Nature of the Case
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Facts
Gottfried Baking Corp. (D) is a closely held family corporation. P is a group of minority stockholders, owning approximately 38% of the stock. At the end of 1946, capitalization consisted of 4,500 shares of Class A stock with an $8 per share dividend and 20,862 shares of common stock. Dividends on common stock were not paid from 1931 through 1945. Financial statements of the corporation show a networking capital deficit at the end of 1941, in which year a consolidated loss of $109,816 had been incurred. Until the end of 1943, the earned surplus was relatively small in relation to the volume of business done and the growing requirements of the business. Ps contend that Ds by excessive salaries, bonuses and corporate loans to themselves or some of them, have eliminated the immediate need of dividends in so far as they were concerned, while at the same time a starvation dividend policy with respect to the minority stockholders -- not on the payroll -- operates designedly to compel the plaintiffs to sacrifice their stock by sale to the defendants.
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