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little upon the issues in the cause, under appellee to show the character of services the circumstances of this case. There is actually rendered, and it was just as necestherefore no cause for reversal, at least, in sary that the value of them should be the action of the court in the matter of these shown. There could have been no recovery exceptions. The fifth exception was to the for larger compensation than the appellee evidence given by a Mrs. Lafferty, in which had claimed in the bill of particulars, but she testified to conversations had with Mrs. within that claim she would have been Staylor in reference to the appellee, one of entitled to recover for services actually renwhich conversations occurred about three dered by her and accepted by Mrs. Staylor, weeks before Mrs. Staylor died. She testi- according to their extent and value, provid. fied to statements made by Mrs. Staylor to ed they were not “other and different serythe effect that she (Mrs. Staylor) had not ices" from those claimed for in the bill of given the appellee anything for her services. particulars, and had been rendered with the The appellee had offered evidence tending intention on her part to charge for them, to show that she had rendered services for and the expectation on Mrs. Staylor's part Mrs. Staylor, and that these services were to pay for them. All question as to the to be paid for. The admissions testified to admissibility of the evidence under considerby this last-named witness went to the ap ation, or as to the action of the trial court pellee's whole case-all of them to the mer upon the prayers that have been referred its, and some of them to the appellee's repli to in this connection, is concluded by the cation to the plea of the statute. It was a case of Fairfax-Forrest Mining & Manufg. part of the appellee's case to show that she Co. v. Chambers, 75 Md. 604, 23 Atl. 1024. had received no payment for her services, In that case the court was dealing with a and that this had been admitted by Mrs. bill of particulars of like character and efStaylor within time before suit brought to fect as the particulars in the case at bar, sustain her replication of new promise. The and, in reference to the identical question evidence in question was therefore directly which is here raised in the sixth exception in support of the issues on trial. The sixth to evidence as to the admissibility of eviexception is to an offer by the appellee of dence to prove the value of services actually evidence to show what was the reasonable rendered, this court said, through Judge value of such services as it had been testi Robinson, “Evidence as to the nature and fied, in the course of the trial, that the ap character of the services, and what would pellee rendered during her stay with Mrs. be a fair and reasonable compensation there. Staylor. The objection to this offer of evi for,' was admissible in evidence.” Judge dence is based upon the same reason and Robinson also said that, for the services rentheory as are the third and fifth prayers of dered, the plaintiff in that case "was, beyond the appellant, which were rejected by the question, entitled to recover, irrespective alcourt. The ground of the objection is that together of the contract itself.” Again, in the appellee's bill of particulars shows that dealing with a prayer in that case which the services, for the value of which the ap had been rejected, and which asserted the pellee sues, were rendered under a special proposition that, to entitle the plaintiff to agreement, according to which the appellee recover, he had to prove the contract set out must recover, or not recover at all, and that in the bill of particulars, the court further consequently no evidence is admissible to said, after criticising the prayer in other parshow what is the reasonable value of the ticulars, "we are not to be understood as services in question, because this would be meaning that the right of the plaintiff to to allow a recovery by the appellee upon recover in an action of assumpsit depended a quantum meruit. Now, it is to be ob upon his being able to prove the agreement served that, assuming that the bill of par under which his services were rendered. On ticulars does set out a special contract, this the contrary, if services were actually rencontract has been fully executed, as to the dered by him and accepted by the defendant, rendering of the services, and nothing re he was entitled to recover compensation for mains to be done under it, except the pay such services, independent altogether of the ment of the compensation due for the serv special agreement.” Then, after speaking ices so rendered. The contract was not spe of the office and effect of the bill of particucific in its terms, fixing a period within lars, and saying that the plaintiff could not which it was to be performed, and defining “recover for other and different services, nor just what the services were that were to be could he offer evidence of any other claim rendered under it. The time during which or demand," the court further said: “But the services were to be rendered was left the bill of particulars did not prevent the indefinite, and the employment was a gen plaintiff from recovering under the common eral one, as a domestic. Under such a con counts if the special contract was executed, tract there can be no way of ascertaining or, in other words, if the services under it the extent, character, and value of services had been fully rendered, and nothing reactually rendered, except by proof such as mained to be done but the payment of the was proposed to be introduced here, and money . by the defendant.” This would made the subject of the exception now under seem to make clear the correctness of the consideration. It was incumbent upon the ruling of the court below upon the sixth ex.
ception to evidence, and upon the third and fifth prayers of the appellant. The case of School Commrs. v. Adams, 43 Md. 349, much relied upon by the appellant here, is not in point. In that case this court said there was error in the ruling of the court below, because the plaintiff there had been allowed to recover for "other and different services" from those that fell within the description given in the bill of particulars. From what has been said, no special comment need be made upon the second, sixth, and seventh prayers of the appellant. They were properly rejected. It remains only to make reference to the one instruction granted by the court below at the instance of the appellee, of which it need only be said that it was based upon the evidence in the cause, and its special form received the approval of this court in the case of Gill v. Staylor, 93 Md. 453, 49 Atl. 650.
