CORPORATIONS - LIABILITY OF OFFICER FOR PROFITS MADE OUT OF HIS OFFICE

Authors

James D. Ritchie, University of Michigan Law School

Abstract

X, in order to obtain funds with which to bid at a government sale of steel in 1919, offered defendant, president of the Y Bank, a one-half interest in the venture. Subsequently, defendant caused the bank to make large loans to the corporation organized to handle the steel transaction. The loans were approved by the bank's loan committee on defendant's recommendation and were repaid in due time. Within the next three years defendant received from the steel enterprise $75,000 in "salary," $73,125 in dividends, and, finally, $200,000 for the sale of his stock. Upon the directors' refusal to sue, plaintiff-stockholders in the bank brought suit on behalf of their corporation to recover the sums so received by defendant. Held, that defendant breached his duty to the bank, the directors' refusal to sue was wrongful, and therefore plaintiffs were entitled to recover for the bank the profits taken in by defendant. Fleishhaker v. Blum, (C. C. A. 9th, 1940) 109 F. (2d) 543, certiorari denied (U.S. 1940) 61 S. Ct. 23, rehearing denied 9 U.S. L. WEEK 3124.

Recommended Citation

James D. Ritchie, CORPORATIONS - LIABILITY OF OFFICER FOR PROFITS MADE OUT OF HIS OFFICE, 39 Mich. L. Rev. 314 (1940).
Available at: https://repository.law.umich.edu/mlr/vol39/iss2/13