184 A.D. 253 | N.Y. App. Div. | 1918
This is an action by minority stockholders of the Elkhorn Valley Coal-Land Company, defendant, a West Virginia corporation, in the right of the company to compel the presidents and secretaries of the company to account for moneys drawn as salaries from October, 1910, to October, 1916, claimed to have been both illegal and excessive.
The salary of the president was increased October 1, 1915,
The company was incorporated in 1891 with stock of the par value of $300,000, and purchased from the defendant Andrews a large tract of coal lands in West Virginia, and the mineral rights in another tract; but at the outset it leased them to other companies for thirty years on royalties based on the quantity of coal mined and of coke manufactured, with a provision for a minimum royalty. The company carried on no active business, and practically the only business trans
Evidently after the action was commenced by the service of a summons, but before the complaint was served, the board of directors of the corporation adopted a resolution appropriating and setting aside $1,000 for the defense of the action, and the stockholders at a meeting called for the purpose ratified and approved such action. There is no evidence that any of the money had been expended at the time of the trial. The plaintiffs contend that the resolution was void and that the defendants should be enjoined from expending the money of the corporation thereunder. What the circumstances were under which the money was appropriated does not appear. It does appear by the complaint subsequently filed that the plaintiffs asked for the appointment of a receiver of the corporation pendente lite. It may be that on the summons, being served their understanding was that a permanent receivership would be demanded, but in any event they were justified in appropriating funds to resist any application that might be made to have the affairs of the company placed in the hands of a receiver, and, therefore, there was no illegality in the reso
There is no merit in the appeal by the defendants in so far as they seek a review of the reduction of the salary of the president. The salary as allowed by the judgment constituted very liberal compensation for the services rendered. He had received only that amount for nearly fifteen years and there was no material change in his duties.
The action having been sustained, it necessarily follows that it should have been brought by the corporation, but an action by the corporation having been prevented by the control of the majority stockholder and the other director, whose election he controlled, it is but right and just that the corporation and such directors, or both, should reimburse the plaintiffs for the reasonable costs and expenses of maintaining the action, for the corporation would itself have incurred such costs and expenses had it performed its duty to the stockholders by bringing the action itself. (Godley v. Crandall & Godley Co., 153 App. Div. 697; affd., 212 N. Y. 121; 181 App. Div. 75; Cook Corp. [7th ed.] § 879; Trustees v. Greenough, 105 U. S. 527; Woodruff v. N. Y., L. E. & W. R. R. Co., 129 N. Y. 27; Grant v. Lookout Mountain Co., 93 Tenn. 691.)
It follows that the judgment should be modified as herein indicated, with costs to plaintiffs, appellants, and all findings of fact and conclusions of law inconsistent herewith to be specified in the order reversed, and further findings of fact and conclusions of law made in accordance herewith, and the judgment as so modified affirmed.
Clarke, P. J., Dowling, Shearn and Merrell, JJ., concurred.
Judgment modified as indicated in opinion and as so modified affirmed, with costs to plaintiffs, appellants. Order to be settled on notice.