(dissenting). The-decision of this appeal is of far-reaching importance insofar as concerns payment by corporations of campaign expenses by stockholders in proxy *177contests for control. This is a stockholder’s derivative action to require directors to restore to a corporation moneys paid to defray expenses of this nature, incurred both by an incumbent faction and by an insurgent faction of stockholders. The insurgents prevailed at the annual meeting, and payments of their own campaign expenses were attempted to be ratified by majority vote. It was a large majority, but the stockholders were not unanimous. Begardless of the merits of this contest, we are called upon to decide whether it was a corporate purpose (1) to make the expenditures which were disbursed by the incumbent or management group in defense of their acts and to remain in control of the corporation, and (2) to defray expenditures made by the insurgent group, which succeeded in convincing a majority of the stockholders. The Appellate Division held that stockholder authorization or ratification was not necessary to reasonable expenditures by the management group, the purpose of which was to inform the stockholders concerning the affairs of the corporation, and that, although these incumbents spent or incurred obligations of $133,966 (the previous expenses of annual meetings of this corporation ranging between $7,000 and $28,000), plaintiff must fail for having omitted to distinguish item by item between which of these expenditures were warranted and which ones were not; and the Appellate Division held that the insurgents also should be reimbursed, but subject to the qualification that “ The expenses of those who were seeking to displace the management should not be reimbursed by the corporation except upon approval by the stockholders.” It was held that the stockholders had approved.
No resolution was passed by the stockholders approving payment to the management group. It has been recognized that not all of the $133,966 in obligations paid or incurred by the management group was designed merely for information of stockholders. This outlay included payment for all of the activities of a strenuous campaign to persuade and cajole in a hard-fought contest for control of this corporation. It included, for example, expenses for entertainment, chartered airplanes and limousines, public relations counsel and proxy solicitors. However legitimate such measures may be on behalf of stockholders themselves in such a controversy, most of them do not pertain to a corporate function but are part of the familiar apparatus of *178aggressive factions in corporate contests. In Lawyers’ Adv. Co. v. Consolidated Ry. Lighting & Refrig. Co. (187 N. Y. 395, 399), this court said: “ The notice in question, however, was not published until after proxies had been sent out. It simply-amounted to an urgent solicitation that these proxies should be executed and returned for use by one faction in its contest, and we think there is no authority for imposing the expense of its publication upon the company. It may be conceded that the directors who caused this publication acted in good faith and felt that they were serving the best interests of the stockholders, but it would be altogether too dangerous a rule to permit directors in control of a corporation and engaged in a contest for the perpetuation of their offices and control, to impose upon the corporation the unusual expense of publishing advertisements or, by analogy, of dispatching special messengers for the purpose of procuring proxies in their behalf.”
The Appellate Division acknowledged in the instant case that “It is obvious that the management group here incurred a substantial amount of needless expense which was charged to the corporation ”, but this conclusion should have led tó a direction that those defendants who were incumbent directors should be required to come forward with an explanation of their expenditures under the familiar rule that, where it has been established that directors have expended corporate money for their own purposes, the burden of going forward with evidence of the propriety and reasonableness of specific items rests upon the directors (Godley v. Crandall & Godley Co., 153 App. Div. 697, 711, mod. 212 N. Y. 121; Hine v. Lausterer, 135 Misc. 397, 401-402, mod. 232 App. Div. 719, affd. 257 N. Y. 523). The complaint should not have been dismissed as against incumbent directors due to failure of plaintiff to segregate the specific expenditures which are ultra vires, but, once plaintiff had proved facts from which an inference of impropriety might be drawn, the duty of making an explanation was laid upon the directors to explain and justify their conduct.
The second ground assigned by the Appellate Division for dismissing the complaint against incumbent directors is stockholder ratification of reimbursement to the insurgent group. Whatever effect or lack of it this resolution had upon expenditures by the insurgent group, clearly the stockholders who voted *179to pay the insurgents entertained no intention of reimbursing the management group for their expenditures. The insurgent group succeeded as a result of arousing the indignation of these very stockholders against the management group; nothing in the resolution to pay the expenses of the insurgent group purported to authorize or ratify payment of the campaign expenses of their adversaries, and certainly no inference should be drawn that the stockholders who voted to pay the insurgents intended that the incumbent group should also be paid. Upon the contrary, they were removing the incumbents from control mainly for the reason that they were charged with having mulcted the corporation by a long-term salary and pension contract to one of their number, J. Carlton Ward, Jr. If these stockholders had been presented with a resolution to pay the expenses of that group, it would almost certainly have been voted down. The stockholders should not be deemed to have authorized or ratified reimbursement of the incumbents.
