Imágenes de páginas
PDF
EPUB

The facts upon which the jurisdiction of the Court of Chancery de- § 45 pends to grant an inspection under this section, therefore, are (1) that the books are outside of the State; and (2) that a proper cause exists for ordering them to be brought into the State.

A refusal to allow a stockholder's authorized attorney to examine them was held to be a denial of the stockholder's rights. (Mitchell v. Rubber Reclaiming Company, 24 Atl. Rep., 407.)

The statutory authority to order a company to bring its books into the State does not, it seems, embrace, by implication, the authority to order it to bring all its papers and memoranda here also. (Huylar v. Cragin Cattle Co., 42 N. J. Eq., 139, 141.)

Charter limitations upon rights of stockholders to examine books.--For the purpose of avoiding litigations by stockholders having but a small interest in the company, and more especially to prevent rival concerns from prying into the private accounts and business of the company by purchasing a few shares of stock, it is common to insert in the certificate of incorporation (pursuant to Subdiv. VII of § 8) a limitation upon the power of the stockholders to examine the books and accounts of the corporation.

Effect of entries in books as evidence.-Directors' minutes are evidence of a contract, though written up after the meeting. They need not be in the handwriting of the secretary; if entered under his direction and approved by him they are valid. (Wells v. Rahway White Rubber Co., 19 N. J. Eq., 402.)

Entries in the books of a corporation are, as a general rule, competent evidence of the proceedings of the corporation and of the acts and votes of its officers transacted at official meetings, but are not notice to third persons of the acts or resolutions entered in the minutes. As to third persons, the books of a corporation are private books, and such persons are not chargeable with knowledge of matters there recorded any more than a third person would be chargeable with knowledge of entries made against him in the books of a private person. (Wetherbee v. Baker, 35 N. J. Eq., 501, 509, 510; North River Meadow Co. v. Christ Church, 22 N. J. Law, 424; and see Van Hook v. Summerville Mfg. Co., 5 N. J. Eq., 137.)

The minute book of a corporation is competent evidence in suits between stockholders to show the acts of the corporation, but is not competent evidence of any agreement made by the stockholders as individuals. (Black v. Shreve, 13 N. J. Eq., 455, 466, 483.)

45. The name of every corporation shall be at all times. conspicuously displayed at the entrance of its principal office in this state, and in default thereof the directors shall be jointly and severally liable to a penalty of two hundred dollars, to be recovered with costs, by the state, before any court of competent jurisdiction, by action to be prosecuted by the attorneygeneral; and they shall jointly and severally be liable to a like

§ 46-47 penalty for every thirty days' additional default from and after the service of process in the first action, to be recovered in like

manner.

[New in 1896.]

46. Whenever, for any reason, a legal meeting of the stockholders of any corporation cannot be otherwise called, three or more stockholders having voting powers may call such meeting by publishing ten days' notice of the time, place and purposes of the meeting in a newspaper published in the county in which its principal office in this state is located, and mailing such notice to all stockholders whose post office address is known or can be ascertained; a meeting called as aforesaid shall be a legal meeting of the corporation, and if there be no officers present, the stockholders may elect officers for the meeting; and the secretary of the meeting shall record the proceedings thereof in the book of minutes of the corporation.

P. L. 1846, p. 70; P. L. 1849, p. 306; Act of 1875, § 51.

IV. Dividends-Payment of Capital Stock.

47. Unless otherwise provided in the original or amended certificate of incorporation, or in a by-law adopted by a vote of at least a majority of the stockholders, the directors of every corporation created under this act shall, in January in each year, after reserving over and above its capital stock paid in, as a working capital for said corporation, such sum, if any, as shall have been fixed by the stockholders, declare a dividend among its stockholders of the whole of its accumulated profits exceeding the amount so reserved, and pay the same to such stockholders on demand.

(As amended by Chap. 110, Laws of 1901, P. L. 1901, pp. 245, 246.) P. L. 1866, p. 1034; P. L. 1891, p. 176; Act of 1875, § 52.

This section in the Act of 1875, and as amended in the supplement of 1891 (P. L. 1891, p. 176), applied only to "manufacturing corporations "within this State." This section applies to all corporations formed under this act, and is not limited to manufacturing corporations.

