Court Opinion

ID: 5300161
Source: CourtListenerOpinion
Date Created: 2022-01-08 03:05:23.069145+00
Date Added: 2024-06-11T08:29:03.850541
License: Public Domain

Proskauer, J.
(dissenting). William H. Birkmire, the husband of the plaintiff and the father of the individual defendants, during his lifetime caused the organization of the defendant corporation and to it transferred valuable real estate. The fifty shares of stock of the company had been held, ten shares by Mr. Birkmire and eight shares each by his sons Harold and Cyril and his daughters Edith, Freda and Gladys. About two months prior to his death he transferred his ten shares to the plaintiff, the stepmother of these children. The corporation owned apartment houses on Andrews avenue and on Boring place, in the borough of The Bronx. From 1914 until the time of his marriage with the plaintiff Mr. Birkmire resided in an apartment in the Boring place house without payment of any rent and his sons and daughters resided with him during a large part of that period. When Harold Birkmire was married in 1917, all the stockholders of the corporation agreed that he should occupy rent free one of the apartments in the Andrews avenue property. A similar agreement was made when Freda Birkmire was married in 1922. Similarly, upon William H. Birkmire’s marriage with the plaintiff, there was an agreement that he should occupy rent free one of the apartments in a building owned by the defendant corporation, and that Cyril Birkmire, Edith Birkmire and Gladys Birkmire should continue to occupy rent free the apartment in the Boring place building in which they had theretofore resided with their father. William H. Birkmire died on February 9, 1924. The individual defendants have been since that time the officers and directors of the corporation. They have continued to occupy their respective apartments on Andrews avenue rent free and have permitted their brothers and sisters to continue to reside at Boring place rent free.
The plaintiff brings a representative action to charge the individual defendants, among other things, with the reasonable rental value of these premises occupied by them and under their authority by their brothers and sisters, and the court has decreed an accounting with respect to these items. I think this direction is correct. It is true that this was a family corporation and that during the lifetime of the father there was unanimous agreement among the stockholders of the corporation which justified the enjoyment rent *229free of these premises. But no inference can be drawn that this arrangement was to last forever. The reasonable interpretation of the agreement and conduct of the parties was that the arrangement was to continue while the family status quo continued. The family situation was changed essentially by the gift of Mr. Birkmire’s stock to his wife and his ensuing death, and no inference can reasonably be drawn that the immunity from rent was to continue after the death of Mr. Birkmire.
The judgment is also challenged because of a direction for the repayment of salaries allowed to officers of the corporation over and above an amount fixed by the court as reasonable compensar tion for their services. Since their father’s death the individual defendants paid out of the assets of the corporation to themselves and their brother and sisters $1,005.60 each in addition to the sum of about $6,000 a year voted to themselves as salaries. During that period the plaintiff, owning one-fifth of the stock, has received nothing. The by-laws of the corporation provided that the salaries of officers should be fixed by the president and until so fixed “ no officer shall be entitled to any remuneration for his services.” During his lifetime Mr. Birkmire had fixed his own salary at $5,000 per annum. This salary continued until February 6, 1924. On that day Gladys Birkmire, as president of. the corporation, fixed her salary at $3,000 per annum and fixed the salary of Cyril Birkmire, as secretary, at $1,500 per annum, and Edith Birkmire, as treasurer, at $1,500 per annum. The gross income of the corporation was about $26,000 a year and the services rendered related merely to the management of these apartment houses. Obviously, no just complaint could be made against the payment of salaries while all stockholders were parties to the agreement under which they were paid. But here again a new situation arose with the death of Mr. Birkmire and the court properly found that the diversion of almost a quarter of the gross income <of the corporation for the negligible services rendered by these individual defendants was an abuse of the discretion of directors and a waste of corporate funds. The amounts fixed by the court as reasonable are fair.
The judgment appealed from should be affirmed, with costs.
Dowling, P. J., concurs.
Judgment reversed, with costs, and complaint dismissed, with costs. The findings inconsistent with this determination should be reversed and such new findings made of facts proved upon the trial as are necessary to sustain the judgment hereby awarded. Settle order on notice.