There is no doubt that the management was entitled and under a duty to take reasonable steps to acquaint the stockholders with essential facts concerning the management of the corporation, and it may well be that the existence of a contest warranted them in circularizing the stockholders with more than ordinarily detailed information. As this court said in Lawyers’ Adv. Co. v. Consolidated Ry. Lighting & Refrig. Co. (supra, p. 399): “ Proper and honest corporate management was subserved by widespread notice to stockholders of questions affecting the welfare of the corporation, and there is no impropriety in charging the latter with any expenses within reasonable limits which were incurred in giving sufficient notice of the special meeting at which the stockholders could be called upon to decide these questions.”
What expenses of the incumbent group should be allowed and what should be disallowed should be remitted to the trial court to ascertain, after taking evidence, in accordance with the rule that the incumbent directors were required to assume the burden of going forward in the first' instance with evidence explaining and justifying their expenditures. Only such as were reasonably related to informing the stockholders fully and fairly concerning the corporate affairs should be allowed. The concession by plaintiff that such expenditures as were made were reasonable in *180amount does not decide this question. By way of illustration, the costs of entertainment for stockholders may have been, and it is stipulated that they were, at the going rates for providing similar entertainment. That does not signify that entertaining stockholders is reasonably related to the purposes of the corporation. The Appellate Division, as above stated, found that the management group incurred a substantial amount of needless expense: That fact being established, it became the duty of the incumbent directors to unravel and explain these payments. : Regarding the $127,556 paid by the new management to the insurgent group for their campaign expenditures, the. question immediately arises whether that was for a corporate purpose. The Appellate Division has recognized that upon no theory could such expenditures be reimbursed except by approval of the stockholders and, as has been said, it is the insurgents ’ expenditures alone to which the stockholders’ resolution of ratification was addressed. If unanimous stockholder approval had been obtained and no rights of creditors or of the public intervened, it would make no practical difference whether the purpose were ultra vires — i.e., not a corporate purpose. (Kent v. Quicksilver Min. Co., 78 N. Y. 159; Capitol Wine & Spirit Corp. v. Pokrass, 277 App. Div. 184, 187, affd. 302 N. Y. 734.) Upon the other hand, an act which is ultra vires cannot be ratified merely by a majority of the stockholders of a corporation. " (Continental Securities Co. v. Belmont, 206 N. Y. 7; Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Schwab v. Potter Co., 129 App. Div. 36; Davis v. Congregation Beth Tephila Israel, 40 App. Div. 424; Fletcher’s Cyclopedia Corporations, §§ 764, 767, 3432, 5795.) In Schwab v. Potter Co. (supra, p. 41) it is said that “ it cannot be'contended successfully that the minority stockholders may not maintain a suit to enjoin the ultra vires acts of their corporation.” It was further held not to be a defense that a majority of the stockholders had adopted a resolution of ratification. In Davis v. Congregation Beth Tephila Israel (supra), it was held that a single dissenting member of a corporation might maintain an action to vacate an ultra vires agreement. In Continental Securities Co. v. Belmont (supra, pp. 18-19), the court discussed ‘1 The distinction between acts that can and those that cannot be confirmed and ratified ** by the stockholders. Quoting from Bagshaw v. Eastern Union Ry. Co. (7 Hare 114), the court said: *181‘“No majority of the shareholders, however large, could sanction the misapplication of this portion of the capital. A single dissenting voice would frustrate the wishes of the majority. ’ ’ ’
The familiar rule, applied in those and other decisions, is that merely voidable acts of the directors of a corporation can be ratified by majority stockholder approval, such as contracts between corporations having interlocking directorates (Continental Ins. Co. v. New York & Harlem R. R. Co., 187 N. Y. 225), loans of surplus funds by a trading corporation (Murray v. Smith, 166 App. Div. 528 — although not in the case of loans to stockholders in violation of the Stock Corporation Law, § 59), and other irregularities involving acts which are neither ultra vires, fraudulent or illegal.