The purpose of the amendment of 1901 primarily was to do away with the effect of Marquand v. Federal Steel Company (95 Fed. Rep., 725), and to enable corporations to pay dividends on common stock during the same year and for the same time that dividends are paid on preferred stock, and to provide in the charter or by-laws for the times of paying dividends.

It would seem that under this amendment the certificate of incorpo

ration or a by-law adopted by a majority of the stockholders may empower § 48-49 the board of directors to do either or both of the following things:

(1) Determine the time or times for the declaration and payment of dividends;

(2) Fix the amount to be reserved as working capital or otherwise.

*

Suits to compel declaration of dividends." The power of the Court of "Chancery to order the directors of a trading corporation to make a divi"dend of unused profits, when they improperly refuse to do so, is "undoubted. * * Generally suits to compel the declaration of divi"dends must be in the name of the corporation, but where the corpora"tion is a defendant and the majority of directors are parties charged "with fraud in this very respect the suit will proceed to a decree upon "the complainant's rights." (Laurel Springs Land Co. v. Fougeray, 50 N. J. Eq., 756, 760.)

When a dividend is declared it becomes a debt due from the corporation to the individual stockholder, and after demand of payment, an action at law may be maintained for its recovery. (King v. Paterson & Hudson R. R. R. Co., 29 N. J. Law, 504.)

As to the rights to dividends as between the life tenant and remainderman of shares of stock, see Van Doren v. Olden, 19 N. J. Eq., 176; Lang v. Lang's Executor, 57 N. J. Eq., 325.

48. Nothing but money shall be considered as payment of any part of the capital stock of any corporation organized under this act, except as hereinafter provided in case of the purchase of property, and no loan of money shall be made to a stockholder or officer thereof; and if any such loan be made the officers who make it, or assent thereto, shall be jointly and severally liable, to the extent of such loan and interest, for all the debts of the corporation until the repayment of the sum so loaned.

P. L. 1846, p. 69; P. L. 1849, p. 306; Act of 1875, § 54.

An agreement on the part of a corporation that a subscriber for stock shall be secured as to part of his investment by mortgage on the corporation's property is void as to creditors of the corporation. (Boney v. Williams, 55 Ñ. J. Eq., 691.)

For further cases see notes to next section.

49. Stock issued for property purchased.

Any corporation formed under this act may purchase mines, manufactories or other property necessary for its business, or the stock of any company or companies owning, mining, manufacturing or producing materials, or other property necessary for its business, and issue stock to the amount of the value thereof in payment therefor, and the stock so issued shall be

§ 49 full-paid stock and not liable to any further call, neither shall the holder thereof be liable for any further payment under any of the provisions of this act; and in the absence of actual fraud in the transaction, the judgment of the directors as to the value of the property purchased shall be conclusive; and in all statements and reports of the corporation to be published or filed this stock shall not be stated or reported as being issued for cash paid to the corporation, but shall be reported in this respect according to the fact.

64

Act 1875, 55; P. L. 1889, p. 412; P. L. 1893, § 444.

"In the absence of actual fraud in the transaction the judgment of the directors as to the value of the property purchased shall be conclusive" was inserted in the statute by the Revision of 1896.

Before the Revision of 1896 the rule was clearly stated by the Court of Errors and Appeals, as follows:

[ocr errors]
[ocr errors]

"The inquiry, therefore, in the court below, should have been, "whether the agreement in question was fraudulent or not; for, if the "transaction was an honest one, the difference in value between the property constituting the consideration of the sale and the stock had no legal significance. The charter of this company authorizes the corpo"ration to exchange its capital stock for property, and, under that condi"tion of things, a court of equity cannot set aside a transaction of that "kind simply on the ground that the bargain, on the side of the corpora"tion, is a disadvantageous one. In such affairs the company and the "purchaser stand on the common footing of buyer and seller, the valua"tions of property in making the exchange, either on the one side or the "other, cannot be supervised or controlled by the Court of Chancery, for, "in the absence of deceit, or some other corrupt constituent, the bargain "between the parties cannot be disturbed." (Bickley v. Schlag, 46 N. J. Eq., 533.)

In the recent case of Donald v. American Smelting and Refining Co. (48 Atl. Rep., 771) the Court of Errors and Appeals said:

[ocr errors]
[ocr errors]

The meaning of Section 48 is not questionable; the money must equal the face value of the stock. The language of Section 49 is even "more explicit; the corporation may issue stock to the amount of the "value of the property. The value of the property in the one case, just "as the value of the money in the other, must at least equal the face "value of the stock. Such was the view expressed for this Court by Mr. Justice Depue in Wetherbee v. Baker, 8 Stew. Eq., 501, and supported by abundance of authority.

