
    Ziegler v. Hoagland et al.
    
    
      (Supreme Court, General Term, Second Department.
    
    May 18, 1889.)
    Corporations—Officers—Fraud.
    Plaintiff owned less than half the stock in a corporation, and the three defendants owned the residue. For many years plaintiff was one of the three trustees constituting the hoard, hut the defendants, who were all of one family, were elected trustees, and they elected themselves respectively president, secretary, and treasurer. One of the defendants sought to buy plaintiff’s stock, but he declined to sell, whereupon said defendant threatened to raise the salaries of the officers, which was done. In the next year another refusal to sell was followed by another raise of salaries, so that instead of $1,800 each per year—the salaries which had been paid for many years—the officers were to receive respectively $50,000, $30,000, and $0,000, and a further increase was threatened, with the statement that the power of the trustees to increase the salaries was unlimited. Another company was controlled by the corporation, and the same officers were chosen, and they voted themselves salaries respectively of $7,500, §6,000, and §1,000, though previously the officers of that company had served without pay. The business was very profitable. The salaries voted were shown to have been greater than the services were worth. JBeld, that the trustees’ action was fraudulent, and equity would restrain the payment- of more than the real value of the officers’ services.
    Appeal from special term, Kings county.
    Action by William Ziegler against Joseph C. Hoagland and others, trustees and officers of the Boyal Baking Powder Company, and said corporation, to restrain said officers from doing certain acts alleged to be in violation of their duties. Judgment for plaintiff, and defendants appeal.
    Argued before Barnard, P. J., and Bykhan and Pratt, JJ.
    
      Platt & Bowers, for defendants Hoagland and others. Benjamin F. Tracy, for the Boyal Baking Powder Company. William J. Qaynor and William O. Dewitt, for respondent.
   Barnard, P. J

The Boyal 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, Baymond 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 ke 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 Raymond, then a minor. At the meeting in 1887 the three Hoaglands all voted upon the stock, and plaintiff was not elected; but Joseph 0. Hoagland, 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 Raymond 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 trustees 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 judge 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 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 so. Butts v. Wood, 37 N. Y. 317; Ogden v. Murray, 39 N. Y. 202. Without examining specifically the evidence upon the question as to the value of the services of the officers, which was rejected, it was 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 á 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.  