(- Minn. 189 N. W. 586.) be done in the conduct of the business. There is no reason why a corporation may not use the services of its directors and pay for them. Commonly in the case of small corporations like this, where the stock is closely held, the capital is invested with the intent that the majority shall have the responsibility of management, and it would not be invested otherwise; and the intention is that the owner who risks his capital and assumes management shall work out the business project for a number of years and have employment and adequate compensation. He would not invest except upon the condition that he have control and compensation. He would not intrust his money to another, nor would he invest it unless, in connection with its use, he was getting an opportunity to engage his activities. and receive compensation. This is the practical fact commonly met in small corporations. If the officers, acting, as they do, in a fiduciary capacity, fix exorbitant and unreasonable salaries so as to absorb earnings which should go in dividends or remain with the company as surpuls, they are not exercising the fidelity which the law requires, and a court of equity will give relief at the suit of a minority stockholder by compelling restoration. In determining whether salaries are excessive and unreasonable, so that there should be a restoration, courts proceed with some caution. An intolerable condition might result if the courts should too lightly undertake the fixing of salaries at the suit of dissatisfied stockholders. An issue as to the reasonable value of the services of officers is easily made. It is not intended that courts shall be called upon to make a yearly audit and adjust salaries. The dissenting stockholder should come into court with proof of wrongdoing or cessive salaries oppression, and should have more than a claim based on mere differences of opinion upon the question whether equal services could have -voting ex liability. been procured for somewhat less. Were it otherwise efficient executives, able to command in competition large salaries, risking their capital on the faith of control and a steady employment, would find themselves and their capital periled by the uncertain view which a court might take. The right of majority control must be given effect, and the minority cannot, through the courts, interfere with an honest and fair majority policy. Thus, in Matthews v. Headley Chocolate Co. 130 Md. 523, 100 Atl. 645, a suit by a corporation to require its officers to account for excessive salaries, the court said: "The court would not be authorized to substitute its judgment for theirs [directors] as to what are proper salaries, provided they acted in good faith, within their powers, and the salaries fixed by them were not clearly excessive." In Fillebrown v. Hayward, 190 Mass. 472, 77 N. E. 45, the court, referring to an allowance of salary to a woman who was treasurer, said: "But if the amount of compensation compared with her actual duties seems to be unduly large, yet it is stated in these findings that she and the directors, acting in good faith, regarded the salary as a fair valuation of her services to the company, which, during the time, was doing a profitable and extensive business. That she was a member of the board, which also included her daughter, would not invalidate its action, for there is no evidence of any purpose to appropriate corporate profits unlawfully under the guise of salary, the abstraction of which would impair either the solvency of the company, or the right of minority stockholders to a reasonable division of surplus earnings in dividends." In Beha v. Martin, 161 Ky. 838, 171 S. W. 393, where the right of a minority stockholder to relief, where excessive salaries are allowed, is recognized, the court said: "In a case like this, where the compensation is fixed by the board of directors, who also are a majority of the stockholders, it does not devolve upon the director whose compensation is in question to prove that the compensation is fair; but the objecting stockholder must establish affirmatively that the salary or compensation is unreasonable and oppressive." We do not stop to review the cases. The holdings are in confusion and not always in accord with the rule we adopt. Sometimes statutes affect the result. Sometimes the question arises when the officer has participated in the fixing of his salary, or when a salary is voted as an incident to an office where no more than ordinary and largely formal duties are performed, or where there is manifest wrongdoing or fraud, and sometimes where the officer seeks recovery in implied assumpsit. We are content to hold, under the facts before us, that the salaries were regularly fixed, and that a dissenting stockholder attacking them has the burden of proving that they are unreasonable and excessive, so that a substantial wrong is done him if they are retained. 