New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1881-05-10
THE DECISION.

relating TO the proposed issue Of stock not before ssuen
by the Western Union Telegraph Company unaer 40
emcnt between aud the other two defendant com
panes under which che last named companies agreed to
sell convey and assign 20 the rst-uamcd company all
their property except tho franchise 10 DC corporations
The Western Union Telegraph Company was organized
under the laws 81 this for tho purpose 81 construct
ing. working and maintaining telegraph lines, md iis
articles OF association constitute &c charter.
The twenty fourth article provided that whenever
the directors shall determine that Is for the interest or
the cotnauv 20 extend its business by adding "a the
,r Of wires or conductors upon the lines aforesaid
or bv constructive any line or uc- o. Operate nv 'piuc
ton herewith they shall cuicf hri oieEini ou up
tbe minutes M large nd al stch add ions shall De- made
hv increase 81 tho capital stock aud n no other naur
Tile board shall fix The amount oi increase necessary i"'
TIC arrccmcnt above referred 70 contains This prov
sion: The Western Union Icirerph company H,"
tkc such proceedings nny lr advised TO cause lih
capt. se'cs 10 u" - - a. ,5c -qp rrIr,srted hy
s ~ ~ 20 100 10 me hoidcrs Of lt- prc,ent sia.s
Iol'"N : ,,-t h.. f-,. nj 81 ra.,iffs in
The turrbso corst ructicn and cqlfIn lt of adi
ii"cs wiz I'D its general plan, s, %" ~ da} Of
July 1886 md he remain SUM }l"JVl' tot 'ne
aCouieitic,i al ncW lines. property. ETC.
The directors ~ The Western Union Telegraph com
mined 90 create this - ck ~ over Ni'"'i"' hh' '
Ia, n atofg ID. p~escnt shareholders without amy f"u-
iira.,on Tor H. issue ~ ftcrr hr subscription
made or MONEY other cunfGt ration Ialls OF "ti'
70 bc uald such stock 10Y opnon as no i"aha' i"n
a. re- 4 ut1 II docs not e-t. and such in law h-
not the characteristic o. property Capital stock DO
ann lea, -euse. only tc created i' COM fa',' $40 l
he by subscription cor ANS other mode Ihcr uft "r
an agreement founded upon foinr 5000 s't '"uN',I
alton. and cannot Doe d'ali Ni'n ' TO .-, ' 49,,
In this way IL mparts tn TIE stock ihc qnn' anu en-
called capital stock because thc corporate 'aAc} Z"
create II il given. Now tle directors LAY 1h'. Sos
Is given TO the holdcrH o. H. pFc-,nt share 10 rtp
resent its inFeHuncut OF ear ,l - ,t
purchase and equipment ~ Au9luonal In,-
and general plant ,ls n W.. ~. - ' - do,i.r
stated OF pr Tended titt 'n' '"il I1f' ,...i
for il Issue Nor q b. chained That TIE ndi"ne'
Etruction 81 the alleged hcr 'his or D) any i"lfiu
ment Of law formed ars consideration Whiie'cI I"r
already belonged "a the corporation
existing asSsts. dividend having btch declared on
them No ncryascd .a,ae " ~ It,,n " nm, &
by declsration that fifteen mhI'on- "l pld $500 ~
hcn iestIed for the purpose 0I ftltril hk t' u" l'
sharehoders or tue pubic 81 "a. r - ,iii
the duties Of direclors ana ulils-l ~
frhds such directors and manager ~ any incofpfhich
~ ,,-rius nr0ff. arising from tlt haut or - n cor
rafjont. and further 0rhds the directors oi At fnc
NJ v Of thrIn any Part OF the capital stock 81 amy such
c0upany reduce the capita, Nllh"It INC ohHfh on
the ieeislafure e. X. ;. 9TH Id, Section =, p JSJ
II was argued by some cf the counsel for tho defend
ants that III statute had application 20 telegraph
companles The object and Intention Of the statute hts
been decided 10y the supreme 'onr OF ''' Sit',; Ne-
- s,,- f,srs md agents scctrd % direct and
,nanore the CORPORATE buslucSs. ard contains well
dioesed code ~ laws cVu ana penal Tor the govern
-, "a ~, cor1,r,fc brotherhood" Consequently ~.
tr,ious are made applicable 10 all future existing
coTporatious IL s sufficient 10 SAY thai since The FORE
,y decison it, prnyl -ous hasr been adopted in our
eCur4s wbere corporations have been organized
uuder the general Law. We're 81 othtrwier. these
ort,anizaticns would not he uldcr the control ~
onv OF The restraints ~ the Legislature confer
rng corporate power. n they ar permitted - u7ufp
IT, sound policy therefore. demands tbAt they should
lie kept strictly within their chartered nnii- and evrJ
contract made by iheir when exceeds th"c nii- l.r
All other contracts ia cODtrateniion Of public policy
Illegal and void. ,,.,. ,.-.,.,
many 10 divide. any way pay Go tho stockholders
any part Of the capital stock iieI re drt tors have
undertaken 70 divide aui pay Sl"h uit%iuI ~Hned 20
tho sfOckhuldcrr II tie i-unc of Hiul stock is FOR
hidden 70 BE- divided and pad To- slo ,oa,ia what can
sdcraton and dividing and pnJi1c Il away Tue a't
was CLEARLY ,n rires and under ne low and ihc drc-
ns cannot ~ ratified hy the stockholders oven hoGh
ali had expressly and With full knowledge lciel or
1ic stock wa Issued Tor unlawful purpose. p-o-
posed bc divided and given away o. fhe r'khudrrs
constituting q large portion Of the whole capital stock
on which fItur diyidcnd- are 20 Dc pad.
