Delaware gazette and state journal. (Wilmington, Del.) 1883-1902, 1897-12-30
DWIGHT D. WILLARD'S CLAIM
An Interesting Opinion Handed
Down by Judge Bradford.
DECISION ADVERSE TO PETITIONER
Suit Against the Receivers OF
the Tayior-Rice Co.
The Action Brought to Eacovnr Upon a
PFnmtssoty Snto--.The Transaction Not
Sanctioned by Inv, and tho Alleged Clsim
Accordingly Disniluwcd With Cosr.

In tho United States Circuit Court
Tuesday afternoon Judge Bradford
handed down hia decision in the apph
cation of Dwight ID. Willard 10 recover
from the receivers OF the Tsy lur. Rice
Engineering Co., upon prumissory
note. The decision was against the
petitinrer. Mr. Willard had INTERVIEWED
IN tho suit OF John NJ. Hamnr vs. the
Taylor-Rice Engineering Co. After the
suit WAS instituted an order was made
by the court notifying all creditors OF
the defendnpt to prove their claims ard
file the Same in court, Dwight y. Will
lard filed with the clerk, December 81,
lS06. verified claim amounting to
-, 200 With interest thereon from June
22d. 1896, based upon promissory
note Tuade by the defendant to his
order for the above mentioned amount,
bearing date March 18th, 1896, and
payable three months after date. The
receivers of the decentralization a.
TAYLOR and James l.. Winchestsr-ex
copied to the allowance of the claim as
follows:
Those receivers deny that thero is
any obligation whatsoever on tho part
of said company, the said claim being
on a note maids by the company to the
sideration for which SAID note, as tho re.
Geiyers are informed and beliere, heing
the amount agreed TO be paid by the
said COMPANY to tho aaid Dwight d
Willard in purchasing frnm him stneI,
OF tho said company. which TRANSACTION
and tho giving of which notv tho re.
ceivers claim was ultra yires go far as
the corporation was concerned and not
within the powers of said company.
The opinion gives history OF the
case and refers TO tho note which was
given by the company to Willard in
payment for stock held by him. The
company was incorporated under an act
OF this State 10 September, 1894. Its
object was to manufacture engineB, ma
chinery, TOOLS &c. The capital stock
was first 500, 00l but was afterward in
creased to $3.50, 000 The opinion reads
as follows:
There are few, If any, doctrines
more firmly rooted in our jurisprudence
than that the Capitnl stock of cor
poration is trust fund for the pay
nrnt OF the corporate indebtedness
b. 70 any diatribution among the
stockholders.
1.-THE capital stock of corporation,
in itH merely nominal sense, ia the sum
specified or authorized in it's charter
or certificates of incorporation, and
thereby usually divided into aliquot
shares: ana such sum is intended to
represent in amount the corporate fund
which ia to serve Re the basis for the
business or enterprise for which the
corporation was created. In its sub
stantia sense, the capital stock OF
corporation is the fund of money or
other property, actually or potentially
IN its possession, derived or to be de-
rived from the sale by il OF shares of
it's stock or their exchange by it for
property other than money. This fund
includes not only money or other
property received by the corporation for
shares OF stock, but all balances of pur-
chase money, or instruments due the
rporation for shares OF stock sold by
it, aud all unpaid subscriptions for
shares. = The fund may through
accident, shrinkage, or business mis-
fortune. be impaired but, subject to
Huch contingencies. it is intended to,
and should BIO equal to tho par value OF
the nominal capital stock which it
representa-.
1.-THE public in dealing with cor.
poration has right to assume that its
capital is real, and not fictitious. and
that it ia equal, subiet to Huch possible
impairment, to the capial stock it pur-
ports to have and which it holds iteelf
oit to the public as possessing. The
capital stuck of h corporation widely
di ffers in legal import from the aggre-
gate shares into which it is divided by
charter. While the former
includes only the fund above described,
the latter represents the totality of the
corporate nsHets and property, and,
directly or indirectly, the management
of the affairs Of the corporation. The
stockholders have the right, according
tn their amount Of stock to participate
in dividends declared, to vote ut srock-
holders mcetings, aud on the uissolu-
tion OF the corporation, after all cor
porate Indebtedness has been paid, to
share hetwseu them tho remaining
assets, A corporation may own property
far in excass OF it's capital stock, or IL
may, with property less than its pro.
ecribed capital, be in very prosperous
business, and in either case the value
of the SHARES may in the aggregate be
multiple of the total capital stock. So,
when the corporate assets arc in exGsss
of the capital stock, tho shares, through
unreasonable delay in declaring divi-
denus or other mismanagement, may be
lesn than par in value. The value Of the
shares in the hunds Of Stockholders,
therefore, 10 no criterion of ths value of
tho capital stock, Tie latter does not
include surplus or net profits. A
solvent corporation, with surplus or
fund of net profits, may dispose of
such surplus or profits for ans le1iti-
mats purpose within the scope Of its
charter. whether expressed or fairly
Implied Ann possibly an expenditure
from such surplus or profits for the
purpose of getting rid of trouble,
some stakeholder by buying his stock,
with view to it's relssue Tor value,
would be proper.
''The case presented, however, does
not call for decision on this pnint.
But whether Il corporation la solvent
or insolvent, the fund represented by
its capital stock must remain inviulate
for the protection of its creditors In
the absence OF statuatory authority in
that behalf a corporation has no legal
right to reduce this fund by any formal
or voluntary act or contract on its part,
to tho preiunIce of it's creditors, either
than or thereafter existing, whether by
distributing any part of it among tho
stockbutdsrs by the way of dividends,
or by giving any part of it to ono or
more Stockholders. or by disposing Of
any part of it 10 any manner, except by
way OF changing its form. Such an act
or contract ia ultra wires, not only of
the directors or stockholders, but of the
corporation itself. + 81 y
"If corporation he incompetent to
release subscriber 10 its capital stock,
q hnaa aiiharrl rtinn has not ham mid