This is a stockholder's derivative action initiated pursuant to C.R.C.P. 23.1 by plaintiff, Robert J. O'Malley. Defendant Jack E. Casey appeals from a judgment awarded to defendant Leigh Barron, Inc., to compensate the corporation for salary paid to Casey. We remand the cause for additional proceedings.
The pertinent facts are not in dispute. Casey owned 65% of the outstanding shares of the corporation and plaintiff Robert J.
Casey first contends that the award to the corporation was improper because the corporation asserted no cross-claim against him. This contention lacks merit.
The purpose of a derivative action is to recover sums owed the corporation and such was the relief requested in O'Malley's complaint. See C.R.C.P. 23.1; Bell v. Arnold, 175 Colo. 277, 487 P.2d 545 (1971). Hence, entry of a judgment in favor of a corporation is proper.
Casey next contends that the trial court erred in setting aside the salary. The court reasoned that the Board's approval of the salary must be set aside because Casey voted in favor thereof and because his vote was necessary to obtain a majority.
We recognize that, absent provisions in the articles of incorporation to the contrary, a Board member may not vote to approve a salary for his services as an employee of the corporation. Steele v. Gold Fissure Gold Mining Co., 42 Colo. 529, 95 P. 349 (1908); see also Colorado Management Corp. v. American Founders Life Insurance Co., 145 Colo. 413, 359 P.2d 665 (1961).
We find that view especially persuasive where, as here, the articles of incorporation specifically sanction a salary agreement between a director and the corporation. See Adams v. Mid-West Chevrolet Corp., 198 Okl. 461, 179 P.2d 147 (1946); Coleman v. Plantation Golf Club, Inc., 212 So.2d 806 (Fla.Dist.Ct.App.1968). The articles of incorporation provide:
Thus, we conclude that the salary approved for Casey by the Board is invalid if the salary is determined to be unreasonable, and this issue was not addressed by the trial court.
Casey also contends that the trial court erred in considering the amount of certain loans made to the corporation by Casey in calculating the amount of salary refund due. He asserts that this issue was not framed by the pleadings or tried by implied consent. However, because the loan issue is inextricably intertwined with the salary issue, both parties should be permitted to amend their pleadings and address the loan issue by evidence and argument on remand.
The judgment ordering Casey to refund salary to the corporation is reversed and the cause is remanded with directions for a new trial consistent with the views expressed in
PIERCE and KELLY, JJ., concur.