New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1881-03-01
AN NJUNCTION CONTINUED.

| -o ,prvvvr THE INCREASE OF CAPITAL STOCK
| Tn the suit of William S. Williams against
the Western Union Telegraph Company and It's directors
and the Union Trust Company to restrain by huncuon
the OF the capital stock of the former eompa ny
| to SsOOOOOOO, Chief Judge sedgwick handed down.
Yesterday decision in which he holds that the
SI5 of the stock proposed to be dsrDuteu
among the stockholders Of the Western Union company
to represent its surplus earnings since july 1901
cannot be so distributed and continues IN THIS particular
the Temporary injunction, which had been gaD'eu ~
the action by Judge Truax He had previously decided
to yacae the temporary injunction In respect 10
matters and to coDfne himself In his decision W Vhe
consideration legality OF the intended disDuon
ofthe fifteen millions Of stock above referred TO- lie also
handed down an opinion in which the motion maze on
behalf OF Mr. Williams in the for the examination OF
the directors OF the Western Union Company before trial
is denied.
The statutes Judge Sedgwlck declares have made pro-
vision for an OF their capital h. telegraph aso
Citations Section of the act Of April IL, 1S49, makes
it lawful for association organized under the act 10
provide by articles OF association for an increase OF
its capita Section "a Of the Articles OF Association oI
the Western Union Company provided "that Its direct
ors whenever shall appear TO them TO be for the inter-
est of the company to extend its business by adding
TO the number of wires conductors upon its lines or Dy
constructing any line or lines shall enter their DC
termination upon the minutes at large, and that all
such additions shall be made by an increase OF the cap
tai stock Of the company and In no other manner Inc
| agreement
the distribution Of the SIS 5265S IN question does not
propose TO make any addition OF wires. conductors or
lines by means Of that part of the contemplated increase
Of the capital stock which is the only thing authorized
by The articles of association Of the company On the CON
trary this clause in the agreement provides that the
Sl5526 $50 is to be distributed among the present
shareholders OF the company to represent tie invest
ments already made of earnings IN lines etc, since
! July, 1866 TO the possible suggestion that, II
the comp anys articles of association had 0een Obeyed
would have been added ny tho increase
of capital stock and that the present intended dstrhu
ton is to compensate the shareholders LOT the departure
from articles, it is said to be sufficient reply that
the wrong as TO the present or past is not
redresed by delivering to them shares OF the proposed
increase of capital stock nasmuch AS II does not give
shares la an undivided capital WIN 1uture rSIt 10
earnings II the new lines acquired since 1850 hsd Deeh
pany which were used to pay for them would have been
distributed among those who were shareholders oeo[e
uay and not members of the corporation The pro-
posed distribution, therefore. leaves the earnings
thing which the articles OF association at least DO not
TIE act no continues. passed May 2, 1870, made It
lawful for telegraph company ITO provide for an IN
crease its capital and the number Of shares into which
the same shall be divided" Under the directors
Of the Western Union Company have the power to in
crease its capital capital stock, and to make any law
full OF the increase But necessary TO uDdersand
what the statute means by the term capital" Judge
Sedgwck cites several authorities which show that the
| term capital IN the act means money or property
statute trustees and bound TO use It, not only as
specifically directed by the statute but under the gem
and other shareholders who already hold shares OF
is to dispose the shares such manner that value
shall be returned to the corporation fo It's business pur
poses the trust obligation at tho least Is 70 opian Us
much value as possible Inc statute intends 1nHt the me
nominal value. The does not specifically say So
but that implied in permitting the increase OF the ca
increase effected by the consent OF the shareholders
but it extends to the actual returns to be mace TO he
