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The earlier cases held that the contract of the subscribers could only be fulfilled by payment in money. In later cases this doctrine has been relaxed, and stock issued and paid up in work and labor, or in the purchase of property the corporation is authorized to hold, has been held to have been legally issued. (Wetherbee v. Baker, 35 N. J. Eq., 501, 512.)

Issue of corporate bonds below par.—The usury act (G. S., p. 3703) forbids the issue in New Jersey of bonds at a greater rate of interest than six per cent. per annum, and in a suit to enforce usurious bonds only the principal can be recovered. Bonds of canal and railroad corporations are excepted from the provisions of the statute. A practical way of avoiding the usury act is indicated by the decisions in Franklin Trust Co. v. Rutherford, B. S. & C. Electric Co., 57 N. J. Eq., 42, and Lane v. Watson, 51 N. J. Law, 186; aff'd 52 N. J. Law, 550.

Sales to company by promoters -The power of directors to contract with the company has been considered (see pp. 27, 28 ante).

Vice-Chancellor Green reviewed the leading English cases on the subject and defined very clearly the duties and liabilities under the laws. of this State of promoters on a sale of property by them to the company. (Plaquemines Tropical Fruit Co. v. Buck, 52 N. J. Eq., 219.)

He quotes with approval Lord Chancellor Cairns:

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I do not say that the owner of property might not promote and "form a joint stock company and then sell his property to it, but I do say "that if he does he is bound to take care that he sells it to the company

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through the medium of a board of directors, who can and do exercise an independent and intelligent judgment on the transaction, and who are "not left under the belief that the property belongs, not to the promoters, "but to some other persons." (Erlanger v. New Sombrero Phosphate Co., 3 App. Cas., 1218, 1236; s. c., 6 English Ruling Cases, p. 777.)

(See also Loudenslager v. Woodbury Heights Land Co., 58 N. J. Eq., 556.)

It was held that where a promoter has a mere option to purchase lands, a one-sided contract which could not be enforced against him, and he contracts to sell those lands to his company, he is liable for the profits. made by himself, but not for profits made by his joint promoter. (Loudenslager v. Woodbury Heights Land Co., 58 N. J. Eq., 556.)

Certain corporations may take stock and bonds in other corporations in payment for labor and materials.-Corporations. having for their object the building, constructing or repairing. of railroads, water, gas or electric works, tunnels, bridges, viaducts, canals, hotels, wharves, piers or any like works of internal improvement or public use or utility, may subscribe for, take, pay for, hold, use and dispose of stock or bonds in any corporations formed for the purpose of constructing, maintaining and operating any such public works; and the directors. of any such corporation formed for the purpose of constructing, maintaining and operating any public work of the description

To face p. 76, Dill on New Jersey Corporations, 3d cloth and 4th paper edition.

Act of 1902.

CORPORATIONS MAY NOT PLEAD Usury.

1. No corporation shall hereafter plead or set up the defense of usury to any action brought against it to recover damages or enforce a remedy on any obligation executed by said corporation; provided, that this act shall not apply to any such action which is now pending. (Chap. 144, Laws of 1902, approved April 3, 1902, taking effect immediately.)

See Chapter 58, Laws of 1902.

This act is for the protection of holders of corporate bonds and obligations originally issued at less than par, and makes such securities unimpeachable so far as the question of usury is concerned. At common law, such bonds, in the absence of fraud in their issue, were valid, but were open to the defense of usury, where usury statutes were in force. Indirectly, therefore, the act enables corporations to issue securities, when market conditions require, at less than the face value.

A statute for the same purpose has been in force in New Jersey with respect to railway companies since 1855. (Gen. Stat., p. 3703.)

A similar statute, applicable to all corporations, foreign and domestic, has existed in New York since 1850 (Chap. 172), and other States have like statutory provisions.

