.

The Common Pleas Court sustained its conclusion ■affirming the judgment of the Municipal Court in favor of plaintiff upon the basis of conspiracy, and authority in the endorser to sign for the real payee, and the “one of two innocent persons” rule. It must be remembered that as far as the actual payee is concerned, the evidence is silent as to what became of her. It requires the employment of conjecture to account for the presence of the check in the hands of the en■dorser accepted by plaintiff.. It is true the “companion” was present, but how, or by what means she secured the check from the actual payee may be only ■■surmised. There is no evidence of either conspiracy or authority. Were the loss to be thrown upon the defendant drawer, it would seem that the gross negligence of the plaintiff in paying such an amount as is herein involved to two strange women on the slightest identification, after banking hours on Saturday afternoon, to a person not the actual payee, would do violence to all the rules applicable to negotiable instruments. Certainly, the use of customary cafe in requiring introduction and identification of the endorser by a mutual acquaintance, as before noted, would have, to some degree at least, indicated care tending to secure the plaintiff from loss. The absence of the actual payee from this drama is a matter of speculation.

The record in this case fails to show any ground for relief in the plaintiff under the provisions of Section 8128 of the Ohio Code of Negotiable Instruments. This section provides:

“When a signature is forged or made without authority of the person whose signature it purports to be, it is wholly inoperative. No right to retain the instrument, give a discharge therefor, or to enforce its payment against any party thereto, can be acquired through' or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.”

The “one of two innocent persons” rule has no application to these facts. This rule is based upon estoppel. The drawer did nothing to induce the payer to accept a forged endorsement, as has been said herein-before. That action was predicated entirely upon the credulity of the plaintiff payer, who failed to use the necessary precaution available to it.

An examination of the record shows no evidence upon which the plaintiff was entitled to recover, and the judgment of the trial court should have been rendered for the defendant in response to the.motion of the defendant made at the conclusion of all the evidence.

Judgment may be here rendered for the defendant.

J.udgment reversed.

Matthews, P. J., Ross and Hildebrant, JJ., concur in the syllabus, opinion and judgment.