Mead v. Mccullough

TRENT, J.:

This action was originally brought by Charles W. Mead against Edwin C. McCullough, Thomas L. Hartigan, Frank E. Green, and Frederick H. Hilbert. Mead has died since the commencement of the action and the case is now going forward in the name of his administrator as plaintiff. The complaint contains three causes of action, which are substantially as follows: The first, for salary; the second, for profits; and the third, for the value of the personal effects alleged to have been left Mead and sold by the defendants.

A joint and several judgment was rendered by default against each and all of the defendants for the sum of $3,450.61 gold. The defendant McCullough alone having made application to have this judgment set aside, the court granted this motion, vacating the judgment as to him only, the judgment as to the other three defendants remaining undisturbed At the new trial, which took place some two or three years later and after the death of Mead, the judgment was rendered upon merits, dismissing the case as to the first and second causes of action and for the sum of $1,200 gold in the plaintiff's favor on the third cause of action. From this judgment both parties appealed and have presented separate bills of exceptions.

No appeal was taken by the defendant McCullough from the ruling of the court denying a recovery on his cross complaint. On March 15, 1902, the plaintiff (Mead will be referred to as the plaintiff in this opinion unless it is otherwise stated) and the defendant organized the "Philippine Engineering and Construction Company," the incorporators being the only stockholders and also the directors of said company, with general ordinary powers.

Each of the stockholders paid into the company $2,000 mexican currency in cash, with the exception of Mead, who turned over to the company personal property in lieu of cash. Shortly after the organization, the directors held a meeting and elected the plaintiff as general manager. The plaintiff held this position with the company for nine months, when he resigned to accept the position of engineer of the Canton and Shanghai Railway Company.

Under the organization the company began business about April 1, 102.itc-alf The contract and work undertaken by the company during the management of Mead were the wrecking contract with the Navy Department at Cavite for the raising of the Spanish ships sunk by Admiral Dewey; the contract for the construction of certain warehouses for the quartermaster department; the construction of a wharf at Fort McKinley for the Government; The supervision of the construction of the Pacific Oriental Trading Company's warehouse; and some other odd jobs not specifically set out in the record. Shortly after the plaintiff left the Philippine Islands for China, the other directors, the defendants in this case, held a meeting on December 24, 1903, for the purpose of discussing the condition of the company at that time and determining what course to pursue. They did on that date enter into the following contract with the defendant McCullough, to wit: For value received, this contract and all the rights and interests of the Philippine Engineering and construction Company in the same are hereby assigned to E. C. McCullough of Manila, P. I. (Sgd.) E. C. McCULLOUGH, President, Philippine Engineering and Construction Company.

(Sgd.) F. E. GREEN, Treasurer. (Sgd.) THOMAS L. HARTIGAN, Secretary. The contract reffered to in the foregoing document was known as the wrecking contract with the naval authorities.

On the 28th of the same month, McCullough executed and signed the following instrumental: For value received, and having the above assignment from my associates in the Philippine Engineering and Construction Company, I hereby transfer my right, title, and interest in the within contract, with the exception of one sixth, which I hereby retain, to R. W. Brown, H. D. C. Jones, John T. Macleod, and T. H. Twentyman. The assignees of the wrecking contract, including McCullough, formed was not known as the "Manila Salvage Association." This association paid to McCullough $15,000 Mexican Currency cash for the assignment of said contract.

In addition to this payment, McCullough retained a one-sixth interest in the new company or association. The plaintiff insists that he was received as general manager of the first company a salary which was not to be less than $3,500 gold (which amount he was receiving as city engineer at the time of the corporation of the company), plus 20 per cent of the net profits which might be derived from the business; while McCullough contends that the plaintiff was to receive only his necessary expenses unless the company made a profit, when he could receive $3,500 per year and 20 per cent of the profits. The contract entered into between the board of directors and the plaintiffs as to the latter's salary was a verbal one.

The plaintiff testified that this contract was unconditional and that his salary, which was fixed at $3,500 gold, was not dependent upon the success of the company, but that his share of the profits was to necessarily depend upon the net income. On the other hand, McCullough, Green and Hilbert testify that the salary of the plaintiff was to be determined according to whether or not the company was successful in its operations; that if the company made gains, he was to receive $3,5000 gold, and a percentage, but that if the company did not make any profits, he was to receive only his necessary living expenses. It is strongly urged that the plaintiff would not have accepted the management of the company upon such conditions, as he was receiving from the city of Manila a salary of $3,500 gold.

This argument is not only answered by the positive and direct testimony of three of the defendants, but also by the circumstances under which this company was organized and principal object, which was the raising of the Spanish ships. The plaintiff put no money into the organization, the defendants put but little: just sufficient to get the work of raising the wrecks under way. This venture was a risky one.

All the members of the company realized that they were undertaking a most difficult and expensive project. If they were successful, handsome profits would be realized; while if they were unsuccessful, all the expenses for the hiring of machinery, launches, and labor would be a total loss. The plaintiff was in complete charge and control of this work and was to receive, according to the great preponderance of the evidence, in case the company made no profits, sufficient amount to cover his expenses, which included his room, board, transportation, etc.

The defendants were to furnish money out of their own private funds to meet these expenses, as the original $8,000 Mexican currency was soon exhausted in the work thus undertaken. So the contract entered into between the directors and the plaintiff as to the latter's salary was a contingent one. It is admitted that the plaintiff received $1.500 gold for his services, and whether he is entitled to receive an additional amount depends upon the result of the second cause of action.

The second cause of action is more difficult to determine. On this point counsel for the plaintiff has filed a very able and exhaustive brief, dealing principally with the facts.

It is urged that the net profits accruing to the company after the completion of all the contracts (except the salvage contract) made before the plaintiff resigned as manager and up to the time the salvage contract was transferred to McCullough and from him to the new company, amounted to $5,628.37 gold. This conclusion is reached, according to the memorandum of counsel for the plaintiff which appears on pages 38 and 39 of the record, in the following manner: Profits from the construction of warehouses for the Government $6,962.54 Profits from the construction of the wall at Fort McKinley 500.00 Profits from the inspection of the construction of the P. O. T. warehouse 1,000.00 Profits obtained from the projects (according to Mead's calculations) 1,000.00 Total