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CHAMBERS v. BEAVER-ADVANCE CORPORATION. (05/02/58)

May 2, 1958

CHAMBERS, APPELLANT,
v.
BEAVER-ADVANCE CORPORATION.



Appeal, No. 213, March T., 1957, from decree of Court of Common Pleas of Lawrence County, March T., 1957, No. 2, in case of Philip Chambers v. Beaver-Advance Corporation et al. Decree affirmed.

COUNSEL

C. Barrickman, with him Keller & Luxenberg and Wallover and Barrickman, for appellant.

Joseph R. McFate, with him Caldwell and McFate and McFate and Rea, for appellee.

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

Author: Bell

[ 392 Pa. Page 483]

OPINION BY MR. JUSTICE BELL

The question raised in this appeal involves the validity of a bonus under the particular facts of this case.

Appellant, who is a director and the owner of 43% of the corporation stock, brought a complaint in equity against the corporation and the other two directors and stockholders (a) to restrain them from paying additional compensation in the nature of a bonus for services rendered by them as president and secretary respectively for the year 1956, and (b) to restrain them from paying any other officer of the defendant corporation any sum of money by way of bonus, and (c) to restrain them from purchasing the West Coast Distributorship from the Mathews Conveyor Company*fn* and (d) to restrain them from erecting any addition to the plant.*fn* The lower Court, after hearing testimony and argument, found that the salaries and bonuses were reasonable and that there was no fraud, bad faith or wasting of corporation assets; and dismissed plaintiff's complaint.

Beaver-Advance Corporation was organized under the laws of the Commonwealth of Pennsylvania and is engaged in the business of the manufacturing of materials and equipment used in the process of heat treating and fabrication of metals, as well as the making and construction of scaffolding materials. The principal office and place of business of the Company is on Factory Avenue in Ellwood City, Lawrence County, Pennsylvania.

The business and affairs of the corporation, according to its by-laws, are to be conducted by three directors. The present directors are Ralph W. McGrew and Ronald G. Morris, who are the two individual

[ 392 Pa. Page 484]

    appellees, and the appellant, Philip Chambers. Appellant states that according to the balance sheet and financial statements submitted at the trial, the company has grown substantially in assets and has enjoyed a lucrative income, although no dividends have been declared for a period of many years.

At a special meeting of the board of directors held on August 9, 1950, it was resolved that additional compensation be paid to C. F. Maroney, D. I. Weisz and R. W. McGrew for the fiscal year ending October 31, 1950. They owned almost all the stock of the corporation and were actively engaged in its operation and management. Incorporated in the resolution was provision for future compensation of these individuals based on a percentage of the (net) income of the corporation generally as follows: 1% for the fiscal year ending October 31, 1950; 2% for the fiscal year ending October 31, 1951; 3% for the fiscal year ending October 31, 1952; 4% for the fiscal year ending October 31, 1953, and 5% for the fiscal year ending October 31, 1954, and subsequent fiscal years.

The terms of the resolution have been followed substantially in governing the amount of additional compensation paid, and the additional compensation had been referred to from time to times as bonuses. There never was any formal ...


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