Court Opinion

ID: 5226373
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:45:45.871546+00
Date Added: 2024-06-11T08:27:35.910376
License: Public Domain

Laughlin, J. (concurring in part):
I concur in the views expressed by Mr. Justice Clarke, excepting on one point. I am of opinion that the directors were guilty of a breach of their trust in authorizing the disbursement of moneys of the corporation in the form of salaries or bonuses 'to employees, based solely upon the stock ownership of such employees, by which, in effect, dividends were given to such stockholders in the form of salaries, for the purpose of depriving the plaintiff from participating in dividends. It was shown by the evidence and found by the trial court that such payments, in so far as they purported to be increases of salary or 'bonuses, were not based upon services rendered.
The principle upon which directors a,re accountable to the stockholders óf a corporation is that they OWe to Jhem a trust duty to exercise reasonable care in the management of the property and affairs of the corporation; and on that theory they are, I think, equally accountable for moneys which they negligently and without consideration to the corporation allow to be disbursed to employees, as for funds which they appropriate *719to themselves. (Mutual Life Ins. Co. v. McCurdy, No. 1,118 App. Div. 815; Mutual Life Ins. Co. v. McCurdy and McCurdy, Id. 827; People v. Equitable Life Assurance Society, 124 id. 714.) The judgment, however, instead of A requiring the directors to account for the increase of salaries, payment of which they thus authorized, requires them to account for the entire amount of the salaries thereafter paid. This I agree with my associates was erroneous because,, but for such action, the salaries would have continued as previously lawfully fixed.
I, therefore, vote to modify the judgment by confining the accounting concerning salaries received by the directors, or paid out pursuant to the resolution of November 14, 1906, to the increase of salaries received or paid out under said resolution, and for its affirmance as so modified.
Judgment modified as indicated in opinion of Clarke, J., and as modified affirmed, without costs. Order to be settled on notice.