In considering this issue, as in the case of the expenses of the incumbents, we begin with the proposition that this court has already held that it is beyond the power of a corporation to authorize the expenditure of mere campaign expenses in a proxy contest (Lawyers’ Adv. Co. v. Consolidated Ry. Lighting & Refrig. Co., supra).. That decision is not distinguishable upon the ground that those expenditures were made by the secretary of that corporation without previous authorization by its directors. That point was involved, but this court said: ‘ ‘ Thus we have it that the publication of the last three notices was not authorized by the hoard of directors and that it could not have been lawfully authorised even if the attempt were made. They bore upon their face sufficient notice to the plaintiff [the printer suing for printing fees] that they were of a character beyond the limit of anything which could be published in behalf of or at the expense of the corporation ” (p. 400; italics supplied). The decision was placed upon both grounds. The statement in the carefully considered opinion written by Judge Hiscock was not dictum that “ it would be altogether too dangerous a rule to permit directors in control of a corporation and engaged in a contest for the perpetuation of their offices and control, to impose upon the corporation the unusual expense ”. In that case, and in all of the other decisions which have been cited with the single exception of a Federal district court decision (Steinberg v. Adams, 90 F. Supp. 604, 606), the question concerned reimbursement of a management group. Moreover, with the exception of an English decision (Peel v. London & North Western Ry. Co., *182[1907] 1 Ch. 5), all of the appellate court cases which have been cited, and Steinberg v. Adams (supra), were decided under the law of the State of Delaware. The Delaware law contains more latitude than in New York State, as was recognized by Judge Rifkind in his opinion in Steinberg v. Adams, who said (p. 607): “ The instant case is concerned with a Delaware corporation and the law of that state determines the scope of the corporation’s powers. Both parties, as I have indicated, agree that this case is governed by a less stringent rule ” than the ruling by this court in Lawyers’ Adv. Co. v. Consolidated Ry. Lighting & Refrig. Co. (supra). We are called upon to decide whether to abandon the rule as previously established in this State and adopt the less strict doctrine of the State of Delaware.
The Delaware cases which are cited consist of Hall v. TransLux Daylight Picture Screen Corp. (20 Del. Ch. 78), Empire So. Gas Co. v. Gray (29 Del. Ch. 95), and the Federal cases applying Delaware law (Hand v. Missouri-Kansas Pipe Line Co., 54 F. Supp. 649, and Steinberg v. Adams, supra). The Hand case (supra) merely denied a preliminary injunction to restrain the management from expending corporate funds to hire professional proxy solicitors. There is a difference between hiring-solicitors merely to follow up proxy notices so as to obtain a quorum, and a high pressure campaign to secure votes by personal contact. The district court in the Hand case did not attempt to decide that aspect of the case, merely ruling that it should be determined after trial, and that no irreparable injury had been shown justifying the issuance of a temporary injunction even if the practice were ultimately held to have been ultra vires. In Empire So. Gas Co. v. Gray (supra), it was held that a corporation might sue to enjoin insurgents from soliciting proxies fraudulently by means of a false statement that such solicitation was being made by order of the board of directors. The case most frequently cited and principally relied upon from among these Delaware decisions is Hall v. Trans-Lux Daylight Picture Screen Corp. (supra). There the English case was followed of Peel v. London & North Western Ry. Co. (supra) which distinguished between expenses merely for the purpose of maintaining control, and contests over policy questions of the corporation. In the Hall case the issues concerned a proposed .merger, and a proposed sale of stock of a subsidiary corporation, These were *183held to be policy questions, and payment of the management campaign expenses was upheld.
In our view, the impracticability of such a distinction is illustrated by the statement in the Hall case (supra, p. 85) that “ It is impossible in many cases of intracorporate contests over directors, to sever questions of policy from those of persons ’ ’. This circumstance is stressed in Judge Rifkind’s opinion in the Steinberg case (supra, p. 608): “ The simple fact, of course, is that generally policy and personnel do not exist in separate compartments. A change in personnel is sometimes indispensable to a change of policy. A new board may be the symbol of the shift in policy as well as the means of obtaining it.”
