Mlinarcik v. E.E. Wehrung Parking, Inc.

Edgar Wehrung created E. E. Wehrung Parking, Inc. (EE) (defendant) in 1948 to sublease a parking garage to another company for $41,600. Robert Wehrung owned 111 shares, Marilyn Wehrung, Robert’s wife, owned 28.5 shares, and Shirley Mlinarcik (plaintiff) owned 9.5 shares of EE. Robert and Shirley were Edgar’s children. Esther, Edgar’s wife, owned one share. After Edgar’s passing, Robert took over EE’s management, and Marilyn and Shirley were placed on the board of directors and paid director’s fees. Robert and Marilyn were paid salaries. For 15 years, Marilyn was paid $3,900 as EE’s secretary until her salary was increased in 1982 to $7,200. From 1982 through 1990, Robert was paid a salary of $10,800 as president of EE. Prior to Edgar’s passing, Edgar and Esther received compensation for services provided to EE. Robert’s compensation was less than Edgar’s. Neither Robert nor Marilyn received any fringe benefits from EE. Robert was responsible for the monthly payroll checks, and he prepared and deposited payroll taxes, wrote miscellaneous checks, and mailed shareholder reports once a month. Although Shirley received a director’s fee, EE held no shareholders’ or directors’ meeting, and Shirley was never told what she was supposed to do as a director. Shirley was not aware of Robert’s and Marilyn’s compensation. Shirley filed suit against EE, Robert, and Marilyn for excessive compensation paid to Robert and Marilyn. At trial, Shirley’s expert witness testified that the annual value of services provided by Robert and Marilyn was between $567, based on the services performed and the time necessary, and $2,000, if the services were performed by a management company. However, the expert’s testimony lacked evidence of compensation provided to similar owners in the local market and did not consider the impact of the lack of fringe benefits on the reasonableness of compensation to the directors. The trial court held that the compensation was not excessive. Shirley appealed, arguing that the compensation received was not reasonably related to the value of the services rendered and that it was Robert’s and Marilyn’s burdens to prove reasonableness of their compensation.