Eaton v. Robinson , 19 R.I. 146 ( 1895 )

The master has found that the salaries voted and paid to the respondents, while nominally and partly for services rendered to the company, were partly and largely for the purpose of depriving the predecessors in title of the complainants of the results of litigation, in the event that the litigation should prove successful. Counsel for the respondents maintain that the master erred in finding the latter purpose because he contends the respondents at the time of the fixing of the salaries could not have known that judgment in the suit at law would be taken for the full amount of the mortgage debt instead of the excess only above the value of the stock pledged, whereby the right to redeem the stock arose. The salaries, however, were not fixed till after the right to redeem the stock had been claimed and suits for the purpose had been begun. We think that the master was justified in his finding.

In so far as the fixing and payment of the salaries were induced by the purpose to deprive the complainants' predecessors in title of their share of the rents and profits accruing to the corporation in case they should obtain the right to redeem the mortgage stock such action was oppressive and must be treated as fraudulent. The respondents, as officers of the corporation, stood in a fiduciary relation towards the complainants' predecessors in title as stockholders in the corporation, analogous to that of trustee and cestui que trust and were bound to the exercise of the utmost good faith toward them. If they acted oppressively, we think that the master erred in allowing them compensation. Davis v. Memphis R.R. Co., 22 Feb. Rep. 883; Sellers v. Phoenix Iron Co., 13 Fed. Rep. 20;Swartswalter's Account, 4 Watts, 77, 79; Berryhill's Adm'xAppeal, 35 Pa. St. 245; Note to Robinson v. Pett, 2 Lead. Cas. in Eq. 550, 570, 600. In the cases cited by the master in which compensation was allowed to officers of corporations, notwithstanding their maladministration, the objection that they were not entitled to compensation because of such maladministration does not appear to have been made. The master should have required the respondents to account for all sums withdrawn for salaries with interest.

We see no reason for disturbing the allowance of $134 by the master for outlays by the respondents for the benefit of the corporation.

We overrule the respondents' exceptions, and those of the complainants except so far as consistent herewith.

The cause then came up on the form of the decree to be entered.

July 3, 1895.