The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1875-01-31

statute 2, +. g.. 452 and before the statute this
equity powers. ogden VS.. Kip, 8Johnson's Chan
cery, 100 attorney General We. Utica Insurance
company, Johnson: $50; Charitable Corporation
the PLAINTIFFS status Is thar OF bondholder or
creator and also that OF shareholder or member
OF the corporation. In the case OF Marsh vs, The
Eastern hulway, 40 n. T., page 54S the Court says
COUNTS OF sourrY HAVE JURISDICTION
over the corporations at the instance OF one or
more OF their members TO apply preventive reme-
dies 10 prevent any misapplcaiion OF capital or
profits which lessen dividends or the value Of
shares PROVIDED aud this proviso should DE noted
the acts intended to be done create what is in
law den0mnated breach OF trust.
rhe plalntin has brought into Court In this ac-
tion the Lake Shore Railway az corporation and
Its several directors aud the Union Trust Com
pany. The directors OF the railway are the trus-
tees OF the shareholders, and the Union Trust
ior those who hold bonds which the mortgage
was given to secure or provide for. 1t Will be
seen, therefore, that all parties, plantin and de-
PENDANTS are properly before the Court Tor tho
prosecution OF an action, II proper case can ne
ton of che princtpal act Complained of 6y inc
plalntln. 1t Is the use OF 81 800, coo to pay de-
CARED dividend to the Shareholders ana the ground
ior the complaining or this act is, incidentally,
mat the company has not earned profits justifyfng
sucn dividend, and, principally tnat the directors
Should apply the money In pursuance OF
the mortgage covenant TO the accumulation OF the
sinking fund. and that an omission to apply 1t
leopardizes the property OF the Shareholders In
the corporation by exposing it to the liability OF
immediate seizure and sale. II the facts estab-
trust the Court WIN nor be swift TO apply the
remedy OF an Injunction. and In the exercise o.
the Jueicia powers OF the Court the discretion OF
directors have made good the sinking lund install
ment, as they claim, the paintin's chief cause OF
paid such instalment, but in the condition In
which the question IS lett by the allegations ana
must be determined on the trial OF the action.
For the purposes OF this motion 1t viii be assumed
t the el reefrns o tine tine
juaIclal power, combined with the discretion
The TACT thai the pIaihtiii acquired 200 shares of
the stock some ten days after the declaration OF
the dividend, and hiull knowledge thereof Is
not be lost sight OF. The other shareholders
are entitled to hold the directors TO the payment
Of the dividend declared. IL is asslgnaDle
and new rights may have been created, ana
nothing should be permitted TO defeat that pay
ment but strongly made case OF lmprovldent
of the Iund oy such use 1t is incumbent on a
plaintf coming into Court to make out prtild
racte case, and sonnet thing more than the declara-
tion and intended payment OF q dividend and the
existence OF unSatIshcd mortgage debts and the
non performance OF special covenant In sup
are A,teo py the defendants on the point that the
Court VIII not exercise inquisitional powers over
a corporation. This Is proper statement OF the
law. The Court will not undertake the
MANAGEMENT OF ANY CORPORATION.
NO Court would be equal to that task. ANY such
attempt might result in greater loss TO the parties
interested than would dow rom q refusal to inter-
fere. But in thus stating the law II VIII be under
stood that trustees and directors may be called to
account for waste misappropriatlOn OF cOrpor
trust funds Cumberland Coal company We.
sherman, 80 Barb 500 and restrained rom COM
hitting clear excess OF chartered powers or
doing an Illegal act TO The prejudice OF snarehold-
ers or cestui qui' tiust. bradshaw VS.. Eastern
Bank, IS Penn, 379.l But where there is no rauo
or clear excess OF chartered powers. and particu.
lsrly where the act has the apparent approval OF
shareholders. an injunction has been refused.
lord We. Copper Miners. 2 Platt 74ll An
Injunction has been refused q. stockholder
AGAINST the use Of funds BY the director.
TO enoln a stock dividend, 1t appearing not to be
an illegal though 1t might be an iniudlciOus act.
n. Y, 37s) In this case the power to increase the
capital was relied on TO justify and egalize the
stock dividend. and the Court SAYS, "lt does not
appear tlat any fraudulent intent existed on the
part OF the directors IN making the dividend"
The powers OF the Court are iurtner discussed in
Belmont vs. Erie Railway SO Barbour, 637, and the
bona hdes OF the sutton also came in question in
that case. l do not discuss questions In this case
winch may more properly be presented at any
future stage OF the action, but, governed by the
apparent facts or the case on the motion, con-
Guide,
i. That the declaration OF the dividend does not
come within the case OF breach OF trust arising
from misapplication or a waste OF funds.
,. That the directors power to declare and pay
dividends Is not questioned, and the exercise OF
that power will not be nteriered with in the case
now made.
8. Tnat the plaintiffs acquisition Of the stock
after such dividend was declared and made known
does not prevent this maintenance OF tie action
for the establishment OF such facts and the de-
mand Tor such rehef as may be advised; but that
1t does 60 to TO the question OF enjOining payment
OF such dividend to the other and seemingly the
great body OF shareholders BY reason OF these
con clusions, and within the rule that where the
whole equity OF the bill is denied, your INDUCTION
will not be continued and the powers OF the Court
should be exercised with caution, deliberation
ana sound discretion. Boswell, 227 652.)
The motion 10 con tlnue the injunction perdente
lne is denied.