Court Opinion

ID: 5226372
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:45:45.868568+00
Date Added: 2024-06-11T08:27:35.906390
License: Public Domain

Scott, J. (concurring):
I concur entirely with Mr. Justice Clarke so far as he goes, but, in my opinion, we should go further and hold the defendants who were directors of the Crandall & Godley Company liable to the company, not only for the moneys fraudulently paid out to themselves under the guise of increased or additional salaries, but also for the moneys paid out in like manner and under the same guise to those favored stockholders who were employees, though not directors, of the corporation.
The basis upon which the directors are held liable at all is that they unlawfully diverted the money of the corporation to themselves and other favored stockholders ostensibly as salaries or compensation for services, but really with a view to dividing up the surplus among themselves and those whom they favored, thus undertaking to “ freeze out” the stockholders with whom they were not friendly. In effect they are found guilty of having paid the moneys of the-corporation to themselves and others without consideration or equivalent flowing to the cor- . poration. This was an unlawful diversion of the funds of the x corporation, and a fraud upon the minority stockholders. The reason why the directors are required to pay back what they illegally received under this scheme is that they were actors in it, and in so acting violated then fiduciary relation to the corporation and its stockholders. I think that they are liable for all that was thus illegally paid out as a result of then wrongful acts. In Latimer v. Veader (20 App. Div. 418) an officer of a bank who had embezzled its funds was held liable not only for what he had stolen himself, but for all that had been stolen *718by his subordinates, through his connivance or negligence. The same rule, I think, is applicable to the present case. I am, therefore, of the opinion that the judgment should be affirmed without modification.
While entertaining, the views above expressed I am not' disposed to insist upon them if by so doing the disposition of the appeal will be delayed. The case is an important one, involving a large amount of money,-and will, I assume, be taken to the Court of Appeals. If so, we should not unnecessarily delay its progress. The case was carefully tried, and it is wholly improbable that any new facts would be developed upon a new trial. The appeal was fully and ably argued, and it is not probable that a reargument would throw any further light upon the questions as to which the members of -this court are divided in opinion. I am, therefore, prepared, in order that the case may be disposed of so far as this court is concerned, to concur in the opinion of my brother Clarke, merely expressing my own opinion as above stated.