The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1859-09-09
The schuyler Frauds.


RESTRAINING THE PAYAHNrOF DIvrDEND
INJUNCTION 70 ny THE NEW YORK AND NEW IA
ON STOCK IsseA. 'eAKY SINCE 1850.
VEN RAILROAD Cor ,-spsctAr vzux
n sssnsA HON. 0 p.S Ingr'h'm'
o'. no"' Gwd Otheys IL The NJ,
y,.I 49,, ~. r.. me, 'ngraham J.-This &C
ton is broush. by tho plaintiffs, who !. ~ ""aer'
Of some Of the stock Of the New Haven h '"" oompa
ny, to restrain the company from paying 1"'aeuo
which lately declared by the directors up>n INC
ground that among the persons who are designated as
stockholders in the company there several holding the
false stock or that which was frauduenty issued by
Schuyler and also restrain the company from decar
ing other dividends until the list Of the stockholders
Is ascertaincd.
The adavits tho part Of the plaintiffs show that acr
tho discovery Of the frauds, committed by Schuyler
Holbrook employed by the directors to examine the
books OF the company and make out list Of tho stock
holders Of the company distinguished from those who
held the false stock issued by Schuyler that he dscharg
ed that duty rendered to the Board what he believed
TO be true list Of such stoc kholders that Holbrook at
forwards entertained doubts as TO the genunenes OF
Of the stock which he had returned good stock,
and made second examination, in which he
discovered, as he thought, an error as to l73
shares, belonging to twenty -four different parties
which were by tho first account thought be genuine
and the second found to be SPURIOUS that after
pleting such examinations Holbrook was preparing new
list Of the genuine stockholders, and informed the
President, who replied to him that they wanted new
list Of sockhodors also appears that the commence
ment Of tho fraudulent issues OF tho stock by Schuyler
long previous to the time when the directors have
sued that Schuyler made the first fraudulent issues Of
stock Whether Of the stock so fnudulently issued
prior 10 1858 found its way upon the transfer books
company not distinctly stated but docs appear that
early 1850 the stock ledger of the company showed
In the accounts OF Schuyler, and Of tho firm OF r. & G.
Schuyler Large excess OF oyer.src OF shares and
above the balance shown by the debit and sides Of
the account, exceeding more than thousand shares II
is also stated that separation Of the stock which com
menced in 1858 must be defective and Other
facts also stated In the affidavit tending establish
the fact that the separation Of genuine spurious stock
made by order Of the Board Of Directors and upon
which the payment of the two dividends have been
based was erroneous and might extend to nearly 200
shares of the stock.
1t shown the part of the defendants that from an
examination OF the stock account OF Schuyler the stock
ledger, the debit and credit sides balanced with the ex
cepton OF four shares standing to the credit Schuycr
on Goes ba p1 aas as aay eSa
statement that none Of the spurious stock issued by
Schuyler previous to the year 1855 had been transferred
on the books Of the company From the facts on
the part OF the plaintiffs, II must be apparent that more
thorough examination of the stock ledger, and of the
transfers of stock previous 1858, necessary before
the true character OF the stock held by those whom the
company propose to pay dividends can be ascertaned
If in no other way, the title to all the stock from the ori-
ginal subscribers be traced through those whom
such stock has been from time to time transferred until
it is found in the possession Of the present holders when
that title is thus ascertaned there be but little diff
Guilty in rejecting the residue spurious stock II is true
that questions may arise, such rs suggested in the
o
such difficulties only shows the proprety Of using moro
caution, and OF making more thorough examinations be-
fore the company should decide to pay the profits Of their
business 70 those who may hereafter be found emit
tied TO share therein and If such doubt and uncertainty
exists, ii only exhibits clearly the improperly Of
making any such distribution Of profit until by judicial
decision the character the respective shares of stock d
II Is objected however to the granting of
this Injunction that the complaint does not show any par
tcular danger OF loss to the plaintiffs beyond the paying
improperly sum of money, and that for this action
at law may be maintained against the company. Such
hardly be said to be the consequences Of the facts
stated in the complaint. II is not confined in its
allegations to the present dividend but that the
oaIu VI nave dec"e tneil purpose 10 continue
pay dividends TO the persons selected by them the
genuine stockholders.
Isuppose stakeholder is not TO be turned to an
action against the company Tin which he must bear part
Of the loss stakeholder in Of recovery when ii
appears that by established of proceeding the
profits Of the company from time to time be divided
in part TO persons entitled thereto. It is also
objected that this company is foreign corporation and
10 Be correct one where corporation transacts all its
business beyond the State where the action Is brought,
and has property within the State, can hardly be
said be applicable railroad corporation which ope
rates than onethrd OF its road within the State and
keeps office for the transaction Of its business here,
and especially when by the act Of the Legislature
their road through this esasc, provided "they
tbis State pe To be- sued BY This case
Is distinguished from the other cases of similar charac
ter which have been before the Court in that it is brought
by genuine stakeholder, and is brought to protect his
individual interests and not for the benefit Of himself and
other stockholders The other cases dismissed
for reasons hot existing in this. The con-
cluson 10 which i have arrived is, that the order
restraining the defendants should be to certain
extent granted. The dividend now declared belongs
to the genuine stockholders. Whenever it Is ascer-
tanned who they are, they will be entitled to receive
their portions and far it can DO ascerained that
any the stockholders hold Of the stock that is not
genuine there is no reason for prohibiting the payment to
them OF the dividend declared by the company. In
the affdavits submitted to mo on the part OF the de-
PENDANTS it is stated that more than one half of the
original subscribers for the stock continue to hold their
stock the present time There is doubt as to their
right the dividend declared, and there are no
allegations that any fraudulent stock issued prior TO
1885, there TO be good reason for restraining the
payment Of the dividends upon any stock which Is now
transferred their stock at any time since that period
With these exceptions the injunction continued as to
ali other stockholders and the directors prohibited
from making any dividend on the stock Of the cor
poraon until by the decision Of some court OF competent
jurisdiction il shall be established who the genuine
stockholders in the company until the further order of
the Court herein