See, as to the effect of the New York act, Stevens v. Watson, 4 Abb.
App. Dec., 302; Butterworth v. O'Brien, 23 N Y. 275; Rosa v.
Butterfield, 33 N. Y., 665; Bank v. Hoge, 35 N. Y., 65; Bank v.
Commercial Warehouse Co., 49 N. Y., 635; Stewart v. Bramhall,
74 N. Y., 85; Hawley v. Kountze, 6 App. Div., 217.

aforesaid may accept in payment of any such subscription, or § 51 purchase, real or personal property, necessary for the purposes of such corporation, or work, labor and services performed or materials furnished to or for such corporation to the amount of the value thereof, and from time to time issue upon any such subscription or purchase, in such installments or proportions as such directors may agree upon, full-paid stock in full or partial performance of the whole or any part of such subscription or purchase, and 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 payments, 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.

P. L. 1891, p. 329.

Only to the corporations designated in this section is express power given by the statute to issue stock in payment of work, labor and services, and then only to construction companies, although it would seem from the case of Wetherbee v. Baker (35 N. J. Eq., 501, 512), that where the contract for the rendition of services has been made in good faith and stock issued thereon, such stock would be held to be legally issued.

51. Any corporation may hold stock and bonds of other corporations. Any corporation may purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of the shares of the capital stock of, or any bonds, securities or evidences of indebtedness created by any other corporation or corporations of this or any other state, and while owner of such stock may exercise all the rights, powers and privileges of ownership, including the right to vote thereon.

P. L. 1888, p. 385; P. L. 1888, p. 445; P. L. 1891, p. 329; P. L. 1893, p. 301.

Before the statute was enacted the general rule was that a corporation had no implied power to purchase shares of the capital stock of another corporation. See Cook on Corporations, § 315; Elkins v. Camden & Atlantic R. R. Co., 36 N. J. Eq., 5.) In 1889, by an amendment to Section 55 of the Revision of 1875 (Section 49, ante) the directors of any company organized under that act were authorized to purchase "the stock of any company or companies owning, mining, manufacturing or producing "materials, or other property necessary for their business," and to issue stock in payment therefor. The present section came into the law in 1893, and since that time there has been no restriction upon the power of corporations to purchase, hold and dispose of stock, bonds and securities of other corporations, domestic and foreign.

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§ 52-53

A corporation may vote shares in another corporation in which it is a stockholder by a proxy duly authorized. (State v. Rohlffs, 19 Atl. Rep., 1099.)

52. False certificate.-If any certificate made, or any public notice given by the officers of any corporation, in pursuance of the provisions of this act, shall be false in any material representation, all the officers who shall have signed the same, knowing it to be false, shall be jointly and severally liable for all the debts. of the corporation contracted while they were stockholders or officers thereof, as a penalty enforceable in the courts of this state only.

P. L. 1846, p. 70; P. L. 1849, p. 307; Act of 1875, $56.

The Revision of 1896 makes a knowledge of the falsity of the certificate or notice a prerequisite to a recovery under this section and provides that the liability created is a penalty enforceable in the courts of this State only. Such knowledge was not necessary under either the Act of 1846 or the Revision of 1875.

This personal liability may be enforced by any creditor, whose contract arose while such officers were stockholders or officers of the company, by an action at law, and it is not necessary to proceed by general creditors' bill, as under Section 36. (Wetherbee v. Baker, 35 N. J. Eq., 501.) Sections 93 and 94 apply, and no sale can be had under the execution against the officer or director, until after judgment has been obtained against the corporation and execution thereon returned unsatisfied. The case of Quimby v. Waters (27 N. J. Law, 296, 28 Id., 533) is a precedent for such an action.

This section relates to "officers," and does not include incorporators who signed the certificate of organization. (Thompson-Houston Elec. Co. v. Murray, 60 N. J. L., 20.)

V.-Winding Up.*

53. Corporate existence continues. All corporations, whether they expire by their own limitation or be annulled by the legislature or otherwise dissolved, shall be continued bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them to settle and close their affairs, to dispose of and convey their property and to divide their capital, but not for the purpose of continuing the business for which they were established.

P. L. 1846, p. 72; P. L. 1849, p. 308; Act of 1875, § 59.

In a suit by stockholders of a dissolved corporation against the directors for mismanagement of its affairs, the corporation should be made a

*A company whose charter has been proclaimed by the Governor to be void for non-payment of taxes is within the provisions of §§ 53-60 as to winding up. (American Surety Co. v. Great White Spirit Co., 58 N. J. Eq., 526.)

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