It follows from the foregoing views that the judgment of the court below must be affirmed. Judgment affirmed, with costs to the appellee.
(56 Md. 446) CANNON V. BRUSH ELECTRIC CO. OF
BALTIMORE et al. (Court of Appeals of Maryland. Jan. 22, 1903.) CORPORATIONS-CONSOLIDATION-ILLEGAL INCORPORATION PROCEEDINGS-RELATION OF STOCKHOLDERS INTER SESE-ACTS OF DI. RECTORS-FRAUD-EVIDENCE.
1. Where a consolidated corporation was forned from two other supposed corporations, which in fact never had any legal existence, the rights of stockholders of such consolidated corporation inter sese should be governed by the supposed charters of the corporatio and laws of the state relating thereto, and not by the rules governing partners; nor should the managing directors be treated as agents of the stock. holders.
2. The B. Electric Company purchased a majority of the stock of the U. Electric Company to prevent competition, and some time thereafter, on the B. Company's plant being destroyed by fire, its directors, who also managed the U. Company, directed that the latter should not take any more business until further orders from such directors. The B. Company there. after used the machinery of the U. Company to furnish power to its customers, and its directors tixed a price of $1,500 per month for the use of such power: Plaintiff, a dissenting stockholder of the U. Company, objected to this allowance, but only requested that it be increased $50 per month, which was denied. Held, that such facts did not show that such price was unfair or unreasonable.
3. Where a competing electric light company purchased a majority of the stock of the U. Company, and, on the burning of the former's plant, notified the U. Company not to take any more lights until notified to do so, but the U. Company's bookkeeper testified that the company had no capacity for more lights, said order did not show that the competing company was managing the U. Company for the benefit of the former's stockholders at the expense of the latter.
4. Where the B. Electric Company owned a controlling interest in the U. Electric Company, with which it was in competition, and the plant of the B. Company was destroyed by fire, the fact that the directors of the U. Company, who
were also directors of the B. Company, used the U. Company's fund in redeeming the ground rent on the U. Company's works, instead of increasing the U. Company's capacity by purchasing more machinery, so that it could reap the benefit of the B. Company's misfortune," did not show that the B. Company was fraudulently using the U. Company for its benefit, at the expense of the U. Company's stockholders.
5. Where a valuable contract for furnishing electric power, lost by the U. Electric Company without any fault or act of the B. Com. pany, which owned a controlling interest in the U. Company, was thereafter obtained by the B. Company, the fact that the B. Company entered into an agreement with the U. Company to supply the power required by the contract at 66 per cent of the price received by the B. Company, in the absence of any showing that the U. Company incurred any loss in supplying such power, did not indicate a fraudulent design of the B. Company to injure the U. Company.
6. Where the B. Electric Company owned a controlling interest in the U. Electric Company, with which it was in competition, the fact that the latter had extended its lines on certain streets of the city in which it was located did not prevent the B. Company, in the exercise of fair competition, from rightfully construeting its lines on the same street to serve its customers thereon.
Appeal from circuit court No. 2 of Baltimore city; J. Upshur Dennis, Judge.
Suit by Thomas J. Cannon against the Brush Electric Company of Baltimore and others for the appointment of a receiver of the United States Electric Power & Light Company of Baltimore City, and to recover damages from the Brush Electric Company of Baltimore for alleged injuries and unfair competition. From a judgment on an auditor's report in favor of defendant Brush Electric Company, plaintiff appeals. Affirmed.