That may be all very well, but the upshot of this reasoning is that inasmuch as it is generally impossible to distinguish whether “ policy” or “ personnel” is the dominant factor, any averments must be accepted at their face value that questions of policy are dominant. Nowhere do these opinions mention that the converse is equally true and more pervasive, that neither the “ ins ” nor the “ outs ” ever say that they have no program to offer to the shareholders, but just want to acquire or to retain control, as the case may be. In common experience, this distinction is unreal. It was not mentioned by this court in Lawyers’ Adv. Co. v. Consolidated Ry. Lighting & Refrig. Co. (supra). As in political contests, aspirations for control are invariably presented under the guise of policy or principle. A valiant effort was made in the English case of Peel v. London & North Western Ry. (supra, p. 21) to conserve the distinction in the opinion by Buckley, L. J., who said: “ Those who are conversant with the affairs of joint stock companies are well aware that cases often arise in which the board in power are anxious to maintain themselves in power, to procure their own re-election, or to drive a policy not really in the interests of the corporation, but for some private purpose of their own, down the throats of the corporators at a general meeting, and in which they issue at the expense of the company circulars and proxy papers for the purpose of attaining that object. When a case of that kind comes before the Court, I sincerely trust that the decision of this Court in this case will not be cited as any authority for justifying the action of the directors.”
*184The main question of “ policy ” in the instant corporate election, as is stated in the opinions below and frankly admitted, concerns the long-term contract with pension rights of a former officer and director, Mr. J. Carlton Ward, Jr. The insurgents’ chief claim of benefit to the corporation from their victory consists in the termination of that agreement, resulting in an alleged actuarial saving of $350,000 to $825,000 to the corporation, and the reduction of other salaries and rent by more than $300,000 per year. The insurgents had contended in the proxy contest that these payments should be substantially reduced so ■that members of the incumbent group would not continue to profit personally at the expense of the corporation. If these charges were true, which appear to have been believed by a majority of the shareholders, then the disbursements by the management group in the proxy contest fall under the condemnation of the English and the Delaware rule.
These circumstances are mentioned primarily to illustrate how impossible it is to distinguish between “ policy ” and “ personnel ”, as Judge Rifkind expressed it, but they also indicate that personal factors are deeply rooted in this contest. That is certainly true insofar as the former management group is concerned. It would be hard to find a case to which the careful reservation made by the English Judge in the Peel case (supra) was more directly applicable.
Some expenditures may concededly be made by a corporation represented by its management so as to inform the stockholders, but there is a clear distinction between such expenditures by management and by mere groups of stockholders. The latter are under no legal obligation to assume duties of managing the corporation. They may endeavor to supersede the management for any reason, regardless of whether it be advantageous or detrimental to the corporation but, if they succeed, that is not a determination that the company was previously mismanaged or that it may not be mismanaged in the future. A change in control is in no sense analogous to an adjudication that the former directors have been guilty of misconduct. The analogy of allowing expenses of suit to minority stockholders who have been successful in a derivative action based on misconduct of officers or directors, is entirely without foundation.-
*185Insofar as a management group is concerned, it may charge the corporation with any. expenses within reasonable limits incurred in giving widespread notice to stockholders of questions affecting the welfare of the corporation (Lawyers’ Adv. Co. v. Consolidated Ry. Lighting & Refrig. Co., supra). Expenditures in excess of these limits are ultra vires. The corporation lacks power to defray them. The corporation lacks power to defray the expenses of the insurgents in their entirety. The insurgents were not charged with responsibility for operating the company. No appellate court case is- cited from any jurisdiction holding otherwise. No contention is made that such disbursements could be made, in any event, without stockholder ratification; they could not be ratified except by unanimous vote if they were ultra vires. The insurgents, in this instance, repeatedly announced to the stockholders in their campaign literature that their proxy contest was being waged at their own personal expense. If reimbursement of such items were permitted upon majority stockholder ratification, no court or other tribunal could pass upon which types of expenditure were “ needless ”, to employ the characterization of the Appellate Division in this case. Whether the insurgents should be paid would be made to depend upon whether they win the stockholders election and obtain control of the corporation. It would be entirely