Wilderman v. Wilderman

Eleanor Wilderman (plaintiff) is a director of Marble Craft Company, with a one-half interest in the corporation’s stock. Joseph Wilderman (defendant) is Marble Craft’s other director, and its president. Mr. Wilderman is also Mrs. Wilderman’s ex-husband. By April of 1971, after their separation, the two directors were deadlocked on the issue of what compensation to pay to Mr. Wilderman, and could not agree to authorize any amount above $400 per week, or $20,800 per year. In 1971, in addition to his authorized salary of $20,800, Mr. Wilderman paid to himself a bonus of $71,738.71. In 1972 Mr. Wilderman paid himself $35,000. In 1973, Mr. Wilderman paid himself a total sum of $86,893.40. During this same period Mrs. Wilderman received $7,800 per year. Mrs. Wilderman brought suit against Mr. Wilderman, claiming that in fiscal years 1971, 1972, and 1973 Mr. Wilderman caused excessive and unauthorized payments to be made to himself from the corporation’s earnings. Mrs. Wilderman sought to have the excess payments returned to the corporate treasury and distributed as dividends. At trial, a financial expert testified that reasonable compensation for Mr. Wilderman would have been between $25,000 and $35,000 per year, and evidence was submitted showing that the Internal Revenue Service (IRS) intended to permit only a $52,000 deduction for Mr. Wilderman’s $92,538 compensation in 1971.