right of a minority stockholder to maintain | However, one fact is found which indubitaa representative action to recover salaries bly stamps the resolution of November 14, voted by the directors to themselves. Butts 1906, as fraudulent. Whatever the power v. Wood, 37 N. Y. 317; Jacobson v. Brooklyn Lumber Co. 184 N. Y. 152, and see cases cited on page 163, 76 N. E. 1075. It is said that there was the element of actual fraud in all of the cases relied upon by the plaintiff; but it is plain that the fraud relied upon in the two cases just cited consisted in the officers helping themselves to the funds of the corporation under the guise of salaries voted by themselves. The court found in this case that there was no by-law of the corporation authorizing the directors to vote salaries to themselves as officers. Doubtless, the directors of a corporation may employ one of their number to perform services outside of the usual duties pertaining to his office, and agree to pay him a salary therefor, and it may be that the act would not be wholly void, though he voted for the resolution.

The precise nature of the services for which the increases were assumed to be voted does not plainly appear. The court found that the services rendered were substantially the same as before the resolution of 1906, and that thereafter they discontinued the 9 per cent annual payments to themselves. The increases of salary amounted to more than said payments, but the court did not expressly find that they were made in lieu thereof. In this connection, it may not be amiss to call attention to the practice, which is becoming too common, of pleading and finding evidentiary facts. Of course, it requires some discrimination and a due appreciation of the principles of law applicable to the case, to state the ultimate facts upon which the judgment must rest; but if, instead of the 163 so-called findings of fact and conclusions of law, the few essential ultimate facts and conclusions of law had been found and made in this case, the plaintiff would have encountered less danger of reversal in this court. The judgment must be sustained, if at all, by the ultimate facts found or established by uncontradicted evidence. We may not choose between conflicting inferences arising from evidentiary facts, and the refusal of the trial court to find a fact is not, as seems to be supposed, the equivalent of an affirmative finding.

Among the conclusions of law there are express findings of fraud. Some of them explicitly relate to the 9 per cent payments of so-called "additional salaries," others may possibly be construed to relate to the increase of salaries under the resolution of 1906, although it is equally possible that they were intended to relate to the destruction of the good will, to be considered later.

of directors to vote salaries may be, they certainly had no power to vote increases of salary to themselves for services already performed under a stipulated salary. Under that resolution the directors paid to themselves an increase of $14,310 for services already performed. That constituted nothing less than a gift to themselves of corporate funds, and of course was a fraud, and it was perforce of that resolution that the increases were paid in subsequent years. In view of the other findings bearing on the question of actual, as distinct from constructive, fraud, dubious as they are, we are not disposed to hold that the resolution of 1906 was fraudulent as to past services and honest as to the future. Manifestly the increases paid for all of the years rested on the same basis. The resolution was tainted with fraud and wholly void.

A majority of the stockholders, consisting of those who had received the preferential payments, voted, after the commencement of this action, to ratify the acts of the directors. But even majority stockholders may not for selfish purposes act in hostility to the interests of the corporation, with the intention of defrauding the nonassenting stockholders. Gamble v. Queens County Water Co. 123 N. Y. 91, 9 L.R.A. 527, 25 N. E. 201; Farmers' Loan & T. Co. v. New York & N. R. Co. 150 N. Y. 410, 34 L.R.A. 76, 55 Am. St. Rep. 689, 44 N. E. 1043; Flynn v. Brooklyn City R. Co. 158 N. Y. 493, 53 N. E. 520; Continental Securities Co. v. Belmont, 206 N. Y. 7, 51 L.R.A. (N.S.) 112, 99 N. E. 138, Ann. Cas. 1914A, 777. The recovery under this head, as modified by the appellate division, was proper.

3. On the 7th of January, 1909, the premises of the corporation were destroyed by fire. A majority of the stockholders, but less than two thirds necessary to dissolve the corporation, decided to discontinue business and liquidate the affairs of the corporation. For his services in thus liquidating the affairs of the company, the directors voted and caused to be paid to the said defendants' testator the sum of $13,750, for which sum, with interest, a recovery has been allowed. That is objected to on much the same ground as the recovery under the preceding head. There is no specific finding as to the value of his services, or that he voted for the resolution authorizing the payment to him of said sum. However, it plainly appears from the findings referred to under the next head, that his services in that regard were not rendered in good faith in the interest of the corporation, but

were in bad faith, and destructive of its true interest. It thus conclusively appears that the payment of compensation therefor was a fraud upon the corporation and the dissenting stockholders. The recovery of the sum thus paid was therefore proper.

