New-York tribune., 1901-04-09
STAY ORDERED CONTINUED.
NEw-JERsEY COURT OF ERRORS RE-
VERSES DECISION OF COURT BELOW.

VERSES DECISION OF COURT BELOW.
Trenton y. j.. April S.-Justice Dixon to-day filed
the opinion of the Court of Errors and Appeals in
the brought by minority stockholders of the
American Smelling and Refining Company to
join the purchase of the property Of NJ Guggen-
helms Sons. This opinion has been awaited with
great interest by corporation lawyers as 1t is
considered most important affecting corporations
i'll New-Je ersey.
The Importance OF the opinion lies in the con-
structon placed by the the forty-eig
and forty-nnth sections of the General Corpora
tions act. Vice-Chancellor Stevens held that the
court could not 80 beyond the decision OF the board
OF directors TO the value Of property TO be pur-
chased by the issuing OF stock. The Court of
Errors, however. holds that It be clearly
shown that the value of such property at least
reasonably near the price to be paid and that the
action OF the directors Is subject at the
instance of any stockhoder who considers himself
aggreved. Justice Dixon says In part:
Under Section 10 OF Corporation act when
an m S Sggns ISSUE Of Of stock for PropeTty
0r taT directors TO see Ihht the RE real value Of the
the stock Before an original issue Of corpora C% G
stock for property be- purchased takes place the
Of the property. while 1t is entitled considerable
the nstanc OF exstins stackhoiders eyd m al
such review by court OF equity. the value of the
the stock the issue should be restrained. After
stock has been issued as full paid stock for prop
erty purchased: the Judgment OF the directors as
10 the value of the property becomes conclusive
III tUc absence or aCtuai Iftud In the transaction
and such stock is not liable to any further call
An Increase of corporate stock. voted for by the
stockholders. in order to issue such stock for
property worth less than the face value of the
stock should be restrained at the instance of dis
senting stockholders
In considering the right OF the court to review
the action OF the directors. Justice Dixon SAYS the
language of Section IS of the Corporation act Is
not questionable TO the fact that the money
paid in equal the face value OF the stock
Issued. The language of Sector 40 is even more
explicit providing that the corporation may issue
stock to the amount of the value the stock
Justice Dixon points out that under Section 49,
when corporate stock has once been issued for
property purchased. the legislature has directed
the application of another rule Under such con-
ditions nothing but actual fraud in the transactions
can impair the right of the sockholder hold his
stock full paid stock free from further call
Applying the rule above laid down Justice
Dixon discusses the actual value of the property
the purchase of which was contemplated by .he is
sue OF sl5 100000 stock. He It admitted that
the value of the Guggenheim plant physical pos
sessions did not exceed S000O00O and with the cash
TO have been turned over. leaving about s23 600 900
to be made UP IN the value OF the goodwill of the
business and the leases and contracts, the nature
of which not at any time disclosed In the pro-
Ceedngs While the defendants claimed the COM
upon them. Justice Dixon holds that under the cir
forced at this stage The proofs Judge D4os saws
point strongly to the conclusion that In the negota
property be acquired had the basis upon
which they have determined the amount Of stock
to be issued therefor.
The fact that the expected consummation OF the
deal caused market value the stock 4, rise
and which was used as an argument that the pro-
Justice Dixon hnds To Se vbons 10 6ne
weight He says that II the intrinsic value of the
stock only GO per cent of its face, an OUT
slider offered 50 per cent in money for additional
stock to be issued. such offer would clearly be
advantageous the company and its stockholders
but 1t could not legally be accepted because the
legislature required that 100 per cent whether
in cash property, shall be received for corporate
stock.
In accordance with these facts the ordered
that the be continued.