Daily globe. [volume] (St. Paul, Minn.) 1878-1884, 1883-10-03
TOO MUCH SURPLUS.

The Minneapolis Harvester Works Con-
spiracy Suit-Synopsis of the Claims OF
Respondent Zones Against the Morrison
Ring and the Opinion Rendered by Chief
Justice Giifllan.
A decision rendered by Chief Justice
Gilfllan the present week in the case OF
Richard Jones, respondent, vs.. Dorlius
Morrison, Clinton Morrison, H. G. o. Nor
rison, Sabin S. Murdoch, John F. Appleby
and the Minnesota Harvester Works, appel
lants, the syllabus Of which We publish in
another column, is attracting no small at
tention both in Minneapolis and ST. Paul,
which leads US to give & running synopsis
of the accusation Of Jones and the decis-
ion Of the court.
The MINI esota Harvester works were in
corporated in 1873 to continue for FIVE
years, with capital stock of 100000,
with power to increase the same to
100000. In 1873 the articles We re re-
corded and the stock increased to $150,000.
Sept. l, 1881, the concern was reincorpor-
ated for term OF twenty-five years with
power to increase It's capital stock.
The business was prosecuted with such
success that Sept. 1, 1881, the value OF the
property above Liabilities was S450,O0O, or
100000 above the par value Of tbs capt.
tai stock outstanding, the amount being
accumulated profits, and 5000 shares OF
$50 each was owned by the defendants.
The basis of the complaint made By
Jones is, that while he was absent in Eu-
rope that the defendants conspired to con-
vert TO their own uses these accumulated
profits by undertaking the property of
the corporation, increasing the capital
stock, and appropriating the increase
among themselves, to the exclusion Of the
other individuals represented in the plain
tiff, or their knowledge, and that on the
return of said Jones from abroad they re-
fused to make any accounting or expla-
nation to him.
The complaint further accuses the ap-
pellants of misapplication of corporate
funds in voting in directors meeting
Nov. 10, 1881, to Dorilus Morrison 81
500 annual back salary from Sept. l, 1876
to Dec. 1, 1881 for his services as presi-
dent in building up the business and per-
sonal liability incurred by him in endors-
ing the company's notes. 1t also arraigns
a resolution passed by Dorilvs Morrison,
Clinton Morrison. and Sabin S. Murdoch as
directors, on Jan. 3, 1882 for increasing
the capital stock by the issue of 1000
81 ares at $50 per share, making the whole
stock 100000 and providing
that none of the new stock
should be disposed of to any but old
stockholders until June IA, 1882, each
original stakeholder having the right to
purchase the same according to the
amount of the ola stock owned by him.
It also complains that June %, 1882,
the Morrisons and one Whitmore, then
director, held directors meeting, of
which the other stockholders had INSULT
cient notice, and pasred resolutions to
throw open the doors to outside stock
holders and take their notes for stock
bought, and holding these notes as col
lateral security, while the conspirators'
notes were given in like manner on q big
lump of the watered stock.
The ruling of the court is that the pur-
chase with corporate money and issue of
shares to Clinton Morrison were with
funds belonging to the corporation as I'M
issued stock. But as no one was hurt by
it, and all consented, and there were no
creditors, there was no harm done, but
the vote of the directors to sell these
shares was unlawful. But the defendants
sold If they were sold or were threaten
ed to be sold, there is relief in equity.
The court further holds that the vote of
back pay to Dorilius Morrison of S39,375,
Clinton Morrison of $1,000 in all $46,575
at the meeting of the four directors, of
which Dorilius and Clinton Morrison and
b. G. o. Morrison were there, the latter
being claimed to be tool of the other
Morrisons, was violation of the terms of
incorporation that these officers were to
serve without pecuniary compensation and
was pretext to absorb the funds of the
corporation, which placed the rights and
interests of the stockholders in a
very precarious situation. The law, al
though it gives great power to directors,
implies that these powers shall be exercised
solely in pursuance of the company's
chartered purposes and for the benefit of
the stockholders. 1t does not extend to
dividing the property of the corporation
among themselves, nor giving it to others,
The vote of back pay was therefore void.
The validity of the vote of directors fix
ing the salary of Dorilus Morrison as presi-
dent. Clinton Morrison as vice president
and j. j. Murdoch as manager, must be
judged on others considerations. Unless
otherwise provided in the incorporation
articles the directors have power to fix
these salaries for their own services either
as directors or other officers, but their act
is not necessarily valid. For they are
agents of the corporation whose interests
they have in charge, and if thsy suffer their
own private interests to conflict with their
duties and the exercise OF the judgment
and discretion they owe their principals,
these acts are looked upon with great
scrutiny and jealousy by the courts, and
it applies the rale vigorously to votes of
directors giving themselves compensation
The cannot thus properly act, or form a
part of quorum to thus act on PROPOSE
ton to increase their own pay. Therefore
the raising of the salary of D Morrison IS
president from $4,000 to $4,000
year, and that of o. Morrison from So
600 to $4,000 is not sustained, neither can
the raising of kurdsok's salary stand.
That portion Of the somplsint that in
sufficient notice was given Of these direct
ors meetings. and did not reach Jones in
Europe, was ruled as having no weight in