The sun., 1883-10-03

says no, because the Judge who tried the
case decided that surplus existed equal
to the divldend-that the property for which
the fifteen millions Of stock had been issued
was actually worth fifteen millions OF dol
lars. II that decision was In accordance
with the facts-and It's correctness was not
questioned on the present appeal-no harm
could have been done by the dividend. On
this point the language OF the opinion of the
Court OF Appeals is as follows:
"nmay be that distribution OF stock gra,uously to
the stockhoiders OF company based upon Naues-a
mere initiation, or, 20 use phrase much In vogue, n
watering Of stock-would 10 condemned by the law;
but when stock has been lawfully created and held by
q corporation. and which II has right to issue for
value then a stock dividend may be made. pro.
vided that tho stock always represents property.
II is conceded that the directors OF the West.
Union Telegraph Company could have issued
this stock for money to be paid into it's treasury.
II could have Issued for property To he received by
for the purpose OF m legitimate business But here s
found that over and above ts capital IL possessed prop
eriy actually worth upward OF SIS 10000 and we know
of law that violated aud public policy that is
invaded by issuing to the stockholders stock TO repre-
sent that amount of property rather than in any mode
to divide 1t up and distribute it among them"
Tho statement that "it may be" that a
gratuitous distribution OF stock would be
condemned by the law seems hardly strong
enough. There ought TO be no doubt on that
point. Still the opinion, taken as q whole.
shows clearly that the stock dividend
Is sustained by the Court OF Appeals
solely on the assumption that there
was no watering of the stock what
ever. AS Judge EARL says, the finding OF
the trial court on that question was conclu-
eiyo ,pop tho Count NJ AD,,oolo Tho Ind ,yoc
there, upon the record before them. were
bound to assume that every dollar OF the
fifteen millions Of new stock represented a
dollars worth of property. AS to the method
OF distribution they say:
"There is statute which requires dividends in tele
graph panes or in companies generally to be made
In cash Whether they shall be made in cash In prop
ery must also rest in the discretion of the directors
There is rule OF law reason based upon public
policy which condemns property dividend The direc
tors could convert the property into cash for dividend
and divide that. So the stockholders can take the
property divided to them and sell it, and thus realize the
cash. within tho domain of law 1t make material
difference which course is pursued"
This decision establishes the legality of
such stock dividends as represent prop
erty of the full face value of the
stock. 1t also indicates. although not
SO positively as is desirable, that when
ever clear case of watering stocks
comes before our courts in the guise OF a So
called stock dividend. the transaction is GER
tain TO be condemned on grounds of public
policy. A minor effect of the decision will be
to raise the standing of Judge TRUAX Of the
Superior Court as a lawyer; and some sur
prise will he felt at the action OF Chief Judge
RUaER and Judge DANFoRTH in remaining
on the bench of the Court of Appeals. as they
are said to have DONE during the argument
of the case, when they We're disqualified
from taking any part in its determination.