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Miller v. Magline, Inc. - 76 Mich. App. 284

Rule:

Whether compensation is excessive is a question of fact, in the determination of which all the circumstances of the case should be considered. The court may not readjust the salary without a yardstick applicable to the particular circumstances and not even then upon mere difference of opinion from that of the board of directors, but only upon concrete proof that the salary evidences wrongdoing or inexcusable oppression to the point of being fraudulent. Less than this would constitute an intolerable interference with legitimate internal corporate management. 

Facts:

Plaintiffs Raymond V. Miller and John R. Thorpe against Magline, Inc., Stanley See, Don C. Law, George Monroe, Raymond Graves, Carl F. Schilling, and Carl N. Mortenson filed a complaint to compel the declaration and payment of stock dividends and to recover allegedly excessive compensation paid to certain corporate officers. The chancellor ordered Magline's directors to declare and pay a dividend, retained jurisdiction for the purpose of determining whether further dividends should be awarded, and dismissed the excessive compensation claim. Defendant Magline appealed from the dividend award and the chancellor's retention of jurisdiction. Plaintiffs cross-appealed from the dismissal of their excessive compensation claim.

Issue:

Did the trial court err in finding that the compensation was reasonable?

Answer:

No

Conclusion:

The court held that the trial court did not err in placing the burden of proof that the compensation was unreasonable on plaintiffs because corporate officers did not vote on their own compensation. The evidence supported the trial court's determination that the compensation was reasonable. The trial court's determination that Magline was required to declare and pay a dividend was supported by the evidence.

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