4. After the fire the defendant Pfeiffer resigned as director of the defendant corporation, and he and the defendant William C. Pettee, the son of said testator, organized a new corporation, known as the CrandallPettee Company, for the purpose of continuing the business theretofore conducted by the defendant corporation. The court found that the decision to discontinue the business of the old corporation was made in bad faith, and that said testator and defendant Finckenstadt in bad faith conspired with the defendants Pfeiffer and William C. Pettee to turn over to the Crandall-Pettee Company the business and good will of the defendant corporation for the purpose of excluding, without compensation, the plaintiff and all other stockholders similarly situated from further participating in such business, and that that purpose was accomplished. I need not refer to the evidentiary facts found which support that conclusion. Suffice it to say that there is evidence to support it.

fiduciary duties simply by realizing on and honestly accounting for the tangible assets. The business, the organization, the list of customers, the brands and tradenames,— everything pertaining to good will,—were turned over without compensation to the new corporation. Being unable to secure the consent of a two-thirds majority of the stockholders to dissolve the corporation, the defendants accomplished their purpose by reducing the capital to $15,000, and by turning over the business and good will without compensation to a new corporation. Directors may not thus, as against dissenting stockholders, in effect terminate the existence of a corporation. People v. Ballard, 134 N. Y. 269, 17 L.R.A. 737, 32 N. E. 54.

But it is objected that in any event the recovery against the defendant Pfeiffer, who had ceased to be a director, William C. Pettee, who never was a director, and the Crandall-Pettee Company, was improper as neither owed any fiduciary duty to the defendant corporation. However, the recovery against them may be sustained on another theory. It is unnecessary at this day to cite authority in support of the proposition that the assets of a corporation constitute a trust fund. This must be true of intangible, as well as tangible, assets. Whoever, therefore, wrongfully, appropriates such assets, may be charged therefor as constructive trustees. The said

to organize another corporation. It had the right within the limits of fair trade, to engage in a competing business with the old corporation. But neither they nor it had the right to enter into and carry out a conspiracy with the directors of the old corporation to acquire the latter's business and good will without paying therefor.

It is said that the evidence established the fact to be that said testator became ill and physically incapacitated to carry on the business after the fire; that the court | erred in refusing to so find, and that fraud defendants, Pfeiffer and Pettee, had the right cannot be predicated on the refusal of a sick man to imperil his life for the plaintiff's benefit. If the findings requested had been made they would not alter the case. The acts complained of were affirmative acts destructive of the true interests of the corporation, not negative acts in refusing longer to serve it. Said testator could with propriety have resigned as an officer and director of the corporation. It may be assumed that a majority of the stockholders could, each in his own interest, vote to discontinue the business. But they could not lawfully do that in bad faith for the purpose of turning its business and good will over to another corporation without compensation, so as to exclude minority stockholders from participating therein.

The court found on sufficient evidence that the good will was worth $90,000. It was the duty of the directors if they decided to discontinue the business, to make an honest effort to realize on the good will. Doubtless it is true, as contended, that good will cannot exist apart from an established business. But the business was not destroyed by the fire. The corporation had assets of $534,439.13, exclusive of good will. The directors did not discharge their

5. Two other small items and a ruling on evidence remain to be considered.

The court found that the defendant corporation paid $6,991.71 for legal services in the defense of this action, and a recovery was allowed for that sum and for $1,000 alleged to have been paid as premium on a bond given to discharge the receiver appointed herein. There is no finding of fact that the latter sum was paid, unless it be found in the conclusion of law on the subject. There is proof of a resolution authorizing the payment of said premium; but there is no proof at all that it was paid, or, if it was paid, that it was not included in the said item of $6,991.71. The plaintiff made no proof at all as to the latter item. The only evidence on the sub ject was brought out on cross-examination of an expert accountant, and was to the effect that the books showed the payment

payments were adopted prior thereto.

The judgments of the Appellate Division and of the Special Term should be modified in accordance with this opinion, and, as modified, affirmed, with costs to the plaintiff.

Willard Bartlett, Ch. J., and Werner, Hiscock, Collin, Cuddeback, and Cardozo, JJ., concur.

MINNESOTA SUPREME COURT.