[ocr errors]

46

[ocr errors]

66

66

The distinction between the contemplated issue of corporate stock "for property and its issues for money lies, not in the rule for valuation, but in the fact that different estimates may be formed of the value of property. When such differences are brought before judicial tribunals, "the judgment of those who are by law entrusted with the power of issuing stock to the amount of the value of the property,' and on whom, "therefore, is placed the first duty of valuing the property, must be ac"corded considerable weight. But it cannot be deemed conclusive when duly subjected to judicial scrutiny. Nor is it necessary that conscious "over-valuation or any other form of fraudulent conduct on the part of these primary valuers should be shown, to justify judicial interposi"tion. Their honest judgment, if reached without due examination into

46

"the elements of value, or if based in part upon an estimate of matters § 49 "which really are not property, or if plainly warped by self-interest, may "lead to a violation of this statutory rule, as surely as would corrupt "motive.

46

[ocr errors]

46

"The cases in this State to which we are referred (Elkins v. Camden "Atlantic R. R. Co., Stew. Eq., 241; Park v. Grant Locomotive Works, 13 Stew. Eq., 114; Ellerman v. Chicago Junction Ry. Co., 49 N. J. Eq., 217; Willoughby v. Chicago Junction Ry. Co., 50 N. J. Eq., 56; Sewell v. East Cape May Beach Co., 50 N. J. Eq., 717; Edison v. "Edison United Phonograph Co., 52 N. J. Eq., 260), in support of the proposition, that the honest judgment of the managers of a corporation "with respect to matters intra vires cannot be disturbed at the instance "of stockholders, all relate to transactions for which the Legislature has "set up no other criterion than the discretion of those managers. But "the original issue of corporate stock is a special function, in the exercise "of which the Legislature has fixed the standard to be observed, and it is "the duty of the courts, so far as their jurisdiction extends, to see that "this standard is not violated, either intentionally or unintentionally. When corporate stock has once been issued for property purchased, "then the Legislature has directed the application of a different rule. In "the words of the same section 49, 'the stock so issued shall be full-paid "stock, and not liable to any further call, neither shall the holder "thereof be liable for any further payment under the provisions of this "Act; and in the absence of actual fraud in the transaction the judg"ment of the directors as to the value of the property purchased shall "be conclusive.' Under these provisions, after the property has been purchased and the stock issued therefor, nothing short of actual fraud "in the transaction can impair the right of the holder to hold his stock as full-paid stock, free from further call. The cases of Bickley v. Schlag, 46 N. J. Eq., 533, and Rural Homestead Co. v. Wildes, 54 N. J. Eq., 668, indicate that the completed transaction was equally secure, "even before the statute received its present decisive form."

64

[ocr errors]
[ocr errors]

Where shares were issued for property at a very excessive valuation, the transaction was held to be dishonest, and it was held that the shares were not fully paid. (Herbert v. Southwestern Cattle Co., 55 N. J. Eq., 18.) This case was prior to the Revision of 1896.

[ocr errors]
[ocr errors]

"To justify a corporation in issuing stock under our act for property purchased, there should be an approximation at least in true value of the thing purchased to the amount of the stock which it is supposed it represents." (Edgerton v. Electric Improvement, &c., Co., 50 N. J. Eq., 354. Decided in 1892.)

[ocr errors]

(See also Rural Homestead Co. v. Wildes, 54 N. J. Eq., 668. Also Meredith et al. v. N. J. Zinc & Iron Co., 55 N. J. Eq., 211; aff'd 56 N. J. Eq., 454.)

it.

The good-will of a business is property, and stock may be issued for And one who participated in and approved the method of valuation of such good-will cannot afterwards claim that the good-will so bought by the corporation was overvalued. (Washburn v. Natl. Wall Paper Co., 81 Fed. Rep., 17.)

An individual creditor cannot bring an action in his own behalf at law against a stockholder upon the ground that the property for which the stock was issued was not of the value of the stock. All such suits must be by a general creditors' bill. (Wetherbee v. Baker, 35 N. J. Eq., 507.)

« AnteriorContinuar »