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Sorensen v. Overland Corporation.

decided.: March 5, 1957.


Author: Goodrich

Before GOODRICH, McLAUGHLIN and HASTIE, Circuit Judges.

GOODRICH, Circuit Judge.

This is an appeal from a summary judgment entered for defendant under Fed.R.Civ.P. 56(b), 28 U.S.C. The action is in federal court by diversity only and Delaware law governs. The case was presented with competence to this Court and all the points raised were thoroughly analyzed and considered by the district judge. 142 F.Supp. 354, D.C.D.Del.1956. We agree with the district judge and our opinion can do little more than put in our own words what he himself has already adequately written.

Plaintiff Sorensen sues the defendant Overland Corporation for counsel fees paid to his lawyer for defending two suits brought against the corporation, himself and other directors and officers. One of them was in a Delaware state court and is referred to as the Krinsky litigation; the other was in Michigan and is referred to as the Fistel case. Each suit terminated in favor of the defendants. This action has some of the same factual background as that presented to this Court in Mooney v. Willys-Overland Motors, Inc., 3 Cir., 1953, 204 F.2d 888, 39 A.L.R.2d 566, but the operative facts in the two cases are so different that the Mooney case furnishes little by way of precedent.

The plaintiff's first claim is under a bylaw of the corporation based on a Delaware statute. The bylaw was adopted in conformity with the provisions of Del.Code Ann. tit. 8, § 122(10) (1953). The bylaw is set out in full in the margin.*fn1 The gist of it, for our purposes, is that an officer or director is entitled to indemnification in connection with suits in which he is involved by reason of his being or having been an officer or director of the corporation.

There were two parts to the Krinsky litigation. One had to do with general charges against this plaintiff and others for alleged improper corporate acquisition of property which, according to Krinsky, the individual defendants should not have caused the corporation to make. Expenses connected with this phase of the Krinsky suit are not involved in the present litigation since the corporation has already paid Sorensen's lawyer for the portion of the legal services rendered which had to do with the improper acquisition claim.

The other claim in the Krinsky case and the sole claim in the Michigan Fistel case was against Sorensen on a matter which arose before he became an officer or director of the defendant company. Prior to his joining the organization, the company and he made a contract whereby he was to become its president, was to receive large compensation whether he continued as president or not and was given a highly profitable stock option contract.

It may or it may not be that this contract was an improper one for the corporation to make with Sorensen. We express no opinion whatever on this point. But it had nothing to do with him as a director or officer of this corporation. It was negotiated and completed between Sorensen and the company before he became either officer or director. If he incurred expenses for counsel fees in defending a lawsuit about entering into the contract, they were incurred by him as an individual who was accused of making an unconscionable bargain with the company, not because he was an officer. We think there is no possibility of bringing such a claim within the protection of the bylaw quoted.

The second basis for plaintiff's claim as to the expense of legal services in the Fistel suit is based on what plaintiff calls a contract implied in fact. The theory of it seems to be that when Fistel sued in Michigan the present defendant company asked Sorensen to enter an appearance in the suit. This he did and incurred expenses for legal help even though he won. For this he claims to be recompensed on the theory that when one does something at another's request and incurs expenses thereby he is entitled to restitution therefor. "In the absence of circumstances indicating otherwise, it is inferred that a person who requests another to perform services for him * * * thereby bargains to pay therefor." Restatement, Restitution § 107(2) (1937).

The trial judge thought little of this theory because he said the plaintiff was domiciled in Michigan and was subject to suit there. The plaintiff insists that the record shows that plaintiff had never been served in Michigan and, therefore, was not in court.The appearance entered by him was something he was not compelled to make. Hence when he made it, the obligation arose to make him whole for expenses. But examination of the exhibits in the present suit does not show that plaintiff was not served in Michigan nor, it may be admitted, does it show conclusively that he was. Nor does it show, as plaintiff now avers, that he did enter an appearance in the Michigan action at the defendant's request.

We do not think the point is worth as much as plaintiff makes of it. It is well settled law that one who is domiciled in a state is subject to the jurisdiction of its courts. Restatement, Conflict of Laws § 79 (1934). In the exercise of that jurisdiction a defendant must be given a reasonable notice and opportunity to be heard. Id. § 75; Restatement, Judgments § 6 (1942). But statutes providing for substituted service on domiciliaries who are either temporarily absent from the state or cannot be found are practically universal and Michigan has such a statute. Mich.Stat.Ann.§ 27.776 et seq. (1936), Comp. Laws 1948, § 613.46 et seq.So, even if Sorensen had not been served at the time he entered his appearance, completion of jurisdiction over him by a Michigan court was a simple matter. It is too slim a foundation to build upon in establishing a claim for restitution.

The defendant also raises the question of the statute of limitations in Delaware. Even if the plaintiff once had a claim, it is argued, he has lost it by lapse of time. The district court has discussed both the one-year and three-year statute.

We shall not discuss the three-year statute*fn2 because we think the one-year statute controls should it be conceded, arguendo, that the plaintiff ever had a claim. It provides:

"No action for recovery upon a claim for wages, salary, or overtime for work, labor or personal services performed, or for damages (actual, compensatory or punitive, liquidated or otherwise), or for interest or penalties resulting from the failure to pay any such claim, or for any other benefits arising from such work, labor or personal services performed or in connection with any such action, shall be brought after the expiration of 1 ...

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