The following is the report of the auditor, referred to in the opinion:
“The bill of complainant alleges, among other things, that the complainant and de- . fendants are copartners, as the attempted incorporation of the consolidated company, the United States Electric Power & Light Company, is void. The, court, by decree of November 26, 1897, has decided that the said United States Electric Power & Light Company was not duly incorporated, and did not acquire and possess the powers and rights of a legally incorporated company under the laws of Maryland. The auditor does not understand, however, that the court has as yet considered and determined whether or not the parties interested in the said company are, as inter sese, copartners, or what is their legal status as regards each other, The facts are: On October 8, 1881, the United States Electric Light Company attempted to iucorporate under the general law, and on September 5, 1885, the United States Electric Lighting Company made a similar attempt; and on October 21st, 1885, the present company, the United States Electric Power & Light Company, was attempted to be formed by a consolidation of the two former companies. By the terms of the pretended articles of consolidation the present
company was to have a capital stock of five the consent or prohibition of the other sharetlousand shares, of one hundred dollars holders. The affairs of the concern were each, and its board of directors was to con governed by a board of directors elected by sist of nine of its shareholders. Under these the shareholders according to the number of attempted incorporations the United States shares held. In view of the fact that the Electric Power & Light Company erected incorporation of the United States Company works and proceeded to furnish light and has been found to have been void, and that electric power in Baltimore City. On March there was no intention of the parties to 7, 1882, the Brush Electric Company made a become copartners as between themselves, it similar attempt to incorporate under the appears to the auditor that the shareholders general law, and in 1890 applied to the Legis in this unincorporated company should be lature to validate its attempted incorpora treated as members of a voluntary association, which the Legislature did March 31, tion, who have by their acts agreed to con1890. Laws 1890, c. 233. In 1886 the Brush duct its affairs, as between themselves, as a Company purchased from certain stockhold corporation, the interests in which are repers 2,784 shares of the United States Elec resented by shares of stock, and the managetric Power' & Light Company, and thus ob ment of which has by them been confided to tained a controlling interest in the United the board of nine directors, and that the States Company.
written terms upon which they have agreed “Under this state of facts, the question to conduct the association are to be found in arises, what was the relation thus created the pretended charter and the by-laws of between the Brush Company and those inter the association. If the auditor is right in ested in the United States Electric Power & this view of the case, then, as between the Light Company? As to third parties who controlling shareholder, the Brush Company, had dealings with or became creditors of a duly incorporated company, and the sharethe United States Company, there can be holders of the United States Company, who, no doubt that the relation would be that of as above stated, had conducted the United quasi copartners. 1 Lindley on Part. p. 25. States Company as a corporation, it would But as between themselves the conditions appear that the principles of law which seem to lack many of the elements which govern the dealings of one corporation with go to create the relation of copartners. that of another corporation are the proper Thompson on Corporations, vol. 1, sec. 14, principles to apply to this case. states as follows the difference between a "The bill of complaint, after alleging, as corporation and a partnership: ‘(1) Its mem above stated, that the parties are to be con- . bers may, in general, without restraint, by sidered, inter sese, as partners, goes on to transferring their shares, introduce other charge that the Brush Company, in buying persons in their stead,' etc. (2) The mem a controlling number of shares in the United bers of a partnership are agents of the part States Company, did so 'with the intent and nership firm, whereas in a corporation they for the purpose of securing to itself the cononly act through the agency of a board of di trol of said United States Company, and of rectors,' etc. (3) The partners are liable in its property and business and of withdrawtheir private estates, for debts,' etc. And ing it from competition with said Brush furthermore, as between the parties them Company,' etc., and that the Brush Company selves, the mere fact of sharing in the prof elected a board of directors, a majority of its will not create a partnership between the whom were representatives of said Brush parties themselves, as to the property, con Company, and that said Brush Company has trary to their intention. Berthold v. Gold for several years past conducted the busismith, 24 How. 537, 16 L. Ed. 762. And ness of said United States Company for its again, between the parties themselves the own advantage, without regard to the benetest has always been their actual intent. fit or advantage of the United States Compa. Culley v. Edwards, 44 Ark. 424, 51 Am. Rep. ny, and has excluded the members of the 614; Waring et al. v. Nat. Marine Bank, 74 United States Company from participation Md. 278, 22 Atl. 140. That there was no in in the management or control of said busitention or understanding of the Brush Com ness, and from sharing in any benefit therepany, or those representing it, when it from, and that the Brush Company is seekbought into the United States Company, to ing to destroy the United States Company and become partners with their other co-share take its business for said Brush Company; holders in the latter company, is clear from that it took from the United States Company the evidence; nor is there a particle of evi the business of the Northern Central Railway dence to show that anyone connected with Company, and that in consequence of this either company supposed or intended at the the United States Company is now running time of said purchase of stock by the Brush at a loss, and that it has taken other lightCompany that a copartnership was thereby ing contracts from said United States Comformed as between themselves. But all par pany, and it has caused certain of the poles ties, up to the filing of the present bill, treat and lines of said United States Company to ed the United States Company as a duly in be taken down, and it has borrowed large corporated company, the shares of which
