Case Name: FLANAGAN v. GLENCOE COTTON MILLS
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1921-08-01
Citations: 116 S.C. 396
Docket Number: 10702
Parties: FLANAGAN v. GLENCOE COTTON MILLS
Judges: Mr. Chieé Justice Gary and Mr!. Justice Watts concur.
Reporter: South Carolina Reports
Volume: 116
Pages: 396–405

Head Matter:
10702
FLANAGAN v. GLENCOE COTTON MILLS
(108 S. E. 156)
Appeal and Eiuior — Where Evidence hot Fully Developed Cause Will be Remanded for New Trial. — In an action by the bookkeeper and director of a cotton mill to recover the balance of the bonus voted him with themselves by the directors, after his obligation to the corporation for the share purchased by him should be marked paid, evidence as to the corporate transactions, particularly the ratification of the directors’ acts by a stockholders’ meeting, held insufficient to permit a final judgment, so that the case should be remitted to the trial Court for full showing as to the facts.
Before Wilson, J., Richland, April, 1920.
Reversed and new trial ordered.
Action by C. A. Flanagan against Glencoe Cotton Mills. Judgment for plaintiff and defendant appeals.
Messrs. Nettles & Tobias and Weston & Aycock, for appellant,
cite: Right of directors owning majority of stock to appropriate funds of corporation: 212 N. Y., 121; 105 N. E., 818; R. R. A., 1915 D., 632. Director has no right by his own vote to reap a benefit at the expense of the corporation: 10 A. & E. Enc. Raw, 790; 14-a C. J. 92, 142; 137 Fed., 790; 166 Fed., 261; 126 Am. St. Rep., 177’ To warrant payment to a director there must have been a valid antecedent agreement: 21 A. & E. Ene. L., 908; 14-a C. J., 142; 3 Cook Corpns. (7th Ed.) 2094; 29 Kan., 311; 44 A. R., 6S0; 71 Ill., 104; 22 A. R., 89; 76 Pac., 194; 104 A. S. R., 703; and cases cited: 7 L. R.’ A., 809; 120 N. Y., 134; 17 A. S. R., 619; 139 Pac., 790. Directors voting as majority stockholders cannot ratify wrongful acts and bind corporation: 3 Cook Corpns. (7th Ed.) 2096, 2612; 124 N. E., 453; 10 A. E. R., 363; 67 Atl., 663; 164 Ill., 427; 56 A. S. R., 211; 59 Atl., 767; Morawitz Priv. Corpns., Sec. 529. Right of corporation to repudiate wrong of directors: 105 S. C., 536; 39 S. C., 44; 14-a C. J., 144; 68 Atl., 777; 206 N. Y., 7; 51 E. R. A. (N. S.), 113; 82 S. C., 82. Prosperity of company no reason for improper payments: 184 N. Y., 152; 76 N. E., 1075. Nor is the fact that loss fell heavily on those who appropriated the money any excuse: 83 N. E., 441 (Ind.). Evil intent of plaintiff not in question: 60 'S. C., 558. Paihtre to answer a letter does not make it competent: Jones Ev., Sec. 269. No obligation to pay more than agreed salary: 36 Pa., 367; 74 Mo. App., 355; 125 N. E., (Ind.), 233; 207 S. W., 838 (Mo.); 164 N. Y., 614; 2 McC., 472. Rule as to gifts: 12 R. C. E., .935; Bail. Eq., 141; 20 Cyc., 1192; 67 N. E., 1, (Ill.)- Gift, unde- . livered, is revocable: 85 S. E., 721, (Va.) ; 36 N. W., 794, (Mich.); 64 So., 420, (Miss.); 28 S. C., 353; 20 Cyc., 1213.
