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Galler v. Galler

OPINION FILED SEPTEMBER 26, 1975.

EMMA GALLER, APPELLEE,

v.

ROSE GALLER ET AL., APPELLANTS.



Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County; the Hon. Charles R. Barrett, Judge, presiding.

MR. JUSTICE RYAN DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 21, 1975.

This is a suit for an accounting arising out of a protracted dispute between two branches of the Galler family. Benjamin and Isadore Galler were brothers and cofounders and equal shareholders in the Galler Drug Company. In July, 1955, the two brothers and their wives executed an agreement to assure financial protection for their families and to provide for equal control of the corporation upon the death of either of the brothers. The agreement provided that in the event of the death of either brother, his wife was to be elected a director and was to nominate a second director to fill the place of her deceased husband. Each family was to have two directors. Benjamin Galler, president of the company, became seriously ill in 1955 and never returned to his corporate duties but continued to receive an annual salary of $42,000 until his death in December, 1957. Isadore Galler also received an annual salary of $42,000. These equal salaries had been paid to the two brothers pursuant to an informal understanding between them. There was no formal agreement between the brothers or action of the board of directors of the corporation providing for the payment of these salaries.

Isadore's son, Aaron, was secretary of the corporation and was employed by the company mainly as a supervisor of its warehouse. On September 25, 1956, pursuant to action which had allegedly been taken at a meeting of the board of directors of that date, he assumed the office of president of the company with a salary increase of $5,000 a year making his total salary $20,000 annually. The purported meeting of the directors was subsequently held to be invalid.

Suit was filed by Emma Galler, Benjamin's widow, when, shortly after Benjamin's death, Isadore and Aaron excluded Emma from the business and refused to honor the 1955 shareholders' agreement. The defendants had assumed absolute control of the management of the company. Plaintiff's suit was for specific performance of the agreement and prayed that Isadore and Aaron be ordered to account to the Galler Drug Company for the salaries that they had taken as officers. Isadore had continued to draw his salary of $42,000 after Benjamin's death.

In a decree entered July 12, 1962, the trial court, confirming the report of the master in chancery, held the 1955 agreement to be valid and binding and ordered that it be specifically enforced; that directors be elected as provided in the agreement and that Aaron Galler be enjoined from acting as president of the corporation unless thereafter duly elected at a valid meeting of the board of directors. The part of the decree of primary concern provided:

"The defendants, Isadore A. Galler and Aaron Galler shall and they are hereby ordered to account to the corporation for all monies received by them, and each of them, and by members of their family, from the corporation since September 25, 1956, and in such accounting shall be allowed fair compensation, to be determined by the Court, for services rendered by them to the corporation during said period, with the burden upon them to prove the fair value of any such services."

The appellate court (45 Ill. App.2d 452) on review reversed the circuit court and held that Isadore Galler did not have to account for his salary and that Aaron Galler had only to account for the increase in his salary from $15,000 to $20,000, which increase had been paid to him after he had assumed the office of president of the company.

On review this court reversed the appellate court except as to the matter of master's fees and upheld the trial court. (32 Ill.2d 16.) In that opinion this court stated:

"We hold defendants must account for all monies received by them from the corporation since September 25, 1956, in excess of that theretofore authorized." (Emphasis added.) (32 Ill.2d 16, 34.)

This present dispute involves Isadore's and Aaron's salaries from September 25, 1956, the date of the invalid directors' meeting, through February 11, 1965, the date this court's judgment was implemented by order of the circuit court. Isadore died on May 27, 1965. He had received his salary of $42,000 a year until February 11, 1965.

On remand the matter was again referred to the master where the defendants took the position that under the italicized language in that part of this court's opinion set out above Isadore Galler was not required to account for any of his salary. It was contended that for some years prior to the death of Benjamin, Isadore had drawn the same salary as Benjamin, namely, $42,000 a year. Defendants asserted before the master that these payments are evidence of the prior authorization of such salary and, thus, it was not in excess of that theretofore authorized.

The master found that the two Galler brothers, Benjamin and Isadore, had always taken equal salaries by informal agreement but that they never entered into any agreement as to future salaries; that this informal agreement terminated with Benjamin's death at the end of 1957; that after Benjamin's death and during the years 1958 through February 11, 1965, Isadore excluded Benjamin's widow from the premises of the drug company; that Isadore continued to draw his salary of $42,000 after Benjamin's death; that, although equal owners of the corporation, the members of the Benjamin Galler family were not consulted as to salaries taken by the members of Isadore Galler's family; that the 1955 agreement had no provision for officers' salaries in the future; and that there had been no corporate authorization for Isadore's salary. The master concluded that pursuant to the informal agreement as to equal salaries which terminated with Benjamin's death, Isadore was authorized to receive $42,000 a year from September 25, 1956, to the date of Benjamin's death at the end of 1957. However, he found there was no authorization for that salary to continue for the years 1958 through February 11, 1965, and that the fair value of Isadore's services to the corporation during that period was $10,000 per year. The master recommended that Isadore's estate repay the corporation $226,666 plus interest.

As to Aaron's salary of $20,000 a year the master likewise found that there had been no authorization for this salary either by the board of directors of the corporation or by agreement or consent of the shareholders. The master found the fair value of services Aaron rendered to the corporation between September 25, 1956, and February 11, 1965, to be $15,000 a ...


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