sums of money from the United States Comwere sold, dealt in, and transferred without pany; that, when the central station of the
Brush Company was destroyed by fire (Oc case upon the subject, and in which the law tober 13, 1893), it required the United States is as strongly laid down as in any subseCompany to furnish the Brush Company's quent case.' And on page 438 the court, concustomers with electric current, and paid tinuing, says:
'In the case of Overend v. the United States Company for it at rates Gurney, L, R. 4 Ch. 701, and the same case wholly inadequate for the service, and on appeal reported as Overend v. Gibb, L. forced the machinery of United States Com R. 5 H. L. 480, where the question was most pany beyond its power capacity, and there elaborately discussed in respect to the negby greatly injured the same, and thus caused ligence of directors, it was held that facts its service to be inferior and unsatisfactory, which may show imprudence in the exercise and created dissatisfaction among its cus of powers clearly conferred upon directors tomers, resulting in loss of business and rev will not subject them to personal responsienue. The bill then prays for an accounting bility; but if the imprudence be so great by the Brush Company of all business, in and manifest as to amount to crassa neglicome, services, and profits taken as afore gentia, and consequently a breach of trust, said, and for a dissolution and winding up of personal responsibility will be incurred. Inthe alleged copartnership, and the appoint deed, all cases agree that directors are not ment of a receiver.
liable for the consequence of unwise or in"Such being the allegations of the bill, this discreet management if their conduct is encase would seem to be similar to that of tirely due to mere default or mistakes of Booth et al. v. Robinson et al., 55 Md. 419, judgment. And the onus of proof of fraud, with this exception: That the company (the combination, or gross negligence, to render Powhatan Steamboat Company) which it is the directors personally liable, is upon the alleged was wrecked by mismanagement of party making the charge, and the proof must the directors of another company was be clear and manifest. Turquand v. Marduly incorporated company, whereas in the shall, L. R. 4 Ch. 376; Overend v. Gibb, L. present case the United States Company R. 5 H. L. 480; Hodges v. New England was an unincorporated company or associa Screw Co., 1 R. I. 312 [53 Am. Dec. 624].' tion, but which, as between its members, Although the court, as above stated, was was carried on and conducted on the same discussing that phase of the case which principles and under the same form of man charged the directors Robinson and Shoeagement as a corporation. In fact, the maker with a personal liability, it also apwhole foundation of the allegations is that, plied these principles in reviewing these under the form of management established facts to the liability of the defendant comby the shareholders of the United States pany, the steam packet company, representCompany, the Brush Company was enabled, ed by said Robinson and Shoemaker. And through owning the greatest interest in the continuing, the court, on page 439, says: United States Company, to elect a majority 'In this case the fact that Robinson and of the managing agents of that company, Shoemaker were stockholders and directors which was designated as a board of direct in the steam packet company, as well as in ors, and that as such agents they misman the Powhatan Company, and participated in aged its affairs. In Booth v. Robinson, 55 the transactions between the two companies, Md. 437, the court (Judge Alvey), in refer with certain interests in other companies, ring to the case of The Charitable Corpora supposed to be interested, would seem to tion v. Sutton, 2 Atk. 400, says: 'In that constitute the main foundation for the princase Lord Hardwicke, in defining the degree cipal charges of the bill. And if it be true, of care and fidelity required of a director, as charged by the plaintiffs, that the two and for what nature of default he may be defendants, Robinson and Shoemaker, actliable, referred to the doctrine of the civil ing for and in behalf of the steam packet law upon the subject. By that law it is company, did purchase the stock in the Powdeclared that those who are named by com hatan Company, and procured themselves to panies and corporations to have the direc be elected directors therein, for the purpose, tions of their affairs are obliged to the same of getting control of the management of that care and diligence as factors or agents, and corporation, and by that means to make it they are answerable not only for any fraud subservient to the interest of rival compaand gross negligence which they may be nies, or with the design of making insolvent guilty of, but also for all faults that are con and utterly breaking down the corporation trary to the care required of them. 1 Do altogether, and thus getting rid of competi. mat, 2 b, til 3, sec. 2, art. 1. And in the tion, no more flagrant fraud could be perCase of Sutton the lord chancellor held that petrated; and there can be no question but directors of a corporation are liable in equi that for all loss to the company or its stockty to the corporation not only for gross holders, resulting from the carrying out of frauds and breaches of trust whereby the such device or contrivance, the guilty parassets of the corporation are wasted, but ties should be held responsible to the fullest are also liable to the corporation if the assets extent allowed by the law. Not only would of the corporation bave been wasted by neg. there be incurred a personal responsibility ligence on their part so gross as to amount by the directors or agents participating in to a breach of trust. This is the leading the wrong, but, if such a scheme were de
vised and executed at the instance or on be. half of another corporation, deriving its powers and franchises from the state, such conduct would be a fraud upon the state; and, in addition to incurring civil liability for the injury done, such conduct would
of law laid down appear applicable to the present case, but also because the conclusions the court came to on a very similar state of facts in that case are the same that the auditor feels compelled to arrive at in this case.
