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SPANG v. WERTZ ENGINEERING COMPANY (05/23/55)

May 23, 1955

SPANG, APPELLANT,
v.
WERTZ ENGINEERING COMPANY, INC.



Appeal, No. 120, Jan. T., 1955, from decree of Court of Common Pleas of Berks County, in Equity, 1951, No. 2425, in case of Luther F. Spang v. Wertz Engineering Company, Inc., et al. Decree affirmed.

COUNSEL

Donald F. Spang, with him Ellis Brodstein, for appellant.

Paul N. Schaeffer, with him George W. Manderbach, for appellees.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.

Author: Musmanno

[ 382 Pa. Page 49]

OPINION BY MR. JUSTICE MUSMANNO

The plaintiff is a minority stockholder of the defendant Wertz Engineering Company. The individual defendants - Augustus S. Wertz, Howard S. Gerhart, George R. Portz and J. Ralph Heinz - are respectively, the President, Vice-President, and Secretary of the company, and together comprise the entire Board of Directors.

In an Amended Bill in Equity filed in the Court of Common Pleas of Berks County, the plaintiff averred that the individual defendants as directors had increased their salaries and given themselves bonuses without authorization and without warrant in law. The defendants in their Answer denied receiving bonus payments and declared that the sums complained of by the plaintiff were salaries established by resolution of the Board of Directors on October 21, 1950, at a time when the plaintiff himself was a director and that he himself had moved adoption of the authorizing resolution which then unanimously passed.

At the trial in the Court below the plaintiff, failing to produce evidence of voted increase in salaries or bonuses, relied for support of his contentions on oral

[ 382 Pa. Page 50]

    testimony and a typewritten statement showing that on December 20, 1951, sums varying from $2,375.20 to $3,685 had been paid to the individual defendants. The record demonstrated that the sums in question were deferred payments on account of past salaries due and owing the defendants and there was no evidence to substantiate any suggestion of overreaching or fraud on the part of the directors. The Chancellor was thus justified in finding as he did that "the individual defendants did not pay any bonus to the individual defendants at the close of the year 1951 or at any other time in that year," and that therefore the defendants were not required to return the amounts received by them. As was stated in Jones v. Costlow, 349 Pa. 136, 143, "While the courts have some measure of supervision over the action of directors in fixing their own salaries as officers or for other services rendered, there should be no judicial interference in that regard unless fraud or overreaching appears ..."

The plaintiff also asked in his Amended Bill in Equity that the Court compel the defendants to permit him to inspect at reasonable intervals the books and records of the defendant corporation. The plaintiff admitted that on Saturday mornings he was allowed to go through the stock register, the general ledger and the minutes of the Directors' meetings, but he contended he needed to see more. He wished to examine, in addition, payroll records, traveling expenses, expense account records, accounts receivable records, accounts payable records, notes receivable records, notes payable records, scheduling records including status of customer orders and status of orders to suppliers for the purpose of determining ...


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