Sotter v. Coatesville Boiler Works

Citations

• 257 Pa. 411
• 101 A. 744
• 1917 Pa. LEXIS 753

Syllabus

<p>Corporations — Directors—Directors acting as officers — Compensation — Alleged fraud — Ratification—Equity—Contracts—Resolution by corporation.</p> <p>1. The directors of a corporation have the right to serve the company in the capacity of officers or employees and to receive compensation for such services, if legally employed by the company.</p> <p>2. Directors of a corporation may contract with agents or employees of their corporation who are likewise directors and, though always subject to close scrutiny and voidable for fraud or overreaching, such contracts are not ipso facto void, but will be sustained if for ,a fair and reasonable consideration.</p> <p>3. Where a board of directors votes excessive salaries to certain of its members who are also officers or employees of the corporation, even though such action may' subsequently be ratified at a stockholders’ meeting, the action of the board, when called into question by a minority stockholder, is subject to review by a court of equity and, if the finding of the latter tribunal is that the salaries in question are exorbitant, it may determine the value of the services rendered by the officers or employees in question and restrain the corporation from paying in excess thereof.</p> <p>4. While a corporation which has voted salaries to its officers or employees may be restrained from paying any sums on account of the amount voted in excess of what the court shall deem to be reasonable, the court has no power to restrain the payment of such salaries in future years when the circumstances may change.</p> <p>5. A manufacturing corporation,, having seven directors, voted salaries to three of. its executive officers who were also directors at $400 per month each. Each of these officers performed special services to the company which were valuable and resulted in financial success. Such officers had threatened to resign and the directors voted to give them from year to year, in addition to their salaries, 50% of the a