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Galler v. Galler

MAY 13, 1968.

EMMA GALLER, INDIVIDUALLY, AND AS TRUSTEE UNDER A TRUST AGREEMENT DATED JULY 21, 1956, AND AS EXECUTOR OF THE LAST WILL AND TESTAMENT OF BENJAMIN A. GALLER, DECEASED, PLAINTIFF-APPELLEE,

v.

ROSE GALLER AND AARON GALLER, INDIVIDUALLY, AND ROSE GALLER AS EXECUTRIX OF THE ESTATE OF ISADORE A. GALLER, DECEASED, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County; the Hon. WALKER BUTLER, Judge, presiding. Affirmed.

TRAPP, J.

Rehearing denied June 21, 1968.

Defendants appeal from an interim order of the Circuit Court of Cook County, Illinois, which was entered pursuant to a reservation of jurisdiction under a previous decree for specific performance of a corporate stockholders' agreement.

In Galler v. Galler, 32 Ill.2d 16, 203 N.E.2d 577, the Supreme Court upheld a decree dated July 12, 1962, which ordered the enforcement of a stockholders' agreement in a close corporation. Such agreement required voting of stock for election of directors which would give equal representation to the members of two families who were dominant owners of the stock. The decree also ordered defendants, Isadore Galler and Rose Galler, to account for salaries received during a prior period. The decree provided inter alia:

"10. The court retains jurisdiction of the cause and of the parties hereto for the following purposes:

"(a) To enforce the provisions of this decree;

"(b) To take the accounting required by this decree, and to enter such further orders and decrees as may be necessary and just relative to such accounting;

"(c) To determine any remaining controversy between the parties with respect to the matters set forth in plaintiff's motion for leave to file a supplemental complaint and the proposed supplemental complaint attached to said motion entered herein on August 4, 1961, and the stipulation of the parties with respect thereto filed herein on August 9, 1961, and for the purpose of entering such orders, conducting such proceedings and entering such judgments or decrees as may be equitable in relation thereto."

Pursuant to the previous decree the bylaws of the Galler Drug Company were amended to provide for a four-member board of directors as follows: Aaron Galler and Emanuel Galler, representing the Isadore Galler family, and Emma Galler, widow, and her attorney, Sidney Zatz, representing the Benjamin Galler family. The Board elected two members of each family as officers as follows: Aaron Galler, President; Emanuel Galler, Treasurer; Emma Galler, Secretary; and Gerald Galler (Emma's son) as Vice-President. In the year 1965, the Board of Directors authorized payment of salaries to the officers in amounts which, during the latter part of 1965, aggregated $37,500 per annum for Aaron and Emanuel Galler, and $37,500 per annum for Emma and Gerald Galler.

At the meeting of the Board of Directors held January 27, 1966, an attorney representing Aaron Galler and Emanuel Galler, proposed that the officers of the company draw no salaries until the accounting suit previously referred to be dropped. It was further proposed that if the accounting suit were dropped, the existing salaries be continued for one year. Plaintiff, Emma Galler, simply proposed that the existing salaries be continued and refused to drop the accounting suit. As a result of the difference, the meeting adjourned and no salaries were authorized.

The petition by Emma Galler for an order requiring the payment of salaries to the officers, and the answer of defendants substantially set forth the facts stated. Additionally, the answer alleges that the services of Emma Galler and Gerald Galler do not justify compensation of $37,500 per year, and further asserts that since the directors did not authorize compensation of the officers they are not entitled to any compensation.

The evidence taken at the hearing essentially confirmed such recitation of facts. However, no attempt was made by either party to furnish a substantial basis for determining a proper salary.

The position of the plaintiff petitioner is that defendants agreed to the salaries, but sought to impose an illegal condition. The position of the defendants is that a court has no authority to require a corporate board of directors to fix salaries, or to fix them in the absence of board action.

Defendants cite Steigerwald v. A.M. Steigerwald Co., 9 Ill. App.2d 31, 132 N.E.2d 373, which holds that compensation of a corporate officer for his duties as such must be authorized by resolution of the board of directors. Joy v. Ditto, 356 Ill. 348, 190 N.E. 671, recognizes the rule that compensation of officers for their duties as such must be authorized by the board of directors, but recognizes that officers may also be employees whose compensation for such services may be fixed according to accepted practice of the corporation. Hall v. Woods, 325 Ill. 114 on 139, 156 N.E. 258, holds that an officer who has received a salary larger than that authorized by resolution of the board of directors is required to return the difference. St. Louis, A. & S.R. Co. v. O'Hara, 177 Ill. 525, on 531, 52 N.E. 734, holds that an officer of a corporation cannot recover a salary unless the same is fixed by resolution of the board of directors. Brown v. DeYoung, 167 Ill. 549 on 553, 47 N.E. 863, holds that a director is not entitled to receive a ...


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