Eaton v. Robinson
| Decision Date | 18 May 1895 |
| Citation | 19 R.I. 146,31 A. 1058 |
| Parties | EATON et al. v. ROBINSON et al. |
| Court | Rhode Island Supreme Court |
Suit by Amasa M. Eaton and others against George H. Robinson and others for an account of moneys paid respondents as officers of a corporation. Both parties except to the master's report Complainants' exceptions sustained in part.
For reports in this ease and prior litigation in the matter, see Hazard v. Robinson, 2 Atl. 438; Clarke v. Robinson, 10 Atl. 642, 13 Atl 124; and Eaton v. Robinson, 27 Atl. 595.
Amasa M. Eaton and Edwards & Angell, for complainants.
Arnold Green, for respondents.
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 the litigation, in the event that the litigation should prove successful. Counsel for the respondents maintains that the master erred in finding the latter purpose, because, as 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 mortgaged 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 towards them. If they acted oppressively, we think that the master erred in allowing them compensation. Davis v. Railway Co., 22 Fed. 883; Sellers v. Iron Co., 13 Fed. 20; Swartswalter's Account, 4 Watts, 77, 79; Berryhill's Appeal, 35 Pa. St. 245; note to Robinson v. Pett, 2 White & T. Lead. Cas. Eq. 550, 570, 600. In the cases cited by the master in which...
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...utmost good faith so that he was required to place the interests of the corporation before his own personal interests. Eaton v. Robinson, 19 R.I. 146, 31 A. 1058 (1895). The duty of utmost good faith is violated when a director or officer fails to disclose material facts to the corporate bo......
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