company upon Its dspOsng Of shares 1t Is not intended
to declare what TO be the specific form OF value Tor
which be ISSUED, bat whatever the form may
| nd
before possessed TO me co9Ton iOr increasing i
dation provide contemplate that the dlsrlbu-
ton Of the 100000 Of stock among the present
shareholders Of the Western Union Company shall be
made upon an equivalent value returned or promised to
be returned by tbem or, indeed upon any ne" value
In repy to the argument that the fifteen millions rep
aG Should have been distributed among the sharehod
ers and acceptance OF stock III ru OF tntm VIII
he Inc same thing effect as II there had been sever
ance Of the earnings from the other proPert on lG cor
poration delivery OF ibem 70 me s,5chnu.r' 1 I
Sdewick holds that while a stockholdcr may consent
to receive stock in payment Of dividend he cannot be
coInnelled 10 do So 4 dividend IT profits or surplus
must be made payable III money, ana Wheh u Is once ue
clared debt due TO the slOckhOdef rom the
corporation stakeholder cannot DC clmpeleu 10 rom
vest dividend IN capital. bt mas an a'0u'9 poWer y"
dispose Of 1t IN any manner he may tn,mh III 8
cannot declared to encrOach upon Inc cdpai 81
company solely for It's surplus prois arising from
the business On the proofs ~ the Case II Mo'V
2 that intention OF the directors Oh e western
me 81 526 800 Of stock without the mediation or
the declaration OF dividend Inc earnings HFeidy
poraon 10 be divided Srsat PSGt OF ave m P e
purchased s no. OF naaue Sicb AZ ia nor Thc agree
ment, therefore, II carried out would result Simply ID on
ssnng of shares without tho corporation receiving any
new capital Even the directors were to proceed to
declare dividend upon the basis OF te former
ments OF earnings must De maze our OF lu3 prom +
a These surplus profits mus; exist IN present. SURPLUS
profits that have existed but no longer exist canot
he The BASIS of dividend IL appears prc5umDt!ey, II
not cOncusiyely that The pr sent value OF tue invest
, meut of Tie cOmpanys past enhH5 cdnno DC Clua 10
the amount of tie nominal value OF the stock proposed
y 10 be diy led. Eght millions OF the earnings wee III
nf Ynl
ec These Investments be in 1866, and BY the law
OF nature the property has since beea III whole OF Ii
Tbrre has been no exercise the discretion and indg
nent of the drecors 10 what the present Yaue Of
n the Investments referred to- of the investments
other telegraph companies and rear estate SINCE 4SOo
aud Mr. Williams and the other shareholders are entitled
10 the OF this discretion Judge SedgWek there
fore holds hat the directors Of me Western Union Com
70 pany not the power 10 dstrlblc among he pres
shareholders the proposed Increase OF STOCK which
TO represent surplus earnings since 1866 to thu amount
OF $15,526,596 In the manner PROVIDED ny me agree
ment OF companies: First, because II lthc agree
value the individual shareholders are entitled, subject
to the discretion of the directors as to the proportion o.
which the corporation has no power to compel tue share
holders receive. Second BECAUSE upon the present
facts an exchange OF the interest Of the shareholders
Individually In the aggregate In the Investments OF
past earnings the proposed shares, would be far
II t6an the nominal value OF the proposed capital"
r. In regard the examination OF the directors Of the
Western Union Company the Court holds that II does
not appear that II Is necessary 10 the prosecution Of
70 Mr. Wliamss rights that The examination should be
As to the effect Of this decision on the consolidation o.
the telegraph companies DE- NOrHn OIccui pesluenJ ~
], the western Union Company said yesterday: 81 have
NOT Vet seen the decision OF Court but 1t cannot In
teTfere with tine consolidation, nor with our control O
the other Companies. The consolidation is simply an
compshed Tbis decision cannot prevent The Issue
Western Union for the purchase OF the Atlantic
and Pacific and the American Union Companies II cal
only interrupt the issue OF new stock TO our own stock
holders and some other plan Will be devised for or
y equitable division OF this STOCK"
a |
a ASKING ITS RIGHTS IN EQUITY
= STATEMENTS OF COUNSEL IN TaE SUIT OF THE CABLE
Il COMPANY AGAINST THE UNION or THE LAM