3. The court said nothing in its original findings about the unreasonableness of the salaries. Its attention was directed to the right of the plaintiff to a dividend and the amount of it. In its memorandum, which can be used only in interpreting or explaining the findings, the court said that the business of the corporation had been capably and honestly conducted; that Theodore Michel was the dominating force; that it was a one-man corporation; that the bonus allowed for 1919 and 1920 made the compensation of Clarence B. Michel beyond what it ordi-" narily should be; that the amount of bonus was caused by the unprecedented amount and profits of the business; but that fraud was not shown. And in the course of its memorandum the court said this: "I am forced to the concluusion that the Michels, in their administration of the affairs of this corporation, exhibit a purpose to unjustly deprive the unsalaried minority stockholders of a fair part of the earnings. This purpose I find manifested in the liberal salaries paid and the accumulation of a large, unnecessary surplus." The memorandum was directed to a discussion of the question whether a dividend should be ordered, and is, of course, not a finding upon the issue of excessive or unreasonable salaries. Upon an application by the plaintiff for amended findings the court found this: "Said Clarence B. Michel, as assistant manager to said Schmitz, was paid a salary of $2,325 for the year 1918; said Henry J. Kaim, as superintendent of said corporation, was paid the following salaries during the following years, to wit: 1914, $2.075; 1915, $2,100; 1916, $2,100; 1917, $2,100; 1918, $2,575; 1919, $3,225; 1920, $3,375; and in addition to the salaries so paid, said Henry J. Kaim was paid additional salaries based upon a percentage of the net profits of the business, and known as bonuses, for the following years, in the following amounts, to wit; 1914, $67.14; 1915, $169.68; 1916, $538.60; 1917, $1,247.41; 1918, $1,997.85; 1919, $2,343.95; 1920, $4,948.53. Each and all of the foregoing salaries and additional salaries or bonuses were fixed by and paid pursuant to resolutions passed by the board of directors of said defendant corporation. The said salaries paid to said officers and managing heads of said corporation are not so unreasonable and excessive under the circumstances as to be deemed fraudulent and requiring restoration thereof, or any part of the same, to the corporate treasury." It may be noted here, without further quotation from the findings, that Theodore Michel received a salary of $3.600 for many years. Clarence B. Michel started in 1917 with $1,850, and in 1920 received $2,950. Kaim received $2,075 in 1914 and $3,575 in 1920. From 1914 a bonus was given the managing officers first of 2 per cent and later it was increased to 10 per cent, except that Theodore Michel received no bonus. (— Minn. —, 189 N. W. 586.) The bonus was computed on the net profits after deducting 6 per cent on the capital and surplus. Kaim and Clarence received the same bonus for the years both worked. Many findings were requested and denied. One request was to the effect that the purpose of the two Michels was "to cause said corporation to pay unreasonable and excessive salaries to the managing officers and directors thereof, with the intention of distributing a considerable portion of the surplus earnings and profits to such officers and directors as salaries and bonuses, and thereby depriving plaintiff of any participation in such surplus earnings." It was denied. Others were to the effect that the salaries paid were "unreasonable and excessive." They were denied. The plaintiff claims that the court should have found whether they were unreasonable and excessive by saying directly that they were or were not. The trial court, when requested, must find one way or the other upon material issues. Turner v. Fryberger, 99 Minn. 236, 108 N. W. 1118, 109 N. W. 229; Orr v. Sutton, 127 Minn. 37, 148 N. W. 1066, Ann. Cas. 1916C, 527; First Nat. Bank v. Towle, 118 Minn. 514, 137 N. W. 291. Here, however, a refusal to find, as requested by the plaintiff, upon whom was the burden of proof, that the salaries were unreasonable and excessive, was equivalent to a finding that they were reasonable. Malchow v. Malchow, 143 Minn. 53, 60, 172 N. W. 915. The finding that the salaries were not "so unreasonable or excessive under the circumstances as to be deemed fraudulent and requiring restoration thereof, or any part of the same, to the corporate treasury," ligation resting upon the plaintiff of presenting facts justifying restoration; and it did not intend, as the defendant claims, that actual fraud independent of the fiduciary relation must be shown. This conclusion necessarily results if effect is given to the finding that the salaries were not unreasonable or excessive. 