IN Asbury itaiiway against flch a. T. T. and j.
hSO Lord Chancellor Cairns states tnc dos trhe: II %
wne q contract void from the beginning, 10 "ae Vull
because the company could not maze The contract II
every shareholder OF tbe company bel ircn in The room,
and every shareholder had said That j. contract
which We desrc make. which an horle c director.
IN make 10 which we@ranciiOn The placing thr sfa ~
The company, she would not h1Fc ri"od 100 dnrr
ent position from that IN which u nov stands. The
been attempting 20 do The Frr3 thing which A the uct
81 Parliament, they were prohibited nom doing.
dd hy the auniole 81 the whole corporation"
90 L., re,f t.-i,rr Railway s. Turner 3 ch Ann
igJ Ia Whitney Arms 90. y. Barlow (62 y.
- 90 s., Judge Aicn clearly points ont
the distinction between nets az ultra Iirrs which
can I've aoauicsccd n and which cannot he. Actz
which cannot tc are those which mot within tAr
o,trs conferred utnn the cOrp0rlfinn hy she acf 0f -
creation and arc u violation 80 the trust rcpo.d pa tho
mana ding board hy the rharrhul. that the Oicge
sbali f,tat,,d and the funds applied solely fof tho
carr, ing ouf i the obcs for which the corporation
created" Bui IL does not appear thN thr plaintiff 81
quicsce In The action Of the directors under the
ent on tho contrary. The rccofd shows that from The
time the agreement made De- appeared no The courts,
and She several f1rcthGr' ahH i-iH'H tu' a'N"n "I
The directors their proceedings ~ carry out the agrcc
mcnts. ....,.., -. 4, -,
be issncd AZ le-s than 700 cus the dollar ~ the par
value provided by the charter IL Do genera rue oi
corporation .aN iial pay iirut lpt 'N.t go .t
man ia money only and that sl,h STOCK rhhho. oc
issued below par Much more m,ti ths %, 80 u i pam
language OF The statue ~ lrc- iul l ueh' ~ Hn,1
The latest authority an this sueci y Barnes agt roN
$50 " " 53A) The Court sa3s ~ f. DOT eAiinea ana
could NOT bF claimed tiii me cnrPuI'uDli ' - -
tOrs could create any valid stock by iseuihg the she
without consideration The dlrcrt0fs tN-uulhk ~ i.sC
stock IA that NAY would peiIFtfatc NF.Nk ln W,
pOfston and ts stockholders aud ifand upon every per
who took such stock a. fan paid stock noa we
appearances aud deceived thrfcbJ Ntiik- hkt o'SS
son bsscl 2i6 knoEltoh agt tolgfcss oktihsn, %
n. Y. St2 Neuse River Navigation Go. AT The Com
missiopers 81 Ncwbern J0pes j. H.. y G.. 100
am unable % discover yfacte or arguments n me Vol
fcndants after an attentive prisal vbc conflict with
the conclusions have arrived al IN this opinion IN CIV
ina ny concurrence, NJ DO in She we've cNpfcred ~ e
learned Chef Judge Of this court inii- refer 20 we &c
iendants answer ON one point ~ ieasts ~ hu'''''b
Tue fundamental error OF tie defendants position f.
clearly exposed by part Of their anawcr recfvod on c
present. lnoiluu before uhoiiAHf ~ NAY ~ ii'i'''
that the thing PrOposed - be divided among The udF-
dna sarc b0iders n capital, common sense Inc iiiNIlh
% corporations and the plain words Of the sa uc
declare that II u unlawful ~ make such use Of capital
equally clear that II ihe thing div dsd ID prons,
the individual SHAREHOLDER has unabcnahie right 20
take Ids portion into his ind yGuA control and power OF
enjoyment The part OF the answer referred I" places
the dete lce upon the following ground:
II the said surplus earnings had been distributed IN
cash dividends ffslm fMs 20 time Il would have been
necessary tor said Western Union Telegraph Company 70
borrow money issae stock for cazh Tor the pr
pose OF making purchases hjob such surplus earnings
were invested"
DO that IN eaeh contingency the SHIRE OF
the cash that would have gone Into the possession W he
individual SHAREHOLDER would have beea money IN NJ
hands capable OF usa by him money ~ dislnGl sh4i
from a Investment That money he could uso - ne
pleased Ia Of the Thousand OF keep Is ss 1SnT