subject the offending corporation to the pen - In the account which the complainant has
submitted to the auditor, as embodying his claim, the items are substantially as follows: 1. For business conducted from
Oct. 1, 1893, to Dec. 1, 1894.. $254,262 66 Int. Dec. 1, 1894, to Nov. 1, 1901
$358,610 81 This claim covers the period
immediately succeeding the
pany had paid the sum of.. $ 13,233 55 Interest on which from Dec.
31, 1894, .to Nov. 1, 1901,
alty of misuser or abuser of its franchises. A corporation cannot be allowed to do indirectly and covertly what it is not authorized to do directly and openly. Such is the law, as applicable to the case, as stated in the bill. But if, upon the proof, there is a failure to establish the fraudulent design or purpose alleged to have characterized the various acts and transactions done and instigated by the two directors named, the whole foundation fails. For, we have seen, mere indiscretion, want of skill or foresight, or mistake of judgment, in the conduct of the affairs of the corporation, afford no ground of personal liability on the part of the directors. And upon the question of the fraudulent intent or design charged, though it be true that these two directors represent. ed both corporations-in the one, being two of a board of eight directors; and in the other, two of a board of six directors-this fact alone, while it should subject their conduct to rigid scrutiny by the court, does not afford ground of presumption against the legality and the fairness of the dealings and transactions between the two companies. The two companies were certainly compe. tent to contract the one with the other, and the two directors whose conduct is in question were interested in both companies, and, by their relation to and official positions in them, they owed duties and were bound to be faithful alike to both. Therefore, while acting within the scope of the powers delegated to them by the stockholders of the corporation, there is no presumption of illegality or unfairness in their dealings and transactions between the two companies. They were the chosen agents of both, and to be successful in any attempt to impeach the validity of their acts, with a view of making them personally responsible either to the corporation or to the stockholders, there must be distinct charges of misconduct, fully supported by proof. Adams Mining Co. v. Senter, 26 Mich. 73; U. S. Rolling Stock Co. v. Atlantic & Great Western R. Co., 34 Ohio St. 450, 32 Am. Rep. 380. This case is alto. gether unlike that of a trustee, agent, or director bargaining, in a matter of personal advantage to himself individually, with the party reposing the confidence in him, and where it is incumbent upon him to show that a fair and reasonable use has been made of that confidence, as in the cases of The Hoffman Steam Coal Co. v. Cumbld. Coal & Iron Co., 16 Md. 456, 77 Am. Dec. 311; Cumbld. Coal & Iron Co. v. Parish, 42 Md. 598; Jackson v. Ludeling, 21 Wall. 616, 22 L. Ed. 492.' The auditor has quoted thus fully from the above ca se because not only the principles
$339,851 01 2. For money collected
from North Avenue
June 30, 1893.. $8,969 08
$ 13,453 62 Less amount paid to
U. S. Company.... $6,448 75 Interest June 30, 1893, to Nov. 1, 1901.... 3,224 37
8,780 50 8. Gross profit on amount ad
mitted by Brush Company
$ 1,532 73
2,019 37 4. Gross profits on business ad.
mitted by the Brush Com-
and Patterson avenue, 1896 $ 138 64
182 66 6. Gross profits on earnings ad
mitted by Brush Company
United States Company..... $ 2,463 58
$349,079 35 "Much of the testimony supposed to support the claim for the items 2 and 5 is found in the case of Davis et al. v. United States Electric Power & Light Company et al., and wbere these very questions here raised have been thoroughly threshed over by the court in its opinion. 77 Md. 35, 25 Atl. 982. For while there is a nominal change of parties, the complainant, Davis, in the one case, hap. ing, by a trade of United States Company stock for Viaduct Manufacturing Company stock, transferred his stock to the present complainant, Cannon, and thus although the matters may not strictly be considered res adjudicata, yet, the facts being the saine, although the parties are nominally different,