4. The salaries with the bonuses added seem large. Aside from the bonus they seem moderate. The bonus was contingent and uncertain. The management was capable, conditions were unusual, and there were large profits. The court so finds. The evidence of Evidence competent witness- sufficiency. that the salaries were not excessive. The trial court worked out the difficulties of the parties with fairness. The defendants were told that they must not oppress a minority. stockholder by accumulating profits and neglecting to pay dividends, and that they might easily be in trouble through taking too liberal salaries. Majority stockholders, in charge of a corporation, and making it a suc cess, too readily think that it is enough if the minority stockholders get 6 per cent return, and that the rest is properly taken as a reward for successful management. The plaintiff was told that majority rule controls, and that, as a minority stockholder, he could not control its policy or too freely complain. It is easy for a minority stockholder to see faults in the management which would not exist were he in control. . Order affirmed. ANNOTATION. Right of court to interfere with amount of salaries voted to officers of private corporations by directors. While it is obviously not in the province of a court of equity to act as the general manager of a private corporation, or to assume the regulation of its internal affairs, it has the power, at the instance of persons interested in the corporation, to review the resolution of the board of directors, fixing the salaries of its officers, and to inquire into the reasonableness of such salaries, considering the nature and extent of the services, and, if found to be excessive, to afford adequate relief. United States.-Sellers v. Phoenix Iron Co. (1881) 13 Fed. 20, 15 Mor. Min. Rep. 388; Wight v. Heublein (1916) 151 C. C. A. 337, 238 Fed. 321. Alabama.-Decatur Mineral Land Co. v. Palm (1896) 113 Ala. 531, 59 Am. St. Rep. 140, 21 So. 315. Illinois. Bixler V. Summerfield (1902) 195 Ill. 147, 62 N. E. 849. Kentucky.-Beha v. Markin (1914) 161 Ky. 838, 171 S. W. 393. Maryland. Matthews v. Headley Chocolate Co. (1917) 130 Md. 523, 100 Atl. 645. Michigan. - Miner v. Belle Isle Ice Co. (1892) 93 Mich. 97, 17 L.R.A. 412, 53 N. W. 218. Minnesota.-Green v. National Adv. & Amusement Co. (1917) 137 Minn. 65, L.R.A.1917E, 784, 162 N. W. 1056; SEITZ V. UNION BRASS & METAL MFG. Co. (reported herewith) ante, 293; Seitz v. Elite Laundry Co. (1922) Minn., 189 N. W. 589. New Jersey.-Raynolds v. Diamond Mills Paper Co. (1905) 69 N. J. Eq. 299, 60 Atl. 941; Lillard v. Oil, Paint & Drug Co. (1905) 70 N. J. Eq. 197, 56 Atl. 254, 58 Atl. 188; Booth v. Beattie (1922) · N. J. Eq. —, 118 Atl. 257. New York.-Carr v. Kimball (1912) 153 App. Div. 825, 139 N. Y. Supp. 253, affirmed withont opinion in (1915) 215 N. Y. 634, 109 N. E. 1068, remittitur amended without affecting this point in (1915) 215 N. Y. 714, 109 N. E. 1069; Godley v. Crandall & G. Co. (1912) 153 App. Div. 697, 139 N. Y. Supp. 236, modified in (1914) 212 N. Y. 121, L.R.A.1915D, 632, 105 N. E. 818; Davids v. Davids (1909) 135 App. Div. 206, 120 N. Y. Supp. 350; Williams v. McClave (1914) 85 Misc. 184, 148 N. Y. Supp. 93, affirmed in (1915) 168 App. Div. 192, 154 N. Y. Supp. 38; Tilton v. Gans (1915) 90 Misc. 84, 152 N. Y. Supp. 981, affirmed without opinion in (1915) 168 App. Div. 910, 152 N. Y. Supp. 1146; Atwater v. Elkhorn Valley Coal-Land Co. (1918) 184 App. Div. 253, 171 N. Y. Supp. 552, affirmed without opinion in (1919) 227 N. Y. 611, 125 N. E. 912; Townsend v. Winburn (1919) 107 Misc. 443, 177 N. Y. Supp. 757; Schall v. Althaus (1923) 120 Misc. 204, 198 N. Y. Supp. 694. Pennsylvania.-Sotter v. Coatesville Boiler Works (1917) 257 Pa. 411, 101 Atl. 744; Lowman v. Harvey R. Pierce Co. (1923) 276 Pa. 382, 120 Atl. 404. But the directors, especially where they own a majority of the stock of a corporation, are invested with large powers in the matter of the salaries to be paid the officers, and with this broad discretion the courts will not ordinarily interfere. Beha v. Martin (Ky.) 