Leigh v. Wasey

Per Curiam. This is an action brought by a stockholder of the corporate defendant to compel the individual defendants, who constituted a majority of the board of directors, to account for misconduct alleged to have resulted in injury to the corporation. The principal acts complained of relate (1) to alleged excessive salary paid to the president, and (2) alleged excessive appropriation for corporate advertising whereby one of the individual defendants secured a personal benefit. In such cases as this, plaintiff must first establish wrongdoing by directors before any right exists to have them account to the corporation. Of course, no referee may be appointed to take [595] and state an account until the wrongdoing of the directors is established to the satisfaction of the Special Term. (Weldon v. Brown, 84 App. Div. 482.) The Special Term justice before whom this case was tried stated that the evidence was not sufficiently clear to enable him to determine the main question involved, and that, as a result, he refused to find misconduct by the directors, stating that the proofs were “ too tenuous and intangible for a holding of guilt.” Nevertheless, the court granted an interlocutory judgment appointing a referee to take and state an account, leaving the question of misconduct to the referee. This procedure was unwarranted. On this appeal the respondent joins with the appellants in asking the court to make appropriate findings concerning the facts, and has asked that it render such judgment as the proof taken before the Special Term warranted. In view of this stipulation, we will determine the issues concerning the right to an accounting rather than remit the case to Special Term to fulfill that duty. We find that the evidence entirely fails to sustain any overreaching or misconduct on the part of the defendant directors, and that the acts complained of were well within their discretion. The judgment, accordingly, should be reversed, with costs, and judgment directed for the defendant directors dismissing the complaint on the merits, with costs. Martin, P. J., Dore, Cohn and Callahan, JJ., concur; Untermyer, J., dissents in part.