APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS, DIVISION OF ST. THOMAS AND ST. JOHN.
Seitz, Chief Judge, and Maris and Gibbons, Circuit Judges.
The defendants, Marion Clark Edson, Jr., Kathryn L. Edson and Desco Products Caribbean, Inc., have appealed from a judgment entered against them in the District Court of the Virgin Islands in an action brought by the plaintiff, Roger F. Moran. Moran and his wife are joint owners of 50% of the stock of Desco, and the Edsons own jointly the remaining 50% of the stock. It appears that Desco was organized in 1960 by Moran and one W. Hugh Maxwell to do business under a franchise from Desco Chemical Company, of Buffalo, New York, manufacturers of roof, wall, swimming pool and other coatings. Moran and Maxwell each owned 50% of the stock of Desco. In February, 1965, Edson purchased the stock of Maxwell in Desco and he entered into a stockholders' agreement with Moran with respect to their respective rights and obligations as stockholders.
The agreement provided in pertinent part:
"1. The three directors of the corporation shall be the parties hereto and a third party to be agreed upon.*fn*
"2. Edson shall be the President of the corporation and shall have final responsibility and authority in the management thereof.
"3. Moran shall be the Secretary-Treasurer of the corporation.
"4. Edson shall have the sole responsibility and authority of the corporation bank accounts and shall be authorized to draw funds therefrom on his signature alone.
"5. Each of the parties shall draw basic salaries of $6,000.00 per year. Should there be funds available, Edson shall draw an additional sum as salary up to an additional $12,000.00 per year. Should business and receipts above that warrant, the parties may draw additional equal salary bonuses.
"6. Moran will provide warehouse and office space for the corporation without charge."
Difficulties and disagreements arose between Moran and Edson over the operation of Desco and their respective rights and obligations with respect to it. About a year prior to December, 1966 Moran commenced charging Desco $75.00 per month for the space which he had agreed to provide without charge. In that month Edson transferred the corporate operations to space owned by a third party. Then on April 1, 1967 he transferred the operations to space which Desco leased from a corporation wholly owned by the Edsons. In July, 1967 the Edson majority of the board of directors removed Moran as secretary and treasurer and terminated his $6,000.00 annual salary. The present suit by Moran followed. The complaint alleged that Moran had been wrongfully removed as a director and officer of Desco and denied his salary and that the Edsons had assumed complete control of the corporation, all in violation of the stockholders' agreement between Moran and Edson, and that the Edsons had unlawfully and corruptly voted themselves excessive salaries and other benefits and had mismanaged, misused and misappropriated substantial funds and assets of the corporation. The complaint asked for an accounting by the Edsons, an injunction against further mismanagement and misappropriations by them and an order removing them as directors and officers and directing a new election. It was alleged that Desco was not joined as a party plaintiff because the Edsons constituted a majority of its board of directors and any demand upon them for such action would have been futile. The suit is, therefore, at least in part, in the nature of a stockholders' derivative action. Separate answers were filed by the Edsons and by the corporation.
The case was tried by the district court without a jury. Voluminous testimony and numerous exhibits were received in evidence. Thereafter the district court filed its ...