JAMES E. McGRATH, Respt.,

of expenses after the fire amounting to
$9,739, and that "$6,900 of it is in the legal
proceedings." If there were no other ob-
jections to allowing the recovery, we might
assume what appears to be manifest, that
everybody understood that the "legal pro-
ceedings" referred to this action. How-
ever, there was no claim in the complaint
for those items. Necessarily, there could
have been none, as the expenses were in-
curred after the commencement of the ac-
tion. But, in view of the manner in which
the evidence was elicited, the defendants
should have had some warning before they
were cast in judgment, that a recovery for
those items was sought. There is no evi-
dence whatever as to the one item, and
very slight evidence at the best as to the NORTHERN
other. It was stated by the learned coun-
sel for the appellants on oral argument,
that some of the items at least, included
in the sum of $6,900, were for matters out-
side of the defense of this action. If sea-
sonably warned that a recovery was sought
for those items, the facts would doubtless
have been developed fully. Under the cir-
cumstances, we think that fairness to the
defendants requires that they should have
some notice of the claim made against them
before the rendition of a judgment, and
that said items should be eliminated from
the recovery, without prejudice, however, to
the plaintiff's right to bring a new action
therefor if so advised.

It is next urged that the court erred in excluding evidence of a conversation be tween the defendant Finckenstadt and said Godley prior to the organization of the defendant corporation, which it is claimed would tend to show that as president of its predecessor, the New Jersey corpora tion, he assented to the practice of distributing earnings as salaries. The evidence was excluded as incompetent under § 829 of the Code of Civil Procedure, and it is argued that the admissibility of the evidence is to be determined precisely as though the corporation itself were the plaintiff. Without deciding that question, it is sufficient to say that the conversation related to the affairs of another corporation, and occurred, at a time when, if earnings were distributed nominally as salaries, there was no attempt at discrimination between shareholders. We do not think that in any aspect of the case the evidence, if received, could have affected the result.

V.

PACIFIC RAILWAY COM-
PANY, Appt.

(121 Minn. 258, 141 N. W. 164.)
Carrier -loss of freight-
liability.

common-law

1. Where property is injured or lost while in the hands of a common carrier, the shipper may sue the carrier upon the latter's common-law liability, without regard to the existence of any special contract of shipment that may have been entered into limiting the carrier's liability, thus leaving it to the defendant to plead such contract by way of defense. Evidence

burden of proof

absence

of negligence. 2. Where a shipper sues a common carrier upon its common-law liability for injury to or loss of the property, and the de

Headnotes by PHILIP E. BROWN, J.

Note. Presumption and burden of proof as to carrier's negligence or lack of negligence in case of contract limiting its liability.

I. Burden on carrier.
a. Generally 645.
b. Fire, 647.
c. Live stock.

1. Generally, 649.

2. Where shipper is in charge,
653.

II. Burden on shipper.
a. Generally, 653.
b. Fire, 656.

c. Live stock.

1. Generally, 658.

2. Where shipper is in charge,

659.

d. Breakage and leakage, 662.
e. Owner's risk, 664.

f. Heat and cold, 664.
g. Decay and rust, 665.
h. Perils of navigation, 665.
III. Pennsylvania, 668.
IV. Louisiana, 669.

V. Tennessee, 670.
VI. Statutory rule, 670.
VII. Nebraska, 672.
VIII. Presumptions, 673.

fendant pleads and proves a special contract | Trial limiting its liability to losses occurring through its negligence, the burden is upon the defendant to prove that the loss was not caused by its negligence, and not upon the plaintiff to prove that it was so caused. Carrier limitation of liability lidity. 3. The circumstances surrounding the execution of a contract limiting a common carrier's liability for the loss of stock to a certain sum per head held such that it could not be held to be just, fair, and reasonable, within the rule announced in Ostroot v. Northern P. R. Co. 111 Minn. 504, 508, and hence the court did not err in excluding it from the consideration of the jury in an action wherein the shipper sought a recovery upon the carrier's common-law liability.

Marble slabs, when delivered, were found to have been damaged. The bill of lading provided that the carrier would not be liable except for gross negligence. It was held that the burden of proof as to the cause of the damage, and as to lack of negligence, was on the carrier. Shriver v. Sioux City & St. P. R. Co. 24 Minn. 506, 31 Am. Rep. 353. The court said: "It is in part because of his superior ability to furnisher's risk" was broken. the proof that the onus of showing the cause Tobacco was shipped from Cincinnati to of a loss or injury to be within the exceptions to his liability is imposed on the

Philadelphia, and the bill of lading provided exemption for any damage "if receipted at Sandusky in good order." It was damex-aged by water. It was held that the burden of proof rested on the carrier to show that the loss or damage occurred without its fault, and when a loss was shown to exist the law raised the presumption of negligence against the carrier. Fatman v. Cincinnati, H. & D. R. Co. 2 Disney (Ohio) 248.