Ziegler v. Hoagland — 24 N.Y. St. Rep. 453

Majority

p. 453

William Ziegler, Resp’t, v. Joseph C. Hoagland, et al., App’lts.

(Supreme Court, General Term, Second Department,

Filed May 13, 1889.)

Headnote

1. Corporations—Salaries op officers—Frauds.,

The plaintiff, together with the defendants, were the incorporators and trustees of a certain corporation. Subsequently the defendants voted themselves respectively, president, vice-president and treasurer, and the company was controlled by the corporation and the same officers chosen. One of the defendants desired to purchase part of plaintiff’s stock, which plaintiff refused to sell. To compel a sale, a threat was made to raise the salaries of the officers. A subsequent raise followed. Again there was the same refusal to sell, another similar threat, and this was followed by an extremely large increase, and this was followed by a threat that there would be another increase, accompanied by an averment that there was no limit to the raise except the will of the trustees. Held, that such action was spoliation of the company for an unworthy purpose, and that the action of the trustees was fraudulent.

2. Same—Evidence—When incompetent.

Held, that a hypothetical question based upon net profits, and calling for the opinion of witnesses thereon, was incompetent.

Appeal from a judgment entered upon a decision of the Kings county special term.

Platt & Bowers, for def’ts Howard, et al.; Benjamin F. Tracy, for the Eoyal Baking Powder Oo.; William J. Gay-nor and William 0. Be Witt, for resp’t.

The Royal Baking Powder Company was organized in 1873. The plaintiff was one of the incorporators, and the defendants, Cornelius C. Hoagland and Joseph C. Hoagland.

The company had great success. In 1881, the plaintiff owned 690 shares; Joseph C. Hoagland, 492 shares; Cornelius C. Hoagland, 410 shares; Reynard Hoagland, 8 shares; making 1,600 shares, which was the full number of shares representing the capital, the par value of $100, each share. The corporation was managed by three trustees, who were also stockholders, and the plaintiff was one, until the election in 1887. Up to this time, the officers were a president, treasurer and secretary, each having a salary of $1,800 a year. In the fall of 1886, Joseph C. Hoagland requested the plaintiff to sell a part of his stock to him. The plaintiff refused to sell, and Hoagland threatened to raise the salaries if he did not sell the stock to him. The net earnings were enormous, being some 450 per cent in 1887. In the beginning of 1887, the defendant, Joseph C. Hoagland, sold eight shares of his stock to his son, Reynard, then a minor. At the meeting in 1887, the three Hoaglands all voted upon the stock, and plaintiff was not elected, but Joseph C. Ploagland, his son, and Cornelius Hoagland, a brother, were elected trustees. The three trustees then elected Joseph C. Hoagland, president, Cornelius C. Hoagland, vice-president, and Reynard Hoagland, treasurer, and voted to the president, $25,000 salary a year, $10,000 to the vice-president, and $2,500 to the treasurer.

In the summer of 1887, Joseph C. Hoagland again requested the plaintiff to sell a part of his stock, and made the same threat in case of refusal, that the salaries' would be again raised. The plaintiff again declined, and in the election of 1888, the same trusties were elected, and the president’s salary was raised to $50,000, and the vice-president’s to $30,000, and the treasurer’s to $6,000. There was a Tartar company which was controlled by the Baking Powder Company, without any salary. In 1887, the same trustees of the Powder Company, by its stock, voted themselves trustees and officers of the Tartar Company, and voted a salary of $7,500 to the president, $6,000 to the vice-president, and. $1,000 to the treasurer. This was again done in 1888.

After the election in. 1888, the president threatened a further raise in the salary, if the plaintiff did not sell his stock, and he then informed him that the trustees had taken legal advice, and were advised that they had the right to put the salaries of the said officers at any figures they saw fit, The finding of the judges, upon this narrative of facts, that the salaries were not earned, and were voted for the fraudulent purpose of coercing the plaintiff into selling his „ stock, is fully supported by the evidence. The company had been managed by the owners of its stock in harmony, and at a small salary, until the president of the company wanted

p. 455

a part of the plaintiff’s stock. To compel the sale, a threat was made to raise the salaries. A subsequent raise followed. Again there was, for the same refusal to sell, another similar threat, and this was followed by an extremely large increase, and this was followed by a threat that there would be another increase, accompanied by an averment that there was no limit to the raise, except the will of the trustees. Such action was spoliation of the company for an unworthy purpose, and trustees are not permitted to do them. Butts v. Wood, 37 N. Y., 317 ; Ogden v. Murray, 39 id., 202.

Without examining specifically the question as to the value of the services of the officers, which were rejected, they were all of a similar nature. The value of the services, from the opinion of the witnesses, and what was paid by other corporations and private firms, were received.

A hypothetical question, based upon net profits, and calling for an opinion of the witnesses thereon, was properly rejected. The value of the services, as found by the judge, is sustained by the evidence. There was a conflict with respect to it, but the weight of the testimony would carry the salaries to no greater amount than was found.

The judgment should be affirmed, with costs.

All concur.