irrelevant whether the corporation is “ benefited ” by their efforts or by the outcome of such an election. The courts could not indulge in a speculative inquiry into that issue. That would truly be a matter of business judgment. In some instances corporations are better governed by the existing management and in others by some other group which supersedes the existing management. Courts of law have no jurisdiction to decide such questions, and successful insurgent stockholders may confidently be relied upon to reimburse themselves whatever may be the real merits of the controversy. The losers in a proxy fight may understand the interests of the corporation more accurately than their successful adversaries, and agitation of this character may ultimately result in corporate advantage even if there - be no change in management. Nevertheless, under the judgment which is appealed from, success in a proxy contest is the indispensable condition upon which reimbursement of the insurgents depends. Adventurers are not infrequent who are ready to take advantage *186of economic recessions, reduction of dividends or failure to increase them, or other sources of stockholder discontent to wage contests in order to obtain control of well-managed corporations, so as to divert their funds through legal channels into other corporations in which they may be interested, or to discharge former officers and employees to make room for favored newcomers according to the fashion of political patronage, or for other objectives that are unrelated to the sound prosperity of the enterprise. The way is open and will be kept open for stockholders and groups of stockholders to contest corporate elections, but if the promoters of such movements choose to employ the costly modern media of mass persuasion, they should look for reimbursement to themselves and to the stockholders who are aligned with them. If the law be that they can be recompensed by the corporation in case of success, and only in that event, it will operate as a powerful incentive to persons accustomed to taking calculated risks to increase this form of high-powered salesmanship to such a degree that, action provoking reaction, stockholders’ meetings will be very costly. , To the financial advantages promised by control of a prosperous corporation, would be added the knowledge that the winner takes all insofar as the campaign expenses are concerned. To the victor, indeed, would belong the spoils.
The questions involved in this case assume mounting importance as the capital stock of corporations becomes more widely distributed. To an enlarged extent the campaign methods consequently come more to resemble those of political campaigns, but, as in the latter, campaign expenses should be borne by those who are waging the campaign and their followers, instead of being met out of the corporate or the public treasury. Especially is this true when campaign promises have been made that the expenses would not be charged to the corporation.
Nothing which is said in this opinion is intended as any reflection upon the motives of the insurgent group in instigating this corporate contest, nor upon the management group. Questions of law are involved which extend beyond the persons and the corporation presently before the court. It is the established law of this State that expenditures may be incurred by management limited to informing the stockholders fully and fairly concerning1 the affairs and policies of the corporation, which may *187well include an explanation of the reasons on account of which its policies have been undertaken, nor is there any reason on account of which stockholders who have neglected to sign proxies through apathy may not be solicited so as to insure a quorum, which would ordinarily occur in instances where there is no contest, but beyond measures of this character, the purely campaign expenses of a management group do not serve a corporate purpose, and paying them is ultra vires. The same is true of all of the expenses of insurgent stockholders.
The release given to J. Carlton Ward, Jr., by the authority of his codirectors, could not have the effect of discharging liability to which they were otherwise subject upon the theory that it operated to release them as joint tort-feasors.
The judgment appealed from should be reversed so as to direct respondent Fairchild to pay to the corporation the sum of $118,448.78, with appropriate interest, representing the moneys reimbursed to him by the corporation and, upon his default, the respondent, Allis should be required to pay said sum; respondents Fairchild and Allis should be required to pay to the corporation the sum of $9,107.10, with appropriate interest, representing the amount reimbursed to L. M. Bolton by the corporation; and an interlocutory judgment should be entered for an accounting to determine what part of the $133,966, representing expenses incurred by the old board, was improperly charged to the corporation and requiring the respondents Wilson and McComas to pay to the corporation the sum thereof, and the respondents Allis and Fairchild such amounts thereof as were paid out after July 15, 1949, with costs of the action to the plaintiff in all courts.
Conway, Ch. J., and Burke, J., concur with Froessel, J.; Desmond, J., concurs in part in a separate opinion; Van Voorhis, J., dissents in an opinion in which Dye and Fuld, JJ., concur.
Judgment affirmed.