Messrs. Nelson, Gettys & Mullins and D. W. Robinson, for respondent,
cite: Burden on appellant to show prejudice in admission of testimony: 104 S. C., 16. Failure to answer letter is admission of its correctness: 195 Eed., 382; 115 C. C. A., 287. Bonus: -83 U. S., 471; 21 L. Ed., 322. Directors may contract with corporation in good faith: 3 Thomp Corp., Sec. 4059 ; 96 U. S., 267; 24 E. Ed., 695. Power of corporation to pay bonus: 150 C. C. A., 592; E. R. 40, Ch. Div., (Eng.), 170; 104 U. S., 450; R. R. 23, Ch. Div., (Eng.), 654; 404 N. Y., Supp. 718; 136 App. Div., (N. Y.), 649; 45 D. R., Ch. Div., (Eng.), 437; 3 A. R. R., 443. Contracts between corporation cmd its officers voidable only: 3 Thomp. Corpns., Secs. 4014, 4061; 109 U. S., 524; 27 E. Ed., 1019. Acts of majority of stockholders binding on minority: 6 Fletcher Corp., Sec. 3992, p. 6798; 5 Allen (Mass.) 230; 9 Bush, (Ky.), 576; 123 N. Y., 91; 9 E. R. A., 53Q; 4 Thomp, Corp., Secs. 4496, 5317; 2 Morawitz Priv. Corp. (2nd Ed.), Sec. 625, 626; 36 E. R. A., GST. S.), 204; 100 Atl., 650. PayT ment of bonus may be ratified to bind corporation, those benefited voting-. 36 E. R. A., (N. S.), 199; 60 E. R. A., 742; 187 N. Y., 225; R. R. 12, App. Cas., 589. Corporation estopped to set up ultra vires: 1 Cook Corp., (7th Ed.), Sec. 38; 176 U. S., 203; 44 E. Ed, 435; 208 Ill, 544; 4 Thomp. Corp, Secs. 5258, 5269, 5270; 5 Id, Secs. 6015, 6016, 60i7, 6018; 103 S. C, 403; 60 L. R. A, (N. S.)i 936; 89 S. C, 185-6; 87 S. C, 447; 3 Fletch. Cyc. Corp, Sec. 1526, p. 2588-9; 51 L. R. A, (N. S.), 122; 206 N. Y, 7; 135 N. W, 331, (Mich.) ; 77 S. W, 1074, (Tenn.); 231 Ill, 594; 1 Cook (7th Ed.), Sec. 39; 78 N. J, 146. Recovery of money illegally paid can only be for the benefit of those who did not acquiesce in its payment: . 100 Atl, 650-1; 29 R. R. A, 100; 8 L. R. A, (N. S.), 738. No recovery of money actually paid where it has been ratified by stockholders: 4 Thomp. Corp, Sec. 4496; 3 Fletch. Cyc. Corp, Sec. 1526; 89 S. C, 185. Non-' suit would have been improper: 100 S. C, 109. And could not have been predicated on evidence brought out on cross-examination of plaintiff: 68 S. C, 10; 26 S. C, 264; 43 S. C„ 27; 46 S. C, 546; 42 S. C, 16. Directed verdict: 89 S. E, 1036; 105 S. C, 410; 101 S. C, 256; 93 S. C, 541; 66 S. C, 489; 104 S. C, 151; 104 S. C.. 415; 104 S. C, 30; 99 S. C, 241. Doctrine of in pari delicto: 5 Thomp. Corp, Secs. 6015, 6017; 2 Pom. Eq. (4th Ed.) Secs. 941, 942; 101 S. C, 479.
August 1, 1921.

Opinion:
The opinion of the Court was delivered by
Mr. Justice Fraser.
This evidence tends to show that the .plaintiff was the bookkeeper of the defendant mill. That the mill bought in the stock of one of its deceased stockholders at 50 cents on the dollar and resold it at par to some of the people who were in with the management of the mill. The defendant purchased 25 shares and gave his obligation to the mill for the purchase money. He was then made a director. The mill had not been making money, but it became prosperous and gave by way of bonus to its directors about $40,000. This gift was ordered by the directors. Subsequently a stockholders' meeting ,was had and the action of the' directors was approved. These directors owned a large majority of the stock. The plaintiff was secretary of the board, but he did not send out any notices of a stockholders' meeting. We are left only to presume 'that the /stockholders were duly notified. Plaintiff demanded that his obligation to the corporation be marked paid, and asked for judgment for the balance. Some, if not all, of the directors, who were voted a bonus are said to have returned it; but there is no sufficient proof of it, or of any circumstances that rendered the payment of a bond necessary or proper, or an indorsement of it by the corporation.
It would be manifestly unfair, on this partial and incompetent statement of facts, to make a final judgment. As the record now stands, it appears that the directors voted a bonus to each other, and then resolved themselves into a stockholders' meeting and approved the action. A bonus equal to 40 per cent, of the capital stock was given to the directors, with no explanation, except that they had the money. No authority sustains that. The plaintiff paid out a part of it as Federal taxes; so there should be a full investigation in order that complete justice may be done.
It is therefore ordered that the judgment appealed from be reversed, that the case be sent back to the Court of Common Pleas for a full showing as to the f-acts of the case, and an accounting by .all who took part in the $40,000 bonus, and that all the directors be made parties hereto.
Mr. Chieé Justice Gary and Mr!. Justice Watts concur.