'supra. And a court of equity is not authorized to substitute its judgment for the judgment of the directors as to what are reasonable salaries for the officers, provided the directors act in good faith within their powers, and the salaries fixed by them are not clearly excessive. Matthews v. Headley Chocolate Co. (Md.) supra. And the court, in determining whether the salary voted a corporate officer is excessive and unreasonable, should proceed with some caution, since it is not intended that the court should be called upon to make a year ly audit and adjust salaries, and the right of the majority to control must be given effect, and a minority cannot, through the court, interfere with an honest and fair majority policy. SEITZ V. UNION BRASS & METAL MFG. Co. (reported herewith) ante, 293. And if the chosen directors, without interests in conflict with the interests of stockholders, act in good faith in fixing salaries, their judgment will not ordinarily be reviewed by the courts, however unwise or mistaken it may appear; but equity will not refuse to redress the wrong done to a stockholder by the action or policy of directors in voting themselves excessive salaries as officers, which operates to their own personal advantage, without any corresponding benefit to the corporation under their control. Wight v. Heublein (1916) 151 C. C. A. 337, 238 Fed. 321. The contention in Carr v. Kimball (1912) 153 App. Div. 825, 139 N. Y. Supp. 253, supra, was that the courts have no authority to disturb the deliberate decisions of the board of directors, made in the exercise of its lawful powers, under the general principle of the lack of power in the courts to interfere with the discretionary powers of public officers and boards, but the court answered that no case could be found holding that a court of equity was powerless to investigate the transactions of a trustee dealing with himself, or a board of directors voting salaries to its members, and, in this connection, further said: "The laws of this state have always conferred upon corporations the power to appoint such officers and agents as its business shall require, to fix their compensation, and to make by-laws not inconsistent with any existing law. Yet, with such provisions in force, the courts have again and again said: 'It is against public policy to allow persons occupying fiduciary relations to be placed in such positions as that there will be constant danger of a betrayal of trust by the vigorous operation of selfish motives. The rules upon this subject are illustrated in many cases.' Earl, J., in Barnes v. Brown (1880) 80 N. Y. 535. We cannot accept the proposition that, by the adoption of such a by-law, a corporation, its directors and its affairs, can be divorced from the well-established equity jurisdiction. We cannot believe that, during all the years the courts have been elaborating and strengthening the fiduciary principle for the protection of stockholders, they were oblivious of the controlling jurisdictional principle propounded by appellants, which, if it exists, nullifies and destroys the fiduciary." The action of directors in voting excessive salaries to officers must amount to fraud upon the corporation or stockholders before the court can interfere. Poutch v. National Foundry & Mach. Co. (1912) 147 Ky. 242, 143 S. W. 1003. But that does not mean that actual fraud must be shown to justify interference by the court, since, although the directors may act in good faith in fixing the salaries of the officers, such salaries may be so excessive, so disproportionate to the value of the services rendered, that their continued payment under existing conditions will be such an injustice to minority stockholders as to amount to a legal fraud. Wight v. Heublein (Fed.) supra; SEITZ v. UNION BRASS & METAL MFG. CO. (reported herewith) ante, 293. The fact that the corporate by-laws provide that the salaries of the officers may be fixed by the board of directors does not deprive the court of its equitable jurisdiction to inquire into the reasonableness of the salaries voted by the directors to themselves as officers of the corporation. Carr v. Kimball (1912) 153 App. Div. 825, 139 N. Y. Supp. 253, affirmed without opinion in (1915) 215 N. Y. 634, 109 N. E. 1068; Tilton v. Gans (1915) 90 Misc. 84, 152 N. Y. Supp. 981, affirmed without opinion in (1915) 168 App. Div. 910, 152 N. Y. Supp. 1146. The burden is upon the dissenting stockholder attacking the reasonableness of the salaries of the officers, regularly fixed by the directors, of proving that such salaries are excessive and out of proportion to the serv |